BP and Rosneft in talks on cash and shares deal

IGOR SECHIN, the Rosneft chief executive, flew into London yesterday for talks with BP that could lead to the state-run Russian oil champion buying the British oil group’s stake in TNK-BP.

BP and Rosneft are in advanced talks on a cash and shares deal that could see BP taking a sizeable stake in the Russian oil company, and will presage a broader change in ownership of the Russian energy sector.

Rosneft could also end up buying out AAR, the group of Soviet-born oligarchs who are BP’s partners in TNK-BP.

AAR reached a preliminary agreement with Rosneft on Tuesday to sell the state company its stake in TNK-BP, according to a person familiar with the matter.

BP, AAR and Rosneft declined to comment.

If Rosneft does buy the whole of TNK-BP, it will become by far the world’s largest publicly listed oil company, with 4.5 million barrels a day of production.

However, analysts said it was unlikely Rosneft could afford such a move.

Meanwhile, there is also a possibility that BP remains in TNK-BP if AAR sells out.

But a person close to BP said any deal between AAR and Rosneft would not affect BP’s decision to sell its stake in the joint venture.

BP announced in June that it was pursuing a sale of its half of TNK-BP, after years of corporate disputes between the UK oil group and its Russian partners.

The tensions climaxed in the summer of 2008 when Bob Dudley – TNK-BP’s then chief executive, and currently BP’s chief executive – was forced to leave Russia.

Since June, BP has been in talks with both Rosneft and AAR on a deal. It said it expected formal offers for its stake from 9am today, when a 90-day period for good faith negotiations with AAR expires.

Under the TNK-BP shareholder agreement, BP can negotiate with other bidders apart from AAR during that period but cannot do a deal with them.

AAR could still submit an offer for the BP stake when the 90-day deadline expires, the person familiar with the matter said, despite its preliminary agreement to sell out to Rosneft. – (Copyright The Financial Times Limited 2012)