Any new BP/Rosneft deal would run afoul of AAR.

10.06.2011

Rosneft (ROSN:LI), the state-owned, listed Russian oil independent, would likely run afoul of BP (BP LN)’s Russian partners Alfa Access Renova (AAR) for any new deal attempt with the British oil group, said three bankers closely following the situation.

The USD 16bn share swap and cooperation transaction was first announced in January 2010, but was subsequently challenged by AAR, BP’s partner in the 50/50 TNK-BP Russian joint venture, on the basis that the Rosneft deal violated the original shareholder agreement that created TNK-BP in 2003.

While Rosneft is believed to be presently considering several options, including a fresh deal with BP under a different form and an exploration partnership with another sector player, any deal involving BP would have to take TNK-BP’s interest into consideration, the three bankers agreed.

The first banker who is familiar with Rosneft said that the Russian oligarchs at the helm of AAR are now on alert since Rosneft tried to go circumvent their shareholder rights in regarding any new business in Russia initiated by their joint venture partner BP.

Media reports earlier this week suggested that BP was on the verge of selling a 25% stake in TNK-BP to Rosneft, but a BP spokesperson in London told this news service that “no decision has been made yet on the plans to sell down a stake.”

The spokesperson added that no discussion between AAR and Rosneft over a revived deal are currently taking place.

Selling-down BP’s 50% stake in TNK-BP would likely trigger another dispute with AAR, the bankers said.

Anton Sitnikov, the head of mergers and acquisitions and a partner at the Moscow law firm Goltsblat BLP, said that he believed a sell-down by BP in TNK-BP remained likely.

Sitnikov added that on one hand, such a move would create further difficulties as it would introduce additional shareholders into the TNK-BP structure, creating decision-making fragmentation.

However, on the other hand, noted Sitnikov, the existing 50/50 joint venture structure had itself proved quite complicated and had seen a series of significant shareholder disputes between AAR and BP.

Another possibility would be that BP transfers its 50% stake in a special vehicle commonly-owned by BP and Rosneft. But here again, AAR’s interests would have to be considered.

BP, Rosneft and the Russian government are believed to be cautious on damaging their reputation after the dispute with AAR attracted media attention for several months.

While the bankers still see a revived deal possible in the mid-term, they don’t believe it could take the form of a share swap.

The second banker who is close to Rosneft also said that if the deal with BP did collapse entirely, then Rosneft could seek a similar partnership with either Total (FP:FP) or Royal Dutch Shell (RDSN:LN), as the Russian company is interested in the European oil majors’ oil exploration experience and technology in any potential partnership.

Statoil, PetroCanada and US-based Chevron were also mentioned by the first and the third banker as potential alternative partner to BP while Exxon was thought not to be keen on a share swap deal with Russian rival Rosneft.

The second banker added that Rosneft had initially mulled a complete bid for BP, but had decided to pull back from this option because BP’s existing shareholders would not have been happy to end of with Rosneft paper and also because of potential political obstacles to such a deal within the UK.

This banker, who is familiar with Rosneft, also noted that BP had much to lose if the deal does not happen as the Russian oil group had acted as a “White Knight” for BP which was being eyed by ExxonMobil following the Gulf of Mexico turmoil.

By Sophie Sassard and Oliver Adelman in London and Maria Petrova in Moscow  

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