BP, Europe's second-largest oil company, has found a way to save its $16 billion share swap with OAO Rosneft, Russia's largest oil producer. BP will cede its role in the Arctic exploration alliance to TNK-BP, the British oil giant's joint venture with Russian billionaire investors, in a bid to clear the way for the share exchange to proceed.
BP (BP) and TNK-BP have been feuding for three months after TNK-BP said BP's deal with Rosneft violated the venture's shareholder rights agreement with the British company and that the venture had exclusive rights to BP's business dealings in Russia.
By giving TNK-BP its slice of the Arctic venture, BP will see its potential profits from the oil-rich region cut down, but the move does ensure BP does not come away empty handed. TNK-BP, Russia's third-largest oil producer, accounts for 25% of BP's output, 20% of reserves and 10% of the British company's profits.
Under the terms of the deal, Rosneft will pay $7.8 billion to acquire a 5% stake in BP. The share exchange would still strengthen BP's presence in Russia and could ease its participation in future oil deals, according to the New York Times. Rosneft, which has been vocal in its opposition to TNK-BP joining the venture, must approve the plan.
After contributing about $6 billion in cash and assets to the founding of the TNK-BP venture in 2003, BP has since then made $14.3 billion in dividends from it, and it still retains 50 percent of the assets, the Times reported.