Putin

Putin Hails Rosneft-BP Merger

"This is a good, large deal that is necessary not only for the Russian energy sector but also the entire economy," Putin said during a Kremlin meeting with Rosneft chief executive Igor Sechin.

Russian President Vladimir Putin on Monday hailed state oil company Rosneft's new tie-up with BP, PLC as beneficial for the economy and a "very good" signal to the markets.

"This is a good, large deal that is necessary not only for the Russian energy sector but also the entire economy," Putin said during a Kremlin meeting with Rosneft chief executive Igor Sechin.

"This is a very good signal to the Russian and international energy markets," said Putin. "I am certain that it will be beneficial."

Putin's comments strongly signal the Russian government's intention to approve the Rosneft's acquisition of the two 50% stakes the TNK-BP joint venture from BP and four Soviet-born oligarchs.

The deal -- estimated to be worth $61 billion by Sechin on Monday -- needs approval by the cabinet because the government still owns a majority of Rosneft.

The deal will see Rosneft initially pay BP $17 billion in cash and give up nearly 12.84% of its shares for the half-stake in TNK-BP.

BP's holding in Rosneft may eventually grow to nearly 20% after negotiations over another stake worth slightly more than five percent of the Russian company's shares.

Rosneft said that it had also agreed the main outlines of a $28 billion cash only deal to buy out the other half stake held by the Russian tycoons who comprise the Alfa-Access-Renova (AAR) alliance.

The company stressed however that a final deal was "subject to the negotiation of definitive agreements, corporate and regulatory approvals and certain other conditions."

The deal for both halves of TNK-BP will create the world's largest publicly traded oil company responsible for 4.5 million barrels of daily oil production and some 45% of Russia's overall output. That size falls in line with Putin's plan of establishing national giants in charge of industry that effectively manage entire sectors of the economy for the Russian state.

But the agreements should also help BP cement a long-term foothold in Russia that does not rely on a conflicted joint venture and has the potential of helping the British company eventually reach Arctic oil.

Sechin for his part called his company's takeover of TNK-BP "historic" and the third-largest in the history of oil industry mergers after the tie-ups between Exxon and Mobile as well as Total and Elf.

Putin for his part told Sechin to build "partnership relations" as it works with BP in the years to come.

Copyright Agence France-Presse, 2012

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