Profits Top $10 Billion for Rosneft in 2010

Feb. 4, 2011
Profits rose 64%

Russia's largest oil firm Rosneft, which struck a milestone partnership with BP and is eyeing ambitious global expansion, said on Feb. 4 that its net profits rose 64% in 2010 to $10.67 billion.

The results were unveiled as a press report said the Russian shareholders of TNK-BP were considering selling out their stake in the Russian-British oil joint venture to state-controlled Rosneft in a deal worth up to $30 billion.

The 2010 earnings underlined the profitability of Rosneft, which became Russia's largest oil firm after snapping up assets of jailed tycoon Mikhail Khodorkovsky's dismantled private oil giant Yukos in controversial auctions.

Net profits for the fourth quarter 2010 amounted to $3.06 billion, up 19% from the third quarter. "We achieved very strong results in 2010, substantially outperforming our profitability and operating targets while also limiting controllable cost growth," Rosneft chief executive Eduard Khudainatov said.

Driven by higher oil prices and production growth, Rosneft revenues rose by 35% in 2010 to $63 billion. The biggest contributors to growth were the Vankor and Verkhnechonsk fields in East Siberia, and also Samaraneftegaz.

"Looking ahead, we are focused on our strategic investment projects, including continuing Vankor's development to deliver peak production in 2014 and our refinery upgrade program," Khudainatov said.

Rosneft's partnership with BP last month saw the two firms found a joint venture for Arctic exploration and take a cross-holding. The BP deal delighted the Russian market with analysts seeing it as a springboard for Rosneft to become a global oil giant and a landmark moment in Russia's economic relations with the West. But it has raised questions over the future of TNK-BP which is jointly owned 50% by the British oil giant and 50% by a consortium of three Russian businessmen.

The High Court in London on Feb. 2 granted a request by the Russian shareholders -- known as Alfa Access Renova (AAR) -- to halt the BP-Rosneft deal after they complained it violated the TNK-BP shareholder agreement. The Vedomosti daily, quoting sources close to TNK-BP, the Russian government and Rosneft, said no final agreements have been reached but the mechanics of a transaction to sell the AAR stake to Rosneft have already been worked out. Vedomosti said Rosneft could acquire a controlling stake in TNK-BP by also taking an additional 1% from BP itself to have the majority in the company. An AAR source and Rosneft issued swift initial denials of the report.

TNK-BP almost imploded during a venomous shareholder conflict in 2008 but BP and AAR then made peace and it is seen as one of the crown jewel assets of the British company.

Ironically, the BP-Rosneft deal was signed by BP's new chief Robert Dudley -- the same executive who was booted out of Russia in 2008 at the height of the row between Moscow and London over TNK-BP. The deal was also overseen by Russia's immensely powerful Deputy Prime Minister Igor Sechin, seen as Dudley's nemesis in the 2008 spat and the prime mover in the dismantlement of Yukos.

Copyright Agence France-Presse, 2011

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