Feud Over Between BP and Russian Joint Venture

Sept. 5, 2008
Energy supplies from TNK-BP are expected to come on stream on the global markets

British and Russian shareholders on Sept. 4 announced an end to a months-long feud for control of joint oil venture TNK-BP, in a move hailed by the Kremlin as a positive signal to foreign investors. The agreement is "a sensible means of resolving a situation that could not continue without causing serious damage" to TNK-BP, which is jointly held by BP and a Russian consortium, BP chief executive Tony Hayward said.

Mikhail Fridman, representing the group of Russian billionaires that owns 50% of the company, said the agreement "opens fundamentally new opportunities for the development of TNK-BP."

The deal, which envisages the departure of British chief executive Robert Dudley but no shift in the balance of ownership, was also welcomed by EU Energy Commissioner Andris Piebalgs as a positive development for global oil markets. "I am confident that this agreement shall allow energy supplies from TNK-BP to fully come on stream on the global markets," Piebalgs said. Dudley will leave his post by year's end, BP said. BP will nominate an independent chief executive for approval by TNK-BP's board, the two sides said.

BP's portion of TNK-BP accounts for a quarter of the British company's global production, 10% of its earnings and a fifth of its reserves.

The dispute between British and Russian shareholders in TNK-BP, Russia's third largest oil producer, was seen as a test of Medvedev's promises to improve the business climate.

The deal "closes the books on an ugly chapter for TNK-BP," said Andrew Neff, an analyst with research group Global Insight. "Nevertheless ... TNK-BP is not out of the woods just yet as there are important details still to hammer out," Neff said, referring to disputes over TNK-BP projects outside Russia and a deal on the Kovykta gas field in Russia.

TNK-BP was formed in 2003 and hailed as a trailblazer for foreign investment in Russia, with 50% owned by BP and the other 50% by a group of Russian industrialists known as AAR.

Copyright Agence France-Presse, 2008

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