Tycoon Seeks End of BP's Russia Venture

May 31, 2012
Tensions build between BP and Russian partner.

The tycoon co-owner of BP PLC's troubled Russian oil joint venture warned that the lucrative nine-year alliance is paralyzed and needs one of two main partners to take full charge.

Mikhail Fridman spoke just days after he resigned as TNK-BP chief executive in a shock move that threw one of the British group's most profitable overseas operations into turmoil.

Fridman said tensions within Russia's third-largest oil producer had been building since BP's failed bid last year to form an Arctic alliance with the state-owned company Rosneft.

"TNK-BP and BP are in the same businesses. So in the broad sense of the word, we are competitors," Fridman told the Kommersant business daily.

He said that the four Soviet-born billionaires who own half of TNK-BP through a consortium known as Alfa-Acess-Renova (AAR) have been trying to get disputes settled by the appointment of independent directors to the board.

But Fridman accused BP (IW 1000/3) of dragging its feet on those nominees out of fear that the new board members would side with the Russian tycoons.

"I would put it this way: this competition between us has stopped corresponding to the parties' interests. Either AAR or BP must ultimately have control over the company," Fridman said.

He added that one solution might involve BP gradually selling its part of the group and leaving the venture over the course of five to seven years.

"We are also examining the possibility of reducing our stake," Fridman said.

BP has expressed immense interest in saving the venture because it accounts for a quarter of its overall production and billions of dollars in annual dividends.

Fridman said that yet another option could see a third firm joining TNK-BP as either a minority stakeholder or leading partner.

Rosneft has been mentioned by Russian media as one possibility because of its growing ambitions and the recent appointment of Igor Sechin -- of the most powerful and trusted aides of President Vladimir Putin -- as chief executive.

Deputy Prime Minister Arkady Dvorkovich confirmed on Thursday that Rosneft has already expressed an interests in taking over the state's overseas exploration unit Zarubezhneft.

Rosneft also has exclusive rights to acquire new shares issued by Russia's leading power utilities amid speculation that Sechin has a merger with the natural gas giant Gazprom as his ultimate goal.

Fridman dismissed suggestions of his resignation being sparked by fears of Sechin's rise in the industry and called Rosneft's interest in TNK-BP minimal.

BP for its part issued only a brief comment on Fridman's remarks that did not rule out the idea of future restructuring negotiations.

"If required, any discussions with Alfa Access-Renova will be done directly with them," BP spokesman Toby Odone told AFP.

Major analysts treated Fridman's board room walkout as a sign of serious internal discord that could eventually hit the company's profits.

Fitch Ratings warned that TNK-BP was suffering from a stalemate among its board of directors and management that "could eventually impinge on the company's business profile and credit ratings."

Fridman owns 25% of TNK-BP through his Alfa Group conglomerate and is the firm's second-largest shareholder after BP.

Russian shareholders value their half of TNK-BP at almost $35 billion and had rejected lower buyout offers from BP and Rosneft during the Arctic alliance dispute.

The market currently values AAR's stake in TNK-BP at about $18 billion and questions who would pay that price in the current global financial climate.

Copyright Agence France-Presse, 2012

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