BP’s Russia venture will make it world’s second largest private sector producer

Petroleum News Staff

BP said June 26 that it and the Alfa Group and Access-Renova have signed a sale and purchase agreement, a step in completing the proposed combination of the companies’ Russian businesses.

The transaction, announced in February, creates a new joint venture company, TNK-BP, with BP and the Alfa Group/Access-Renova each holding 50 percent stakes. When the transaction is completed, BP said, it will become the world’s second largest private sector producer of oil and gas, and TNK-BP itself will be the 10th largest.

BP said closing adjustments reflecting increased debt levels in TNK-BP, partly due to TNK’s financing of the Slavneft acquisition, mean BP now expects to pay around $2.4 billion for its equity interest in TNK-BP, less than the $3 billion anticipated at the time of the announcement in February. In addition there will be three annual tranches of $1.25 billion, payable in BP ordinary shares valued at market prices prior to each annual payment.

More than 70 members of the management team for the new joint venture company have already been appointed.

BP said the June 26 agreement finalizes all the commercial arrangements for the formation of the TNK-BP joint venture company, which will be effective from Jan. 1, 2003, subject to the approval of regulatory authorities including those at the European Union, in Ukraine and in Russia.

Discussions continue between BP and the Alfa Group/Access-Renova on whether the interest, which TNK has taken in the Russian company Slavneft, should be included in TNK-BP. Any such inclusion will result in additional consideration being paid to Alfa Group/Access-Renova, BP said.

BP said that as of Dec. 31, 2002, total net assets and profits after tax of the combination of businesses, which are the subject of this transaction, were $5.1 billion and $1.551 billion respectively.