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BP to invest $6.75 billion in new Russian oil venture
Petroleum News Alaska
BP p.l.c, which has repeatedly said it wants to expand its gas production ratio and move away from oil, plans to invest $6.75 billion in a new company that would be the third-largest oil company in Russia, London-based BP said Feb. 11.
The deal is one of the largest ever by a Western company in post-Communist Russia, and it marks a major strategic move by BP into an oil-rich country it almost abandoned after a commercial dispute.
BP is the second-largest oil producer in Alaska, after ConocoPhillips.
BP would own 50 percent of the new venture, which would incorporate the Russian energy businesses TNK and Sidanco and include exploration interests in Siberia and Sakhalin Island in Russia's Far East.
BP's Russian partners — Alfa Group and Access-Renova — would own the other half of the venture.
Three billion in cash due from BP when deal closes The new Russian company would have 5.2 billion barrels in oil reserves and daily crude production of about 1.2 million barrels. North Slope crude production was slightly more than 1 million barrels per day in January.
It would also have stakes in five refineries and 2,100 retail outlets in Russia and Ukraine.
BP plans to pay $3 billion in cash on completion of the deal, plus three subsequent annual payments of $1.25 billion in BP shares.
The shares would be valued at market prices before each annual payment, the company said. The deal would be effective as of Jan. 1 and is expected to be completed this summer. Browne calls deal a strategic step BP chief executive Lord Browne called the agreement “a major strategic step into a country with massive oil and gas reserves and immense potential for future growth.” Russia is the world's second-biggest oil producer, behind the United States, according to the International Energy Agency, a watchdog for the major industrialized countries.
“We believe this to be a great moment in the history of BP and of TNK/Sidanco and, indeed, an important milestone in the history of the industry,” Browne said.
The deal still must meet regulatory approval in Russia and the European Union, BP said.
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