Russia’s Rosneft buys out TNK-BP

MOSCOW—Russian state-owned oil giant Rosneft strengthened its hold on the country’s lucrative oil industry when it sealed a deal yesterday to buy TNK-BP, the 50-50 joint venture between BP, the British energy country, and a group of Russian oil oligarchs.

The deal will allow Rosneft, already the country’s top oil producer, to increase its global profile. The new combined company will leapfrog ExxonMobil Corp to become the world’s largest publicly traded producer of oil and gas, in terms of output. ExxonMobil’s latest earnings show its daily output at 4.2 million barrels of oil, below the expanded Rosneft’s projected 4.6 million.

As part of the deal, BP succeeds in unloading its stake in a troublesome joint-venture. In return, it gets US$17.1 billion in cash from Rosneft and a 12.84 per cent stake in Russia’s biggest oil company. The British company is also planning to use some of the money it’s reaped from the sale to raise its stake in Rosneft to 19.75 per cent. BP will also get two seats on the Russian company’s nine-member board.

In a parallel development, Rosneft said it had agreed to buy the other 50 per cent in the joint venture from AAR, for US$28 billion, and that the deal was “entirely independent of the transaction with BP.” AAR confirmed that a memorandum of understanding has been signed, but added that it is still subject to other conditions.

AP