Bloomberg News

TNK-BP Seeks to Lower Price for Half of Itera on Economy, Tax

October 04, 2011

Oct. 4 (Bloomberg) -- TNK-BP is seeking to pay a lower price for half of OOO Itera, a Russian natural-gas producer and trader, on a deterioration of the economic and tax situation.

The macroeconomic environment has changed “significantly” since the start of negotiations with Itera, Mikhail Slobodin, an executive vice president at the oil producing venture between BP Plc and a Russian group of billionaires, told reporters outside Moscow today.

TNK-BP, Russia’s third-biggest oil producer, was looking to pay less than $2 billion, a person familiar with the talks said in August. The Moscow-based company may raise annual gas output to 50 billion cubic meters by 2020 before acquisitions, as consumption and prices at home rise Slobodin said at the time. That compares with 13.2 billion cubic meters last year. Itera is a partner in Siberian ventures with OAO Gazprom and OAO Novatek, Russia’s two biggest gas producers.

The global economic slump has pushed the price of Urals oil, Russia’s biggest export earner, down 7 percent in the past two months. Russia faces “lasting stagnation” as external demand weakens, said Alexander Morozov, HSBC Holdings Plc’s chief economist in Moscow, in a report yesterday that showed manufacturing output stalled in September.

Gas tax proposals and domestic prices may also affect the value of the assets, Slobodin said. The country is delaying an increase in the regulated domestic gas prices to July from January. The mineral extraction tax for OAO Gazprom, the natural-gas exporter that controls one of Itera’s ventures, may rise more than planned from next year.

The deal requires approval from a governmental commission on foreign investment, which may meet within a month, Slobodin said.

--Editors: Torrey Clark, Amanda Jordan

To contact the reporters on this story: Stephen Bierman in Moscow at sbierman1@bloomberg.net; Anna Shiryaevskaya in Moscow at ashiryaevska@bloomberg.net

To contact the editor responsible for this story: Will Kennedy at wkennedy3@bloomberg.net


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