Bloomberg News

BP Ordered to Pay TNK-BP $3.1 Bln on Failed Rosneft Deal

July 27, 2012

BP Plc (BP/) was ordered to pay TNK-BP, its joint Russian venture with a group of billionaires, 100.4 billion rubles ($3.1 billion) in damages over a failed deal with oil producer OAO Rosneft.

A court in the Siberian city of Tyumen upheld a suit by Andrey Prokhorov, a minority investor in listed unit TNK-BP Holding, court spokeswoman Anastasia Nigmatulina said today by telephone. Prokhorov claimed TNK-BP could have lost earnings if a proposed BP-Rosneft share swap and Arctic alliance, from which it was excluded, had come to fruition.

The judgment, while less than the 409 billion rubles originally sought by Prokhorov, is “satisfactory,” said Dmitry Chepurenko, a partner at the Liniya Prava law firm that represented Prokhorov. BP will challenge the ruling, Toby Odone, a spokesman for the London-based oil producer, said by e-mail.

The ruling piles pressure on BP as it renegotiates its 50 percent holding in TNK-BP with AAR, which represents the billionaires. BP said June 1 it will pursue a sale of its stake after years of disagreements with AAR, which in 2011 blocked the alliance with Rosneft, saying it violated their shareholder agreement and prevented its access to such an opportunity.

“TNK-BP did not suffer and could not have suffered any damages; any arguments on the issue are pure speculation,” BP’s Odone said. “TNK-BP initially was not considered as a possible participant in the Arctic projects by Rosneft.”

Renewed Hearings

The case brought by Prokhorov, who owns about 0.00001 percent of TNK-BP Holding (TNBP) according to BP, was thrown out in November and returned for hearings in June as Prokhorov called for additional evidence, BP’s lawyer Konstantin Lukoyanov said at the time.

BP began talks this month with AAR and state-run Rosneft to sell shares in its half of TNK-BP, Russia’s third-largest oil producer. TNK-BP has paid BP $19 billion in dividends since 2003 and accounts for a quarter of the company’s global output.

AAR last year blocked the planned $7.8 billion share swap between Rosneft and BP, as well as their deal to explore Russia’s Arctic, citing the TNK-BP shareholder accord. The billionaires subsequently rejected an offer from Rosneft and BP to buy out their half of TNK-BP for $32 billion.

Rosneft had wanted BP, not TNK-BP, for the Kara Sea project, Eduard Khudainatov, Rosneft’s first deputy chief executive officer, said last year when he headed the company. TNK-BP doesn’t have Arctic offshore experience.

TNK-BP declined 0.6 percent to 76.98 rubles in Moscow trading. BP rose 1.4 percent in London.

Dmitry Sergeev, a TNK-BP spokesman, and Chief Financial Officer Jonathan Muir declined to comment on the ruling today in Moscow as the company reported second-quarter earnings.

To contact the reporters on this story: Anna Shiryaevskaya in Moscow at ashiryaevska@bloomberg.net; Jake Rudnitsky in Moscow at jrudnitsky@bloomberg.net.

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


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