Bloomberg News

BP Ends Disputes With TNK Partners to Clear Rosneft Way

November 13, 2012

BP, TNK Billionaires Said Nearing Accord to Drop Mutual Claims

Rosneft said last month it plans to pay BP $17.1 billion in cash and 12.8 percent of its stock for half of TNK-BP, and agreed to buy AAR’s half of the oil venture for $28 billion in cash. Photographer: Andrey Rudakov/Bloomberg

BP Plc (BP/) agreed to end all legal disputes with its billionaire partners in Russia’s third-biggest oil company, clearing a path for the sale of the venture to OAO Rosneft. (ROSN)

The TNK-BP shareholders will drop arbitration against each other and waived the venture’s right to new opportunities in Russia and Ukraine, according to statements today from BP and AAR, the group representing the billionaires. AAR’s battle against a BP-Rosneft alliance last year centered on the nine-year venture’s right to new projects in Russia.

Rosneft is set to gain all of TNK-BP for about $55 billion under accords with the partners last month. BP and AAR today expressed support for each other’s respective sale.

“This agreement is an important step as we dispose of our stake in TNK-BP and reposition ourselves in Russia while remaining on good terms with AAR,” said David Peattie, head of BP Russia.

State-run Rosneft plans to pay $17.1 billion in cash and 12.8 percent of its stock for BP’s half of TNK-BP and buy AAR’s 50 percent share for $28 billion in cash. BP has said the deal may close in the first half of next year.

BP Payment

BP agreed to pay $325 million to AAR as part of the dispute resolution, two people with knowledge of talks said today, asking not to be identified because the information is private.

The agreement doesn’t involve any admission of wrongdoing on either side, BP spokesman David Nicholas said, without elaborating. AAR also declined to comment on any payment.

BP and Rosneft are now able to discuss potential projects after none were included in the deal for the TNK-BP stake. BP backed away from talks with OAO Gazprom, Russia’s natural-gas export monopoly, on extending its undersea the Nord Stream link, after AAR refused to grant a waiver on its obligations, according to correspondence between the partners in June.

BP said June 1 it would look to sell the TNK-BP stake after repeated battles with the billionaires. AAR, controlled by Mikhail Fridman, Viktor Vekselberg, German Khan and Len Blavatnik, in 2008 ousted Bob Dudley, now BP’s chief executive officer, as head of TNK-BP after a public fight over strategy and management. Last year, the partners blocked the U.K. company’s plan to swap shares with Rosneft and explore for Arctic resources.

Global Output

TNK-BP accounts for about a quarter of BP’s global output and has returned $19 billion in dividends. The company hasn’t paid dividends on 2012 profit because it has lacked a functioning board since former German Chancellor Gerhard Schroeder and James Leng, a former chairman at Corus Group Ltd. and Rio Tinto Group, quit the board in December.

BP and AAR agreed on Nov. 8 to allow the board to funtion fully even while lacking a final independent board member.

Shares in OAO TNK-BP Holding (TNBP), the venture’s traded unit, fell 2.5 percent to 63.01 rubles in Moscow, the lowest since they first started trading in 2010

“The settlement enables BP and AAR to focus on issues that are most important at this stage: closing our respective transactions with Rosneft and ensuring that TNK-BP continues to operate at world class levels during the transition period that lies ahead,” AAR CEO Stan Polovets said in the group’s statement.

To contact the reporters on this story: Torrey Clark in Moscow at tclark8@bloomberg.net; Ilya Arkhipov in Moscow at iarkhipov@bloomberg.net

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


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