BP in 'advanced' talks over sale of Russian stake to Rosneft

British oil group BP and Russian Rosneft are at an advanced stage in talks for Rosneft to buy BP's half of Russian venture TNK-BP, BP said on Monday, in a deal believed to be worth about $27 billion (20.7 billion euros). “BP confirms it is in advanced discussions with (Russian group) Rosneft regarding the sale of its 50-percent interest in TNK-BP,” the British oil company said in a brief statement.

“No agreement has yet been reached. A further announcement will be made if and when an agreement is reached.” A deal would create a top player in the global oil sector with big implications for Arctic exploration and boost BP's interest in Rosneft to 14 percent from the current level of 1.3 percent, reports said. That would make BP the second-biggest shareholder in Rosneft after the Russian state.

The Financial Times, citing a person familiar with the matter, said BP's board had already approved the cash-and-shares deal. A transaction could be announced later on Monday following a meeting between Rosneft chief executive Igor Sechin and Russian President Vladimir Putin, the newspaper added.

The deal, which would catapult Rosneft into becoming the world's biggest publicly-traded oil company and second in size only to Saudi Arabia's Aramco, was reportedly worth about $27 billion (20.6 billion).

The Wall Street Journal valued the deal at between $26.6 billion and $28 billion, depending on how calculations are made. Moscow's Kommersant business daily cited its own sources as saying that the transaction, which it also valued at $27 billion, was for $17 billion in cash and a 12.53-percent stake in Rosneft shares. Kommersant added that BP would probably be awarded one seat on the Rosneft board.

“The prospect of a cash payout has investors rubbing their hands in glee, but the loss of the income from TNK-BP will be a point of contention for many,” noted analyst Chris Beauchamp at trading group IG.

Richard Hunter, analyst at Hargreaves Lansdown stockbrokers, said a deal appeared to make sense for BP. “If it happens, it seems a sensible deal. It both removes the management from the political distractions of the holding thus far, whilst potentially still leaving BP with an exposure to the region,” he told AFP.

The sale would end BP's profitable but fraught tie-up with TNK-BP, which has provided $19 billion in dividend payments since the joint venture was set up in 2003. The deal will make Rosneft the world's biggest publicly traded crude producer with a daily output of 3.15 million barrels -- far higher than current leader ExxonMobil, which pumps out 2.3 million barrels a day.

Rosneft is expected to follow up the sale with a potential $29-billion buyout of the four ex-Soviet billionaires who own the remaining half of TNK-BP, bringing Russian state control to over 40 percent of the nation's oil output.

AFP