BP Stops This LUCRATIVE Joint Venture

Hamstrung by limited possibilities for growth, weary of continual bad blood with its Russian partners, and possibly anticipating fresh problems with newly returned, nationalistic Russian President Vladimir Putin, BP Plc (NYSE:BP) finally announced plans to exit its huge joint venture TNK-BP.

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AAR, a consortium of billionaires that is BP’s partner in TNK-BP, confirmed that it had been notified by BP of plans to sell its stake and reiterated that it stood ready to augment its own holdings.

For BP, the decision to sell out may have been a wrench – it stands to lose an asset that underpinned a third of its oil production and was also an extremely profitable investment. BP paid $8 billion for its stake in TNK-BP in 2003, and has already reaped over $19 billion in dividends from the joint venture since then. The value of the stake has been estimated to be worth “at least $30 billion” by Valery Nesterov, oil analyst at Troika Dialog. Denis Borisov, oil analyst at Nomos Bank said, however, that a price of around $25 billion was more likely. BP may utilize the sales proceeds to expand in other areas in Russia or elsewhere, and fund its liabilities from the Gulf oil spill disaster.

BP has already received “unsolicited approaches” from an undisclosed buyer who, according to unnamed sources, is a state-owned Russian oil and gas firm. TNK-BP is currently Russia’s third-largest oil producer, and the offer may be evidence of the Kremlin’s attempts to obtain a strangle-hold on its oil sector.

Oswald Clint, oil analyst at Bernstein said, “We believe that the eventual buyer will have to be Russian – a 2 million barrels per day company (1 million barrels per day net to BP) is just too strategic for Russia to let fall into foreign hands.”

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