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A group of Russian billionaires is likely to receive a stake in a historic deal between oil giant BP and Russia’s state-oil champion Rosneft after an arbitration tribunal extended an injunction on the tie-up, an oil analyst has said.
The Stockholm court ruling put a halt to the $16 billion (£10 billion) share swap deal to search for oil in the Arctic. The billionaires – who make up the Russian half of BP's current joint venture in Russia, TNK-BP – had argued that the tie-up violated their own shareholder agreement with the British company.
‘What I think probably may happen is BP will... finally be part of the consortium, but TNK will have to be given a stake,’ Brendan D’souza, oil analyst at broker Seymour Pierce, told Citywire. ‘I think that’s probably how this will end up.’
Pointing out that the ruling was ‘clearly a setback’ for BP, D’souza said it was also a blow to Russia’s hopes of expanding its share of the world energy market, a goal for which it needed BP’s technological prowess.
The oil giant is ‘one of the most advanced companies in the world, notwithstanding what happened last year at Macondo; they have very advanced technology in deepwater drilling,’ the analyst said.
In the wake of the tribunal ruling, BP issued a statement saying it ‘remains committed to partner with Russia’ and would seek other ways of completing the deal with Rosneft – which had received the personal blessing of Vladimir Putin, Russia's powerful prime minister.
Stan Polovets, chief executive of Alfa-Access-Renova, as the Russian shareholders behind TNK-BP are known, said: ‘Wilfully ignoring the provisions of the shareholder agreement was a serious misjudgment by BP that has severely damaged the relationship between the TNK-BP shareholders; it has also harmed BP’s reputation in Russia.’
BP (BP.L) shares eased 4p to £4.77 as investors digested news of the move, halting a recent bounce. The shares have dropped 26% over the last year, as they sank following the oil spill in the Gulf of Mexico; they have, however, risen significantly from their low of £3.02 in July.
Analysts at broker Evolution Securities, meanwhile, pointed out that they had not ‘factored any upside’ in to their valuation for BP after the original deal announcement. But they added that the extension of the injunction may impact sentiment towards the company and fuel fears over possible concessions it may have to make in order to appease its TNK partners.
‘This could manifest itself in many ways including offering stakes in projects outside Russia which the TNK partners had previously desired,’ the analysts wrote in a research note today.
D’souza said the legal feud would take some time to resolve, but ultimately ‘BP won’t be able to get rid of TNK; TNK won’t be able to do it without BP; and Roseneft will definitely want BP.’
He added: ‘BP will probably get a piece of the cake, but it will probably be... a smaller slice.’