Russian state oil company Rosneft was closing in on control of privately held TNK BP sending its powerful boss to London for talks with 50% shareholder BP after the tycoons who own the other half agreed to sell.

Industry and financial sources in London, Moscow and elsewhere painted a picture of a potential three way deal that could emerge over the coming weeks.

They said that both the British oil company and the four Soviet born tycoons could emerge with minority stakes in an enlarged Rosneft as well as billions of dollars in cash all in exchange for a highly profitable company which has been valued at over USD 50 billion. The combined group would dominate Russia’s increasingly state controlled oil industry and would be producing well over 4 million barrels of oil and gas a day more than US No1 Exxon Mobil.

Financial sources said that Rosneft agreed to pay the tycoons’ AAR consortium USD 28 billion. However it was unlikely all of this would be in cash especially if Rosneft intends to buy out BP as well. Some USD 15 billion could be met through a loan agreement Rosneft has been negotiating with international banks for weeks and it can get another USD 3 billion from Russian banks.

A senior minister said that Rosneft had not yet requested the necessary government approval for a deal. BP’s shares closed up 3% on the news at 452 pence as investors digested the prospect its years of Russian difficulties could now be behind it.

BP’s decision in June to put its own stake up for sale put pressure on the oligarchs to sell their half of the business because the first to sell to Kremlin backed Rosneft was likely get the higher price.

Source – Oman Observer

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