The Russian billionaires who own the TNK-BP joint venture with BP yesterday accused the British company of being “unconstructive and unreasonable”, in an escalating war of words between the two sides.
Stan Polovets, chief executive of the group, known as Alfa-Access-Renova (AAR), launched an attack against BP after the two sides reached stalemate at a board meeting on Saturday in Paris over BP’s proposed share swap and Arctic development partnership with the Russian company Rosneft.
AAR, which owns half of TNK-BP, is fighting BP’s separate tie-up with Rosneft, saying that it breaches their shareholder agreement, which stipulates that BP will carry out development in Russia through TNK-BP. At the meeting this weekend, AAR proposed that both the share swap and the Arctic development project with Rosneft should be transferred from BP to TNK-BP.
BP said that it was prepared to explore the possibility that TNK-BP replace it in the development project looking for new oil and gas in the Arctic, but would not change the terms of its share swap, under which it is to take a 9.5 per cent holding in Rosneft in exchange for the Russian company owning 5 per cent of BP.
Both sides voted against each other’s offers, leaving them no further forward in their dispute.
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Mr Polovets said yesterday: “Eliminating the share swap would reduce TNK-BP’s negotiating leverage with Rosneft in relation to the Arctic exploration project and would render negotiating an equitable agreement with Rosneft virtually impossible.”
He added that “having BP, which is a 50 per cent shareholder in TNK-BP, become the largest private shareholder in one of TNK-BP’s main competitors would inevitably lead to conflicts of interest and new tensions between the shareholders”.
BP in return accused AAR of having “risked progress to the detriment of Rosneft, TNK-BP and BP”.
The company also said that a tie-up between between it and Rosneft was not unusual or detrimental to the prospects of TNK-BP. “It is very common in the oil industry all over the world for companies to ally themselves with their competitors for specific projects. BP has long been a partner with Rosneft for offshore exploration, off Sakhalin for example, without AAR or TNK-BP objection,” BP said in a statement.
The failure of the two sides to resolve their differences this weekend makes it more likely that a London arbitration tribunal will determine the outcome.
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After four days of hearings last week, a decision binding on both sides is expected this month or early in April, although BP and the oligarchs could reach a compromise before the ruling.
One of the areas of disagreement is that TNK-BP wants to hand BP £5 billion in return for 5 per cent of its shares, which the joint venture would then use in the cross-holding agreement with Rosneft. TNK-BP argues that the move would be in the interests of BP, which has been bolstering its capital after the Gulf of Mexico oil spill last year.
BP is opposed to the change, partly because it does not want to dilute its shareholder base. It also said that it had “genuine concerns about the finance, strategy and technical risks for TNK-BP in pursuing the BP/Rosneft opportunity under the terms supported by AAR”.
Igor Sechin, Russia’s deputy Prime Minister who also serves as Rosneft’s chairman, said: “Russia has the right to choose its own partner.”
Rosneft added in a statement: “TNK-BP has never been considered a potential participant in the alliance due to its lack of required competence.”