TNK-BP sparring turns up heat on Dudley, TNK-BP
Release Date: 2011-08-29
Ever since the collapse of BP’s proposed alliance with Rosneft, the Russian state oil group, Bob Dudley, chief executive of the UK oil company, has done his best to talk up its prospects in other countries.
Australia, Angola, India and the North Sea have all been singled out as regions that will underpin long-term growth for the company and deliver much-needed returns for shareholders after last year’s Gulf of Mexico spill. But Mr Dudley’s problems in Russia do not appear to be over just yet.
While BP’s alliance with Rosneft to explore in the Arctic may not have materialised, the consequences of that high-profile move continue to reverberate. Earlier this month, BP’s Russian partners in its existing venture, TNK-BP, requested a final ruling by on whether the UK group breached their shareholder agreement when it tried to team up with Rosneft.
Stan Polovets, chief executive of Alfa-Access-Renova, the vehicle through which the partners hold their stake, said the alleged breach has “undermined the trust between the partners, has caused TNK-BP to suffer substantial damages and has hampered the company’s ambitions, both domestically and internationally”. AAR, he added, had asked the tribunal to make clear “that BP must accept responsibility for its actions and honour its obligations to its partners”.
BP, which has consistently denied any wrongdoing, said it was “surprised that AAR had been commenting publicly” on what is meant to be a confidential arbitration process, adding that “we don’t believe any losses have been suffered”. One person familiar with the matter said the latest comments from AAR were nothing new, and that it was merely creating noise around a process it started earlier this year.
The question for Mr Dudley – who is already under pressure from shareholders who want to see greater evidence of momentum from the group – is whether this latest round of sparring is something that can be contained with limited fallout or whether the current shareholder structure of TNK-BP is no longer tenable.
Analysts say the renewed legal aggression from AAR – and a suit filed in Russia by minority shareholders in TNK-BP for $3bn in damages they claim were caused by the “lost opportunity” – may represent a fresh attempt to put a buy-out deal back on the table. A joint effort by BP and Rosneft to buy out the partners as a way of allowing the BP-Rosneft alliance to proceed collapsed at the last minute in May.
“The vast majority in Moscow believes that there is no merit to AAR’s case because there has been no change to TNK-BP’s operations,” said one industry expert. “This is simply to keep the pressure for the [potential buy-out] deal to reach its conclusion. At this stage it makes sense for everyone that some form of the original deal goes ahead.”
But one person familiar with the situation said the attempts to enforce the claim were making already extremely slim chances for a fresh share and cash buy-out even more remote. “BP and its board were willing to have [Mikhail] Fridman as a substantial shareholder … but considering his behaviour since the deal fell apart they’ve become less and less interested .”
“I can’t imagine there is any deal to be discussed,” the person said. “Life moves on.”
Several people close to the joint venture said the litigation can continue to run in parallel without damaging either TNK-BP’s day-to-day operations or its shareholder structure for the foreseeable future.
Even from the start the relationship has never been an easy one – Mr Dudley famously had to flee Russia when a dispute with AAR over strategy turned ugly – but despite the strains, it has been very lucrative. TNK-BP recently posted second-quarter net income this year that had nearly doubled year-on-year to $2bn on higher oil prices. But others disagree.
“AAR does not want to sell, and it appears that BP is not interested in exiting TNK-BP either, so the ownership structure might not undergo any fundamental changes in the foreseeable future,” said Mr Polovets.
“However, life can’t go on as though nothing has happened. BP needs to acknowledge the fact that it has breached the shareholder agreement and offer to compensate TNK-BP for the damages.”
Employees, however, insist the company has not been affected. “The company is doing well and it’s good that it has always been self-financing which always gives us a degree of independence,” said a person close to TNK-BP.
For Mr Dudley, however, the continuing legal tit-for-tat and the possibility that BP could be found to have breached a shareholder agreement, is a headache that he could well do without.
| Type: | NORMAL |
| Company: | TNK-BP |
| Country: | Russian Federation |
| Url: | http://www.ft.com/intl/cms/s/0/fb3f249a-c9b9-11e0-b88b-00144feabdc0.html#ixzz1WWVPJQwL |