Police raid BP’s Russian venture
Catherine Belton and Isabel Gorst in Moscow , Financial Times , 20 Mar 2008View original article
Police investigators on Wednesday searched the Moscow offices of TNK-BP, BP’s 50 per cent-owned Russian joint venture, as part of a criminal probe, in what industry experts saw as a possible increase of state pressure on the company.
Russia’s interior ministry said police were seizing documents in relation to a criminal investigation into the Sidanco oil firm, a predecessor company that now forms part of TNK-BP.
BP declined to confirm or deny the searches.
The company, which is also 50 per cent-owned by a group of Russian billionaires, has been the target of constant speculation that it could be the next takeover target of Gazprom, the state-controlled gas company. TNK-BP’s Russian owners have denied they are looking to sell.
Gazprom has been tightening its grip over the energy sector, winning control of Royal Dutch Shell’s Sakhalin-2 project in 2006 following state allegations that the oil and gas venture in Russia’s far east was in breach of environmental regulations.
TNK-BP last year agreed to sell its vast east Siberian Kovykta gas field to Gazprom following claims by the government that it had violated licence terms. But the deal has been delayed amid wrangling over the price of TNK-BP’s 62.9 per cent stake, and the terms of a broader deal in which TNK-BP could re-enter the project with a 25 per cent stake via assets swaps.
Speaking before news of the searches broke, Alexander Medvedev, Gazprom’s deputy chief executive, said in an interview that he expected the Kovykta deal to be closed by the end of April.
“With respect to Kovykta, there are still some details that should be finalised but the principal questions are solved.
“We anticipate that very soon we will finalise the deal: hopefully not later than the end of April,” he said.
Mr Medvedev did not deny that Gazprom could seek a broader partnership with BP via a stake in TNK-BP. “We still did not hear from them whether they would like to sell,” he said.
Viktor Vekselberg, one of the owners of TNK-BP, said in January he would only sell his share if his valuation of $60bn for the company was met.
TNK-BP’s market capitalisation hit a low of $25bn this year.
Commenting on the price tag set by Mr Vekselberg, Mr Medvedev said: “The question of greediness should not be part of this discussion.”
The following Guest Commentary is taken from Citigroup's Oil & Gas Daily, issued on 20th March 2008.
The Russian Ministry of Internal Affairs yesterday searched the offices of TNKBP and BP in Moscow. A representative of the Ministry's economic security department said that investigators took out a number of documents relating to a criminal case against Sidanco oil company. Later, the official said that nothing was taken out and that investigators "invited two employees to our office so that they could provide us with explanations. We have no claims against TNK-BP". Some time later it was reported that investigators also visited the offices of BP Moscow as well. No further comments were provided.
The news comes in the middle of negotiations between TNK-BP and Gazprom (GAZP.RTS - US$12.55; 1L) over the giant Kovykta gas field (2,000 bcm of C1+C2 reserves). In mid-2007 it was announced that TNK-BP would sell 62.9% of Rusia Petroleum, operating Kovykta, to Gazprom with an option right to repurchase 25% stake. As a part of that deal BP, Gazprom and TNK-BP were supposed to form a consortium for joint development of gas projects.Soon after the announcement, another TNK-BP gas producing unit Rospan International, after four years of negotiations, finally got approval from Gazprom to connect two of its fields to the Gazprom's pipeline system, thus allowing it to increase production from 1.2 to 3.4 bcm in 2008 and to 17.4 bcm by 2017. It is believed that Rospan International may become a part of the future consortium. Completion of the deal has been postponed several times as the sides have not been able to agree on the final terms.
It would appear that the Russian authorities are making tactical moves designed on the one hand to force TNK-BP to finally complete the Kovykta transfer to Gazprom, and on the other hand to wrestle part of AAR's interest in TNK-BP to bring it under state control.