Comment: BP’s still exploring in the murky Russian waters

By MARTIN FLANAGAN
Published on 21/09/2012 00:00

IF BP ever does manage to achieve a strategic alliance in Russia with state-owned Rosneft it will certainly have taken the scenic route.

And if you are going to have a broker for an eventual tie-up you would be pressed to find a better one than president Vladimir Putin.

But such wheeler-dealing and political intrigue has become almost par for the course in a country that has been a source of rich dividends and bitter corporate strife for the British energy giant.

Since last July Rosneft (for which also read the Kremlin) has been eyeing up a $25 billion (£15bn) bid for BP’s half-stake in its soured Russian joint venture TNK-BP.

The Russian company has spent the summer hawking the idea to a dozen or so lenders in the City , where it is looking for loans and bridging finance. But the confirmation that BP chief executive Bob Dudley met Putin at the latter’s Black Sea residence earlier this week to discuss the deal significantly ups the ante.

The president would surely not get involved unless it was also to discuss a possible ongoing relationship between BP and Rosneft, together with other Russian energy companies.

There is strong talk now that Rosneft would pay for the British group’s TNK-BP stake with cash and shares, leaving BP with a significant stake in a larger state-owned giant and big commercial opportunities in the country.

But what a turn-up it would be if BP did end up resurrecting the partnership. The pair struck what was seen as a historic alliance last year to explore the Russian Arctic for energy, but the deal was scuppered in the courts by the AAR consortium, BP’s oligarch partners in TNK-BP.

The billionaires felt they had been stabbed in the back by their British partners, and that, at the very least, they should have first dibs on any new Russian projects BP got involved in.

Relations in the j/v had not been brilliant before then as BP and the oligarchs argued about things like dividend and investment splits. Even as the British group tapped the golden goose for billions of pounds in dividends paid back to London, the corporate cracks were clear to see.

But the boardroom atmosphere at TNK-BP could never be the same once the Russian businessmen had put the planned Arctic tie-up with Rosneft to the sword.

Things still remain as murky as only Russian business dealing can. The AAR consortium has expressed both an interest in buying half of BP’s stake in TNK-BP or being bought out themselves.

However, given that the price they would demand is likely to be stratospheric, the latter is probably a non-runner, though BP is contractually committed to negotiate in good faith with its partners while also talking about doing the exact opposite down the road with Rosneft under the”good offices’”of president Putin.

Who knows where it will go from here?

An eventual revival of a BP/Rosneft exploration deal in the Arctic if Rosneft replace the British group in its Russian j/v? And would the oligarchs try to block Rosneft as new partners in the same way they blocked BP?

Oligarchs versus Putin? Now where have we heard that one before…

Claiming a medal in the scepticism games

I WAS sceptical here earlier this summer when a flurry of retailers forecast there might be an Olympics “dividend” for the high street. Official data out yesterday suggests the scepticism was warranted. Retail sales fell 0.2 per cent in August after a 0.3 per cent rise in July and 0.6 per cent rise in June.

Apparently, online sales were particularly hit last month as people chose to watch the Games rather than shop. And for every Olympic-centric tourist who might also go shopping, there was always likely to be a stayaway tourist not into the historic event who gave London – and therefore its shops – a miss.

Some sports retailers undoubtedly bucked the trend somewhat, as exploits down at Stratford inspired their customers. But, overall, the Olympics did not light the high street’s torch.