TNK-BP-Gazprom: who's the odd man out?

MOSCOW. (RIA Novosti economic commentator Oleg Mityayev) - June 26 is the date set for the annual shareholders' meeting of TNK-BP, the oil and gas company owned 50-50 by Russian oligarchs and British oil giant BP. But the meeting might be derailed, so deep are the differences in the ongoing row between the Russian and British members of the joint venture.

It now appears the British could settle for state-controlled Russian energy giant Gazprom taking the place of the stubborn Russian oligarchs on the TNK-BP board.

The conflict has a long history. And in the weeks remaining before the June 26 meeting, reports from the opposite sides read like war bulletins.

The Russian shareholders of TNK-BP, which together control 50% of the venture (25% is owned by Mikhail Fridman's Alfa Group, 12.5% by Leonard Blavatnik's Access Industries and 12.5% by Viktor Vekselberg's Renova - so-called AAR consortium), are not happy with the way TNK-BP President Robert Dudley is running the company. They say he mainly protects the interests of the British side.

By a strange coincidence, Dudley has also run foul of Russian law enforcement bodies. In particular, they demanded that he explain how TNK paid its taxes in 2001-2003, although the company was then an all-Russian undertaking and Dudley did not manage it. At the same time, about a hundred and fifty British staff employed at the Russian headquarters of TNK-BP are facing problems with the migration service over work permits.

Things have gone so far that early in June Tony Hayward, the head of BP, flew into Moscow to settle the conflict and seek support from the Russian authorities. He had meetings with Russian Deputy Prime Minister Igor Sechin, who oversees the oil and gas sector, and Gazprom CEO Alexei Miller. But the content of their discussions was never disclosed.

The AAR managers, represented by Fridman and Vekselberg, have started giving news conferences and interviews to leading Russian publications. Their remarks make it clear that the TNK-BP board chaired by Dudley has blocked a host of favorable deals across the world, which AAR has proposed over the five years that the venture has existed. BP, however, is skeptical about these claims.

Yet despite all their charges against the British management of TNK-BP, which has reportedly scuppered so many prospective deals, Russia's AAR shareholders are not planning to sell their stakes in the venture. Understandably: oil prices on the world market swing in the fantastic range of $130 to $140 per barrel, and TNK-BP, for all the "slips" of the management, remains practically the only Russian oil company that commissions new wells and increases output.

However, British members of TNK-BP also have ammunition with which to counter the Russian accusations. Dudley says the AAR consortium last November made investments in northern Iraq without consulting TNK-BP. But that is peanuts.

The main stumbling block between the Russians and the British in TNK-BP is a June 2007 memorandum under which Gazprom is to buy out TNK-BP's controlling stake (63%) in the Kovykta gas and condensate deposit in the Irkutsk Region, one of Russia's three largest, with more than two trillion cubic meters. The memorandum also provides for a strategic alliance between BP, TNK-BP and Gazprom to undertake joint projects, including a swap of global assets worth $3 billion. In that context, TNK-BP could even rejoin the Kovykta project.

But before and after the signing of the memorandum, there were persistent rumors that the Russian half of TNK-BP would soon pass from the private shareholders to state-run Gazprom. The only remaining obstacle was the date: BP and AAR had agreed not to sell their shares in TNK-BP before January 1, 2008. But, it appears, the Russian oligarchs could not bring themselves to sell their oil and gas assets when they were yielding such enormous profits. Rumor had it they even refused to include another large gas field discovered by TNK-BP in this region in the Kovykta agreement with Gazprom. But the "honest" British partners immediately informed Gazprom about this. As a result, the deal announced a year ago is still not sealed.

Gazprom, meanwhile, is widely rumored to be considering another strategy: to buy a half of TNK-BP. No one knows which half. It is not ruled out that the final choice will be in favor of BP. The two global oil and gas giants, as follows from last year's memorandum, are in need of strategic partners. BP has the resources to help Gazprom put the Kovykta field into operation at a time when Gazprom requires fresh gas supplies for export. In turn, it is only with Gazprom's approval that the British can gain access to the Russian gas pipeline that will allow them to sell Kovykta gas in Russia and perhaps abroad. Gazprom, on the other hand, is nurturing ambitious plans to secure 15% to 20% of the UK gas market by 2015. That would be much easer to do in alliance with BP.

The opinions expressed in this article are the author's and do not necessarily represent those of RIA Novosti.

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