BP creates strategic partnership in Russia
11 Feb 2003
BP, the Alfa Group and Access-Renova (AAR) said today that they have agreed in principle to combine their interests in Russia to create the country's third biggest oil and gas business.
The new company will incorporate TNK and Sidanco, which between them produce approximately 1.2 million barrels of oil a day.
It will also own significant exploration interests in Siberia and Sakhalin, together with a major downstream business that includes interests in five refineries and a retail network of more than 2,100 sites in Russia and the Ukraine.
For its 50 per cent stake in the new company BP will pay AAR $3 billion in cash on completion of the deal and three subsequent annual tranches of $1.25 billion in BP shares, valued at market prices prior to each annual payment.
'BP entered Russia five years ago when we bought ten per cent of Sidanco,' said Chief executive Lord Browne. 'We had a tough time initially, but after the present management and ownership structure was established early in 2001 we have gradually built an important, mutually beneficial relationship with the owners of AAR and learned a great deal about doing business in Russia.'
The new combined company will produce 1.2 million barrels of oil a day. BP estimates that the oil and gas resources of the new concern are at least 5.2 billion barrels. BP's share of resources will be in line with its 50 per cent interest in the company. Its share of oil production will total more than 500,000 barrels a day.
The assets being contributed by BP to the new company include its holding in Sidanco, its stake in Rusia Petroleum, its interest in the Sakhalin V exploration licence and its holding in the BP Moscow retail network.
AAR is contributing its holdings in TNK and Sidanco, its share of Rusia Petroleum, its stake in the Rospan gasfield in West Siberia and its interest in the Sakhalin IV & V exploration licence.
The transaction, which is scheduled to close in the summer, is subject to regulatory and other approvals, including the consent of the EU and Russian Ministry of Anti-Monopoly Activities.
