BP and Rosneft working together
BP has completed a landmark transaction with Russian oil giant Rosneft that will see it taking a stake of nearly 20% in what is now the world's largest publicly traded oil company
In this film, the significance of the deal is discussed by BP's Chairman, Carl-Henric Svanberg; Rosneft's Executive Chairman, Igor Sechin; BP's Group Chief Executive, Bob Dudley; Pulitzer Prize-winning author of The Quest, and IHS CERA Chairman, Dan Yergin; and BP Chief Economist, Christof Ruehl.
Rosneft and Russia
Rosneft is achieving its new scale through buying BP's 50% stake in TNK-BP - itself Russia's third largest oil and gas producer - as well as the remaining 50% formerly held by AAR.
With the acquisition, Rosneft's existing portfolio of upstream assets across all of Russia's major oil and gas producing regions will be enhanced by the addition of TNK-BP's operations, including major oil and gas fields in Siberia and the Yamal Peninsula. These include both mature 'brownfield' reservoirs and vast undeveloped 'greenfield' areas.
Rosneft's Russia-wide network of refineries and service stations will be complemented by TNK-BP's downstream operations, including those serving the Moscow and St Petersburg areas.
Russia is already the world's largest producer and reserve holder of oil and gas combined - however Rosneft and BP see the potential to increase production and reserves even further through the application of new technologies and techniques.
The deal also brings the prospect of efficiencies, with the combination of TNK-BP's assets with those of Rosneft. For example, the physical proximity of TNK-BP and Rosneft's greenfield developments on the Yamal Peninsula and in East Siberia provides the opportunity to realise natural industrial efficiency gains.
In the Yamal area, there is potential for crude transport and field infrastructure efficiencies in at least four greenfield developments. The similar field characteristics of both companies' greenfield developments provides the potential for sharing knowledge and production techniques.
Rosneft President and Chairman of the Management Board Igor Sechin said: "We are delighted to close this transaction ahead of schedule and would like to thank our partners in BP for their cooperation throughout the process. We look forward to working with BP and we are convinced Rosneft will benefit from BP's significant experience and successful track-record of applying best international practices in Russia."
BP Group Chief Executive Bob Dudley said: "This is a historic day for BP in Russia. BP has invested in Russia for more than 20 years and for a decade we have been Russia's largest foreign investor through our involvement with TNK-BP. We aim to continue that success with today's transaction, which increases our stake in Rosneft and gives us a wonderful opportunity to forge a new partnership with a great Russian oil company.
"We hope to help Rosneft to deliver synergies through its acquisition of TNK-BP and to grow production and reserves through brownfield, greenfield and unconventional opportunities as Rosneft strengthens its position among the world's leading global energy companies."
BP Chairman Carl-Henric Svanberg said: "This is the beginning of a distinctive and exciting future consistent with our strategy to invest in Russia and leverage our unique expertise to create value for BP and our shareholders, for Rosneft and for Russia."
BP is set to play a part in the new Rosneft in several ways. Bob Dudley has been nominated as a candidate to join the Rosneft Board of Directors. In due course, BP expects to have two seats on the nine-member Board.
Dudley will also sit on the newly-formed integration steering committee alongside Igor Sechin. Other members include first vice president and deputy chairman of the Rosneft management board, Eduard Khudainatov and Daniel Yergin, the Pulitzer Prize-winning author of The Prize and the founder of Cambridge Energy Research Associates (CERA).
BP also expects this transaction will bring value to BP shareholders in different ways: through growth of reserves, production and earnings; cash returns through Rosneft's dividend growth; and potentially access to new opportunities, both in Russia and elsewhere.
BP can bring its own experience of mega-mergers to the integration. Over the past 15 years, BP has managed a series of high-profile mergers. In particular, one of the largest oil industry mergers of all time with Amoco in 1998. BP played a major part in successfully managing the merger of BP's and TNK's assets in 2003.
BP can also contribute specific expertise and capability gained in Russia. BP has invested in Russia for more than 20 years and for a decade has been Russia's largest foreign investor through its involvement with TNK-BP.
During BP's involvement, TNK-BP's production rose by over 40% over nine years, while proved reserves grew by over 50%, partly due to the application of specialist BP technologies, such as enhanced oil recovery.
BP plans to work in partnership with Rosneft as similar technologies are applied at brownfield assets, potentially achieving results on an even larger scale.
BP and Rosneft: An interactive presentation
Last edited - 21 March 2013