TNK-BP is BP’s largest business in Russia. Currently BP is in the process of selling its stake in TNK-BP and increasing shareholding in Rosneft.
TNK-BP is an integrated oil and gas company based in Russia. Formed in August 2003 from the assets of TNK (Tymen Oil Co.), Onako, Sidanco and the majority of BP’s assets in Russia, the company is 50% owned by BP and 50% by a group of Russian investors: Alfa Group, Access Industries and Renova (AAR). TNK-BP also owns a 50% interest in Slavneft.
Over its existence, TNK-BP has been a successful joint venture – from the net profit it has generated (over $48 billion since its creation); to the taxes it has paid to the Russian government (more than $187 billion in taxes, duties and levies). In addition the company has increased organic production by more than 40% since 2003 and has high reserves replacement ratio.
TNK-BP is led by a qualified and competent management team, employs about 50,000 people and operates in nearly all of Russia's major hydrocarbon regions, including:
- West Siberia (in the Tyumen, Khanty-Mansiysk, Yamal-Nenetsk and Novosibirsk Regions);
- the Volga-Urals (in the Orenburg and Saratov Regions);
- East Siberia (in the Irkutsk Region)
Average daily production of TNK-BP in 2011 was 1.988 million boe/d including the interest in Slavneft (1.934 million boe/day in 2010). Total organic capital expenditure in 2011 was over $4 billion ($3.4 billion in 2010).
TNK-BP has five refineries in Russia and Ukraine and markets products through 1,400 retail service stations operating under the TNK and BP brands. Through its retail network, TNK-BP is among the market leaders in petroleum product sales in European Russia, including Moscow. The company continues its program of refinery upgrades.
TNK-BP is investing in technology, in HSE and integrity management, delivering improved safety and performance. TNK-BP has also explored international opportunities in 2010 signing a sales and purchase agreement for BP’s assets in Vietnam and Venezuela. The deal offers TNK-BP a solid foundation as it builds its business outside Russia. In October 2011 TNK-Brasil (a 100% subsidiary of TNK-BP Group) signed a farm-in agreement and a joint operating agreement (JOA) with the Brazilian company HRT O&G to acquire a 45% stake in the Solimoes Basin project in Brazil.
On June 1, 2012, BP announced its intention to pursue a potential sale of its shareholding in TNK-BP. Almost five months later, on October 22, BP signed heads of terms to sell its 50 per cent share in TNK-BP to Rosneft. The proposed transaction consists of two tranches:
(i) BP will sell its 50 per cent shareholding in TNK-BP to Rosneft for $17.1 billion in cash and Rosneft shares representing a 12.84 per cent stake in Rosneft;
(ii) BP will then use $4.8 billion of the cash proceeds to acquire a further 5.66 per cent stake in Rosneft from the Russian government at a price of $8 per share (representing a premium of 12 per cent to the Rosneft share closing price on the bid date: 18 October 2012).
Therefore, on completion of the transaction, BP will acquire a total 18.5 per cent stake in Rosneft and net $12.3 billion in cash. This would result in BP holding 19.75 per cent of Rosneft stock, when aggregated with BP’s 1.25 per cent current holding in Rosneft. At this level of ownership, BP expects to be able to account for its share of Rosneft’s earnings, production and reserves on an equity basis. In addition BP expects to have two seats on Rosneft’s nine person main board.
Definitive and binding sale and purchase agreements (SPAs) for the sale of BP’s 50 per cent interest in TNK-BP to Rosneft and BP’s investment in Rosneft.were signed by BP, Rosneft and Rosneftegaz on November 22 after the Russian Government approved BP’s purchase from Rosneftegaz of a 5.66 per cent stake in Rosneft for $4.8 billion, as an integral part of the transaction.
BP expects this transaction to close in the first half of 2013 with only routine regulatory approvals needed prior to closing.