Rosneft, BP advance 'strategic global alliance' with Ruhr Oel JV

Eric Watkins
OGJ Oil Diplomacy Editor

LOS ANGELES, May 6 -- BP PLC announced that Russia’s OAO Rosneft has become its new 50% partner in the German refining joint venture, Ruhr Oel GMBH, following the departure of former partner Petroleos de Venezuela SA.

Under the Ruhr Oel agreement, which became effective from May 1, both companies co-own the following assets: Gelsenkirchen refinery (100% Ruhr Oel); PCK Schwedt refinery (37.5% Ruhr Oel share); Bayernoil refinery (25% Ruhr Oel share); and MiRO refinery (24% Ruhr Oel share).

The Ruhr Oel announcement coincided with reports that an arbitration panel issued a consent order permitting BP and its existing partners—four billionaires known as the Alfa-Access-Renova (AAR) consortium—to assign the so-called Arctic opportunity to TNK-BP, subject to consent by Rosneft.

Earlier this year, Rosneft and BP agreed to form a strategic global alliance that included a stock swap, an Arctic offshore exploration JV and research effort, and a refining partnership—the Ruhr Oel JV.

On completion of the agreement, Rosneft will hold 5% of BP's ordinary voting shares in exchange for 9.5% of Rosneft's shares. BP already has a 1.3% shareholding in Rosneft, and as a result of the transaction, BP's stake in Rosneft will increase to 10.8% (OGJ Online, Jan. 24, 2011).

However, that strategic global alliance agreement had been frustrated by BP’s partners in TNK-BP, the AAR billionaires, who had successfully argued in a London court that it contravened an earlier agreement they made with BP.

The new arbitration order also permits the proposed share swap between BP and Rosneft to proceed, subject to Rosneft having consented to assign the Arctic opportunity to TNK-BP.

For the share swap to proceed, both BP and Rosneft also would have to agree that any shares received as a result of the share swap would be held for investment purposes only and placed in trust, with voting rights exercised by independent trustees, together with certain other technical amendments.

Neither company would have representatives on the others board in respect of these holdings.

As a result of the consent order, BP said it can now seek agreement from Rosneft on the assignment of the Arctic opportunity to TNK-BP and modification of the terms of the share swap agreement.

“Rosneft’s consent will be required for both of these matters to proceed,” BP said, adding that the interim injunction on both the share swap and the Arctic opportunity remain in place, subject to obtaining Rosneft's consents.

“We welcome today’s developments,” said AAR Chief Executive Officer Stan Polovets.

“Since BP announced the Rosneft deal in January, AAR has been consistently guided by two priorities,” Polovets said.

“Firstly, we wanted to protect the integrity of our shareholder agreement and the value of TNK-BP, which has proved itself to be a fantastic business with a bright future,” he said.

“And secondly, we see the Arctic transaction with Rosneft as a great opportunity for TNK-BP and for Russia which we would like to succeed,” Polovets said.

“Today’s agreement provides a good way forward for achieving these priorities and opens the way to bring BP’s valuable expertise and technology to offshore exploration in Russia,” Polovets said.

“We are now focused on working with BP and management of TNK-BP to continue the development of TNK-BP in Russia and internationally,” he said.

Contact Eric Watkins at [email protected].