The management of Anglo-Russian TNK-BP has proposed to its board of directors to buy a 5% stake in BP for further share swap with Rosneft in a move to resolve the oil venture's shareholders dispute over a planned strategic alliance between BP and Rosneft, a source close to the board of directors said Wednesday.
"TNK-BP is offering to buy BP's shares for cash and swap them for Rosneft's shares," the source said.
"The only difference to the original scheme [of the BP-Rosneft deal] will be that TNK-BP rather than BP will be an owner of Rosneft's shares," the source told Platts, confirming a report by UK daily The Times.
In mid-January, BP and Rosneft announced a major strategic alliance, which includes a $8 billion share swap and joint exploration of three blocks in the Russian Arctic. The deal would see BP take an additional 9.5% stake in Rosneft, raising its total holding to 10.8%, with the majority state-owned Russian company acquiring about 5% of BP.
BP's Russian shareholders in 50:50 TNK-BP, a consortium called AAR, however, took legal action in London to block the BP-Rosneft deal, arguing that it contravened a shareholders agreement stipulating that any deals BP enters into in Russia should first be offered to TNK-BP.
On February 1, a UK court issued an injunction blocking the completion of the BP-Rosneft agreement and ordered the two sides to settle their differences through arbitration by February 25. The injunction was later extended to March.
TNK-BP's board of directors was to consider the management's proposal last Friday but the meeting was postponed to March 4 as directors representing BP did not attend the meeting requesting more time to evaluate the proposal.
On Tuesday, TNK-BP's CFO Jonathan Muir said the oil venture had enough funds to finance its participation in the BP-Rosneft deal but declined to provide details.
The source Wednesday said TNK-BP's management had already held consultations with banks on a possible loan to partially finance the deal.
The source added that TNK-BP had not conducted any preliminary consultations with Rosneft on the proposed scheme.
"The proposal should be approved by the [TNK-BP] board first," he said.
A representative with Rosneft declined to comment.
Rosneft's officials have repeatedly said their company is not interested in TNK-BP taking part in the deal.
Last week, Russia's deputy Prime Minister Igor Sechin, who is also Rosneft's chairman of the board, told the Wall Street Journal Rosneft might seek compensation from BP or its Russian oil venture TNK-BP if the planned mega deal with BP on a strategic partnership is canceled.
