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Daily Telegraph: Will Browne, the embattled oilman, stay the course?: Russia raises pressure on Shell and BP

Business comment
By Richard Fletcher, Deputy City Editor Last Updated: 12:04am GMT 11/11/2006

It has been a week in which BP has – again – fallen on its corporate sword. With out-of-court settlements in Russia and America. Unfortunately for chief executive Lord Browne, a man for whom that over-used word “embattled” was surely invented, it is not the end of his woes.

Yesterday, TNK-BP, the UK company’s joint venture in Russia, paid a back-tax bill it had believed was not owed. It is one of a string of back-tax demands levelled by the Russian authorities on western oil majors.

On the positive side, TNK-BP provided for the claim in its 2004-5 accounts. And as the demand dates from before 2003, when BP formed the joint venture, it should be TNK shareholders who pick up the bill as agreed. But the issue is worrying nevertheless. The Russian authorities say BP paid-up voluntarily. But it looks more like capitulation in face of Moscow’s use of tax demands to beat oil companies into submission. The Russian government wants a larger slice of the oil revenues and is determined to get them.

Another worrying aspect is that TNK-BP has paid in full, seemingly unable to negotiate down the size of the final settlement. That does not bode well for more recent back-tax demands that are being contested by BP and its competitors. Royal Dutch Shell, Total, Exxon Mobil, and Chevron are all being squeezed one way or other another, either with back-tax claims or threats to withdraw licences. Remember, it was a tax bill that did for oil giant Yukos, although the sums involved were, admittedly, much higher. BP may argue that its decision to pay in full will help reduce tensions with Moscow but it will probably just encourage the authorities.

In America, BP’s agreement with Eva Rowe over the fatal Texas City refinery explosion at least removes the need for Lord Browne to appear in a Houston court. Ms Rowe, whose parents died in the blast, wanted “the world to know what BP did” and as part of next week’s civil case an avalanche of potentially incriminating documents were to be released. But BP is only delaying the pain, not neutralising it. As part of the settlement with Ms Rowe, some documents might yet be made public. And if she cannot release them, they will surely come to light when, as seems likely, US regulators start criminal proceedings against BP.

Is it any wonder that some people are questioning if Lord Browne will stay the course. Assaulted on all sides by problems, he sometimes appears weighed down by the burden. But who would replace him? It would not be surprising if, in the current climate, the rumour mill began turning up a few names.

http://www.telegraph.co.uk/money/main.jhtml?xml=/money/2006/11/11/ccom11.xml

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