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Daily Telegraph: BP enters auction for Yukos assets

By Russell Hotten, Industry Editor
Last Updated: 3:10am GMT 24/03/2007

BP’s Russian joint venture unexpectedly announced yesterday that it will take part in an auction for a £3.5bn-plus stake in state-owned oil producer Rosneft that belongs to the now-bankrupt Yukos.  
 
The controversial decision came on the day that departing BP chief executive Lord Browne, and his successor Tony Hayward, met Russia’s president Vladimir Putin for talks about the company’s future in the country.

TNK-BP, owned 50-50 by the UK company and a group of Russian billionaires, said it would bid next Tuesday for a 9.44pc stake in Rosneft, the first lot in an auction of Yukos assets.

Yukos collapsed under the weight of back-tax claims which the company claimed were politically inspired to ruin former owner Mikhail Khodorkovsky, now serving eight years in a Siberian jail after a controversial fraud trial.

Tim Osborne, director of Yukos holding company Menatep, told the Reuters news agency yesterday: “There is a lot of risk attached to any western company getting involved in these auctions because they are in receipt of stolen goods.”

Some analysts were sceptical about whether TNK-BP was really interested in the stake, and speculated that the announcement was part of the geopolitics being played with Russia’s valuable energy assets.

Mr Putin wants to bring much of Russia’s oil and gas crown jewels back under the control of Moscow, with Rosneft taking on the bulk of Yukos’s assets. Last year state-owned gas company Gazprom controversially secured majority control of Royal Dutch Shell’s Sakhalin 2 project.

The TNK-BP move could be a diplomatic gesture aimed at giving the Yukos auction legitimacy and win favour for BP in Moscow. There has been speculation that Moscow wants to take control of TNK-BP’s vast Kovykta gas field.

In our view, TNK-BP will be participating in the auction as Rosneft’s partner rather than as a real bidder,” said analysts at Moscow’s MDM Bank in a note. Another analyst said she doubted BP would want to sanction a huge investment in Russia at a time of great uncertainty over control of energy assets. However, BP says TNK-BP’s bid for the Yukos assets would be self-funding and not involve finance from the UK company.

TNK-BP’s Alexander Shadrin said the auction move was aimed at deepening its co-operation with Rosneft, and dismissed suggestions that its participation was a dummy bid. He said: “We think this will be good for our strategic relations with Rosneft. We are bidding to win.” TNK-BP has placed a deposit, reported to be $1.5bn, in order to participate in the auction.

According Russian news agency reports, Lord Browne told Mr Putin that BP hoped to deepen its relationships in Russia through a series of joint ventures. Lord Browne also met Rosneft’s president Sergei Bogdanchikov to discuss co-operation. It is understood he did not meet directors of Gazprom.

BP invested $1bn in Rosneft when the Russian company floated in July. If TNK-BP bought the Yukos stake its holding would be about 10pc and potentially grant the UK company representation on the board.

Mr Khodorkovsky’s lawyer, Robert Amsterdam, said: “Two things are guaranteed: the auctions are fixed and the value will be unconscionably low. Western participation to legitimise this farce only shines a light on the desperation of these firms to curry favour with the president’s gatekeepers.”

http://www.telegraph.co.uk/money/main.jhtml?xml=/money/2007/03/24/cnbp24.xml

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