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The Times: BP unit to bid for $9bn stake in the remnants of Yukos

March 24, 2007
Carl Mortished, David Robertson, Kevin O’Flynn and Julian Evans

The Russian arm of BP is to bid for a $9 billion (£4.6 billion) shareholding in Rosneft, to be sold in an auction of the remaining assets of Yukos, the bankrupt Russian oil company.

The surprise move by TNK-BP emerged hours before Lord Browne of Madingley, BP’s chief executive, and his successor Tony Hayward, met President Putin.

Any attempt to purchase the 9.44 per cent stake in Rosneft could put BP into competition with Rosneft, which is itself intending to bid for Yukos assets.

TNK-BP’s move drew condemnation from the leading Yukos shareholder, GML, formerly Group Menatep, which accused BP of “window-dressing” an auction that was not real.

Tim Osborne, director of GML, said that he would not be surprised to see BP acquire the stake at a discount and sell it to Rosneft. “If these assets are sold for their real worth it will add up to substantially more than the liabilities. The surplus would then go to shareholders, which is why they can never let that happen.”

Rosneft this week settled terms to borrow $22 billion from Western banks, to support its bid for assets auctioned from Yukos on March 27. The loan is the biggest raised by a Russian company to date, and was arranged by ABN Amro, Barclays, BNP Paribas, Calyon, Citibank, Goldman Sachs Group, JPMorgan Chase and Morgan Stanley. It comprises a $13 billion facility due in 12 months and a $9 billion credit which matures in 18 months.

BP yesterday insisted that it wanted to buy the Rosneft stake. “We are bidding to win,” a spokesman for TNK-BP said before Mr Putin met Lord Browne and Mr Hayward.

During the meeting, Mr Putin said: “This private company is actively developing in Russia, where it has increasing reserves, production and profits.”

It is understood that the two executives discussed the possibility of Russian energy companies cooperating with BP in countries outside Russia, as well as “various questions connected with the company’s activities in Russia,”.

If BP does win the auction, its holding in Rosneft would soar to more than 10 per cent. Last July BP invested $1 billion during the Russian company’s London IPO. That stake may be enough to get BP a place on the Rosneft board.

State-owned Rosneft, which has widely increased its power and grip on the Russian oil business under Mr Putin was, until BP’s interest, likely to be the only bidder at the auction.

Yukos, whose former head Mikhail Khodorkovsky is now in jail, was once Russia’s biggest oil company, but it was bankrupted in a series of massive tax claims which Yukos executives believe were part of a political campaign against Mr Khodorkovsky. The auction for Yukos’s assets would have even less credibility if there was only one bidder.

In 2004, Rosneft gained control over Yukos’s production unit after an auction won by Baikal Finance, a company whose business address was an office above a grocer’s shop in a small Russian provincial town. It quickly sold on the assets to Rosneft.

BP has come under pressure over its Kovykta oilfield in Siberia and has the example of Shell — which after political pressure offered in December to sell its stake in a $20 billion oil and gas project on Sakhalin Island to Gazprom — to see where the wind is blowing. and its sister websites,,,,, and are all owned by John Donovan. There is also a Wikipedia article.

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