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The Wall Street Journal: BP: ‘Mr. Putin may make TNK-BP an offer it can’t refuse.’

“Keep your friends close but your enemies closer,” is the advice Don Vito Corleone gives his son in “The Godfather.” BP’s outgoing chief executive, John Browne, might say the same about Russia to the oil group’s incoming CEO, Tony Hayward. Both men were to meet with President Vladimir Putin Friday. Two quite separate issues will probably top the agenda. The first is whether a Russian state-owned energy firm might muscle into BP’s Kovykta gas field. The second is whether the same might happen at BP’s Russian joint venture, TNK-BP.

The giant Kovykta gas field is strategically placed next to China, has reserves twice the size of Norway’s, but development has stalled for lack of regulatory permits. Getting Gazprom involved would change that, as BP well knows. TNK-BP’s current share of the field is 37%, so it might be happy to see Gazprom’s entry dilute that to around 25% — similar to Royal Dutch Shell’s stake in the Sakhalin project. Inefficient Gazprom may not be an ideal partner, but BP has always made clear that the project needs to have Gazprom involved. That’s Russian reality. You need to keep your “enemies” close.

Then there is the ownership question at TNK-BP. There is no sign at the moment that BP’s current co-investor, the oligarch-owned group Alfa Access Renova, wants to sell out. However, Russian state-owned energy firms have made clear that they want to buy in. Having a state-controlled firm on board would open the way for TNK-BP to develop strategic Russian oil reserves that it currently can’t.

The most interesting question is who TNK-BP’s new partner might be. With Gazprom taking a stake in Kovykta, the Kremlin would probably want to balance that by seeing Rosneft move in. That’s goodish news for BP, which considers Rosneft a friend, having bought a stake in the firm during its initial public offering last year. It also makes sound political sense for the Kremlin, which likes to maintain tension between its two energy national champions. Mr. Putin may make TNK-BP an offer it can’t refuse.

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