BP refuses to be intimidated by ‘strong-arm tactics’

Tony Hayward has a clear message for the Russian partners in TNK-BP, repeated several times in a conversation with the Financial Times last night: “We are not going to be intimidated by strong-arm tactics.”

In the view of London-based analysts and others who are sympathetic to BP’s cause, this is the most sensible thing its chief executive can say. He has to be prepared to fight on, because backing down would mean surrendering BP’s influence over the joint venture that accounts for a quarter of its production and a fifth of its reserves.

Yet the tough talk signals that TNK-BP could be in for a protracted conflict that will be damaging for the joint venture, for BP and for Russia’s oil industry.

Mr Hayward was keen to correct what he said were misperceptions of the fight for TNK-BP with the Alfa-Access-Renova (AAR) group of Russian shareholders.

This was not about the joint venture’s performance, he said, which had been “stunning”. In terms of organic production growth and reserve replacement, dividend pay-outs, costs for finding oil and return on capital, it had been the best in Russia in the years since it was established in 2003.

Neither was it about pressure from the Russian government, he added. “This has got nothing to do with state involvement,” he said, highlighting what he called “very helpful” remarks yesterday from Igor Sechin, Russia’s deputy prime minister.

Mr Sechin had said: “I think that BP brings in new technology and transparency which positively influence the company’s performance,” and called on the two sides to resolve their dispute.

Instead, Mr Hayward said, the battle was about “control and the future direction of TNK-BP . . . We want to invest in the long term, while our partners want to take cash out. So there is deadlock.”

Tim Summers, TNK-BP’s chief operating officer, warned that TNK-BP could lose up to 6 per cent of production if its Russian shareholders were to enforce cuts in capital expenditure.

He said the company could lose 1m to 5m tonnes of production in the next 12 months, should the Russian partners in the 50:50 oil venture push through plans to cut capex from $4.4bn (£2.2bn) to $3.5bn this year.

BP has resisted the move but both sets of shareholders are reviewing the investment plans.

Mr Hayward said it was up to BP and AAR to find a way through. “We need to negotiate in a grown-up way, and we are not going to be intimidated by all this nonsense.”