MOSCOW (AP) — Russian state-owned oil giant Rosneft strengthened its hold on the country's lucrative oil industry when it sealed a deal Monday to buy TNK-BP, the 50-50 joint venture between BP, the British energy country, and a group of Russian oil oligarchs.
The deal will allow Rosneft, already the country's top oil producer, to increase its global profile. The new combined company will leapfrog ExxonMobil Corp. to become the world's largest publicly traded producer of oil and gas, in terms of output — ExxonMobil's latest earnings show its daily output at 4.2 million barrels of oil, below the expanded Rosneft's projected 4.6 million.
As part of the deal, BP succeeds in unloading its 50 percent stake in its troublesome joint venture and in return gets $17.1 billion in cash from Rosneft and a 12.84 percent stake in Russia's biggest oil company. The British company is also planning to use some of the money it's reaped from the sale to raise its stake in Rosneft to 19.75 percent. BP will also get two seats on the Russian company's nine-member board.
In a parallel development, Rosneft said it had agreed to buy the other 50 percent in the joint venture from AAR, for $28 billion, and that the deal was “entirely independent of the transaction with BP.” AAR confirmed that a memorandum of understanding has been signed but added that it is still subject to other conditions.
Rosneft, formed in 1993 out of the former Soviet state oil and gas authority, is currently 75 percent owned by the government. The remaining shares are either traded publicly on the Russian stock market or owned by the company and its managers. It is not yet clear how much of Rosneft's existing shares BP will take or if the Russian company will have to issue new stock to seal the deal.
Rosneft CEO Igor Sechin broke the news about the deal Monday afternoon to President Vladimir Putin, telling him that the deal would be worth about $61 billion.
“This is a good big deal which is important not only for Russia's energy sector but for the entire Russian economy,” Putin said in remarks carried by Russian television.
Russia is an important part of BP's business, accounting for a quarter of its oil production. BP Chief Executive Bob Dudley has looked to the country's vast oil resources as a key ingredient to the company's recovery from the disastrous oil spill in the Gulf of Mexico.
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