How BP’s exit plan is changing the Russian energy map
BP’s plan to sell its 50pc stake in TNK-BP will be critical to the future of the British oil giant – but it may also be a catalyst for a wider shake-up of the Russia’s energy sector.
The corporate soap opera starring BP and its oligarch partners, AAR, looks set to run for many months. Some still doubt that BP really wants to exit the lucrative venture. They suggest its chief executive, Bob Dudley, could be playing a tactical game to “smoke out” the troublesome oligarchs who are proving impossible to work with – to make them co-operate or sell their stake to a more compliant bedfellow. BP insists it isn’t bluffing and really does want to sell – an idea welcomed by some in the City, so long as BP can get a good price.
Meanwhile, the oligarchs say they do not want to exit, and that they want to buy BP’s stake – yet they would also be willing to sell their stake for the right price.
Amid the contradictory messages, analysts say, one thing seems clear: at least one of the partners is likely to sell, and that means half of Russia’s third largest oil company is up for grabs.
How that pans out will be revealing for the future of the country’s oil and gas industry.
“BP’s announcement raises important questions about the future shape of the sector as a whole in Russia,” says John Lough, Russian energy expert at Chatham House and a former advisor to TNK-BP. “The impending change of ownership will affect the balance of the Russian oil and gas industry.”
Favourite to buy BP’s stake is, effectively, the Russian state – most likely through oil producer Rosneft, or holding company, Rosneftegaz.
Analysts believe that Vladimir Putin, recently returned to the Presidency, wants to further extend the state’s grip.
“I think they look at TNK-BP as a kind of Russian state asset,” says Iain Reid at Jefferies. “Before the Soviet Union broke up, these were all state assets. I think Putin would like to get as much as possible back into state control. I would be very surprised if it doesn’t end up with Rosneft.”
Even if AAR buys BP’s stake, Mr Lough at Chatham House argues, it is likely to have to sell it on to one of the state-run companies.
The effect would be to put a further 8pc of Russia’s oil production in state hands – on top of the 30pc it directly controls, and 12pc it indirectly controls through secretive ‘private’ company Surgutneftegaz.
Speculation that Rosneft’s role is to grow has been fuelled by last month’s appointment of Igor Sechin as its chief executive. Sechin, a formidable Putin ally dubbed Darth Vader, is an anti-privatisation hawk who built up Rosneft and became Russia’s energy tsar. Some felt that Sechin’s influence had waned of late, not helped by his masterminding of BP’s failed attempt to tie-up with Rosneft last year. But the important Rosneft role appears to signal that he is back.
Many believe it most likely that Sechin has been given a mandate to mastermind a bigger shake-up of the state ownership model and extend the role of Rosneftegaz, having recently been appointed to its board.
If Sechin does use Rosneft or Rosneftegaz to buy BP’s stake in TNK-BP, that in turn raises questions for the AAR oligarchs’ role. Some suggest they would inevitably also then head for the door, their influence overpowered by the state and with Sechin perhaps keen to punish them for blocking the BP-Rosneft deal. Others are not sure the picture is so clear – noting oligarch Mikhail Fridman has proven a powerful lobbyist.
If Sechin has been given a mandate to carry out a wider shake-up of the oil and gas sector, the spotlight will also fall on Gazprom, the gas-focused, state-controlled behemoth which some suggest could be target for a shake-up.
The company, headed by Alexey Miller, is seen to be already struggling with too much on its plate elsewhere – it has seen delays with its the giant Shtokman gas field in the Barents Sea. “Gazprom is seen as in need of renewal,” says one industry source. “It is quite inefficient in certain areas.”
Analysts at risk consultants Maplecroft say Putin’s return to the presidency will see him “engage in restructuring the elites that have underpinned his influence over government”.
So a shake-up of state energy assets could perhaps benefit the likes of oil trader Gennady Timchenko, a very close associate of Putin and a major shareholder in independent gas producer Novatek.
Keeping a close eye on the developments will be Western oil majors. Despite an apparent drive for greater state expansion, Russia also needs foreign help to develop the vast but challenging reserves of the Arctic.
Putin and Sechin “are going to have to be willing to allow foreigners in and have less state ownership in certain types of projects,” says Lysle Brinker, director of energy equity research at IHS. “All the biggest companies still recognise that there is so much tremendous potential resources in Russia that you just can’t ignore it – even though it’s a very challenging environment in which to do business.”
And that is why some believe that even if BP exits the TNK-BP soap opera, it may still find itself a role in the wider Russian energy play. “BP has set something interesting in motion,” one industry source says. “Some pieces are going to now move around on the board – and they may see potential opportunities created.”
