* AAR gets $27.73 bln for its half of TNK-BP
* BP gets $12.48 bln, 19.75 pct Rosneft stake for its half
* Rosneft now a bigger oil producer than Exxon
* Transfers finalised during all-night session with Putin
* AAR partners plan new ventures in oil, telecoms
* BP confirms its cash is outside Russia
By Vladimir Soldatkin and Andrew Callus
MOSCOW/LONDON, March 21 Russian state oil
company Rosneft closed its deal to buy TNK-BP
from UK-based BP and four tycoons on Thursday,
releasing $40 billion cash to the sellers and becoming a bigger
oil producer than Exxon Mobil.
The $55 billion deal, which also gives BP a near 20 percent
stake in Rosneft, was announced last year after months of on-off
negotiations. It is the biggest in Russia's corporate history.
It tightens the government's grip on the energy sector and
is a victory for Rosneft chief Igor Sechin, a close confidant of
Russian President Vladimir Putin, creating a business with
annual production of about 4.6 million barrels of oil
equivalent, more than Exxon Mobil, the world's No.1
The deal gives Rosneft an expert international shareholder
and extra oil output revenue it can put to work to explore
Russia's vast reserves and to replace ageing and depleting
fields. It hopes to extract $10 billion a year of costs savings.
BP, selling one half of the business, gets some hard cash in
the bank that reduces its dependence on an uncertain future in
the country. It has promised some of the $12.3 billion to
shareholders, and can set the rest against its multibillion
dollar Gulf of Mexico oil spill liabilities.
Cash also goes to the private businessmen who owned the
other half of TNK-BP to fund their international ambitions.
A BP spokesman confirmed that the company's cash was in the
bank, and outside Russia. BP has made huge profits in its
20-year history there, but where increasing state involvement
has hampered its business plans over the past decade.
TNK-BP was created in 2003 by a merger of BP's Russian
operations with those of the Alfa-Access-Renova (AAR) consortium
of four Soviet-born billionaires, some of whom will stay in the
oil industry by setting up international investment business.
Thursday's deal has brought the state share in Russia's oil
sector, the world's largest by output, to more than 50 percent.
It has drawn criticism from some analysts and managers of
non-state enterprises, who said it would hinder competition and
The acquisition closed three months ahead of its June 30
deadline, as predicted in an exclusive Reuters story of Feb. 22.
"This is a historic day for BP in Russia," BP Chief
Executive Robert Dudley said in a statement. "BP has invested in
Russia for more than 20 years and for a decade we have been
Russia's largest foreign investor through our involvement with
ALL-NIGHTER WITH PUTIN
Dudley finalised the massive and complex cash and stock
transfers in an all-night round-table session with Rosneft Chief
Executive Igor Sechin, Russian President Vladimir Putin,
attendant lawyers, and bankers from Bank of America Merrill
Lynch and CitiGroup, at Putin's official residence in Moscow.
Both Dudley and Sechin were in London for a news conference
on Thursday evening at which Sechin, a close Putin confidant and
former deputy prime minister, said BP would be "welcome" to join
exploration projects with his invigorated company.
"The pot is so enormous that we would welcome BP at one of
our larger projects," he said. "We already know what they would
prefer to develop and in the near future we will find the one."
He said BP would get no special treatment over rivals like
Exxon, Statoil and ENI, which have already
signed up to work in the Arctic on some of Rosnefts 41 offshore
licences, although both he and Dudley pointed out that BP would
benefit anyway as a one-fifth Rosneft shareholder.
Dudley, under huge pressure in recent months as the deal
came together during ongoing oil spill litigation in the United
States, looked more relaxed than he did a few weeks ago at the
company's fourth quarter results presentation.
CHEAP CHINESE CASH
To acquire TNK-BP, which pumps oil at the rate of around 1.5
million barrels per day, Rosneft had to borrow up to $40
billion, mostly from Western banks. It has managed to cover its
most immediate needs by lining up a syndicated loan as well as
$10 billion in financing from traders Vitol and Glencore
According to industry sources, Rosneft has been in talks
with China to secure cheaper loans in exchange for boosting oil
supply to the world's top energy consumer.
Rosneft paid $27.73 billion cash to AAR for its half of
Russia's third-largest crude producer.
The deal with BP nets the British company $12.48 billion in
cash, including a $700 million dividend paid out in December
after the deal was struck, plus an 18.5 percent Rosneft stake
that lifts its holding in the state firm to 19.75 percent.
BP will have two seats on the Rosneft board, including one
offered to Dudley, who served as chief executive of TNK-BP until
The AAR part of the deal will share the cash pot between
Mikhail Fridman, German Khan, Viktor Vekselberg and Len
Blavatnik, all of whom emerged as tycoons after the Russian
privatisations of the 1990s.
Khan, who effectively heads TNK-BP and is Fridman's partner
in the Alfa Group consortium, sought advice and broached
"Alfa Group is currently setting up a major, new
international investment business which draws on the group's
significant expertise in oil and gas and telecoms, looking for
long-term, strategic investment opportunities in Russia, North
and South America, Asia and Africa," Stan Polovets, the CEO of
AAR, told Reuters.
He added that the new company will receive a significant
part of the proceeds from the sale of TNK-BP, of which Alfa
Group's share is close to $14 billion.
Sources have told Reuters that mining tycoon Vekselberg of
the Renova Group and Blavatnik of Access Industries, are likely
to bow out and focus on other ventures and charity work.
One of the holding companies in TNK-BP's structure is based
in Cyprus. Sechin said the bank closures there of recent days as
a financial crisis rages did not result in any losses for any