22 March 2013, 08:38

Rosneft, BP eye joint work

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Russia’s Rosneft oil major is pinning high hopes on implementation of a spate of strategic joint projects in collaboration with BP.

Rosneft CEO Igor Sechin said on Thursday that  the two companies were currently discussing terms of joint work on Russia’s inland and offshore oilfields and cooperation in a number of international projects.

On Thursday Rosneft closed a deal on buying TNK-BP shares and Rosneft/BP integration committee was meeting in London.

Deal with BP helps Rosneft to make progress

A deal with British Petroleum will help Russia’s state-run oil giant Rosneft to achieve great success, its chief executive Igor Sechin said at a meeting with President Vladimir Putin and chief executive of BP Robert Dudley.

On Thursday, all legal and financial formalities linked to the purchase of 100 percent of the assets of TNK-BP by Rosneft were completed.

According to Sechin, the company’s predicted production in 2013 will exceed 206 million tons of oil and 47 billion cubic meters of gas, while the annual revenue will be 4.9 trillion rubles or 163 billion US dollars.

President Vladimir Putin congratulated the heads of Rosneft and BP.

“This was a huge and complicated deal worth 61 billion US dollars,” the President said.

On his part, Robert Dudley said that BP would hope for efficient cooperation with Rosneft. He said that BP supports its Russian partner in every possible way and will stand behind it, adding that they came in Russia seriously and for the long haul. 

BP earns $16.65 billion in cash and becomes the second biggest shareholder of Rosneft after the Russian state, with a 19.75% stake. AAR gets $28 billion. The two previous owners get $1 billion each as a bonus interest fee.

The new Rosneft will produce 200 million barrels of crude oil per day and become the largest producer in the world, with 28 billion barrels of oil reserves.

The company will be headed by the current Rosneft vice-president, Eduard Khudainatov, while most of the TNK-BP senior managers, including executive director German Khan, will leave their posts. Robert Dudley is expected to make it to the board of Rosneft. He could also be joined by another BP representative.

Given TNK-BP’s oil fields are more depleted than those of Rosneft, the company’s efficiency will be adversely affected. Its operating expenses are expected to rise from $2.9 to $3.7 per barrel produced, and from $3.04 to $3.17 per barrel refined. The refining throughput will drop from 48.5% to 45%. But still it is a good bargain for Rosneft, believes Investcafe analyst Yulia Voitovich.

In order to complete the deal, the Russian oil major this week borrowed almost $6 billion from Gazprombank, the largest transaction in the history of Russia’s banking system.

Rosneft also agreed for another $29.8 billion line of credit with a group of international banks led by Bank of America, Merrill Lynch and Citigroup. The first transaction took place last December, with the second part transferred in February.

After the purchase is finalized the company’s debt service coverage ratio will rise from 1.2 to 2.2. But according to Voitovich, Rosneft “could lower debt load very quickly” courtesy of diversification of loans.

Voice of Russia, TASS, RT

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