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Friday, November 09, 2007

British Petroleum, Gazprom Step Up Talks on Purchase of TNK-BP Stake

November 9, 2007 - Reuters By Dmitry Zhdannikov – MOSCOW — BP and Gazprom are holding intensive talks on the possibility of Gazprom buying into BP’s Russian venture, TNK-BP, industry sources said Wednesday. Such a deal would mark another milestone in a Kremlin drive to reassert control over the energy industry, which has alarmed foreign oil majors but not deterred them from doing business in resource-rich Russia. BP chief executive Tony Hayward, who flew to Moscow for high-level talks in May and September, met Gazprom’s chief executive, Alexei Miller, again Tuesday night. “The last meeting took place in Germany at [Tuesday’s] Champion’s League football match between Schalke 04 and Chelsea,” a Gazprom source said. Photographs of the meeting showed the two bosses at the match, smiling and draped in blue-and-white Schalke scarves. BP has a 50 percent stake in TNK-BP, the country’s third-biggest oil producer, while a group of Russian and U.S. shareholders owns the remaining 50 percent. BP’s spokesman in Moscow, Vladimir Buyanov, confirmed that the two chief executives met Tuesday, but declined to comment on the nature of their talks. “It is natural for the companies’ heads to meet from time to time. I would also remind you that BP, Gazprom and TNK-BP signed a deal in June to set up a strategic alliance,” he said. Under the pact, Gazprom was to buy TNK-BP’s giant Kovykta gas field in eastern Siberia for $700 million to $900 million, while the three firms also plan a broader international venture. The Kovykta sale is due to close before the end of the year, but an industry source said that now it might not happen. “I see a chance of Kovykta never happening at all. It would make no sense if there is a broader deal,” he said. Another industry source said a five-year lock-up agreement that the shareholders signed when BP bought its stake in TNK-BP in 2003 would expire within months. “Talks have intensified,” said the source, who suggested that BP had become keener to link up with a Russian state company since Hayward took charge at BP from John Browne in May. A source close to TNK-BP’s owners said its billionaire shareholders, Viktor Vekselberg, Len Blavatnik, Mikhail Fridman and German Khan, were open to the idea of a sale. At market prices, 50 percent of TNK-BP would be worth $18.5 billion. Vekselberg and Fridman have both denied that they have plans to sell, but that has not quelled speculation of a deal before voters elect a successor to President Vladimir Putin in March. Gazprom served as the vehicle through which the Kremlin regained control of the vast Sakhalin-2 oil and gas project from Shell a year ago. Shell chief executive Jeroen van der Veer saying that the English-Dutch company would enter a “huge-scale” oil and gas project on the Yamal Peninsula.

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