A change of ownership at Russian oil giant TNK-BP Holding (TNBP.RS) isn't a foregone conclusion if BP PLC (BP) takes a more compromising stance toward the wishes of its Russian partners, a prominent shareholder said Wednesday.
Disagreements over TNK-BP's strategic direction have spilled out into public view in recent weeks, raising questions about BP's ability to preserve its key Russian asset.
"Fifty-fifty is OK," said Viktor Vekselberg, who together with two other Russian billionaires, Mikhail Fridman and Len Blavatnik, owns 50% of the company. "We just want BP to accept some of our points."
BP wasn't immediately available for comment.
The Russian shareholders, including Vekselberg, say London-based BP violated some tenets of a shareholder agreement and has resisted expansion ideas. BP has accused its Russian partners of using these claims as part of a broader effort to gain control.
The conflict underscores the challenges of navigating energy partnerships in a time of record-high oil prices, especially in Russia, marked by opaque politics and the presence of powerful state-controlled oil and gas companies.
The TNK-BP board is set to meet in Cyprus on Friday.
On the agenda are four items the Russian side wants approved, Vekselberg said. Their demands include: TNK-BP Chief Executive Robert Dudley and other top company officials, expatriate as well as Russian, should be removed, with a new management taking control on Jan. 1, 2009; the right to appoint board members to TNK-BP subsidiaries should be transferred from Dudley to the shareholders; all BP employees seconded to TNK-BP should become bona fide employees of TNK-BP; and, power of attorney should be restored to Russian executives.
Dudley revoked power of attorney for Russian executives at the beginning of the year, Vekselberg said, adding that he lost such privilege. He also added that he has no problem with BP retaining the right to nominate TNK-BP's CEO.
If efforts to negotiate a cease-fire between shareholder groups fail, then the Russian shareholders, who are already consulting with lawyers, are prepared to take the matter to international arbitration, as called for under the shareholders agreement.
Vekselberg, who values the entire company at about $60 billion, said BP rejected all proposals for TNK-BP's expansion beyond Russia and the Ukraine, including potential projects in Kurdistan and Cuba. Kurdistan is an autonomous region of Iraq that has begun giving oil-production licences to foreign companies.
In order to better align the interests of the Russian side and BP, Vekselberg said he was still open to the prospect of swapping shares in TNK-BP for BP stock. Because BP's response to the idea was tepid, Vekselberg said, negotiations on such a transaction or a variation thereof haven't progressed.
With Russia's clout growing with high oil prices, the government has encouraged Russian businesses to expand abroad. However, contrary to what some observers are saying, the Russian side of TNK-BP isn't doing the Kremlin's bidding, Vekselberg said.
"The Kremlin didn't ask us to do this," he said, referring to the pressure from immigration and tax officials being exerted on TNK-BP.
Some industry analysts have expressed doubts that BP will be able to retain its 50% stake, because the Russian government has unofficially capped foreign ownership of hydrocarbon reserves at a level well below that since the TNK-BP deal was struck in 2003.
Analysts also believe that a state-controlled company such as OAO Gazprom (OGZPY) or OAO Rosneft (ROSN.RS) will end up with a majority stake in TNK-BP if a settlement is reached between the warring shareholders.
"Gazprom has never given us a proposal," Vekselberg said.