Differences over the finalization of the Kovykta gas field sale are tightly interwoven with a very public spat between the shareholders of Russo-British OAO TNK-BP (TNBP.RS), people familiar with the matter said Friday.
In particular, mounting speculation that the venture's Russian shareholders may have to make way for a state concern has pushed them to secure guarantees for other parts of their business empire, they said.
Conversely, a resolution of the internal dispute may also facilitate the finalization of the divestment of the field to OAO Gazprom (GAZP.RS), which has been bogged down for a year, the people said.
However, they said systematic disagreements over the choices made on international expansion, notably in Iraq, had also fueled the internal strife.
TNK-BP, Russia's No. 3 oil producer, has been wracked for weeks by conflict between BP PLC (BP) which holds a 50% stake, and its Russian partners - Alfa Group, Renova and Access Industries, respectively, controlled by billionaires Mikhail Fridman Viktor Vekselberg and Len Blavatnik.
Last week, the two sides split over the fate of TNK-BP Chief Executive Robert Dudley, a former BP employee. The Russian shareholders said he was biased in favor of BP and demanded he be removed; BP refused.
The conflict, which has been brewing for months, escalated because of disagreements over the final terms of a sale of the Kovykta field in Siberia to Gazprom, a transaction agreed in principle in June last year. Vekselberg, who, as TNK-BP's head of gas is in charge of the talks with Gazprom on Kovykta, pushed for a supply deal for his own petrochemical business outside the joint venture, the people said.
That slowed down the discussions and set him in a collision course with BP and Gazprom, they said. "If it was down to BP, the deal would have been signed already," one person said. As the deal got tangled up, BP felt Vekselberg's demands were "putting salt on the wounds. It got personal," another person added.
Vekselberg told Dow Jones Newswires that "exchanges are constant" over Kovykta with Gazprom, but he declined to say more. BP, Access and TNK-BP declined to comment. Alfa didn't return a request for comment.
In addition, the Russian partners got frustrated by BP's reluctance to let the joint venture expand outside Russia.
"BP felt there was so much to do in Russia it made no sense to go abroad" for TNK-BP, one person said. "It did not want to create its own competition," another person said.
After two years of insistence, the Russians got a nod from their British partner. BP agreed last year to diversify TNK-BP as long as it fit the venture's core technical skills developed in the Russian onshore and that the deals were commercially viable.
However, differences erupted again over a TNK-BP approach to enter Iraqi Kurdistan, supported by the Russian shareholders, the people said.
The plan put BP directly at odds with its ambitions to sign technical agreements on large Southern Iraq fields. Iraq's central government has said it would bar any company clinching deals in Kurdistan to get contracts in the rest of the country.
"BP stopped it," one person said about TNK-BP's Kurdish proposal. Instead, at least one Russian shareholder, Alfa, was granted a license under the name Norbest, the people said.
In Turkmenistan, TNK-BP's next potential target, the partners disagree over what acreage they should look into. The Russian shareholders are interested in onshore licenses while BP, as a separate company, is looking into the offshore.