BP May Sell Venezuela Oil Stakes to Russian TNK-BP Venture
Storage tanks sit elevated at the Petroleos de Venezuela SA, PDVSA, Amuay refinery in northern Venezuela. Source: PDVSA via Bloomberg
BP Plc has told Venezuela’s state oil company it’s interested in selling stakes in three projects to its Russian venture, TNK-BP, Petroleos de Venezuela SA Vice President Eulogio del Pino said.
BP needs the Venezuelan government’s approval to begin negotiations on the proposed sale, del Pino said in a mobile phone text message. BP, seeking to overcome cleanup costs and liabilities from the Gulf of Mexico oil spill disaster, didn’t indicate a value for the assets, he said late yesterday.
“We received a letter from BP raising the possibility of transferring its stakes of 16.66 percent in Petromonagas and its minority stakes” in two further ventures to TNK-BP, he said.
BP said July 27 it plans to dispose of as much as $30 billion in assets in the next 18 months, after reporting a record second-quarter loss because of the costs of the Gulf of Mexico oil spill. BP is in talks with TNK-BP over the sale of a $1 billion package of Venezuelan projects, the Times reported earlier today, without saying where it got the information.
“TNK-BP views this as an opportunity to further develop its international business portfolio and expand its presence in Venezuela,” TNK-BP spokesman Nikolay Gorelov said by e-mail today.
The Moscow-based company, which is half owned by BP, supports moves by the U.K. company to “strategically realign” its asset base in Venezuela and is examining the opportunity, Gorelov said.
‘Highest Price’
“Both companies may lose as a result of such a deal,” said Alexander Nazarov, a Moscow-based analyst with IFC Metropol. “BP needs to get the highest price for its assets. TNK-BP would be seeking a considerable discount from BP, being a BP associate. Moreover, the deal would be subject for a close consideration by regulative authorities, as a related party transaction.”
Vladimir Buyanov, a BP spokesman based in Moscow, said the company wasn’t commenting on its divestment plans.
BP said last week that it sold $7 billion of assets in the U.S., Canada and Egypt to Apache Corp. It also plans to sell holdings in Pakistan and Vietnam. BP may revive the sale of fields in Alaska after they failed to make it into the Apache deal, two people with knowledge of the matter said last week.
“TNK-BP would have no problem” paying about $1 billion dollars for new assets, said Svetlana Grizan, a Moscow-based analyst with VTB Capital.
Heavy Oil
In Venezuela, BP has stakes in the Petroperija and Boqueron oil fields and the Petromonagas heavy oil-upgrading project, which produces 110,000 barrels of oil a day, according to BP’s website. Petroperija and Boqueron produce a combined 19,500 barrels a day, according to PDVSA’s website.
The largest, Petromonagas, was formerly known as Cerro Negro and was operated by Exxon Mobil Corp. It includes wells, pipelines and an upgrader to convert tar-like crude into lighter synthetic crude.
Venezuela took over the project on May 1, 2007 along with other privately operated oil ventures as part of a nationalization drive by President Hugo Chavez. Exxon demanded about $5 billion in compensation for the project, according to Venezuela’s ambassador to the U.S. at the time, Bernardo Alvarez.
Morgan Stanley and Royal Bank of Scotland Group Plc may be involved in BP’s negotiations with TNK-BP, the London-based Times said in its report.
Hayward’s Job
The Gulf of Mexico disaster has cost Tony Hayward his job as BP’s chief executive officer. He will be replaced Oct. 1 by Robert Dudley, who was forced to leave Russia two years ago in a battle for control of the 50-50 venture with the company’s billionaire shareholders.
BP plans to nominate Hayward as a non-executive director of TNK-BP, the U.K. producer said July 27. He will also remain on the BP board until Nov. 30.
TNK-BP shareholder German Khan said July 27 he had congratulated Dudley on his appointment. “We also welcome the possibility that Tony Hayward will be named to the board of TNK- BP,” Khan said. “We think he’s a highly qualified specialist and was the victim of a subjective situation.”
Moscow-based TNK-BP accounts for about a quarter of BP’s production, a fifth of reserves and about a tenth of earnings. In 2008, TNK-BP’s partner AAR, a group of companies owned by Khan, Mikhail Fridman, Viktor Vekselberg and Len Blavatnik, called for Dudley’s ouster in a dispute over strategy at Russia’s third-biggest oil company, alleging he ignored their interests. Dudley denied the charge.
Reducing Debt
BP reported a record $17.2 billion second-quarter loss on July 27. It is reducing its debt to as little as $10 billion in the next 18 months after cutting it by $5 billion to $23.2 billion last quarter from a year earlier.
To raise funds for President Barack Obama’s $20 billion spill fund and shore up investor confidence, BP last month canceled the $10 billion dividend for three quarters and said it would reduce investment to raise funds. BP has spent $4 billion on the spill response so far, and analysts say the total bill is likely to be about $33 billion, according to the median of 11 estimates in a Bloomberg survey.
To contact the reporters on this story: Jose Orozco in Caracas at jorozco8@bloomberg.net; Natalie Obiko Pearson in Mumbai at npearson7@bloomberg.net.
Rate These Stories
Rate this Page