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BP CEO meets potential buyers of Russian stake in TNK-BP

John Browne, British Petroleum's CEO, yesterday met two potential buyers of the Russian stake in the TNK-BP joint venture - Gazprom CEO Alexei Miller and Rosneft President Sergei Bogdanchikov.

Browne and Miller discussed "joint projects and interaction on trade in liquefied natural gas and agreed to meet again in the first quarter of 2007," a Gazprom spokesman said.

The meeting at Rosneft ended with the signing of shareholders' operating agreements on joint development of the Vostochno-Shmidtovskoye (Sakhalin 5) and Zapadno-Shmidtovskoye (Sakhalin 4) license areas.

Rosneft holds a 51% stake in each project, and BP 49%. The latter will also finance the entire geological exploration, including the drilling of test wells, before commercial drilling starts.

Investment in the project has already amounted to $80 million, and the partners will invest another $700 million in the next five years. BP's expenses will be covered from Rosneft's share of the output.

Several managers of Western banks said the two state-owned companies are potential buyers of Russian shareholders' stakes in TNK-BP. Sources close to the company did not deny that shareholders were interested in selling, but said there were no talks yet because there was a moratorium on selling the stakes until the end of 2007.

It is important for Browne to ensure the support of both Miller and Bogdanchikov, said a source close to the Gazprom management.

TNK-BP has recently been hit with numerous problems. The tax authorities presented it with a back tax bill for 2001-2003 totaling $1.9 billion (most of it has already been paid).

The British-Russian JV also risks losing two of its key gas assets, Rospan and the Kovykta field. The Natural Resources Ministry has threatened to revoke the license of its subsidiary Rusia Petroleum for Kovykta early next year, while the Prosecutor General's Office demands that Rospan International's license be revoked.

After Yamal prosecutors launched criminal proceedings on charges that Rospan violated its licensing agreements in October, Browne began seeking a meeting with Miller, said the source.

If a transaction with Gazprom or Rosneft goes through, the "new state-owned shareholder will most probably relieve TNK-BP of its political risks and will help the company resolve the issues with licenses and taxes," said Aton's analysts in a note.

Investors all over the world prefer private companies because they are usually managed better. "In Russia, however, the administrative resource is more important now, because it guarantees stability and, consequently, profit," said Konstantin Batunin, an analyst with Alfa Bank.

© Vedomosti

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