The similarities between the biggest Russian and U.S. oil producers end there. An enlarged Rosneft will employ more than 210,000 people, almost three times as many as Exxon. Rosneft’s oil and natural gas reserves will be 7 percent larger, while the traded value of Russia’s state-run oil company will be $292 billion less than Exxon.
Rosneft is now bigger than Exxon.
“Putin Is the New Global Shah of Oil”
y Marin Katusa via Casey Research,
Exxon Mobil is no longer the world’s number-one oil producer. As of yesterday, that title belongs to Putin Oil Corp – oh, whoops. I mean the title belongs to Rosneft, Russia’s state-controlled oil company.
Rosneft is buying TNK-BP, which is a vertically integrated oil company co-owned by British oil firm BP and a group of Russian billionaires known as AAR. One of the top-ten privately owned oil producers in the world, in 2010 TNK-BP churned out 1.74 million barrels of oil equivalent per day from its assets in Russia and Ukraine and processed almost half that amount through its refineries.
With TNK-BP in its hands, Rosneft will be in charge of more than 4 million barrels of oil production a day. And who is in charge of Rosneft? None other than Vladimir Putin, Russia’s resource-full president.
TNK-BP has been an economic dream, producing many billions in dividend payments for its owners – but it has been a relations nightmare. The partners have fought repeatedly. In 2008 Russian authorities arrested two British TNK-BP managers amid a dispute over strategy that forced then-CEO Bob Dudley (who now heads BP) to flee Russia – and that is just one of many partnership scandals.
The writing has been on the wall for TNK-BP since this time last year, when one of the AAR billionaires quit his role as CEO of the venture and declared that the relationship with BP had run its course. Since then speculation has raged over who might buy into the highly profitable venture.
Now we know: Rosneft is buying the whole thing, in a two-part deal. In the first part, Rosneft is acquiring BP’s 50% stake of the joint venture in exchange for cash and Rosneft stock worth $27 billion. The deal will give BP a 19.75% stake in Rosneft. In stage two, AAR would get $28 billion in cash for its half, though this deal is not yet finalized.
Finalized it will be, however, because the billionaires of AAR are now eager to sell, rather than remain in a joint venture with the powerful Russian oil company. Rosneft gained much of its current heft at the expense of another Russian oligarch whom Putin threw under the bus, and the billionaires of AAR know they could easily meet the same fate if they try to partner with Rosneft as equals.