BP sells $1.8bn in assets to TNK-BP

BP has agreed to sell its oil and gas production businesses in Venezuela and Vietnam to its Russian affiliate TNK-BP for US$1.8 billion (Dh6.6bn) as it continues to raise funds after the Macondo oil spill in the Gulf of Mexico.

The UK-based oil group said the deal covered its minority interests in three oil and gas joint ventures in Venezuela as well as its 35 per cent operating stakes in two gasfields and associated pipeline and power generation infrastructure in Vietnam.

BP said the sales were part of its plan, announced in July, to sell up to $30bn of assets by the end of next year to help the company meet financial obligations arising from the oil spill this year in the Gulf of Mexico. It has already announced deals to sell more than $9bn of assets in countries including the US, Canada, Egypt, Colombia, France, the UK and South Africa.

The agreement "is further evidence of the rapid progress BP is making towards the divestment target we set out in July", said Bob Dudley, the group chief executive of BP. "These are robust businesses which offer both existing production and potential opportunities for future growth. We believe they will offer TNK-BP a solid foundation as it builds its business outside Russia."

BP owns 50 per cent of TNK-BP, its joint venture with a group of Russian billionaires. For the Russian company, the deal could be transformative.

TNK-BP produces all its oil and gas from Russia, mostly from European territories west of the Ural Mountains. It also owns and operates four oil refineries in Russia and one in Ukraine. Now, because of BP's recent misfortune, TNK-BP is set to become an international oil company in its own right.

"The acquisitions in Venezuela and Vietnam mark a milestone in TNK-BP's strategic expansion in the global energy market," said Mikhail Fridman, the joint venture's chief executive. "Given Russia's strong relationships with Vietnam and Venezuela, we are sure that this transaction will create significant value both for TNK-BP and our local partners."

TNK-BP agreed to pay BP a $1bn cash deposit on October 29. The balance of the payment is due on completion of the transaction, which is subject to regulatory and third-party approvals.

BP estimated that 270 million barrels of oil equivalent of proved oil and gas reserves were associated with the assets covered by the transaction. It said the majority of the 140 staff it employed in Vietnam and its 35 workers in Venezuela were expected to transfer to TNK-BP. BP's other business activities in Vietnam and Venezuela, notably its "significant" Vietnamese lubricants business, would be unaffected.

This year, amid deteriorating relations with the US, Venezuela established its first joint venture with Russian companies - a consortium of five Russian oil producers including TNK-BP - aimed at extracting crude from vast untapped deposits of ultra-heavy oil in its Orinoco belt. The South American nation, a founding member of OPEC, has also signed oil deals with Cuba and Iran.

Last month, Russia and Vietnam agreed to co-operate on oil, gas and nuclear energy as part of a wider diplomatic push to strengthen trade ties between the two former communist allies.

A blowout at BP's Macondo exploration well in April sent more than 4 million barrels of crude spewing into the Gulf of Mexico in the biggest marine environmental disaster in US history. BP has established a $20bn escrow fund to pay compensation claims and legal damages resulting from the spill.

tcarlisle@thenational.ae