BP’s man in Russia lives to fight again
The Kremlin, BP and four Russian moguls all want control of TNK-BP. Roger Baird reports.
The embattled chief executive of BP’s Russian joint venture TNK-BP, Robert Dudley, survived an attempt by its Russian billionaire partners to remove him on Monday – but he will have to do it all over again on Friday.
The screws are tightening around BP appointee Dudley, who survived a 3 to 2 vote against dismissal at an extraordinary meeting of TNK-BP Management committee two days ago.
The call for him to go came from the joint venture’s four Russian billionaire partners – Mikhail Fridman, Viktor Vekselberg, Leonard Blavatnik and German Khan. They own 50 per cent of the business through their AAR holding company, with BP holding the other 50 per cent.
But the BP man will have to face his opponents again at the end of the week at TNK-BP’s full board meeting where they are expected again to call for his resignation. Luckily for him, this will be difficult: its ten-strong board is evenly split between BP, led by chief executive Tony Hayward, and AAR appointees.
TNK-BP is an essential resource for the British giant: as Russia’s third largest oil business it produces 1.8m barrels a day. BP receives half of this, or 900,000 barrels per day; this accounts for a quarter of the oil giant’s total output of 3.9m barrels a day, making the Russian venture a central part of its operations and future.
Russia generated $2.3bn, or 13 per cent, of BP’s $17.8bn net income last year. This would be higher still if the Kremlin didn’t take such a large slice in tax. The real dispute between the parties is about the future ownership of the firm, amid increasing fears the Kremlin will ease out one of the partners to gain control of its Russian-based assets. To many, it seems clear that the increasingly nationalistic Russian authorities will no longer tolerate foreign ownership of energy resources.
Moscow is already in talks to take a controlling stake in the Kovykta gas field from TNK-BP, and has bought back a majority stake in the £5bn-rated Sakhalin oil and gas field from Royal Dutch Shell in the last two years.
After Monday’s vote BP said: “Bob Dudley is and remains an outstanding chief executive who has consistently acted with integrity in the interests of all the shareholders of the TNK-BP group. Under his leadership, the company has delivered outstanding returns to shareholders.”
But AAR has predictably vowed to keep fighting. The Russian venture claims Dudley is hindering the firm’s foreign expansion and is acting solely in BP’s interests rather than that of the wider company. The Russian partners also want greater representation on TNK-BP’s boards and fewer BP secondees at the company, which employs 90,000 workers in total.
AAR chief executive Stan Polovets said: “We are disappointed but not surprised by the results of the vote.” He added: “We have asked our partners from BP to cast a wide net and recruit a new chief executive from any other major oil company, except BP. Last time we checked, BP had not cornered the market on management talent.”
The controversy over the troubled company was raised by Prime Minister Gordon Brown during his first meeting with Russian President Medvedev at the G8 summit in Hokkaido, on Monday.
But Sergei Prikhodko, Medvedev’s foreign policy aide, said that the President had reiterated his view that this was a private dispute between shareholders.
Needless to say, with oil prices surging, few believe him. This leaves BP and Dudley sandwiched between four hostile oligarchs and a calculating Kremlin. Only a real optimist would bet on the British giant coming out ahead.
