BP Russia chief to go in bid to settle row

BP is understood to be close to signing an agreement with the Russian oligarchs who co-own TNK-BP, which is Russia's third-largest oil company and responsible for 25% of BP's production of 3.5 million barrels of oil a day.

The deal, it is reported, will see BP keeping its 50% stake in TNK-BP in return for the departure of Robert Dudley, the joint venture's chief executive.

Talks are continuing today to resolve a dispute which has not only been a major headache for BP's bosses, chief executive Tony Hayward and chairman Peter Sutherland, but has threatened to tarnish Russia's reputation in the wider corporate world.

Dudley was hounded out of Russia five weeks ago after an extraordinary campaign by dissident shareholders, who had variously accused him of financial, environmental and labour relations malpractices. Pressure had also been heaped on Dudley and other BP executives through the non-renewal of their Russian visas.

Dudley's departure will be seen as a victory for TNK-BP's oligarch shareholders Mikhail Fridman, German Khan, Viktor Vekselberg and Len
Blavatnik who hold their 50% stake in the joint venture through the Alfa-Access-Renova group.

The departure of the American Dudley will not reflect well on Hayward, who at BP's half-year results at the end of July launched a stinging attack on the Russians' strong-arm tactics.
The BP chief executive is, however, likely to brandish the agreement with the oligarchs as a major success.

The deal is said to confirm BP's continuing 50% holding in TNK-BP. It comes amid fears that BP's stake would be greatly diluted in an assets grab similar to that which hit Shell when it was forced to halve its stake in the giant Sakhalin gas project in Russia's Far East to a minority holding.

The TNK-BP accord, it is understood, will include a float of part of the joint venture to allow the oligarchs to cash in some of their holdings. It is also likely to see a shake up of TNK-BP's currently split board. Its make-up in the future is likely to be four BP people, four representatives of the oligarchs, and three new independent directors.

A BP spokesman said talks are continuing. "We would hope to reach an agreement very soon," he said. BP shares, under the cloud of the TNK-BP rift in recent weeks, rose 12p to 518p.

Margins fall despite oil-price highs

Oil companies' profit margins are falling despite the record run in oil prices, which this summer saw crude hit all-time highs.

Latest research reveals the rising costs of extracting oil — including the availability of rigs, labour costs and the price of energy used to lift supplies — have outpaced the revenues that the producers have been able to lock in from the soaraway prices.

Producers have seen their return on capital fall 3.5 percentage points to 19%, according to industry research firms IHS Herold and Harrison Lovegrove.

While oil and gas prices have been rising, the research found the producers only marginally increased production and failed to up their reserves.