Britannia Radio

From The Times

May 13, 2009

Control of Russian venture TNK-BP slips away from BP

Robin Pagnamenta, Energy and Environment Editor

BP's troubled Russian subsidiary, TNK-BP, is slipping farther from its grasp amid fresh delays to the appointment of a new chief executive at the joint venture.

Tony Hayward, the British oil giant's chief executive, travelled to Moscow last month for secret talks with Mikhail Fridman, the Russian oligarch who heads the AAR consortium that is BP's 50-50 partner in TNK-BP, The Times has learnt.

Among the topics discussed at the meeting on April 17 was the appointment of a successor to Bob Dudley, who fled Moscow last summer amid a bruising battle between BP and AAR for control of the group, Russia's third-largest crude producer.

Rather than approving a new candidate, people familiar with the talks said both men agreed that the appointment of a permanent chief executive was no longer a top priority. They added that Mr Hayward's informal agreement to soft-pedal on the appointment is a tacit admission that TNK-BP is no longer under BP's control.

RELATED LINKS

• BP promises to cut costs as profits tumble

• Denis Morozov back in running to lead TNK-BP

MULTIMEDIA

• Graphic: Loosening their grip

TNK-BP is being run by Mr Dudley's former deputy, Tim Summers, whose title is acting chief executive, but there are growing signs that the company is in fact controlled by German Khan, another member of the AAR consortium that includes Leonard Blavatnik and Viktor Vekselberg.

It also means that TNK-BP, which employs 64,000 people and contributes nearly a quarter of BP's total daily oil production, is likely to have been left without a permanent chief executive for at least a year after the departure of Mr Dudley.

Ten months have elapsed since his departure from Russia, which he blamed on a campaign of intimidation and a string of legal and visa problems. A BP spokesman said the search for a successor to Mr Dudley continued and that an appointment would be made in due course, but added: “We are happy with the current situation. Tim Summers and the management team are doing a very good job.” He declined to offer a timeframe for the appointment and said that Mr Hayward's visit to Moscow was part of an “ongoing and regular dialogue” with AAR.

Last month TNK-BP reported core earnings of $1.5 billion (£1 billion) for the first quarter of this year. Despite a complete breakdown in relations between the two sides last year, the latest talks between Mr Hayward and Mr Fridman are thought to have been cordial, with BP eager to prevent the strained relationship from erupting into direct conflict. In an attempt to mend relations after Mr Dudley's departure from Russia last July, BP and AAR reached a new shareholder agreement last September and bolstered the board with the appointment of three new independent directors. They included Gerhard Schröder, the former German Chancellor, Jim Leng, chairman of Corus, and Alex Shokhin, president of the Russian Union of Industrialists and Entrepreneurs.

The appointment of a chief executive remains the final piece of the agreement designed to ensure stability at TNK-BP, which was formed in 2003. A number of Russian candidates have been under consideration for the job, including Denis Morozov, former head of Norilsk Nickel, the Russian mining giant, and Alexander Bulygin, chief executive of Rusal, the metals group.

In February BP appointed Mr Dudley, a former Amoco executive, to its board as a managing director with responsibility for oversight of the company's activities in the Americas and Asia.