Latest News

BP quits Russia in up to $25 billion hit after Ukraine invasion

2/2
© Reuters. FILE PHOTO: An illuminated BP logo is seen at a petrol station in Gateshead, Britain September 23, 2021. REUTERS/Lee Smith/File Photo
2/2

By Ron Bousso and Dmitry Zhdannikov

LONDON (Reuters) – BP (LON:BP) is abandoning its 19.75% stake in Russian oil giant Rosneft after Russia’s invasion of Ukraine, it said on Sunday, in an abrupt and costly end to three often fraught decades of operating in the oil-rich country.

Rosneft accounts for around half of BP’s oil and gas reserves and a third of its production and divesting the stake will result in charges of up to $25 billion, the British oil and gas giant said, without saying how it plans to extricate itself.

“I have been deeply shocked and saddened by the situation unfolding in Ukraine and my heart goes out to everyone affected. It has caused us to fundamentally rethink bp’s position with Rosneft,” BP Chief Executive Bernard Looney said.

The rapid retreat represents the boldest step yet by a Western oil company with operations in Russia, including France’s TotalEnergies, amid an escalating crisis between the West and Moscow.

British Business Secretary Kwasi Kwarteng, who on Friday expressed “concern” over BP’s stake in Rosneft in a call with Looney, welcomed the decision.

“Russia’s unprovoked invasion of Ukraine must be a wake up call for British businesses with commercial interests in Putin’s Russia,” he said on Twitter (NYSE:TWTR).

Earlier, President Vladimir Putin put Russia’s nuclear deterrent on high alert in the face of Western reprisals for his invasion of Ukraine, which included blocking access to the SWIFT international payment system for some Russian banks.

And Norway’s $1.3 trillion sovereign wealth fund, the world’s largest, will divest its Russian assets following the invasion of Ukraine, its prime minister said.

DIVIDEND BLOW

BP said its move and financial hit will not impact its short and long term financial targets within its strategy to shift away from oil and gas to low-carbon fuels and renewables energy.

Looney and his predecessor as CEO Bob Dudley will both step down from the board of Rosneft, which BP acquired a shareholding in as part of its $12.5 billion TNK-BP stake sale in 2013.

BP held a board meeting on Friday and another on Sunday where the decision to quit Rosneft, as well as two other joint ventures BP has with Rosneft in Russia, was taken, a spokesperson for the company said.

It will take an $11 billion foreign exchange non-cash charge after the exit from Rosneft, which BP will no longer include in its accounts. BP said it also expects a second non-cash charge of up to $14 billion, for the “carrying value” of Rosneft.

BP received revenue from Rosneft in the form of dividends which totalled around $640 million in 2021, roughly 3% of its overall cash flow from operations.

The company currently has around 200 employees in Russia, most of whom are local staff, the BP spokesperson said.

Many other Western energy companies have operations in Russia, including TotalEnergies which holds a 19.4% Novatek stake and 20% of the Yamal LNG project.

“In the current environment any European or American company with assets in Russia must be considering similar moves,” Eurasia Group analyst Henning Gloystein told Reuters.

(Graphic: BP exits its Rosneft stake: https://graphics.reuters.com/UKRAINE-BP/xmvjoeljrpr/chart_eikon.jpg)

BP quits Russia in up to $25 billion hit after Ukraine invasion

You may also like

Leave a reply

Your email address will not be published.

More in Latest News