Earlier this year Forbes Magazine ranked the world's largest energy companies, based on production volume.
- Saudi Aramco
- National Iranian Oil Co.
- Royal Dutch Shell
- Kuwait Petroleum Corp.
In a surprise move that will change the standings the global energy market, Russian oil and gas giant Rosneft announced on Monday, October 22nd, 2012, that it will buy complete ownership of TNK-BP, Russia’s third largest oil producer.
Rosneft was number 15 on the Forbes list, but this deal will move it to number one.
TNK-BP was a 50-50 partnership between BP and a group of Russian billionaires who operate under the corporate banner AAR. Under terms of the deal, the billionaire investors will get $28 billion in cash and BP will get stock equal to a %12.8 stake in Rosneft and an unspecified amount of cash (combined value of $26.8 billion).
The TNK-BP venture had soured over the past nine years. It started to visibly unravel last year when BP wanted to partner with Rosneft, offering its drilling experience and expertise, to help explore fields inside the Arctic Circle. AAR blocked that deal, preferring to continue TNK-BP's focus on increasing production from Siberia's aging oilfields.
BP will initially lose roughly 700 million barrels of oil reserves, but will now be free of its partnership with AAR. Instead of being partnered with group of self-serving billionaires intent on serving their own personal interests, BP will now be closely linked with Putin and the Russian government itself, which owns 75% of Rosneft. BP even plans to use a large chunk of the cash it will get from the deal to buy a large block of stock in Rosneft.
In Russia, when the government is your partner, there's smooth sailing ahead. Rosneft now gets a seat at the table as a major player on par with ExxonMobile and Saudi Arabia, and BP unloads a troublesome partner and suddenly has very close friends in very high places.
Roseneft and BP will now have unrestricted access to the vast undersea oil reserves in the Arctic Circle, while ExxonMobile, Shell and the others will have to settle for what's left. In the world of global oil, the game has changed, big-time!