BP and the Alfa Group and Access-Renova (AAR) have agreed to combine their interests in Russia to create the country’s third biggest oil and gas business, in which they will each have a 50% stake. The new company will incorporate TNK and Sidanco, which together produce approximately 1.2 million bpd. It will also own significant exploration interests in Siberia and Sakhalin, together with a major downstream business that includes interests in five refineries and a retail network of more than 2100 sites in Russia and the Ukraine. For its 50% stake in the new company, BP will pay AAR USD 3 billion in cash on completion of the deal and three annual tranches of USD 1.25 billion in BP shares. The transaction, is scheduled for completion in the summer. BP Chief Executive Lord Browne described the transaction as “a strategic step into a country with massive oil and gas reserves and immense potential for future growth. Over the past year we have conducted a thorough examination of the assets involved in this deal, including rigorous and extensive physical inspections.â? The new company will be governed by a ten-strong board, with members nominated equally by BP and AAR. The new company will have a production of some 1.2 million bpd. BP estimates that the oil and gas resources of the new concern are at least 5.2 billion barrels. BP’s share of resources will be in line with its 50 per cent interest in the company. Its share of oil production will total more than 500,000 bpd.
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