In February 2003, BP announced it had entered into a strategic transaction to create Russia’s third-biggest oil and gas company in a 50/50 partnership with the Alfa Group and Access-Renova (AAR).
In addition to handing over to the new company its holdings in Tyumen Oil Company (TNK) and Sidanco Oil Company (Sidanco), AAR contributed its share of Russia Petroleum and its stake in the Rospan gas field. BP contributed its holding in Sidanco, its stake in Russia Petroleum and its holding in the BP Moscow retail network. In addition, BP paid AAR $2.4bn in cash and will pay three subsequent tranches of $1.25bn in BP shares, valued at market prices prior to each annual payment.
The scale and significance of the deal is notable, as it is the single biggest foreign investment in Russia ever. Following the transaction, BP becomes the world’s second-biggest western oil company in terms of reserves and production, with an unequalled foothold in Russia.
The transaction is viewed as the first really strong commitment by a foreign firm in Russia and is seen as evidence of the country’s progress since the 1998 financial crisis.
