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

LONDON, Feb 27 (Reuters) – BP is abandoning its stake in Russian oil big Rosneft in an abrupt and dear finish to a few a long time of working within the energy-rich nation, marking probably the most important transfer but by a Western firm in response to Moscow’s invasion of Ukraine.

Rosneft accounts for round half of BP’s oil and gasoline reserves and a 3rd of its manufacturing and divesting the 19.75% stake will lead to fees of as much as $25 billion, the British firm mentioned, with out saying the way it plans to extricate itself.

“I’ve been deeply shocked and saddened by the state of affairs unfolding in Ukraine and my coronary heart goes out to everybody affected. It has brought about us to essentially rethink bp’s place with Rosneft,” BP Chief Govt Bernard Looney mentioned.

The fast retreat represents a dramatic exit for BP, the largest overseas investor in Russia, and places the highlight on different Western firms with operations within the nation together with France’s TotalEnergies (TTEF.PA) and Britain’s Shell (SHEL.L), amid an escalating disaster between the West and Moscow.

It additionally underscores rising strain from Western governments on their firms to curtail operations in Russia as they widen a internet of financial sanctions in opposition to Moscow.

British Enterprise Secretary Kwasi Kwarteng, who on Friday had expressed “concern” over BP’s Rosneft, welcomed the choice.

“Russia’s unprovoked invasion of Ukraine should be a get up name for British companies with business pursuits in (President Vladimir) Putin’s Russia,” Kwarteng mentioned on Twitter.

Rosneft (ROSN.MM) blamed BP’s choice on “unprecedented political strain”, Russian information companies reported, saying 30 years of profitable cooperation had been ruined.

Susannah Streeter, senior funding analyst at British retail inventory dealer Hargreaves Lansdown, mentioned it is going to be “extremely troublesome” for BP “to get better wherever close to what was thought-about to be the complete worth” of Rosneft.

Final week, Looney mentioned that BP was sticking to its Russian enterprise and would adjust to any Western sanctions on Moscow.

Earlier, Putin put Russia’s nuclear deterrent on excessive alert within the face of Western reprisals for his invasion of Ukraine, which included blocking entry to the SWIFT worldwide cost system for some Russian banks. learn extra

And Norway’s $1.3 trillion sovereign wealth fund, the world’s largest, will divest its Russian property after the Ukraine invasion, its prime minister mentioned. learn extra

DIVIDEND BLOW

BP mentioned its transfer and monetary hit won’t affect its quick and long run monetary targets inside its technique to shift away from oil and gasoline to low-carbon fuels and renewables power.

However Hargreaves Lansdown’s Streeter mentioned a write down of this magnitude is “prone to restrict the extent to which BP can proceed to speed up its transition in the direction of renewables.”

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

BP held a board assembly on Friday and one other on Sunday the place the choice to stop Rosneft, in addition to two different joint ventures BP has with Rosneft in Russia, was taken, a spokesperson for the corporate mentioned.

It’s going to take an $11 billion overseas alternate non-cash cost after the exit from Rosneft, which BP will not embrace in its accounts. BP mentioned it additionally expects a second non-cash cost of as much as $14 billion, for the “carrying worth” of Rosneft.

BP obtained income from Rosneft within the type of dividends which totalled round $640 million in 2021, roughly 3% of its general money stream from operations.

The corporate presently has round 200 staff in Russia, most of whom are native employees, the BP spokesperson mentioned.

Many different Western power firms have operations in Russia, together with TotalEnergies which holds a 19.4% Novatek (NVTK.MM) stake and 20% of the Yamal LNG venture.

“Within the present setting any European or American firm with property in Russia should be contemplating comparable strikes,” Eurasia Group analyst Henning Gloystein advised Reuters.

Reporting by Ron Bousso; Modifying by Alexander Smith

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