Rosneft and BP to announce deal imminently? (Photo: Reuters)
Rosneft and BP to announce deal imminently? (Photo: Reuters)

BP is in advanced talks for the sale of its troubled joint venture TNK-BP in a deal that could see the Russian state-owned giant Rosneft become the world's biggest oil company.

According to multiple media reports, the agreement will land BP with a stake of between 16 percent and 20 percent in Rosneft in exchange for its 50 percent stake in the oil production venture TNK-BP in a deal estimated to be worth between $25bn to $28bn. Reports have also indicated that Rosneft may also buy the TNK-BP stake currently held by a group of Russian billionaires, a move which could see it controlling over half of Russia's oil and gas output and overtaking Exxon as the world's top international oil company.

BP acknowledged for the first time Monday that it was in "advanced discussions" with Rosneft about a potential sale, but would not confirm that a deal was imminent.

BP shares were trading around 1 percent lower in London at 445.5 pence each. The shares have risen nearly 11 percent since news of the TNK BP sale began to circulate in late July. Rosneft shares were little changed in Moscow at 215.04 each.

If the deal does go ahead it could yield BP a cash return of between $10bn-$13bn and bring the group closer to the Russian government and put to an end its troubled nine-year partnership with the Russian investor group known as AAR. Last month Rosneft CEO Igor Sechin said he could either buy out the stake of AAR, the consortium which shares TNK BP with the UK oil group, or cut a deal directly with BP.

AAR said in July that it wanted to put an end to the long dispute that has frozen relations between it and its British partner by either buying out BP's 50 percent stake for around $10bn or exchanging its half of the venture for BP shares.

"The only thing that worries me is that they seem to think that owning 20 percent of Rosneft will open up bright new horizons, become Rosneft's new and only best friend and have the vast reserves of the Arctic delivered to them on a plate," wrote Malcolm Graham-Wood, an analyst at VSA Capital, in a research note.

"I'm not saying that this is not going to happen and that they won't get preferential access, projects prioritised and interests aligned with the government but to expect this to be a company changing bed of roses is to expect much too much, much too soon as the song goes. Will a 20 percent stake in Rosneft return more or less than BP buying stakes in Exxon, Chevron, Shell or Statoil?" he added.