BP leaves Russia with up to $25 billion after Ukraine invasion

  • CEO Looney and Bob Dudley leave Rosneft board
  • BP to write down up to $25 billion after exit
  • BP says decision follows Moscow’s invasion of Ukraine

LONDON, Feb 27 (Reuters) – BP is shedding its stake in Russian oil giant Rosneft, bringing an abrupt and costly end to three decades of business in the energy-rich country, marking the most important decision ever made by a Western society in response to Moscow’s decision. invasion of Ukraine.

Rosneft accounts for around half of BP’s oil and gas reserves and a third of its production and the sale of the 19.75% stake will result in charges of up to $25 billion, the British company said, without saying how. she plans to get out of it.

“I was deeply shocked and saddened by the unfolding situation in Ukraine and my heart goes out to everyone involved. It has caused us to fundamentally rethink bp’s position with Rosneft,” said the CEO BP, Bernard Looney.

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The rapid decline represents a dramatic exit for BP, the largest foreign investor in Russia, and shines a light on other Western companies operating in the country, including France’s TotalEnergies (TTEF.PA) and Britain’s Shell (SHEL.L). , in a context of escalating crisis between the West and Moscow.

It also underscores growing pressure from Western governments on their companies to scale back operations in Russia as they expand a web of economic sanctions against Moscow.

British Business Secretary Kwasi Kwarteng, who on Friday expressed “concern” about BP’s Rosneft, welcomed the decision.

“Russia’s unprovoked invasion of Ukraine should be a wake-up call for British companies with business interests in (President Vladimir) Putin’s Russia,” Kwarteng said on Twitter.

Rosneft (ROSN.MM) blamed BP’s decision on “unprecedented political pressure”, Russian news agencies reported, saying 30 years of successful cooperation had been ruined.

Susannah Streeter, senior investment analyst at UK stockbroker Hargreaves Lansdown, said it will be “very difficult” for BP “to recover anywhere near what was considered full value” from Rosneft.

Last week, Looney said BP was sticking to its Russian business and would comply with any Western sanctions against Moscow.

Previously, Putin had put Russia’s nuclear deterrent on high alert over Western retaliation for his invasion of Ukraine, which included blocking access to the SWIFT international payment system for some Russian banks. Read more

And Norway’s $1.3 trillion sovereign wealth fund, the largest in the world, will divest its Russian assets after the invasion of Ukraine, its prime minister has said. Read more

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BP said its decision and its financial impact will not impact its short and long-term financial goals as part of its strategy to shift from oil and gas to low-carbon fuels and fuels. renewable energies.

But Hargreaves Lansdown’s Streeter said a writedown of this magnitude is “likely to limit the extent to which BP can continue to accelerate its transition to renewables”.

Looney and his predecessor as CEO, Bob Dudley, will both leave the board of Rosneft, which BP bought a stake in as part of its $12.5 billion sale of TNK-BP stake in 2013 .

BP held a board meeting on Friday and another on Sunday at which the decision to leave Rosneft, along with two other joint ventures BP has with Rosneft in Russia, was made, a company spokesperson said. .

It will take an $11 billion non-cash foreign exchange charge after the Rosneft exit, which BP will no longer include in its accounts. BP said it also expects a second non-cash charge of up to $14 billion, for the “book value” of Rosneft.

BP received income from Rosneft in the form of dividends which totaled around $640 million in 2021, or around 3% of its overall operating cash flow.

The company currently has about 200 employees in Russia, most of whom are local employees, the BP spokesperson said.

Many other Western energy companies have operations in Russia, including TotalEnergies which has a 19.4% stake in Novatek (NVTK.MM) and 20% of the Yamal LNG project.

“In the current environment, any European or American company with assets in Russia should consider similar moves,” Eurasia Group analyst Henning Gloystein told Reuters.

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Reporting by Ron Bousso; Editing by Alexander Smith

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