A sale by BP of its 50 percent stake in Russian venture TNK-BP now could be a bad move, Liam Halligan, chief economist at Prosperity Capital Management, told CNBC’s “Squawk Box Europe.”
On Friday, BP said it had received interest in the stake and would pursue the sale. A successful sale of TNK-BP — Russia's third-largest oil firm estimated to be worth $30 billion — to the state would boost government control of the country's oil production to over 50 percent.
Halligan said it was difficult to say whether the latest announcement by BP, after a decade of economically prosperous but legally difficult dealings in the region, could be due to an attempt by the Russian government to take full control of the country’s energy resources, reminiscent of the early 2000s with the state takeover of oil and natural gas companies Rosneft and Gazprom.
“It’s very difficult to say, there are a lot of moving parts here," he said.
"What strikes us is how significant TNK-BP has been for BP over the years. Our general view is that BP shareholders should be careful what they wish for. If BP does end up exiting on commercial grounds you’ve got to consider that this is a third of their reserves, this was the lion’s share of their dividend payment last year. It probably has been one of the best investments in BP’s long history,” Halligan explained.
Weak Stock Market
Speaking to CNBC from Moscow, Halligan said that although the company could be worth around $30 billion, it was a “a particularly bad moment for BP to try and get a market price on TNK-BP” given the weak Russian stock market, depressed market valuations, current low production costs and high revenues the company enjoyed.
“Of course they’ll get a price, many people want this asset, this is the tenth-biggest oil company in the world and the third-biggest oil company in Russia…Beyond the dysfunction among the top executives, operationally this company has been working spectacularly well,” Halligan added.
He said that in his opinion the potential selloff by BP was due to a corporate struggle that has resulted from the difficult relationship between joint owners BP and the consortium of Russian billionaire shareholders AAR.
The conflict, Halligan said, would not be resolved simply, particularly since a shareholder agreement prevents BP providing confidential company data to any potential interested parties.
“It’s clear that AAR don’t think the partnership is sustainable in its current form. A sale is going to happen here but it’s not going to be straightforward given that the stakes are so high,” he said.
BP has been approached by state energy holding giant Rosneftegaz, which controls a stake of over 75 percent in Russia's biggest oil company Rosneft, according to sources quoted by Reuters.