Much fuss was made yesterday about BP (or bp as it now prefers to call itself after what was, presumably, a very expensive rebranding exercise) supposedly getting rid of its interest in its joint venture with Russian energy giant Rosneft. As the Guardian put it:
BP is exiting its stake in Russian state-owned oil company Rosneft, days after coming under pressure from the UK government over its involvement with Russia.
Only, let's be clear here: no such exit is taking place. The simple reality is that BP, or bp, is at present simply undertaking another very expensive rebranding exercise, as their own press release makes clear when you read between the lines.
As a matter of fact, there is no buyer for BP's stake in Rosneft. Nor, in the current circumstance, is there likely to be. And, unless BP has torn up all its contracts with Rosneft, which I think to be very unlikely and which it has not said that it has done, then all that has really happened is that two BP directors have resigned from the board of Rosneft, of which it still owns 19.75% nonetheless.
As BP's last available financial statements made clear, this is significant. As they noted there:
Significant judgement: investment in Rosneft
Judgement is required in assessing the level of control or influence over another entity in which the group holds an interest. For bp, the judgement that the group has significant influence over Rosneft Oil Company (Rosneft), a Russian oil and gas company is significant. As a consequence of this judgement, bp uses the equity method of accounting for its investment and bp's share of Rosneft's oil and natural gas reserves is included in the group's estimated net proved reserves of equity-accounted entities. If significant influence was not present, the investment would be accounted for as an investment in an equity instrument measured at fair value as described under 'Financial assets' below and no share of Rosneft's oil and natural gas reserves would be reported.
Not to be too unsubtle about it, having those two directors on the board of Rosneft meant that BP could claim that it had significant control over a company where there was nobody who owns 50% of the shares. As a result, it could therefore account for Rosneft's activities as if they were its own, claiming as a consequence that they owned 19.75% of its overall results, and assets including its oil reserves.
Take those two board members away and BP cannot claim this. Instead it simply has an investment, and whether or not it gets any benefit from that investment is now entirely dependent upon whether, or if, it ever sees any outcome from it in cash terms. Previously, the cash did not matter: the value could be claimed anyway because it was suggested that the value in question was under the control of BP, and now it is not.
No one can be sure as to what the consequence of these changes are as yet. That is for BP and it's auditors to decide, but the overall value attributed to this Rosneft stake was around $14 billion, meaning that any financial hit is likely to be significant. As the price of a rebranding that is significant. But, right now there is nothing that has been said that suggests to me that this relationship is necessarily over.
Unless BP confirms that by removing these two directors it loses the right to reappointment in the future, or that its contract has been ripped up as a consequence, then all that is being played here is a game of smoke and mirrors. Everyone needs more than that right now. BP should be putting its cards more clearly face up on the table.
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I whole heartedly agree sounds very dodgy to me given the current circumstances.
“You couldn’t give it away” for once, is literally true…. assuming that you don’t want to give it to the Russian State.
The Directors should resign, payments due to Rosneft under existing contracts should be suspended, BP staff seconded to Rosneft should leave Russia (if they haven’t already) and the value of their shareholding should be written down to zero.
BUT they would still be owners of a chunk of Rosneft. What if the talks today brought peace, Putin’s retirement to his Dacha with free and fair Russian elections announced for next month? (unlikely, but bear with me). In this case, Rosneft would be worth a lot and their stake would be revalued upwards.
Perhaps the only way for BP to salvage its reputation is to place the shares in a Trust for the people of Ukraine (in the event that Rosneft is ever worth anything again).
Excellent idea
“Much fuss was made yesterday about BP …. supposedly getting rid of its interest in its joint venture with Russian energy giant Rosneft.”
The problem here, as with your thread on Britain’s current predicament is that we have a Government that has an ideology wrapped solely in the shallow technique of the sound-bite: everything the Goverrnment does is entirely, and solely reactive. It has no ideas of its own, no vision; its single purpose is brittle and superficial; to survive in power, and in Downing Street (even when they have already proved that they have trashed and ruined the Executive structures there, and undermined the constitutional prestige and status of the Civil Service). Johnson’s government is incapable of genuine leadership, of foresight, of judgement (you can forget wisdom, they have never heard of it). This ramshackle cabal of repellant incompetents follows the lead given by every lurch in public opinion, reacts by changing direction in the blink of an eye; denies its failures and waves a magic wand; forget the disasters and failures, they are fresh, newly and heroically rising to the moment; as if claiming some lofty new, easily claimed aspiration to transform itself from serial blunderer is somehow the same as achieving it; but this is a Government that has neither the sense nor stamina to see anything through unless led to it by the weight of public opinion (as measured by the tabloid or crony media), or by the overwhelming pressure of world geopolitical reality, or the panic-stricken terror of simply being found out; and it will always look for some surrepticious way to come up short, without anyone noticing.
Repellant? A repellent use of repellent. Regret at leisure. The problem of social media – it induces an approach that facilitates haste over care; rather like our Conservative Government.
See
https://davidallengreen.com/2022/02/the-chelsea-fc-statement-that-is-not-what-it-seems/
About Chelsea FC
Basically the same situation
See
https://davidallengreen.com/2022/02/the-chelsea-fc-statement-that-is-not-what-it-seems/
It relates to the similar issues around Chelsea FC
In the Shetlands there is considerable anger among islanders about the expected visit of a Russian tanker to the island terminal. It seems the Russian vessel has slipped through a ‘loophole’ in the sanctions. The Scottish Government is currently trying to persuade the British Government to close the loohole in time to stop the tanker. Loopholes are always likely to be found in a crisis; oil and gas, of course is a deep problem because the West has been asleep at the wheel for so long; but tanker fleets? It is a reminder just how deeply asleep the West, and the British Government has been. This failure, to protect the national interest and public security must not be forgotten by the electorate. Ever. It is not as if this has not happened before under weak and complacent Conservative Governments in Britain.
WTF?
?
Not polite…common on Twitter though
You threw me, Richard. The acronym eventually dawned, but I confess I didn’t expect you to use it, and so found myself trying to work out whether it was some esoteric acronym, perhaps referencing an international sanction-busting organisation I hadn’t come across. I quickly gave up, and figured out you were simply as surprised as the people in the Shetland Isles.
I use it very rarely
Sometimes swearing is the only appropriate response
That is why it has to be done rarely
I know borders, like immigration, are reserved to Westminster, but surely the Scottish Gov or the harbourmaster in the Shetlands or the Shetlands Council can find a pretext to close the harbour and keep the Russian tanker from docking? The Shetland islanders don’t want the ship to dock, nor, I suspect do the majority of Scots. Why doesn’t the Scottish Gov act now, declare Scottish waters closed to Russian ships and deal with any aftermath later?
The lack of interest and urgency of the Tory Gov in Westminster to take any positive, humanitarian steps in the face of a pan-European refugee crisis is staggering. Meanwhile Scotland’s low birth rate, falling population and previous success in absorbing refugees make it an obvious place for refugees to be settled. We’re witnessing this crisis growing by the day, but the absence of any semblance of leadership in the Tory Gov continues to prevent action. I fully understand it means the Scottish Gov acting ultra vires, but desperate times call for desperate measures and my view is that the First Minister should extend an open invitation to war refugees to come to Scotland, if necessary organising direct flights into Scotland to bypass England and deal with the aftermath once lives have been saved. It would undoubtedly cause fury in Westminster, but it would immediately increase support for independence inside Scotland and across the civilised world.
A P.S. to my post of c10:00pm: When was writing that post I hadn’t seen the Channel 4 News to its conclusion (it was recorded for later viewing), but its last item was a segment from the Orkneys (not Shetland as I had written) in which it was reported that the Orcadians had planned to chain themselves to the dock at the Flotta Oil Terminal to prevent the Russian ship from docking in the morning. However Grant Shapps has subsequently announced the closure of UK waters to Russian shipping. OK, one down, one to go: how about opening borders to let war refugees into the UK, or do we have to be the last in Europe to do so?
We now have a pathetic one year visa scheme ….
There is another angle to this. See this report in The National today: https://www.thenational.scot/news/19957187.call-remove-300-000-holyrood-pension-funds-russian-state-owned-sberbank/
The underlying problem is bigger than just investments in Russian assets – note how the trustees of the MSP pension fund have no control over where the fund is invested – because they invest in “pooled funds” managed by asset managers like Baillie Gifford. There is no proper accountability for the investment of public money – and it is public money we are talking about here because all funded public sector pension schemes get their contribution income from the public purse.
The tail is wagging the dog.
I hate these pooled arrangements
Bigger pool, bigger fees. How much more civilised it was when you strolled down St.Vincent Street Glasgow, surrounded by Mutual Funds, run principally by well paid, but not over-paid, actuaries (not bonus freaks), who ran the funds soely in the long term (where long-term extends beyond the next bonus payment) interests of the mutual investors.
Menawhile in other news, the share price of rnewables & companies making hydrogen production equipment are… recovering from the recent slump. Gosh I wonder what this could be connected to? Sarcasm aside, the oil majors such as BP have used their involvement in renewables as window dressing – they are now in for a proper stuffing. Renewable build out in the EU will be turbo charged and there are plenty of (non oil & gas) companies that can take advantage.
I think a trip to DG Competition is over due – have a chat about oil&gas companies snaffeling up renewable companies. Needs to stop. Plenty of good reasons to prevent such takeovers. BP, Shell etc al want to go into renewables – start investing in organic growth.
Good point
Lwt us look at the BP share price as the “market” wisdom’s response to exiting 20% of Rosneft Astonishingly the BP share price is 375p today. Over the last four weeks it has oscillated around circa 360p-405p, but today 375p-378p (around +/- 6%?). Is this the impact of a supposed $29Bn adjustment? I am not clear what this is telling us, but perhaps someone else can solve the mystery.
The explanation is market irrationality
Ah! That’ll be ‘business as usual’, then. Nothing like a crisis to being out the market’s true nature.