Dudley Warns Fight Tearing TNK-BP Apart

ReutersTNK-BP chief executive Robert Dudley gesturing after a news conference Thursday. He said he hoped to still be able to walk into TNK-BP's offices on Monday.
TNK-BP chief executive Robert Dudley on Thursday warned that bitter infighting would "tear the company apart" as a group of Russian managers announced they were suing him over alleged mismanagement.

"We have reached a new low in the tactics being used," Dudley told reporters at a hurriedly called news conference in a Moscow hotel, a few hours after the employees, led by a company vice president for legal affairs, insisted at a rival news conference inside TNK-BP headquarters on the Arbat that Dudley was not eligible to run the company.

The renewed pressure on Dudley and other BP-appointed managers at TNK-BP came one week after BP chief executive Tony Hayward flew to Moscow for a day of talks with Deputy Prime Minister Igor Sechin, the chairman of Rosneft's board, and Rosneft CEO Sergei Bogdanchikov.

A source close to BP said Thursday that Hayward's meeting with Sechin was long and wide-ranging, held over a lengthy lunch.

BP is thought to be angling for a broad cooperation deal with one of the country's state-run energy giants, Rosneft or Gazprom, as way out of the current deadlock with its current Russian partners, billionaires Mikhail Fridman, German Khan, Viktor Vekselberg and Len Blavatnik.

Dudley's position as chief executive is in limbo as he waits for the Federal Migration Service to rule by Saturday, the expiry date on his visa. The service is studying his employment contract, which Dudley insisted Thursday automatically changed to an open-ended one after a fixed period ended Dec. 31.

The Federal Migration Service said its decision on Dudley's visa hinges on whether it can regard Dudley's employment contract valid.

BP fears that if Dudley is forced to leave the country, its tenuous share of control over TNK-BP will be under threat.

BP and its Russian partners have been locked in a battle over the company's foreign expansion and reliance on BP's employees, a dispute that broke out into the open in May.

Dudley insisted Thursday that he was entitled to continue working while his visa status is reviewed, while the Russian shareholders claim he is not.

The fog of confusion surrounding Dudley's position has grown so thick that he could not immediately answer a question as to whether he would be able to walk into his office Monday.

After pausing to consult a colleague sitting nearby, Dudley said: "Yes, I am planning to come to work on Monday. I can work until they decide."

Dudley's departure, if it happens, will not have an operational effect on the company, said Alistair Graham, BP's chief liaison with TNK-BP.

"It's not an ideal situation, but he has all the authority necessary to continue running the company [from abroad]," Graham said at a third news conference, held at BP's Moscow headquarters on Novy Arbat, a few minutes' walk from the TNK-BP head office.

Dmitry Peskov, a spokesman for Prime Minister Vladimir Putin, reiterated the government's stance that it will not interfere in the dispute. "The Federal Migration Service in this case is guided strictly by the clauses of the law," he said.

The conflict at the company doesn't so far threaten the government's goal of reversing a slump in oil production by the end of this year, he said. At a government meeting dedicated to the oil and gas industry last week, Khan, TNK-BP's influential executive director, told Putin that the company was working "absolutely normally," Peskov said.

The Russian managers' lawsuit against Dudley, however, is just the latest action in a bitter conflict within TNK-BP's head office, where Dudley and Khan have offices directly opposite each other, and sources within the company say the atmosphere is brutal.

According to the managers, Dudley is running the company on a void contract and discriminates against locally hired staff.

At his conference, Dudley rejected the lawsuit, saying that the company was "blind to passports," his contract was effective and he didn't plan to step down.

Dudley said the announcement of the lawsuit was a "cynical exercise" to intensify a shareholder dispute between BP and its billionaire partners, grouped into a consortium called AAR. Dudley said that he suspected the billionaire shareholders to be behind the lawsuit.

Out in TNK-BP's oil-producing units, business continues uninterrupted, a source in one of the company's regional offices said. Visa problems for TNK-BP's foreign employees mean that it is sometimes quicker to get approval of plans because they have to go through fewer experts, he said. "It's even somewhat easier to work," he said.

Foreign managers who stayed and their Russian colleagues cooperate in making joint decisions when they look at plans to develop existing projects, the source said, speaking on condition of anonymity because he was not authorized to speak to the media.

Another TNK-BP source, in Moscow, said: "It's the daily work that's getting done. It's more about the long-term planning that's more problematic."

In a surprise, for the first time in its five-year history TNK-BP has been producing more oil so far this year than it planned, another source familiar with the situation said.

Despite the difficulties at TNK-BP's management, the firm Wednesday signed a deal with Rosneft that will see the state-run firm sending 13 million tons of crude annually to TNK-BP refineries.