Harried Dudley Leaves the Country

ТNK-BP's embattled chief executive, Robert Dudley, temporarily left the country Thursday after facing bureaucratic hurdles renewing his work visa but vowed to continue running the company from abroad.

"In the light of the uncertainties surrounding the status of my work visa and the sustained harassment of the company and myself, I have decided to leave and to work outside Russia temporarily," Dudley said in an e-mailed statement.

In a separate statement, BP chief executive Tony Hayward said he regretted Dudley's departure, which he blamed on sustained attacks against him.

Dudley's departure, even for a short time, may jeopardize the interests of BP in the joint venture, as it has warned that the company's 50 percent Russian shareholders, the AAR consortium owned by billionaires Mikhail Fridman, German Khan, Viktor Vekselberg and Len Blavatnik, will likely attempt to wrest control of the company in his absence.

The departure, ahead of a Tuesday deadline for the Federal Migration Service to rule on renewing his visa, could indicate that BP anticipated his application would be refused.

A spokesman for the migration service said Dudley would need a new invitation to return to the country, Interfax reported late Thursday.

AAR chief executive Stan Polovets said in a statement late Thursday that the consortium was not surprised at Dudley’s decision to leave but regretted that BP was seeking to run the company from London.

In his statement, Hayward said BP would “use all means at its disposal,” including arbitration in a court, to protect the interests of its shareholders.

Dudley has been unable to renew his work visa despite possessing a valid work permit and work contract, BP said. The Federal Migration Service granted Dudley a 10-day transit visa, which is set to expire Tuesday.

Even as the joint venture has been torn apart by internal shareholder conflict, it has recorded some of the biggest gains in its history during the first half of 2008, the company’s chief operating officer Tim Summers told reporters at a briefing earlier Thursday.
 
“We are on track to deliver our best record as a company,” Summers said.

First-half profits for the company were about $4.7 billion this year, compared with $2.1 billion in the same period last year, while dividends to shareholders were $2.4 billion in the first half of this year, compared with $1.1 billion in the same period last year, Summers said.

Summers acknowledged that it had “been a very difficult time for our employees in the company. ... It’s not a good thing for anyone, for any company to be in such uncertainty.”
 
He said shareholder issues could affect the company’s performance next year, although “it is yet to be determined how that will roll out.”

Most recently, the Russian billionaires have demanded that Dudley personally compensate shareholders for $900 million they claim has been over-invested in the company’s operations this year, without the permission of the shareholders.

Summers said, however, that all the shareholders agreed to spend $4.4 billion of the company’s capital in 2008, approximately $2.2 billion of which has already been used. AAR’s proposed cut in capital expenditures could lower the company’s oil output by 1 million to 5 million tons over the course of the next year, Summers said.

The Russian shareholders argue that Dudley, a former BP executive, has failed to develop the company to its full potential, has not taken advantage of international expansion oppor
tunities and has favored BP’s interests
over AAR’s.

BP has rejected AAR’s claims,  pointing to production growth and  shareholder gains during Dudley’s tenure.

“There can’t be any compromise and won’t be any compromise. We want a new chief executive who is not from BP but hired on the open market,” Fridman said in an interview with The Times of London earlier this week.

Reiterating statements from other government officials, Deputy Prime Minister Igor Sechin said Thursday that the dispute should be resolved to maintain the company’s growth rates.
“They have to come to an agreement. There is nothing good in this conflict. It is a burden to their projects,” Sechin said in Nizhny Novgorod, Reuters reported.

In addition to Dudley, 75 other foreign employees of TNK-BP have not yet received their work visas, Summers said.

During Dudley’s previous absences, his duties as CEO have been delegated in rotation to the company’s top four executives — Khan, Vekselberg, Summers and chief financial
officer Jim Owens. Summers said Thursday, however, that he did not know who would take over permanently if Dudley left the company.

“I have no plans to replace Mr. Dudley,” Summers said. “My only plan is to remain the chief operating officer.”

In the past week, the company has also lost the last 60 of 148 BP technical specialists that were seconded to work in the joint venture.

Their loss will be felt in the company’s operations in the long term, Summers said, as many were involved in developing new projects.

Chris Weafer, chief strategist at UralSib, said the escalation of the conflict would likely lead to arbitration by a third party, either another oil company or the government.

“What we are seeing is each side piling on the pressure and neither making any concessions to the other,” Weafer said in e-mailed comments. “I think that we are very quickly getting
to the point where the shareholders will have backed each other into a cul-de-sac.”

The focus on how the company’s operations may suffer brings “the national interest” into play, Weafer said. “The recent more serious escalation in the dispute may well be the opening for the state to get involved.”