BP Wants Rosneft Stake in Sakhalin 1

World oil No. 3 British Petroleum wants half of state-owned oil company Rosneft’s 40 percent stake in the massive Sakhalin 1 offshore oil and gas project, The Wall Street Journal Europe reported Tuesday.

Rosneft spokesman Alexander Stepanenko was quoted by the paper as saying that BP sent a letter to Rosneft late last month with an offer to purchase the stake, which analysts say could go for as much as $400 million.

Both BP and Rosneft refused to confirm the report Tuesday.

On Monday, Rosneft said it had rejected a $170 million offer for the stake by India’s Oil and Natural Gas Corp. — prompting analysts to conclude that Rosneft was holding out for a larger bid.

Gennady Krasovsky, oil and gas analyst for the NIKoil brokerage, said the stake could be worth up to $400 million, which BP would probably be willing to pay.

One analyst said BP would pay as much as $400 million for the Sakhalin stake.

Reports of BP’s interest in Sakhalin 1 — near the Sakhalin Islands in the Pacific — surprised many observers because the company’s huge investment in a 10 percent stake in oil major Sidanko currently appears in jeopardy. Sidanko’s main production unit Chernogorneft was acquired last year by the Tyumen Oil Co., or TNK, in a hostile takeover. Sidanko and TNK are still fighting over the unit.

"If BP Amoco is becoming more aggressive in its activities in Russia, despite the difficulties with Sidanko, then they are very brave people," said Dmitry Avdeyev, oil and gas analyst for United Financial Group.

The purchase of the stake in Sakhalin 1 could represent a safer investment for BP, since the project is covered by a production sharing agreement, or PSA, with the federal government that guarantees attractive investment terms, such as tax breaks.

BP’s recent behavior indicates that the company is trying to strengthen its ties with its Russian partners, said Yury Kafiev, chief analyst at the investment company Olma.

Just a year ago BP was strongly opposed to a planned $500 million loan from the U.S. Export-Import Bank to TNK.

That loan was temporarily frozen after TNK’s acquisition of Chernogorneft.

Now, however, BP is strongly in favor of the loan, and the company is seeking to actively cooperate with TNK in the development of western Siberian oil fields, Kafiev said.

Kafiev said he didn’t think that Rosneft was trying to sell half its stake in Sakhalin 1 because of a cash crisis. "Rosneft does not need the money," he said, adding that Rosneft could be planning to use the investment to enlarge its stakes in Sakhalin 3, in which it currently holds a 33.3 percent stake.

The move could also be a at Rosneft to "consolidate" itself. The oil company could be contemplating increasing its 38 percent stakes in its subsidiaries.

UFG’s Avdeyev said that it was simply "the best time [for Rosneft] to sell the stake" because demand for oil products is at a record levels.