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BP is planning to offload its 19.75% stake in the Russian state-owned oil firm Rosneft, in response to Moscow’s assault on Ukraine.
The move comes days after BP came under pressure from the UK government over its business partnership with Rosneft, following Russia’s military operation in Ukraine.
The exit is expected to cost BP as much as $25bn by the end of the first quarter of this year. At the end of year 2021, the stake had an estimated value of $14bn.
The firm has also removed dividend payments of Rosneft from its financial frame.
BP did not disclose the details on how it would exit its stake.
With an immediate effect, the two BP-nominated directors will also resign from Rosneft’s board. They include CEO Bernard Looney, and former BP group CEO Bob Dudley.
In a press statement, BP said: “The resignations will require BP to change its accounting treatment of its Rosneft shareholding and, as a result, it expects to report a material non-cash charge with its first quarter 2022 results, to be reported in May.”
The British oil and gas giant, which has held the stake in the Russian firm since 2013, will also not report reserves, production, or profit for Rosneft.
BP chair Helge Lund said: “This military action represents a fundamental change. It has led the BP board to conclude, after a thorough process, that our involvement with Rosneft, a state-owned enterprise, simply cannot continue. We can no longer support BP representatives holding a role on the Rosneft board.
“The Rosneft holding is no longer aligned with BP’s business and strategy, and it is now the board’s decision to exit BP’s shareholding in Rosneft. The BP board believes these decisions are in the best long-term interests of all our shareholders.”
BP will also exit from other Russian businesses with Rosneft. These include three joint ventures that were valued at approximately $1.4bn at the end of 2021.
Crude oil prices have further surged as sanctions against Russia continue to mount over its invasion of Ukraine, and concerns over oil supply disruptions due to Moscow’s nuclear alert and bank payment constraints.
Brent crude futures rose by $3.95, or 4% to reach $101.88 per barrel at 0228 GMT while US West Texas Intermediate (WTI) crude futures increased by $4.55, or 5%, to settle at $96.14 a barrel, reported Reuters.
Earlier this month, BP announced that it had commenced operations at its Herschel expansion project, in the Gulf of Mexico.