BP boss shrugs off ethical doubts over Rosneft

Browne 'open-minded' about buying stake· Russian oil firm courts strategic foreign investors Terry MacalisterTuesday July 4, 2006The Guardian
Lord Browne, the BP chief executive who has championed the cause of ethical capitalism, is willing to invest in the controversial flotation of Russia's Rosneft - if the price is right.
Rosneft, supported by blue chip Western investment banks such as Morgan Stanley, will launch its inital public offering in London and Moscow, despite numerous court cases against it for alleged misappropriation of assets.
The Russian firm denies all the charges, saying it legally obtained 70% of its producing assets when it bought the Yuganskneftegaz oil and gas business after a forced sale by its parent, Yukos, to pay for a multibillion tax demand.Many analysts saw the tax demands as part of a Kremlin campaign against the political ambitions of the Yukos founder, Mikhail Khodorkovsky, who is now serving eight years in a Siberian jail

The boss of Britain's biggest company has not decided yet whether to take a stake in the IPO to raise $11bn (£5.9bn), but BP sources said reputational risk, while being considered, would not be paramount.
"It's a factor, but the company remains 'open-minded' and it will ultimately come down to price. If you took all your decisions on the basis of reputational risk, you would never do anything," one source said.
The revelation came as the London-based oil group released a half-year trading update yesterday showing it had produced 4.01bn barrels of oil a day and had won an average selling price of $69.53 for each barrel.
This is up from $61.69 in the first quarter, which left the company with profits of more than £3bn for that period. BP is also to benefit from a doubling of refined product prices, but second-quarter profits will be dented by taking an extra $500m (£270m) charge to cover the Texas City plant fire.
Overall production levels were down 4%, leaving the company struggling to meet its promise to grow annual output, but the firm was helped by a 12% increase in its TNK-BP business.
Lord Browne has since been offered an opportunity to invest further in Siberia, thanks to Rosneft. The Russian oil group has approached a handful of foreign companies, including BP, Malaysia's Petronas and China's Sinopec, to see whether they would like to take a strategic stake in the float.
Yukos has launched a series of legal actions in the US and has called on the UK's Financial Services Authority to block the float. The American government has expressed concern about the Yukos affair and the growing influence of the Russian president, Vladimir Putin, in commercial affairs.
BP would not want to upset Washington, nor would it want to undermine its image as a big, profitable - but caring - oil company. Lord Browne has, however, shown himself to be as pragmatic as he is principled.
He fought a vicious battle with Russian companies such as the Alpha Group for allegedly unlawfully taking assets away from another Russian company, Sidanco, in which BP had an interest. Lord Browne even called on Tony Blair to raise the issue with Mr Putin, but having won the assets back it was not long before BP joined forces with Alpha to establish TNK-BP. And Lord Browne, who won a prize for ethics in 2004 from Columbia Business School in America, may feel it would help his relationship with Mr Putin if he bought a stake in Rosneft.
The BP boss has previously bought stakes in Sinopec and PetroChina in moves seen by many as a way of currying favour with politicians in Beijing.
But the UK oil group has also been going through a difficult patch of its own with regard to reputation, following the Texas City incident and pipeline leaks in Alaska. The company has just suspended three Houston-based traders - alleged to be at the centre of a propane price manipulation scam.
A civil lawsuit by the Commodity Futures Trading Commission, a regulator in the energy field, alleged a five-man team had cornered the market. BP is already understood to have removed two other staff members from their posts.Special reportsOil and petrolUseful linksOpecInternational Energy AgencyAmerican Petroleum InstituteEnergy Institute