With $30bn, BP can find new partners after its dance with the Great Bear

http://www.guardian.co.uk/business/2012/jun/03/bp-tnk-russia-joint-venture-oil

Version 0 of 1.

Lord Browne was rightly called the Sun King when he was at BP – because of the huge influence he exerted as a result of his early successes, as well as the fact that he liked to be in the limelight. Early last week he was back in the media glare after talking about the need for business to shed its prejudices against the gay community.

Just days later, one of the defining moves that created the Sun King myth ended ignominiously when his successor-but-one, Bob Dudley, threw in the towel in Russia. BP said it had received a number of "unsolicited" approaches which might lead to an offer for its half of the TNK-BP joint venture. It said it was minded to sell.

Russian state-owned groups such as Rosneft and Gazprom are seen as the likely potential buyers, even though the former insisted it had made no offer. Western oil majors such as ExxonMobil and even Total of France must surely be considering the opportunity – as well as the dangers such a stake would bring.

But the Alfa Access Renova (AAR) consortium of Russian oligarchs who control the other half of TNK-BP made it clear they will also be exercising their right to make an offer. The sale of BP's stake will not be easy, given the political skills of those wily oligarchs whose consent will be needed.

The TNK stake has given BP a million barrels of oil equivalent a day, a third of group production and 10% of profits. The success of this business means it is also of strategic importance to Russia, so it will not be given away without the say-so of the Kremlin.

Over the nine years of its involvement in TNK, BP has had regular rucks with either the AAR shareholders or the state. Any western buyers are likely to be extremely wary. In fact the scale of the risk now, with Vladimir Putin reinstated as president, led many equity analysts to celebrate BP's decision to exit a very profitable but turbulent joint venture.

Better to leave now with cash in your pocket, they say, than to lose it all in a punch-up with the state – perhaps over BP's ill-fated decision to try to form a joint venture with Rosneft, which has left it facing huge compensation claims in court.

Dudley certainly needs to do something exciting if he is to put some life back into the share price, given that his time at the top has largely been taken up by the undoing of past wrongs. The two years since the Gulf of Mexico blowout have been spent improving safety, settling with Deepwater Horizon claimants – and failing to tie up new Arctic deals in Russia or growth ones in India. Any sale money from TNK could still end up going straight to the US department of justice if negligence charges arise, but BP does not expect this to happen.

So how could $30bn be put to good use? A move into the many new emerging oil and gas opportunities in Africa could be a starting point. Rarely a month goes by without a new discovery in Mozambique, Tanzania or somewhere along the west African coast.

BP could certainly consider pouncing on some of the new smaller exploration companies active in the area, such as Ophir Energy or even Tullow Oil. Or could it carve out a niche as a partner to a national champion such as Petrobras in Brazil, one of the great new deepwater players.

Some will be thinking wistfully of what the man who did the mega-mergers with Amoco in the 1990s and initiated that brave, but ultimately doomed, dance with the Great Bear would have done in these circumstances. You have to believe Browne would have thought hard about whether now was finally the time for a dramatic BP break-up.

'Safe haven' or no, Britannia will go down if the eurozone does

George Osborne has made great play of his efforts to build a safe haven from the storm raging across the channel, and been rewarded with record low gilt yields and a surprisingly resilient pound.

But if investors' worst fears are finally realised and the eurozone splinters apart, the UK could suddenly appear dangerously exposed.

As HSBC's David Bloom put it in a research note last week: "If the situation were to get mildly worse, the euro will continue to fall against sterling. But if the situation gets a lot worse, do not expect sterling to offer any refuge from a eurozone fallout."

A euro break-up would be likely to plunge the UK into a longer, deeper recession, instead of the current shallow dip; the coalition would face a choice between missing its deficit targets or cutting faster and harder; and the banking sector would be highly vulnerable to the knock-on effects of a continental credit crunch.

There may also be worse to come for the housing market, where prices have been drifting downwards for 12 months, and many analysts fear that banks have billions of pounds' worth of overvalued properties clogging up their loan books.

There are already rumours in financial markets that the Treasury could be forced to unveil a revamped special liquidity scheme – the rescue scheme for banks – if the woes of the European banking sector start to infect our own lenders.

Remember what happened at the onset of the financial crisis in 2008: the pound lost about a quarter of its value against other currencies, as investors calculated – rightly – that the UK, with its monster banking sector, would be severely punished. That may have been a boon for exporters, but was hardly a vote of confidence in UK economic management.

Sterling's slide on Friday, after a catastrophic manufacturing survey suggested there is no sign of recovery in the offing, may have been a taste of things to come.

Sorrell and WPP should note: Publicis gets more for less

Now if this were a world where companies listened to their shareholders, the board of WPP would currently be preparing a <em>mea culpa</em>. The 30% salary rise awarded to founder and chairman Sir Martin Sorrell, would be rethought in an effort to ensure that the 40% vote against the remuneration report last year does not spiral into a full-blown no vote in Dublin on 13 June.

But Sorrell and the remuneration committee, led by banker Jeffrey Rosen, appear to be in no mood to listen, preferring instead to argue that the business is operating on the international stage and needs to pay its founder as such.

There is no doubt that Sorrell is highly regarded, and shareholders say they don't balk at rewarding success, but WPP has achieved a lower total return over the past five years than its French rival Publicis, whose chief executive, according to Manifest, earns less than Sorrell. It's not too late for a climbdown, but don't hold your breath.