MOSCOW — BP’s board has approved an offer from the Russian state oil company, Rosneft, to buy most of BP’s business in Russia for cash and shares in Rosneft, further consolidating Russia’s control of its oil industry, an executive with knowledge of the decision said.
Under the terms of the deal, BP would remain in Russia but — initially at least — only as a minority investor in an oil company controlled by the government of President Vladimir Putin. Later, BP is hoping to use this new strategic tie with the Kremlin to drum up other business.
BP had been telegraphing its willingness to make a deal for some time, and Rosneft formally submitted an offer Thursday to buy out BP’s 50 percent of a joint venture here called TNK-BP. The board’s authorization allowed BP’s chief executive, Robert W. Dudley, to negotiate the final terms for BP’s sale of its Russian holdings within a range of acceptable combinations of cash and shares, the executive with knowledge of the decision said.
The ranges were $10 billion to $14 billion and 15 to 20 percent of Rosneft’s shares. BP is likely to receive at least one seat on the board.
A formal announcement is expected as early as Monday. BP’s stock rose about 4 percent last week when it became clear that a deal was imminent.
For BP, the sale comes as the biggest step yet in Dudley’s ‘‘shrink to grow’’ strategy in the wake of the 2010 Gulf of Mexico oil spill. Dudley, a Mississippian, took over in the midst of that disaster and decided that BP, to survive, should put its global business on a new footing by selling older, less profitable fields and concentrating on exploration.
BP sold assets in countries from Venezuela to Vietnam. The Russian holdings were the largest that fit the category for potential sales, comprising mostly aging oil fields in Siberia with little potential for new output. Still, they account for about 25 percent of BP’s global production, or about as much oil as BP pumps in the United States, including Alaska.
For the Russian industry, the buyout of BP’s share in TNK-BP takes a large swath of the industry full circle back to state ownership.
TNK-BP is the third-largest Russian oil company; if Rosneft buys out both BP and the handful of Russian billionaires who control the other half of TNK-BP, Rosneft will become the world’s largest publicly traded oil company, with daily production of about 4.5 million barrels a day.
For Putin, this represents a milestone in the consolidation of the Russian oil industry. Oil and natural gas contribute about 50 percent of the federal budget and 60 percent of export revenues.