AAR Welcomes Arbitration Tribunal Decision Against BP

Calls on BP to respect the London ruling to avoid further contention

MOSCOW , March 24, 2011 /PRNewswire/ -- At 5:30 p.m. London time today, the Stockholm Arbitration Tribunal notified AAR and BP that it has ruled that BP's proposed strategic alliance with Rosneft breaches the terms of the TNK-BP shareholder agreement.

According to the Tribunal, BP cannot proceed with any part of its proposed Rosneft transaction, which includes: (i) the Cooperation Agreement to explore for oil and gas in the Arctic; (ii) the Framework Agreement, which encompasses a broad strategic alliance between BP and Rosneft, and (iii) the Share Swap, which underpins both the Cooperation and Framework agreements, thus cementing a strategic partnership between the two companies.

The Tribunal decision means that BP is prohibited from entering into any future share arrangement with Rosneft that has any kind of a strategic component.

"AAR welcomes the decision of the Arbitration Tribunal, which we expect BP to honor fully and absolutely," said Stan Polovets, chief executive officer of AAR. "Willfully ignoring the provisions of the shareholder agreement was a serious misjudgment by BP that has severely damaged the relationship between the TNK-BP shareholders; it has also harmed BP's reputation in Russia. We expect Bob Dudley to make every effort to rectify the situation and rebuild the trust that has been lost between BP, AAR and the management of TNK-BP."  

Since its establishment in 2003, TNK-BP has delivered consistently high returns as a leading vertically integrated Russian oil company. During this period, BP has received $14.3B in dividends from TNK-BP. This amount excludes the Q4 2010 dividend of $1.7B, which has been suspended subject to the resolution of the ongoing dispute between AAR and BP.

Last year, TNK-BP increased production of oil and gas by 3.1% and replaced 134% of its reserves. In comparison, BP's production (not counting TNK-BP) declined by 6% and its reserve replacement ratio was only 70%.

SOURCE AAR Consortium