BP, Investors Settle TNK-BP Dispute; Dudley to Leave

By Torrey Clark and Eduard Gismatullin

Sept. 4 (Bloomberg) -- BP Plc and its billionaire partners in TNK-BP, Russia's third-largest oil company, signed an accord to resolve a management dispute at the joint venture, removing the Russian company's chief executive and expanding the board.

TNK-BP CEO Robert Dudley will step down by the end of the year, the partners said today in e-mailed statements. The shareholders will also examine selling shares in a unit of TNK- BP Ltd. to boost the company's market value. BP shares rose 3.4 percent to 523 pence at 9:55 a.m. London time.

The accord ends more than three months of public acrimony, leaving BP with its stake in the venture intact and giving the Russian investors more influence on strategy. TNK-BP accounts for almost a quarter of BP's worldwide output and proved reserves.

``This agreement could be positive for the Russian market in general,'' Oleg Maximov, an oil analyst at Moscow-based Troika Dialog brokerage, said today by phone. ``Many investors were very concerned about this situation.''

The shareholders agreed to expand the board of TNK-BP Ltd. to 11 directors, four from each side and three independents. The current board has 10 members, split evenly between BP and AAR, which represents the Russian billionaires.

Investors Mikhail Fridman, German Khan, Viktor Vekselberg and Len Blavatnik made the demand for Dudley's departure central to the fight over control of TNK-BP.

Court Battles

Dudley left Russia July 24, citing ``sustained harassment'' amid court battles and labor and tax inspections that led to him being disqualified from his post in Russia for two years. TNK-BP has appealed the disqualification decision.

``Any settlement is good news,'' Edward Collins, a London-based fund manager at New Star Asset Management Group Plc, who helps manage about $41 billion, said today. ``It removes a cloud from the shares.''

BP said the memorandum of understanding signed today includes an option to sell up to 20 percent of a TNK-BP subsidiary through an initial public offering on international financial markets ``at an appropriate future point,'' subject to the consent of the Russian authorities.

To contact the reporters on this story: Torrey Clark in Moscow at tclark8@bloomberg.net. Eduard Gismatullin in London at egismatullin@bloomberg.net