The Work

January 18, 2011 4:03 PM

Freshfields, Linklaters Lead on $16 Billion BP/Rosneft Joint Venture

Posted by Brian Baxter

Two Magic Circle firms have taken lead advising roles on a strategic partnership between British oil giant BP and the Russian government-owned energy colossus Rosneft, according to U.K. legal publication Legal Week.

Linklaters corporate partners Stephen Griffin in London and Grigory Gadzhiev in Moscow are advising longtime client BP, Legal Week reports. The deal, which marks the first significant shares swap between a private and state-controlled company in the oil sector, will see BP exchange nearly $8 billion in shares for a 9.5 percent stake in Rosneft.

In exchange, Rosneft will receive a 5 percent BP stake valued at $7.8 billion, according to Bloomberg. While the main purpose of the joint venture is to explore for oil off Russia's vast Arctic coast, the deal has many moving parts, Reuters reports.

BP already owns 50 percent of Russia's third-largest oil producer, TNK-BP.  As previously reported here, a long list of outside legal advisers got involved when that union hit a rough patch two-and-a-half years ago.

Linklaters and Russian firm Egorov Puginsky Afanasiev & Partners represented BP and its current CEO Robert Dudley--then a top TNK-BP executive--in that dispute. (Dudley fled Russia for a time; click here for a profile of Egorov Puginsky from The American Lawyer.)

In recent months, Linklaters has been a key outside legal adviser to BP as the London-based company raised capital to offset costs connected to last year's Deepwater Horizon oil spill in the Gulf of Mexico. The firm advised BP when it borrowed $5 billion from a consortium of banks last summer and on the company's $650 million sale of four wells in the Gulf of Mexico in October.

BP also tapped Freshfields Bruckhaus Deringer, another of its key outside firms, amid the string of asset sales. The company last relied on Freshfields for the $775 million sale of its Pakistan operations in December.

In the Russian deal, it was Freshfields corporate partner Sebastian Lawson and associate Sergei Diyachenko who advised Rosneft on the strategic joint venture agreement with BP, Legal Week reports. (For an earlier transaction of similar size, a $15 billion loan-for-oil deal with the Chinese government, Rosneft turned to Baker Botts for outside counsel.)

The London Evening Standard reports that the joint venture between BP and Rosneft left the major international investment banks on the sidelines, and that fees from the deal could exceed $15 million apiece for Freshfields and Linklaters.

While some in the U.S. have called for close scrutiny of the deal, Bloomberg reports that the transaction could avoid the review of stateside regulators. On Monday, British prime minister David Cameron denied that there were any lingering political tensions over the accord between BP and Rosneft.

BP's general counsel is Rupert Bondy. Rosneft's vice president for legal support is Larisa Kalanda, who also serves as deputy chairman of the company's management board.

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