Back pedalling

BP assets: BP would rather not be selling up to $20 billion of assets because it needs to pay for a record-breaking oil spill in the Gulf of Mexico. Fortunately for the embattled UK oil and gas company its forced-seller status might not be so troublesome. BP has non-core assets that look attractive to cash-rich buyers who have already shown their appetite to buy.

Take the 60 per cent stake in Pan American Energy, an Argentina-focused oil and gas producer. It is a mature, low-growth asset that BP probably wouldn't miss. By contrast, Latin America has become a key target market for Asian oil rivals, which have been paying top dollar for assets. CNOOC, the Chinese oil giant, shelled out $3.1 billion to take an indirect stake in American Energy just three months ago. That implies BP’s stake could be worth over $9 billion. In the same region, BP could sell its Colombian assets, which are also mature.

Then there are the listed stakes. BP’s 1.4 per cent holding in Rosneft is of questionable strategic value and could be worth $1 billion. Jettisoning a 71 per cent stake in Castrol India could bring in another $1.6 billion. These may not attract as much interest as the LatAm assets — but they can be sold quickly. BP has said it is targeting asset sales of $10 billion to help cover the $20 billion base commitment made to the US government for damages from the spill. But if all goes well, these disposals could raise much more.

To go further, tougher decisions will be needed.

Assets in Trinidad and Tobago are core to BP’s plans to expand in liquefied natural gas. Its fields in Angola and Egypt offer growth. And while the North Sea assets are mature, they are high margin and probably wouldn’t catch the eye of the Chinese. BP could also theoretically sell down its exposure to its Russian venture, TNK-BP. But it is hard to see who would want to pay a high price to enter this politically problematic relationship. That leaves assets in the United States. BP could sell its joint ventures in the hot area of shale gas. The Gulf of Mexico deepwater exposure is, at this point, arguably worth more to another operator, but is an engine of future growth. Exiting would be an unpalatable option. Hopefully for BP, it need not come to that.