11.02.2003 – 12:09

BP plc

euro adhoc: BP PLC
Joint Ventures
Re Joint Venture (E)

Disclosure announcement transmitted by euro adhoc. The issuer is
responsible for the content of this announcement.

February 11, 2003

BP CREATES STRATEGIC PARTNERSHIP IN RUSSIA

BP and the Alfa Group and Access-Renova (AAR) said today that they
have agreed in principle to combine their interests in Russia to
create the country's third biggest oil and gas business, in which
they will each have a 50 per cent stake.

The new company will incorporate TNK and Sidanco which, between them,
produce approximately 1.2 million barrels of oil a day.

It will also own significant exploration interests in Siberia and
Sakhalin, together with a major downstream business that includes
interests in five refineries and a retail network of more than 2,100
sites in Russia and the Ukraine.

For its 50 per cent stake in the new company BP will pay AAR $3
billion in cash on completion of the deal and three subsequent annual
tranches of $1.25 billion in BP shares, valued at market prices prior
to each annual payment.

The transaction, which will be effective from January 1, 2003, is
scheduled for completion in the summer.

BP said the deal would be immediately accretive to cashflow, earnings
per share and return on capital employed, and it expected to improve
performance significantly over the next four years through synergies,
cost reductions and output growth.

Chief executive Lord Browne described the transaction as "a major 
strategic step into a country with massive oil and gas reserves and
immense potential for future growth."

He said: "BP entered Russia five years ago when we bought ten per
cent of Sidanco. We had a tough time initially, but after the present
management and ownership structure was established early in 2001 we
have gradually built an important, mutually beneficial relationship
with the owners of AAR and learned a great deal about doing business
in Russia.

"Over the past year we have conducted a very thorough examination of
the assets involved in this deal, including rigorous and extensive
physical inspections. We have also taken great care to put in place a
system of governance that safeguards the interests of all parties.

"These prudent measures, combined with Russia's greatly improved
economic stability, improved legal system and increasing commitment
to international rules of trade and business, have convinced BP that
now is the time to deepen our partnership with AAR.

"We believe this to be a great moment in the history of BP and of
TNK/Sidanco and, indeed, an important milestone in the history of the
industry. It marks a step change for both companies and establishes a
business which will be able to meet the competitive challenge ahead,"
Browne said.

The new company will be governed by a ten-strong board, with members
nominated equally by BP and AAR and decisions taken unanimously.  AAR
will nominate the chairman of the Board, and BP will nominate the
chief executive and provide significant management and technical
resources to the new company.  BP and AAR intend to apply western
principles of corporate governance.

The new combined company will have production of some 1.2 million
barrels of oil a day. BP estimates that the oil and gas resources of
the new concern are at least 5.2 billion barrels.

BP's share of resources will be in line with its 50 per cent interest
in the company. Its share of oil production will total more than
500,000 barrels a day. Over 40 per cent of the output is exported as
crude and 15 per cent as refined product, both at international
prices. The remainder is sold domestically at
lower prices.

The transaction is subject to regulatory and other approvals,
including the consent of the EU and Russian Ministry of Anti-Monopoly
Activities.

The assets being contributed by BP to the new company include its
holding in Sidanco, its stake in Rusia Petroleum, its interest in the
Sakhalin V exploration licence and its holding in the BP Moscow
retail network.

AAR is contributing its holdings in TNK and Sidanco, its share of
Rusia Petroleum, its stake in the Rospan gasfield in West Siberia and
its interest in the Sakhalin IV & V exploration licence.  Neither
AAR's association with Slavneft, nor BP's interest in LukArco or the
Russian elements of BP's international businesses such as lubricants,
marine and aviation, are included in the transaction.

Notes to Editors:

·  As at December 31, 2001 the total net assets and profits after tax
of the combination of companies which are the subject of this
transaction were US $3,635 million and US $1,435 million
respectively.

·  BP was advised in this transaction by Merrill Lynch International,
Morgan Stanley & Co. Limited and United Financial Group.

- ENDS -

This information is provided by RNS
            The company news service from the London Stock Exchange

end of announcement        euro adhoc 11.02.2003

Further inquiry note:

Further information: BP Press Office London, tel: +44 (0)207 496 4624/5256/4358/4708/4851

Branche: Energy
ISIN: GB0007980591
WKN: 850517
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