Kuwait Buys 10% of BP Worth Estimated $2.6 Billion

The Kuwaiti government has bought a stake of more than 10% in British Petroleum Co., the world’s third-largest oil company, BP said Wednesday.

The move makes Kuwait the biggest shareholder in BP. It also gives the Persian Gulf nation effective 5% interest of the Prudhoe Bay oil field in Alaska, the largest in the United States, and numerous other U.S. assets.

Kuwait’s latest stake in the U.S. Oil Patch comes through BP’s ownership of the former Standard Oil of Ohio, which controls 50.6% of the Prudhoe Bay reservoir on Alaska’s North Slope and is a major force in the domestic oil industry generally.

The Kuwaitis already own Santa Fe International, a large international drilling and exploration firm based in Los Angeles, which it acquired for $2.5 billion in 1982.

BP said the London-based Kuwait Investment Office had acquired a 10.06% equity stake in the newly privatized firm. The Kuwaiti Investment Office, which invests the oil-rich nation’s petrodollars, said it considered its purchase of BP shares to be “a good long-term investment” at current prices. Analysts said a 10% stake in BP would be worth around $2.6 billion.

The KIO would make no comment on whether it planned to buy more BP stock, but recent market rumors suggested that it sought a stake as high as 15%.

Kuwait, one of the smallest but wealthiest oil-producing nations and a key member of the Organization of Petroleum Exporting Countries, has invested an estimated $100 billion in Western corporate ventures in recent years. Its biggest outright oil acquisition was of Santa Fe International.

The Kuwaitis also have established major overseas retail operations in the past few years, refining their own crude oil into gasoline that it sells at its 5,000 service stations in Western Europe under the brand name Q8, for Ku-wait.

It has been on the lookout for more refining and retail outlets in Europe, but analysts Wednesday discounted suggestions that Kuwait’s new BP stake is related.

British Petroleum gave a cautious welcome to its new investors, noting that it “has often made clear its desire to widen its international shareholder base. While the KIO’s holding is considerably greater than other institutional shareholdings in BP, the company always welcomes significant new long-term investors of an institutional nature.”

But some brokerage analysts saw in that a veiled warning that Kuwait not venture toward what one called “putting an armlock on management.”

The British government recently sold off its 31.5% stake in BP at the same time the company sold new shares to raise about $2.6 billion.

The combined $13-billion sale was a flop because of last month’s collapse of world stock markets, which depressed BP’s share price below the offering price.