Corporate news

Sheila McNulty

The amount of private equity moving into the US oil and gas sector has risen dramatically over the past year, drawn by a long-term bet on rising commodity prices and heightened demand for energy infrastructure. This is according to PwC, the consultancy, which put out a report on US energy sector deals on Tuesday.

Overall, there were eight private equity-backed transactions in the first quarter of this year, representing $4.8bn, or 9 per cent of total deal value, compared to just one during the same period last year, worth $767m, the report said.

Chart showing overall value of PE-backed oil and gas deals

Figures from PwC

BPBP shareholders breathed a sigh of relief on Tuesday on the collapse of the Rosneft deal talks, with the stock climbing over 1 per cent.

And quite right too. In its original form, the deal with the Russian state’s oil champion was a high-risk venture hard to sell to shareholders. But not impossible, given the potential rewards in developing the Russian Arctic.

The final version, involving a costly and awkward compromise with BP’s existing Russian partners, was fatally flawed. But BP must not give up on the Arctic. It should try again  – perhaps after Russia’s 2012 presidential election.

Sheila McNulty

Deepwater Horizon explosionThe big question for months has been what would happen if there was a significant spill in the deepwater outside the Gulf of Mexico. Following BP’s Macondo disaster, the industry worked together to build two spill response systems for this area. But nobody said what would happen if a deepwater disaster unfolded in the waters offshore Ghana or Brazil.

Now the industry has gathered together to address that question. Nine of the world’s biggest oil and gas companies – BG Group, BP, Chevron, ConocoPhillips, ExxonMobil, Petrobras, Shell, Statoil and Total have launched the Subsea Well Response Project (SWRP), an initiative designed to  enhance the industry’s capability to respond to subsea  well control incidents.

BP‘s bid for a strategic alliance with Rosneft, the Russian state oil champion, collapsed on Tuesday after the UK oil group failed to reach agreement to salvage its $16bn share swap before a midnight deadline expired.

Rosneft was not willing to extend the deadline further, a person close to the state company said, after talks failed over a deal to buy out BP’s partners in TNK-BP, its existing Russian joint venture. A person familiar with the matter said Rosneft would now seek new partners for the Arctic exploration deal it had proposed for the alliance with BP.

Bob Dudley, BP chief executive, and Vladmir Putin, Russian prime minister, when the BP-Rosneft deal was announced in January 2011BP was fighting on Monday to save its planned $16bn deal with Russian state-run oil group Rosneft before the deadline on the deals lapses at midnight.

The UK group was in talks with Rosneft and with the Russian oligarchs who have blocked the Rosneft deal to protect their interests in BP’s existing Russian joint venture, TNK-BP. As the FT has reported, a buyout of the oligarchs – possibly for around $30bn – is one of the options of the table. But, with three parties to the negotiations, and the Russian state involved, nothing will be agreed until everything is agreed.

Sheila McNulty

(From l to r) Rex Tillerson, Chairman and CEO of ExxonMobil; John Watson, Chairman and CEO of Chevron; James Mulva, Chairman and CEO of ConocoPhillips; Marvin Odum, President of Shell Oil Company; and Lamar McKay, President and Chairman of BP AmericaThere is no doubt it is hard to feel sorry for Big Oil. It pulls in  billions of dollars in profits whenever oil prices go up, and yet higher oil prices result in higher petrol prices for the public.

So whenever these companies are doing well, the public is doing worse. And that, inevitably, leads to talk about punitive taxes (or at least a loss of tax breaks) for the oil industry.

That time has come once again. A few weeks ago, the world’s biggest oil companies reported massive profits just as petrol moved up and beyond, in some cases, $4 a gallon. That is a big deal in the US, where people often commute long distances to work, particularly in sprawling cities like Houston, Chicago, Los Angelos, and other highly populated areas. And it is particularly important now when the economy has not fully recovered, unemployment remains high and the public at large is still having economic difficulties.

Sheila McNulty

The rise in US crude oil prices has been pushing petrol up toward $4 a gallon – a level analysts note has historically led to a drop in consumer demand. The current national average price of petrol is just under there, according to the Daily Fuel Gauge Report by AAA, America’s largest motoring and leisure travel membership organization.

John Felmy, economist at the American Petroleum Institute, the national industry trade association, said the last time crude oil prices were hitting these levels – in 2008 – consumer demand for petrol began dropping around the $2.80 per gallon level. The bigger declines were when gasoline rose above $3.75 a gallon, he said.

Serious interest in buying Poland’s Lotos Group has come only from Russian companies, making the sale of the government-owned refiner politically problematic before this autumn’s parliamentary election.

Unofficially, the Russian companies who submitted bids for Lotos before the treasury ministry’s deadline at the end of last month include TNK BP, GazpromNeft and Rosneft, according to Poland’s Parkiet newspaper.

Russian companies have long been interested in Lotos, the country’s second largest refiner – which owns a modern refinery in northern Poland as well as a chain of petrol stations and some oil production on the Baltic Sea – as a way of gaining a foothold in the Polish market.

Bob Dudley, BP chief executive, and Vladmir Putin, Russian prime minister, when the BP-Rosneft deal was announced in January 2011BP is bending over backwards to save its controversial deal with Rosneft, the Russian state-controlled oil group, and try to square its interests with those of the Russian authorities and of the oligarch partners in its current Russian joint venture, TNK-BP.

Shareholders should be wondering whether all the contortions involved are worth the effort.

Rosneft has given the British company until May 16th to negotiate an acceptable alternative to their original January agreement, that envisaged a $16bn share swap and an ambitious exploration and development joint venture for the Russian Arctic.

Kiran Stacey

Newsflash from Reuters:

15:15 06May11 RTRS-BP PLC <BP.L> – ARBITRAL PANEL PERMITS CONDITIONAL COMPLETION OF BP-ROSNEFT SHARE SWAP
15:16 06May11 RTRS-BP PLC <BP.L> – ASSIGNMENT OF ARCTIC OPPORTUNITY TO TNK-BP
15:16 06May11 RTRS-BP PLC <BP.L> – THE ORDER ALSO PERMITS THE PROPOSED SHARE SWAP BETWEEN BP AND ROSNEFT TO PROCEED

BP shares are now on the up following early morning falls.BP share price

More on this to follow from our energy editor Sylvia Pfeifer.

Energy Source is no longer updated but it remains open as an archive.

Insight into the financial, economic and policy aspects of energy and the environment.

Read our farewell note

About the blog

Archive

« AugSeptember 2014
M T W T F S S
1234567
891011121314
15161718192021
22232425262728
2930