Tag: AAR

Kiran Stacey

We all knew that the collapse of BP’s deal with Rosneft to drill in the Arctic was more damaging for BP than it was for its Russian prospective partners.

For BP, the deal represented the chance not only to tap the significant Arctic resources for which Rosneft holds licenses, but also a chance to diversify away from the Gulf of Mexico, and to show the world it can still drill safely in difficult places, even after last year’s spill.

But Rosneft, while preferring the technical skills BP had to offer, still has plenty of options on the table. Big oil companies are lining up to take BP’s place and exploit the Arctic’s resources themselves. And none of them bring the baggage of existing Russian partners who could get in the way.

Russian president Dmitry Medvedev at a news conference May 18They should have done their homework. That’s the view of Russian president Dmitry Medvedev on the collapse of the BP-Rosneft deal. And it’s hard to fault his conclusion, delivered at a mega press conference on Wednesday that was broadcast live.

Although he did not say so, his criticisms were aimed at both BP and Rosneft – and deputy prime minister Igor Sechin, the former Rosneft chairman, who was forced to leave the company earlier this year on Medvedev’s orders.  And the confident-looking president even allowed himself a little swipe at Russia’s most powerful man, prime minister Vladimir Putin.

The president implied that BP and Rosneft should have anticipated opposition from the Russian oligarchs who are BP’s partners in its current Russian venture, TNK-BP. “Those who prepared the deal should have paid closer attention to the nuances of the shareholder agreement,” Medvedev said.

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.

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.

President Dmitry Medvedev speaks with Vice Premier Igor SechinBy Catherine Belton and Stefan Wagstyl

At first glance, Igor Sechin’s abrupt departure as Rosneft chairman appears to bode badly for BP’s last-ditch bid to salvage its alliance with the Russian state controlled company.

But, it could turn out to be a clever tactical move that might yet save the deal. So complex are the political tensions surrounding the deal that the outcome remains impossible to predict. In other words, BP is still in with a chance.

FT Energy Source

Bob Dudley, BP chief executive, and Vladmir Putin, Russian prime minister, when the BP-Rosneft deal was announced in January 2011BP is running out of options. Its plans for a cooperation pact with Russia’s Rosneft was on Friday blocked for a second time by a legal challenge from its Russian partners in its existing Russian joint venture, TNK-BP.

While the international tribunal has still to give a definitive ruling on a key element of the accord – a $16bn share swap – its temporary injunctions could now have a permanent effect on BP’s ability to close the deal. The Russian TNK-BP partners headed by oligarch Mikhail Fridman are winning in their effort to block the ambitious venture.

As beyondbrics has reported, the Stockholm tribunal – which is actually three Brits meeting in London – ruled on Friday that a temporary injunction blocking the share swap should remain in place.

BP failed on Friday to secure legal permission to go ahead with its proposed share deal with Rosneft, the Russian state-controlled oil group, after the Russian partners in its existing Russian venture TNK-BP opposed the plan.

The arbitration court, which had earlier blocked a proposed BP-Rosneft venture for Arctic exploration, on Friday ruled that the second element in the overall agreement – the share swap – could not go ahead on its own for now, under the terms of a temporary unjuction.

BP is rightly coming under growing shareholder pressure to explain what it is doing with its stalled Rosneft deal – or get out of the increasingly controversial $16bn-plus project.

Amid much anonymous grumbling, one big shareholder – Standard Life – went on record on Tuesday questioning BP’s proposals. With the deal deeply entwined in the complexities of the Kremlin and its relations with Russian big business, it is impossible to say how the dice will fall. But the whole affair has done nothing to enhance investor confidence in either BP or Russia.

The British company knew when it announced the deal with Rosneft, with much fanfare and prime minister Vladimir Putin’s public blessing, that it would run into trouble from the Russian billionaire partners in its existing joint venture, TNK-BP.

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