Tag: BP

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.

BP will find out on Thursday whether its proposed alliance and share swap with Russia’s state-oil champion Rosneft broke the UK oil group’s shareholder agreement with its other Russian venture TNK-BP.

The Stockholm tribunal panel hearing the case is expected to issue its ruling to the two parties on Thursday afternoon and both sides are likely to issue an announcement sometime after that.

Sheila McNulty

Deepwater Horizon explosionIt turns out the reason why the blowout preventer on BP’s Macondo well failed to close was because a section of drill pipe had buckled inside the well during the accident and blocked efforts to seal it off. This is according to Det Norske Veritas, a consultancy hired by the US interior department to investigate why the blowout preventer failed.

Cameron International, the maker of the blowout preventer, responded:

The BOP was designed and tested to industry standards and customer specifications. We continue to work with the industry to ensure safe operations.

Kiran Stacey

George Osborne, the UK chancellor, has just announced his tax measures for the next year, and the biggest surprise came with a cut to fuel duty, to be funded by extra charges on North Sea oil producers if the oil price remains over a certain price somewhere around $75 a barrel. The supplementary charge for such companies will now go from 20 per cent to 32 per cent.

So the North Sea’s big oil and gas producers must be suffering, right? Well, no.

For the big companies this means little – the North Sea is a declining asset, which will not mean much in the long term, and the £2bn raised altogether from this tax is nothing compared to their incomes (for comparison, Shell’s pre-tax net income last year was $35.3bn, about £21.7bn). That’s why their share price hasn’t budged in reaction.

BP will not pay bonuses for last year to any of the executive directors involved in the disastrous Gulf of Mexico spill, but the UK oil group has awarded partial pay-outs to two directors for meeting specific divisional targets.

Bob Dudley, chief executive, his predecessor Tony Hayward and Andy Inglis, the former head of exploration and production who left the company last October, have all been denied an annual bonus for 2010 and no director will receive shares under the long-term remuneration plan running from 2008 to 2010, BP disclosed in its annual report.

All four BP-nominated directors failed to turn up for an extraordinary meeting of TNK-BP’s board on Friday, torpedoing a crucial vote on whether the Russian oil venture should participate in the UK oil group’s alliance with Rosneft.

“The board was not able to vote because the BP directors did not show up,” said Stan Polovets, chief executive of AAR, BP’s Russian partners in TNK-BP. “There was no quorum.”

The no-show by BP raises the stake in a stand-off between BP and the Russian billionaire partners in TNK-BP who claim BP’s alliance with Rosneft, the state-controlled oil company, is a breach of their shareholder agreement with BP.

In one of the biggest foreign direct investments to date in India, BP is to pay $7.2bn to Reliance Industries in a deal that will give it a 30 per cent stake in 23 oil and gas blocks.

The blocks together cover approximately 270,000 sq km, the companies said in a statement on Monday, making the partnership “India’s largest private sector holder of exploration acreage”. BP and Reliance will also form a 50:50 joint venture for the sourcing and marketing of gas.

Kiran Stacey

BP’s partnership with Rosneft was remarkable for a number of reasons, not least that it was done against the wishes of BP’s partners in TNK-BP and was the first equity partnership between a private international and a public national oil company. It is also a partnership not limited to developing Russian assets only: the two parties have a 50/50 ownership of Ruhr Oel, a German refining joint venture.

Ian Smale, BP’s group head of strategy and policy, told an audience in London on Monday that the two companies would be looking at further JVs outside Russia, and described the arrangement as an example of how IOCs and NOCs could form closer partnerships in future.

Kiran Stacey

A newsflash from Reuters has reported that a UK court has issued an injunction on the BP-Rosneft deal, which is now on hold.

This won’t come as a surprise to BP. Bob Dudley told reporters on Tuesday morning:

There is a relatively low hurdle in the UK for granting an injunction. That may well happen today.

This came after a case brought by AAR, BP’s partners in TNK-BP, who have been far from happy about the Rosneft deal.

But Dudley will not be overly concerned by such a move. Earlier, he insisted that an injunction would be merely a “time-out” in the discussions.

UPDATE – Rosneft is echoing BP’s confidence. A spokesman has said:

All the risks were expected and the London court decision should not affect the essence of the deal.

Shareholders apparently agree. BP remains about 0.5 per cent up on the day, having moved largely on its results.

Sylvia Pfeifer

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