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 BP's strategic alliance with Rosneft
30-01-11
Oil giant BP announced a strategic alliance with Russia's Rosneft on 14th January. The companies have agreed to explore and develop three license blocks - EPNZ 1,2,3 - on the Russian Arctic continental shelf. These licences were awarded to Rosneft in 2010 and cover approximately 125,000 square kilometres in a highly prospective area of the South Kara Sea. This is an area roughly equivalent in size and prospectivity to the UK North Sea.
There is a share swap component in the deal. Rosneft will hold 5 per cent of BP's ordinary voting shares in exchange for approximately 9.5 per cent of Rosneft's shares.
The alliance will allow Rosneft access to BP's technology and expertise. The two companies will establish an Arctic technology centre in Russia building on BP's deep offshore experience.
Rosneft's director, Igor Sechin who participated in the signing ceremony in London described the event as historic. Igo Sechin is Russia's Deputy Prime Minister and is considered to be Mr Putin's close ally.
Rosneft was widely criticized after swallowing up the assets of Yukos. Recently, Ex-Yukos boss Mikhail Khodorkovsky's sentence was extended by six years.
Thousands miles away from the Arctic, concerns are expressed on Capitol Hill for security reasons as BP is a major oil supplier to the US military.
'BP once stood for British Petroleum,' said Edward Markey, the top Democrat on the House Natural Resources Committee. 'With this deal, it now stands for Bolshoi Petroleum.'
The British company has already had a difficult time with its reputation in the US after the Gulf oil spill last year.
But Norway's deputy oil and energy minister welcomed the BP-Rosneft deal, reported Reuters.
Immediately after the tie-up announcement, BP's shares jumped 2% but the share price slipped following reports that the TNK-BP oligarchs are upset about the deal.
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