Russia sees future in BP despite court delays

8th April 2011, Comments 0 comments

Russia said Friday it could still complete its main oil company's tie up with BP despite an arbitration panel's ruling against both the share swap and Arctic exploration parts of the $16 billion deal.

A Stockholm panel decided to keep its injunction on the BP-Rosneft cross holding "until further notice" after issuing a similar ruling on the Arctic exploration part of the historic agreement two weeks earlier.

The twin blows for BP were softened only by news that the British giant could now discuss the possibility of extending the April 14 deadline by which its deal with the Russian state-held company would have to be closed.

The ruling essentially delays a final resolution to a conflict that emerged only days after Prime Minister Vladimir Putin personally blessed a tie up that would have enabled Russia to gain a broader swath of the world energy market.

Rosneft needs the support and technology of an international heavyweight to conquer the extreme seas and thick sheets of ice believed to be hiding some of the world's biggest untapped reserves of both oil and natural gas.

BP meanwhile saw the deal as a chance to be the first through the door to the Arctic -- a vital part of its business strategy following the fiasco it suffered during the 2010 Gulf of Mexico oil spill.

But the deal ground to an almost immediate halt when it was challenged by the small group of billionaires who make up the Russian half of BP's local venture TNK-BP.

The deal threatened to make TNK-BP -- one of the world's top 10 private oil firms -- redundant and deprive the Russian billionaires of leverage in any attempt by either Rosneft or BP to buy out the group.

The Russian billionaires argued in court that they had a right of first refusal on any deal with Rosneft and the Stockholm panel has now backed their claim in both parts of the dispute.

BP said in a four sentence statement that the ruling marked just another step in a winding legal battle it planned to pursue.

"The share swap and the Arctic opportunity announced January 14 remain subject to the final decision of the arbitration tribunal," BP said in a statement.

The Russian billionaires for their part said they were willing to fight the tie-up to the end.

Analysts said the final word now rested with a Russian government that had the option of either dropping BP out of frustration or extending the deadline by which the deal could be wrapped up.

Rosneft chief Igor Sechin -- a close ally of Putin who serves as Russia's effective energy czar -- hinted in strong favour of the second option by noting that he expected the two warring sides to hammer out a deal.

"I think that there will be a way out of this," news agencies quoted Sechin as saying.

"All participants of this process have time to think things over and make a contribution" that could resolve the dispute.

Yet Sechin's own standing was shaken at the end of March when President Dmitry Medvedev announced plans to dismiss all government officials from their seats on state company boards by the end of the year.

Several analysts suggested that Medvedev was becoming alarmed at Sechin's growing stature and what this meant to his own political future.

But others observed that Russia was unlikely to drop BP simply because Sechin was a part of political intrigues that are preceding a presidential election next year in which either Putin or Medvedev can run.

"A strong Rosneft does not hurt Medvedev," said UniCredit equity analyst Artyom Konchin.

"I do not think that he is trying to rein in Rosneft. That would be a strange policy that runs counter to his market ideology," said the analyst.

"I think Rosneft still wants to partner with BP in the Arctic and that we will soon see this confirmed by a more flexible deadline from Rosneft for this transaction to go ahead."

© 2011 AFP

0 Comments To This Article