Rosneft quits BP Russia deal: report

17th May 2011, Comments 0 comments

Rosneft has pulled out of its oil alliance with BP and will look for new Western partners to explore the Russian Arctic, a report said on Tuesday, giving an abrupt twist to the historic deal.

A source close to state-owned oil group Rosneft told the Interfax news agency that the company had lost patience with Russian shareholders in BP's joint venture called TNK-BP.

The report was published shortly after the latest deadline to complete the transaction had expired.

The Russian billionaires -- who control their shares through a group known as AAR and are led by the banking tycoon Mikhail Fridman -- have used the courts to block the alliance and refused to sell their stake at the prices offered by BP.

"This entire time, Rosneft has been keeping to a constructive position," the Rosneft source told the Russian news agency. "This is confirmed by the fact that it agreed to extend the deadline."

"From the moment the BP agreement lapses, Rosneft will start reviewing all of the previously-submitted proposals for the (Arctic) shelf projects and decide on a strategy for attracting a partner to the Kara Sea," the source said.

Rosneft had already extended the deadline by which the deal could be completed in own hope of securing an experienced partner who could help the Russian giant tap the vast wealth believed to be buried in the Kara Sea.

News reports said BP and Rosneft had been willing to pay more than $30 billion (21.1 billion euros) for the Russian partners' stake, a sum the Rosneft source described as a "premium price".

BP shares shot up more nearly on percent on the reported failure of the deal, reflecting earlier investor fears that the British company would overpay for a buyout and get stuck with a project whose immediate benefits were unclear.

Those terms also included the Russians receiving a 6.7 percent stake in BP, making them the largest minority shareholder in the firm.

Rosneft for its part was on course to becoming the world's biggest publicly traded oil producer by eventually acquiring TNK-BP through a complicated deal whose negotiation the company is no longer willing to pursue.

The announcement leaves the Arctic door open to the US multinational ExxonMobil and Royal Dutch Shell, two companies have previously expressed an interest in working with Rosneft.

The announcement appeared to catch the British firm at its Russian partners off guard, coming only moments before they issued their own prepared statement saying that further negotiations were in store.

"We plan to continue discussions about potential collaboration among BP, Rosneft and AAR," AAR shareholder Mikhail Fridman said in the statement.

The British firm and the Russian partners added that while "a solution has not been found at this time ... talks will continue."

Neither BP nor the Russian partners commented on the Rosneft announcement itself.

But while the reports cheered investors in BP, the could deal a major play to the fortunes of the company's chief executive Bob Dudley, who has staked his reputation on a growth path through Russia.

Dudley had been hoping to use the Russian tie-up to end years of BP shares' underperformance, bringing a new growth strategy to a firm that had to sell fields to pay for the damage of the 2010 Gulf of Mexico oil spill.

"BP remains committed to Russia," Dudley said in Tuesday's statement. "All parties have worked hard to reach an acceptable solution ... to Rosneft, AAR and Russia."

© 2011 AFP

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