BP, Rosneft announce share swap, Arctic exploration deal

The heads of oil giant BP and state-run Russian firm Rosneft announced a deal Friday to work together to exploit the resources of the Arctic and to swap shares so Rosneft will hold five percent of BP.

In what BP chief executive Bob Dudley said was an “historic” deal, the firms will explore and develop Rosneft’s three licensed blocks on the Russian Arctic continental shelf, covering about 125,000 square kilometres in the South Kara Sea.

“Following completion of this agreement, Rosneft will hold five per cent of BP’s ordinary voting shares in exchange for approximately 9.5 per cent of Rosneft’s shares,” the two firms said in a joint statement.

The statement outlining the deal was issued at a press conference in London given by Dudley and Rosneft President Eduard Khudainatov, shortly after Russian Vice President Vladimir Putin announced the agreement in Moscow.

Putin met Dudley in Moscow earlier Friday, telling him, according to Russian news agencies: “The Russian government is going to support your joint work.”

BP currently has a three percent stake in Rosneft, while Russia accounts for around one quarter of the British energy giant’s total production.

BP also owns 50 percent of Russia’s third biggest oil producer, TNK-BP, where Dudley served as chief executive for five years until he was expelled by BP’s Russian partners during a shareholder dispute in 2008.

The Russian government said in September that Russia needed technology and funds from foreign firms to explore gas and oil reserves in the country’s Arctic regions.

BP would not be the first major British company to plan to drill in the Arctic. Cairn Energy announced last week that it would be investing 500 million dollars this year in new wells off the coast of Greenland.

However, the new deal is likely to anger environmentalists who have warned that the Arctic ecosystem is very fragile.

“This unique agreement underlines our long-term, strategic and deepening links with the world’s largest hydrocarbon-producing nation,” Dudley said in a a statement.

“We are very pleased to be joining Russia’s leading oil company to jointly explore some of the most promising parts of the Russian Arctic, one of the world’s last remaining unexplored basins.”

Khudainatov added: “In its operations, our future joint venture will utilize the experience and expertise of BP, one of the leaders in the global oil and gas industry.

“This project is unique in its complexity and scale both for Russia and the global oil and gas industry.”

BP has endured a torrid time following last year’s oil spill at a the Gulf of Mexico, and it has embarked on a wide process of divestment to raise the funds to pay for the clean-up and compensation claims.

BP said in November that the disaster could cost it 40 billion dollars.

At the same time, however, it also reported a net profit of 1.785 billion dollars for the third quarter of 2010 — a huge turnaround following a loss of 16.9 billion dollars during the second quarter.

The energy giant is currently in the process of selling 30 billion dollars worth of assets to cover its part of the bill for the oil spill disaster.