Russia's Rosneft looks to future after BP

10th June 2011, Comments 0 comments

Russia's state oil giant Rosneft charted a global future without BP on Friday after the British firm pronounced their much-maligned alliance effectively dead.

"Rosneft will be placing a special emphasis on creating partnerships with international energy industry leaders," chief executive Eduard Khudainatov told shareholders at its annual meeting.

"Today, with the company expanding to new horizons, we are giving strategic cooperation with international clients much greater weight," the Rosneft chief said.

Rosneft shot up from the ruins of the jailed Mikhail Khodorkovsky's Yukos and controls about one-fifth of Russia's oil production as well as some of the world's most coveted reserves.

It formally pinned its future in January to a $16-billion (11-billion-euro) share swap that would have made BP into the first Western oil major to tap the vast Arctic fields.

A source close to Rosneft said the company thought it had struck a "visionary" partnership that would have seen the two giants lord over nearly half of the world's oil production within the next 20 years.

But Khudainatov said Rosneft "no longer sees" BP as an Arctic partner.

"Rosneft, and this was clear and obvious to everyone, really wanted to partner with BP. You saw it in our actions. But, unfortunately, BP was unable to complete this deal," Khudainatov told reporters.

"We have had no other offers from BP and we are holding no discussions," he said.

The deal collapsed in May over protests by BP's Russian partners in its local joint venture and the subsequent failure of efforts to buy out the unhappy shareholders.

BP chief Bob Dudley said earlier in the week he thought the deal was effectively dead and it was time for his firm to be "moving on".

"We are also moving on," the Rosneft source told AFP. "We are opening our doors to everyone. We are saying welcome."

Spelling the end of another international cooperation deal, Khudainatov said Rosneft will likely have to break its Black Sea alliance with the US oil giant Chevron, signed in June 2010, over energy estimate disagreements.

"We had a normal argument between partners. We had a categorical disagreement with Chevron's geologists," he said of the deal on the Shatsky Ridge.

Rosneft has already held talks with the visiting head of the Anglo-Dutch firm Royal Dutch Shell and is fielding other offers from companies that can offer the technology and expertise to reach and market the oil.

The source said Rosneft was also conducting "ongoing and detailed negotiations" with ExxonMobil of the United States while Khudainatov mentioned interest from Norway's Statoil.

But Shell has already said it was not discussing a cross-holding and the Rosneft source said ExxonMobil was also unwilling to exchange shares with the Kremlin-controlled firm.

BP had reportedly agreed to swap shares after coming pressure from the Russian government and the Rosneft source said a cross-holding was vital to any new agreement.

BP is a bruised veteran of Russian energy negotiations and analysts have refused to rule out their potential involvement until the new agreement is signed.

But Russia's energy tsar and outgoing Rosneft chairman Igor Sechin said BP would have to "improve the effectiveness of its offer" significantly to deal with Rosneft again.

Analysts suggest that Russia's new Arctic partner will likely be forged with whichever company is ready to assume the political risk at home of forging a cross-holding with a Kremlin-controlled firm.

Yet Khudainatov also raised the option of forging a massive multinational alliance to assume the enormous expense and risk of pioneering Arctic oil exploration.

"We will see -- there can be three partners or four," Khudainatov told reporters. "These large projects involve huge risks and major investments."

A quick start to Arctic development is imperative for Russia's oil champion because it could theoretically be stripped of the licences for failing to produce enough oil under existing legal obligations.

The source close to Rosneft said the company's current development of the Arctic was going "on schedule" but provided no details about when actual production might start.

© 2011 AFP

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