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.

Its future ambitions were pinned to a $16-billion (11-billion-euro) share swap with the British firm 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.

"We are no longer holding discussions with them," Interfax quoted Khudainatov as saying on the sidelines of the meeting.

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. Dudley himself said the deal was dead," the Rosneft source told AFP. "We are opening our doors to everyone. We are saying welcome."

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.

"They (ExxonMobil) are not ready for it," the Rosneft source said of a share swap.

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

"We see it as a kind of security pledge -- a sign that we trust each other and are working toward the same goals," said the source.

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.

The company's shareholder meeting showed impressive current production data whose sustainability depended heavily on Arctic oil eventually reaching the market.

Khudainatov said Rosneft's current reserves of 3.1 billion tonnes of oil equivalent made it into the world's largest publicly traded company and would last another 21 years.

But one analyst told the conference the firm could only boost production by a relatively meager 40 percent over the next two decades with its current range of exploitable fields.

Those prospects are making Arctic development even more vital because Rosneft faces the theoretical risk of losing the licenses under existing legal production obligations.

The source close to Rosneft said the company's current development of the Arctic was going "on schedule" while Khudainatov had to field a question from one shareholder frustrated with the idea of a Western tie-up.

"We live in a global world and Rosneft is destined to become a large and strategically developing company," Khudainatov said.

© 2011 AFP

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