A deal between BP and Russia’s state-owned oil company Rosneft to explore the Arctic seems to have fallen apart after the two failed to come to an arrangement on a stock swap. It is now doubtful that BP will get a piece of the Arctic action at all.
Rosneft was to take a 5% stake in BP and BP would acquire about 9.5% of Rosneft in a $16 billion transaction. However, it looks like Rosneft has walked away from the arrangement. The flies in the ointment are the four billionaires in Russia who collectively go by Alfa Access Renova [AAR]. AAR owns half of BP’s current venture in Russia, TNK-BP.
The BBC reports, “The agreed solution was for BP and Rosneft to jointly purchase the billionaire’s stake in a joint venture with BP, called TNK-BP, for $32bn. But the fundamental problem was that the billionaires and Rosneft, which is an arm of the Russian state, don’t trust each other to deliver on their respective sides of the bargain – and struggled to find legally enforceable contracts that obviated the need for trust.”
So it now looks like BP is stuck working through TNK-BP for any activity in Russia. And Rosneft if on record as saying TNK-BP lacks the requisite expertise to participate in the deep water projects Rosneft is looking at in the Arctic.