Swedish court nixes BP, Rosneft Arctic tie-up

none@none.com (Syed Murtaza Gheblehzadeh) — Thu, 24 Mar 2011 21:07:25 +0500

MOSCOW: A Stockholm tribunal on Thursday ruled out British energy giant BP's Arctic oil tie-up with Rosneft, a decision that could hit Russian hopes of expanding its share of the world's energy market. The Stockholm Arbitration Tribunal ruling uphold a freeze on the tie-up issued by a London court in February and formally puts a halt to the $16 billion deal. The British firm immediately issued a statement stating that it "remains committed to partner with Russia" and would seek other ways of completing the historic deal. The $16 billion share-swap and Arctic exploration agreement was announced with much fanfare by the Russian government in January and was soon followed by a similar agreement between Rosneft and US oil major Exxon Mobil. The deal would have handed Rosneft five percent of BP's ordinary voting shares in exchange for approximately 9.5 percent of the Russian company's stock. But a more crucial part of the deal would have seen the two firms jointly search for oil in Rosneft's three licensed blocks in the Arctic, a 125,000 square kilometre (50 square mile) region said to contain five billion tonnes of oil and 3.0 trillion cubic metres of gas. Rosneft has been seeking a Western partner to provide it with the know-how and technology to developing the forbidding seas and the Kremlin eventually gave the nod to BP, a company with a long but sometimes troubled history in Russia. The deal was personally blessed by Russia's prime minister and de facto leader Vladimir Putin and hailed by BP as an important part of its expansion plan following the humiliation it suffered during last year's Gulf oil spill. But its implementation has been blocked in the courts amid arguments by BP's Russian joint venture TNK-BP that the tie-up violated the smaller company's shareholders agreement. BP was technically committed to perform all its operations in Russia through its local venture but was already working on its own in the vast energy project the country is developing in the Pacific Sakhalin Island. The British firm's statement said it would now look to complete the share swap without the joint Arctic exploration part of the deal. "BP will now apply for a determination whether the share swap may proceed on its own," the company said.

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Swedish court nixes BP, Rosneft Arctic tie-up