BP's plan to gain a foothold in Russia's offshore Arctic oilfields through a deal with state-controlled Rosneft has collapsed, opening the way for other oil groups to try to fill its place. The tie-up unravelled because BP failed to mollify partners in its existing Russian venture TNK-BP. They argue the British company had no right to strike a new deal in the country without them.
BP chief executive Bob Dudley had trumpeted the Arctic exploration pact and share swap with Rosneft, signed in January, as a signal BP could still offer growth after its disastrous Gulf of Mexico oil spill last year. While some said BP was better off not pursuing the deal, failure to see it through has been seen as an embarrassment for Dudley, who said on Tuesday talks aimed at resolving the problem with TNK-BP partners had not reached agreement.
"This is putting a brave face on a disappointing episode. While the market may see this as disappointing we believe it is better to walk away than have a bad deal," Evolution Securities analyst Richard Griffith said in a research note. The collapse also marks a personal setback for Russia's Deputy Prime Minister Igor Sechin. He has masterminded Rosneft's growth and development since it acquired the assets of bankrupt oil firm Yukos and went on to open an eastern pipeline export route for Russian crude to the Asia-Pacific. Sechin and his boss, Prime Minister Vladimir Putin, have become accustomed to being able to dictate terms in strategic oil deals. Sources say Sechin has a good personal relationship with Dudley and views the share swap component of the BP deal as particularly attractive.