by Jim Washer, London, EI
BP’s proposed alliance with Russia’s state Rosneft is running into trouble. Alfa Access Renova (AAR), BP’s [Russian] partners in the TNK-BP joint venture, have succeeded in halting the deal, at least in its current form, by convincing an arbitration tribunal in Sweden that the pact did violate the TNK-BP shareholder agreement [please see remarks below -- D.R.]. BP has said the deal is worth fighting for and is not giving up, but the longer the uncertainty goes on, the greater the risk that Rosneft and its Russian government owners will lose patience, cut their losses and look for another partner – Shell is already being mentioned as a possible replacement for BP in Rosneft’s proposed Arctic exploration venture. BP might still be able to proceed with its cross-shareholding with Rosneft, but to what purpose? What BP had really wanted from the Rosneft alliance was to show investors that, despite the Macondo disaster, it was still a desirable upstream partner and could still secure attractive upstream opportunities. Those twin objectives are now in serious jeopardy.
(The AAR partners had accused BP of violating their shareholder agreement which, they claimed obliges both parties to pursue new projects in Russia through the 50-50 TNK-BP venture. For information on BP-Rosneft alliance, unveiled in January, please see my post, here. For the Macondo disaster, please see my post here. -- D.R.)