BP Gets Second Chance In Russia - With A Catch

BP BP, Europe's second-largest oil company by market value, has found a way to save its controversial $16 billion share swap with OAO Rosneft, Russia's largest oil producer. Sort of. An arbitration panel ruled on Friday that the British oil giant can pursue the deal with Rosneft only if the Arctic exploration alliance is done through TNK-BP, BP's joint venture with Russian oligarch investors. The Arctic plans were the centerpiece of the BP/Rosneft accord, which will see Rosneft pay $7.8 billion for a 5% stake in BP. TNk-BP, Russia's third-largest oil producer, has been fighting the deal for several months, saying it violates its shareholder rights pact with BP and that the venture has exclusive rights to BP's Russian endeavors. Even if BP does ultimately sacrifice its role in the Arctic alliance, that outcome is better than the deal with Rosneft being scrapped altogether. Since TNK-BP accounts for 25% of BP's output, 20% of reserves and 10% of the British company's profits, BP will still profit from new Arctic drilling in some fashion. The share exchange would still strengthen BP's presence in Russia and could ease its participation in future oil deals, according to the New York Times. Rosneft must still approve the plan for TNK-BP to join the venture and that is not a foregone conclusion because the Russian oil giant has not been shy about saying it does not TNK-BP involved. After contributing about $6 billion in cash and assets to the founding of the TNK-BP venture in 2003, BP has since then made $14.3 billion in dividends from it, and it still retains 50 percent of the assets, the Times reported.