BP/Rosneft Pact Falls Apart

BP's BP proposed $16 billion share swap with OAO Rosneft, Russia's largest oil producer, has fallen apart after the British oil giant and Rosneft failed to reach an agreement to acquire TNK-BP, BP's joint Russian venture with oligarch investors. BP and Rosneft reportedly offered $32 billion for TNK-BP, Russia's third-largest oil producer, but the venture was worth $44 billion as of Monday's close, Bloomberg News reported. The collapse of the deal with Rosneft is a major blow to BP's plans to boost reserves and expand in Russia, one of the world's largest oil-producing countries. BP, Europe's second-largest oil company, has sold over $24 billion in assets in the past year to raise cash for expenses tied to the Gulf of Mexico oil spill and those asset sales have weighed on the company's production. The alliance with Rosneft would have given BP access to 100 billion barrels of reserves in Russia's Arctic region, Bloomberg reported. Analysts said BP and Rosneft may come back to the negotiating table, but Rosneft has been opposed to TNK-BP joining the Arctic venture, an option BP had floated to allow the share swap to proceed. TNK-BP accounts for a quarter of BP's output, 20% of total reserves and 10% of the company's profits. Rosneft was opposed to TNK-BP replacing BP in the Arctic venture because TNK-BP lacks Arctic drilling experience and Rosneft wanted access to BP technological expertise. While BP continues to hope that an agreement can be reached down the road, Rosneft will consider offers from other global oil majors to replace BP on the Arctic project, Bloomberg reported. Exxon Mobil XOM and Chevron CVX, the two largest U.S. oil companies, and Royal Dutch Shell RDS, Europe's largest oil company, have been mentioned as possible options for Rosneft to replace BP with.