BP's Russian Folly Opens The Door For Rivals

BP's BP loss in Russia could be a major gain for one of the British oil giant's chief rivals as Russia's Arctic region, one of the most sought-after untapped oil destinations in the world, comes back onto the market after BP and OAO Rosneft, Russia's largest oil company, failed to come to terms on a $16 billion share swap. BP and Rosneft were to partner on an Arctic alliance that would have seen the company drill in the Kara Sea, an area that may have 12 billion to 15 billion barrels of recoverable reserves. With new oil reserves becoming increasingly difficult to find and more falling into the hands of unfriendly governments, Western oil majors are likely to jump at the chance to gain access to the Russian Arctic, indicating Rosneft will have no difficulty finding a suitable replacement for BP. Rosneft is likely to prefer to American or European partners over an Asian company because of their experience in offshore drilling and superior technology and personnel, Bloomberg News reported. That could open the door for Exxon Mobil XOM or Chevron CVX, the two-largest U.S. oil companies, or Royal Dutch Shell RDS, the largest European oil company, to step in to replace BP. A Rosneft spokesman said the company is studying the situation and will make a choice in the near future, Bloomberg reported. Shell currently has a relationship with Russia's OAO Gazprom while Exxon and Chevron are involved in partnerships with Rosneft. A Rosneft pact with any of those companies would almost certainly take on a different structure than the proposed share exchange with BP as Shell, Exxon and Chevron would not need to commit to the share exchange for the purposes of raising cash as BP did. Chevron previously said it would not participate in a share swap.