Up and Coming: BP Russian Arctic venture blocked

Friday, March 25, 2011

BP Russian Arctic venture blocked

Russian flag planted on the Arctic Sea bed at the North Pole

Russia lays claim to extensive oil deposits within the Arctic sea bed

Russian shareholders of TNK-BP have blocked BP's Arctic exploration deal with state-owned Rosneft.

"We won," said a spokesman for the oil joint venture's Russian shareholders.

A Swedish arbitration panel in London agreed that the Arctic deal violated a previous agreement between them and BP when they set up TNK-BP.

BP said it was disappointed at the decision, and hoped it could still go ahead with a share swap agreed with Rosneft as part of the deal.

"BP looks forward to finding a way to resolve its differences with its Russian partners to allow these important Arctic developments to proceed in future," said the UK oil firm in a statement on the arbitration panel's decision.

The oil giant signed the controversial new deal with its Russian state-owned counterpart in January, in order to exploit potentially huge deposits of oil and gas in Russia's Arctic shelf.

But TNK-BP's Russian shareholders claimed BP broke an agreement to inform them of any other Russian oil business deals.

The "strategic global alliance" with Rosneft would have seen the UK and Russian firms exchange expertise in exploring the region.

As part of the deal, the pair had agreed that Rosneft would take 5% of BP's shares in exchange for approximately 9.5% of Rosneft's shares.

It is this share exchange that is said to have particularly upset TNK-BP's Russian shareholders.

The Alfa-Access-Renova consortium, which represents the Russian shareholders, won a High Court injunction in London last month that put the BP-Rosneft deal on hold until the dispute could be resolved by arbitration.

It was hoped that the joint venture might be given a role in the Arctic exploration deal, but TNK-BP's shareholders failed to agree on this.

The arbitration panel has now ruled that the temporary injunction "should continue" according to BP.

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