Russian oil firm to take stake in BP

Earlier in the day, the oil giant BP confirmed it was in discussions with Rosneft regarding a “possible arrangement”.

But underscoring the deal’s significance, the company’s chief executive Bob Dubley held a press conference at BP‘s headquarters in London at 9pm on Friday to announce the deal.

The deal basically involves the two companies swapping shares in each other. Rosneft will now have a 5 per cent stake in BP, which it has swapped for approximately 9.5 per cent of Rosneft’s shares. The aggregate value of the shares in BP to be issued to Rosneft is approximately $7.8bn.

It also involves the two companies working together to explore three areas on the Russian Arctic continental shelf – around 125,000 square kilometres in the South Kara Sea, equivalent in size and potential to the UK North Sea. The two companies will also establish an Arctic technology centre.

Igor Sechin, Deputy Prime Minister of the Russian Federation, who participated in the signing ceremony, said: “Global capital and Russian companies are clearly ready to invest in world class projects in Russia; and Russian companies are quickly emerging at the forefront of the global energy industry.”

BP’s Chief Executive Bob Dudley said: “This unique agreement underlines our long-term, strategic and deepening links with the world’s largest hydrocarbon-producing nation…Underpinning this alliance is a new type of relationship based on a significant cross-shareholding, and bringing together technology, exploration and safe and responsible field development skills.”

Safety net

Having Russia’s backing would make it more difficult for a rival, such as Shell, to mount a takeover bid for BP, which has been seen as vulnerable since it was considerably weakened after the Gulf of Mexico oil spill.

BP already owns a small stake, about 3 per cent of Rosneft, and a 50 per cent holding in TNK-BP, Russia’s third biggest oil producer.

Read the Channel 4 News Special Report on the BP oil spill 

Bob Dudley, BP’s newly crowned CEO, has a checkered history in Russia. He lived there and was boss of TNK-BP for five years, before being expelled by BP’s partners during a shareholder dispute in 2008.

That, seemingly, is well behind him and Mr Dudley today met with Vladimir Putin, the Prime Minister, in Russia, before heading home to make his announcement this evening.

It will be Mr Dudley’s first significant corporate move since taking the helm at BP after the resignation of Tony Hayward in October.

A high-ranking Democrat in the US Congress called for a careful US government review of the BP deal, to see if the deal could have an impact on US national security.

“If this agreement affects the national and economic security of the United States then it should be immediately reviewed by the Committee on Foreign Investment in the United States. Additionally, the US State Department should closely monitor this transaction,” said Representative Edward Markey.