BP warns Russian partners over Rosneft deal

By Rob Davies for the Daily Mail
Updated: 03:48 EDT, 8 June 2011

BP has warned its Russian partners in joint venture TNK-BP that it could sell out to their Kremlin-backed competitor Rosneft unless they remove their opposition to its Arctic exploration deal.

Blocked: BP is licking its wounds after AAR prevented its Arctic exploration deal with Rosneft

AAR - the quartet of oligarchs who control half of TNK-BP - successfully blocked BP's bid to swap shares with Rosneft and form a partnership to explore Russia's Arctic continental shelf.

Efforts to reach a compromise that suited all sides failed and BP has been left licking its wounds, while rivals such as Shell enter talks with the Kremlin about taking the firm's place.

But some of the most senior names at the British firm have now warned AAR's oligarch owners that their reward for thwarting the deal at every turn might be to see BP sell out to Rosneft.

That scenario would leave AAR in an unwanted partnership with one of its main competitors in the Russian oil industry.

Senior executives at the oil supermajor are thought to be using the threat as a bargaining chip to revive a proposal under which AAR would sell their 50% stake for around £20bn to BP and Rosneft, while AAR would get shares in BP worth £5.5bn.

The duo would then be free to explore the Arctic continental shelf, which is believed to contain some of the world's largest untapped reserves of oil and gas.

BP put the offer to AAR last month as the deadline for its deal with Rosneft drew closer, but it was roundly rejected.

BP (down 2.75p at 448.15p) said yesterday it had no intention of selling its stake in TNK-BP to Rosneft.

One insider insisted that board-level executives had threatened to do just that earlier this week. But the source said it made no sense for BP to sell a controlling stake in a profitable venture from which it receives annual dividends that average in the billions of pounds.