BP's Arctic oil deal collapses

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BP's Arctic oil deal collapses

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BP’s efforts to gain a foothold in Russia’s offshore Arctic oilfields through a deal with state-controlled Rosneft have collapsed.

The British energy giant failed to reach an agreement with its partners in an existing Russian joint venture TNK-BP. They said BP had no right to strike a new deal in Russia without them and went to court to block it.

Rosneft will reportedly launch a search for new partners.

This is a big blow for BP chief executive Bob Dudley who trumpeted the Arctic exploration pact and share swap with Rosneft.

Dudley said it showed that BP could still offer growth after its disastrous Gulf of Mexico oil spill last year.

The collapse of the deal also marks a personal setback for Russia’s Deputy Prime Minister Igor Sechin. He has masterminded Rosneft’s growth and development since it acquired the assets of bankrupt oil firm Yukos.

Sechin and his boss, Prime Minister Vladimir Putin, have become accustomed to being able to dictate terms in strategic oil deals. Sources say Sechin has a good personal relationship with Dudley and views the share swap component of the BP deal as particularly attractive, but Rosneft does have other options in the Arctic.

BP’s partners in TNK-BP — four Russian billionaires represented by the Alfa-Access-Renova (AAR)consortium — objected to the Rosneft tie-up, saying BP was obliged to pursue all its Russian ventures through TNK-BP.

BP and Rosneft made a cash and stock offer to buy out AAR, in an attempt to find a compromise with BP’s partners, but there was no agreement.