BP frozen out in Russian Arctic

published 2 September 2011

US oil giant ExxonMobil has formed a $3.2bn partnership to explore the Arctic Ocean with Russia's state-controlled oil group Rosneft. Estimates suggest that the Arctic holds around 25% of the world's undiscovered oil and gas. The tie-up ends BP's hopes of exploring the Arctic with Rosneft, a venture announced earlier this year. Shareholders in TNK, BP's joint venture partners in Russia, thwarted that deal. Bailiffs raided BP's Moscow offices this week. The search was related to a lawsuit by shareholders in TNK-BP.

What the commentators said

There is an old saying in the oil business, notes Ed Crooks in the FT: "BP does it first, but Exxon does it better." That certainly applies this time, said Lex in the same paper. Exxon chairman Rex Tillerson "has secured a better deal" than BP CEO Robert Dudley "thought he had for BP". The partnership gives Exxon the exploration projects originally earmarked for BP, and it contains fewer concessions to the Russian partner. Rosneft gets a share of US exploration work, but Exxon shareholders won't be diluted. BP had offered Rosneft a 5% stake.

"Recalling the paranoia" that prevented China's CNOOC from buying a US oil firm in 2005, access to Exxon's US operations represents "a sizeable coup" for the Russians, said Ian King in The Times. They also gain Exxon's technology and expertise to help them exploit the Arctic. As for Exxon, access to new resources is "the life blood of oil companies", says Fadel Gheit of Oppenheimer & Co. While Exxon steams ahead, BP is "still in bed with Russian partners clearly capable of derailing anything BP tries in the country", said Damian Reece in The Daily Telegraph. Rosneft has put the "BP debacle behind it" with this Exxon deal, said Lex. "If only the same could be said for BP."