British oil giant BP made a crucial concession yesterday in a bid to salvage a share-swap agreement with Rosneft, the Russian state-controlled oil company.
According to BP, it would agree to hand over a potentially lucrative exploration deal in the Arctic to its Russian joint venture, TNK-BP in exchange for concluding the share-swap. The move would be in line with an arbitration panel ruling that was released yesterday. Any changes would be subject to approval by Rosneft.
With the move, BP hopes to put to an end to a three-month dispute with the Russian billionaires who are its partners in TNK-BP, who had opposed BP's Rosneft deal.
These Russian partners partners had blocked BP's $7.8-billion agreement with Rosneft, which included access to exploration blocks in Russia's Arctic that might hold oil worth billions of dollars.
According to the partners the deal breached their shareholder agreement with BP and demanded that they be made partners to any exploration in Russia.
BP's shares initially surged with the Rosneft deal as it promised to strengthen the British oil company's position in the biggest oil-producing country in the world. The deal also guaranteed access to potential new oil reserves at a time of increasing competition and growing demand for oil. It would be less profitable for BP to operate the exploration deal through its joint venture.