BP's new Russian friend plays down rival's Arctic blast

Russia's Rosneft vowed to persevere with a strategic alliance with BP yesterday, despite a block on the deal by the UK oil giant's partners in joint venture TNK-BP.

But the extended legal injunction against the tie-up granted on Thursday evening has thrown a spotlight on BP chief executive Bob Dudley's judgment, in apparently not gauging how hostile BP's existing joint venture partners would be to the collaboration.

Analysts also wondered whether it opened the window for a replacement Arctic exploration deal between Rosneft and other major foreign oil players instead of BP - with the likes of Shell, Chevron and Exxon Mobil being seen in the frame.

Rosneft chairman Igor Sechin put a gloss on things yesterday. He said the arbitration panel ruling preventing BP and the Russian state-controlled energy giant from jointly exploring Russia's Arctic region, and from executing a $16 billion (10bn) share swap, had not derailed the deal.

"The court didn't block (the deal], it extended the injunction until 7 April. We must await the court's verdict," said Sechin, also Russian deputy prime minister.

He added that Rosneft, Russia's biggest oil company, was "satisfied" with BP as its partner and would defend its interests.

Analysts questioned Dudley's tactics in Russia. "Given (Dudley's] past relationship in Russia, how difficult it has been, he should have been a bit more appreciative of how tricky it can be operating in Russia," said Arbuthnot Securities analyst, Dougie Youngson.

Jason Kenney, oil and gas analyst at ING in Edinburgh, said: "BP has underestimated the desires of its TNK-BP partners, Alfa-Access-Renova (AAR]. But whether that is Dudley's fault, I don't know. You can question anybody's judgment in Russia because of the way things happen there."

Oswald Clint, oil specialist at Sanford C Bernstein, added: "The cleanest thing for Rosneft, if it wants to start developing its offshore acreage and resource potential, is to choose a different partner."

Rosneft recently struck deals with US oil majors Chevron and Exxon Mobil to explore in the Black Sea.

Sechin said Rosneft had already suffered losses as a result of the actions of AAR, which represents the billionaire oligarchs that own 50 per cent of TNK-BP. They have pursued court action against the BP-Rosneft tie-up, arguing the alliance violated their right of refusal.

Rosneft head Eduard Khudaynatov said in January the group was awash with proposals from foreign companies for exploring in the Arctic, and Royal Dutch Shell, BP's arch rival, has already confirmed its interest.

The British group's embarrassment over the ruling was compounded by the fact American chief executive Dudley had been seen as well plugged into the complexities of Russian oil.He was in charge of TNK-BP before being forced to leave Russia in 2008 due to what he said was a campaign of harassment by the joint venture's co-owners. He took over as group chief executive last year following BP's disastrous Gulf of Mexico oil spill.

On Thursday, Dudley played down the impact in an internal memo, saying: "BP's long history in Russia demonstrates progress and growth is not always straightforward. But it has consistently been successful over the long term".

Dudley said BP would seek a ruling on whether the share swap under which it would exchange 5 per cent of its own stock for a 10 per cent holding in Rosneft may proceed on its own. BP shares closed up 2.65p at 483.55p.