Russia & BP: A 21st Century Alliance?

Under the alliance agreement, BP acquired a 9.5 percent stake in Rosneft and in return Rosneft is issued new BP shares giving it a five percent share in BP (valued at around 7.9 billion US dollars). This new agreement gives BP a total stake in Rosneft of 10.8 percent. The alliance will form a joint venture to explore three license blocks in the South Kara Sea, an area of 125,000 kilometres - about the size of the North Sea - in relatively shallow water. The area is the offshore extension of the West Siberian basin that is Russia's most important oil and gas region. According to the Russian Ministry of Natural Resources, the Kara Sea is estimated to have 37.4 percent of the hydrocarbon potential of Russia's continental shelf. Rosneft will own 66.7 percent of the venture and BP the remaining 33.3 percent; BP covers most of the initial 1-2 billion dollar exploration costs. This is clearly a major opportunity for BP but operating conditions will be extremely challenging as the area is only navigable one hundred days a year. In addition, the two companies will establish an Arctic technology centre in Russia and will seek further opportunities for international collaboration beyond their 50-50 joint venture partnership in Ruhr Oel GmbH in Germany.