BP Russia deal blocked

An arbitration tribunal has blocked
BP Plc’s planned $7.8 billion share swap and Arctic exploration deal with OAO

The ruling represents a setback for
BP’s efforts to exploit one of the largest untapped oil troves left on earth
after the London-based producer’s reputation was battered by the Gulf of Mexico
oil spill last year.

In a statement, BP said it was
disappointed by the outcome of the tribunal and that it would look to find a
way to “resolve its differences” with the Russian billionaire partners in its
TNK-BP joint venture.

 It will also apply for a ruling as to whether
the share swap can proceed by itself.

BP’s partners had claimed exclusive
rights to pursue new opportunities in Russia for BP.

Last month, they won a court
injunction to delay the deal.

AAR, the group that represents the
billionaires, said in a statement that TNK-BP is interested in finding a way to
work with Rosneft itself.

Tensions between BP and the
billionaires have escalated after two years of peace following a battle over
TNK-BP’s strategy in 2008 that damaged output at Russia’s third-largest oil

The billionaires had initially blocked
BP’s 14 January agreement to swap about $7.8 billion of shares for a 9.5 per cent
stake in Rosneft and form an Arctic offshore exploration venture, which Russian
Prime Minister Vladimir Putin had lauded.

It would have been the first deal
of its kind between a state- owned company and an international oil producer.

As part of the accord, the two
companies had agreed to explore a 48,000 square-mile area of the Kara Sea,
north from Russia’s largest developed fields in West Siberia.

The first well was unlikely to have
been drilled before 2015, and first oil production was not due until 2025.