It would have taken a brave analyst to predict that BP would end the year having negotiated its exit from TNK-BP, the highly profitable but troubled Russian venture created in 2003.

In October BP agreed to sell its 50 per cent stake in the joint venture to Rosneft, the Russian state oil company, in a deal worth $28 billion. BP thus becomes a 20 per cent shareholder in Rosneft, which is also buying the other half of TNK-BP from BP's old partners, the Alfa, Access, Renova (AAR) consortium. The acquisition will make Rosneft the world's largest publicly traded oil company by output.

Such an outcome had seemed unlikely after the unravelling in 2011 of BP's attempt to form a strategic alliance with Rosneft to explore the Russian continental Arctic shelf. AAR used legal challenges abroad and political lobbying at home to scupper the deal.

BP was left looking flat-footed, as though it had misread the politics and overestimated the capabilities of the deal's sponsor, Igor Sechin, the Deputy Prime Minister, who appeared to be in eclipse during the presidency of Dmitry Medvedev. But three things changed in 2012.

First, the collapse of the 2011 deal with Rosneft led to a complete breakdown of BP's relationship with its Russian partners. As a result, BP announced in June that it was selling its stake in TNK-BP.

Second, with Vladimir Putin back in the Kremlin, Sechin became chief executive of Rosneft. Reports of his demise had been greatly exaggerated.

Third, Gazprom, the state-owned gas concern, was underperforming. It had failed to adapt to the new market realities resulting from the shale gas revolution.

Sechin moved quickly to create a new national champion with access to BP's experience of creating value out of its Russian assets. It is still unclear how much influence BP will have in the running of Rosneft's operations. Nevertheless, BP has created a vast set of new opportunities both onshore and offshore. The Russian state will be a different partner from AAR -- and not necessarily a more straightforward one.

 

John Lough, Associate Fellow, Russia and Eurasia Programme, Chatham House

 

 

(c) 2012 Tribune Media Services