BP has struck what it describes as an “historic” agreement with the Russian government, in a £10 billion deal to exploit potentially huge deposits of oil and gas in the Arctic. The UK energy giant, recovering from its Gulf of Mexico oil spill disaster, will swap 5% of its shares, valued at $7.8bn, for 9.5% of Russia’s state-controlled Rosneft in an agreement that immediately raised concerns about US economic security from at least two American lawmakers and criticism from environmentalists.
The deal covers huge areas of the South Kara Sea in the Arctic that BP said could contain billions of barrels of oil and gas and had been previously off limits to foreign companies. The venture underscores Europe’s dependence on Russia for a rising share of its energy needs – particularly for clean-burning natural gas.
Russia holds one-fifth of the world’s reserves of natural gas. The pact, which is expected to be completed in a few weeks, highlights a rebound in relations with Moscow, both for BP and its chief executive Bob Dudley.
Dudley said the deal was the first significant cross-shareholding between a nationally-owned oil company and an international oil company and called it “a new template for how business can be done in our industry”.
Russia, the world’s top oil producer with an output of more than 10 million barrels of oil per day, estimates that its Arctic zone holds about 51bn tonnes of oil, or enough to fully meet global oil demand for more than four years. Chris Huhne, British Secretary of State for Energy and Climate Change, welcomed the “groundbreaking” deal and called it “good news for Europe, for the UK’s energy security and worldwide.”
But US Congressman Edward Markey, who is the top Democrat on the House Natural Resources Committee, immediately called for a review of the deal by US regulators to see whether it affects the national and economic security of the United States.
He noted that in 2009, BP was the top petroleum supplier to the US military. Republican Congressman Michael Burgess, who is on the House Energy and Commerce Committee, also said the deal “deserves some analysis and scrutiny” by the government’s Committee on Foreign Investment in the United States.
Environmentalists too have questioned the deal. “The Arctic is the world’s most fragile environment for oil exploration, while its ice sheet is melting rapidly due to climate change,” said Charlie Kronick of Greenpeace. “Any company that drills for oil there forfeits any claim to environmental responsibility”, he warned.
