Rosneft and BP form strategic alliance for Kara Sea
The Russian and British oil majors have agreed to explore and develop three license blocks in an area in the southern Kara Sea, roughly equivalent in size and prospectivity to the British sector of the North Sea.
Russian Prime Minister Vladimir Putin told RIA Novosti on Friday that the government intends to create most favourable tax and administrative regime to development of the project.
The Kara Sea is east of Novaya Zemlya in the Russian Arctic, and the licenses in question cover an area of approximately 125,000 square kilometres.
The agreement is based on mutual shareholdings between the two companies. Rosneft will receive 5% of ordinary voting shares of BP in exchange for 9.5% of its shares, according to a press-release from Rosneft.
The shares are worth £5 billion (€5,9 billion) in each company.
BP says in their press-release the deal is an historic agreement that creates the first major equity-linked partnership between a Russian and a international oil company.
Arctic shelf technology centre
BP and Rosneft have also agreed to establish an Arctic technology centre, to be located in St. Petersburg, which will work with leading Russian and international research institutes, design bureaus and universities to develop technologies and engineering practices for the safe extraction of hydrocarbon resources from the Arctic shelf.
The technology centre will build on BP’s deep offshore experience and learnings with full emphasis on safety, environmental integrity and emergency spill response capability.
New environmental regulations
Last spring oil poured from a blasted deep-sea BP well in the Gulf of Mexico with severe environmental consequences, by environmentalists said to be the worst oil-disaster in history.
About the same time as BP managed to seal its leaking well in the Gulf of Mexico, Russian authorities approved the introduction of a set of new national oil preparedness regulations as reported by BarentsObserver.
The Kara Sea, where BP and Rosneft will explore petroleum together, is ice-covered some 7-8 months a year.
- Oil spill would be catastrophic
- BP is the last company that should be operating there [in the Arctic], that is why last year the government of Greenland refused to grant concessions to BP, Greenpeace spokesman Ben Stewart told AFP, after the cooperation deal was announced.
- The Arctic is the most fragile environment in the world in which to drill for oil and there can be no confirmation yet that BP has learned the lessons for the Gulf of Mexico disaster, says Ben Stewart.
- An oil spill in the cold waters of the Arctic would be catastrophic and extremely difficult to deal with. Any company that drills for oil in the Arctic forfeits any claim to environmental responsibility, says Stewart.
Read also: More Russian oil along coast of Norway
“Bolshoi Petroleum”
The deal signed on Friday between BP and Rosneft is not only of concern for environmental groups. While the agreement is backed by both British Prime Minister David Cameron and Prime Minister Vladimir Putin, it has drawn anger among some American politicians.
US congressman Edward Markey, a Democrat who led investigations into the giant Gulf of Mexico leak, questioned the deal on grounds of “national and economic security”. Quoted by The Telegraph on Saturday he claimed that “BP once stood for British Petroleum. With this deal, it now stands for Bolshoi Petroleum.”
Russian authorities are however very pleased with the British oil major’s participation on the Russian Arctic continental shelf.
Read also: Lavrov: No war over Arctic resources
- Will again work together
Attending the signing ceremony, Russian Deputy Prime Minister Igor Sechin said: - International capital, and Russian companies are again willing to work to implement new large-scale investment projects world-class in Russia, and leading Russian companies accelerate their entry into the elite of the global energy industry.
Rosneft’s President, Eduard Khudainatov, says in a statement: -I am pleased that in just a few months we’ve significantly moved forward in implementing Russia’s offshore strategy. In its operations, our future joint venture will utilize the experience and expertise of BP, one of the leaders in the global oil and gas industry.
- This project is unique in its complexity and scale both for Russia and the global oil and gas industry. We see it as the next step in developing our relations with BP, Khudainatov said.
Arctic shelf program
BarentsObserver reported on Friday that the Russian Government plans to develop a state program for exploration and extraction of mineral resources on the Russian Arctic Continental Shelf by the end of 2011.
Russian experts estimate recoverable oil and gas resources on the continental shelf at 100 billion tons of oil equivalents. There are 51 discovered deposits on the Russian shelf, of which six, including the Shtokman gas field, are considered to be unique.
