BP’s decision yesterday to accept Rosneft’s offer for its shares in TNK-BP in return for $12.3 billion and a 19.75% stake in Rosneft, has cemented its position as the dominant western oil major in Russia, and effectively closed the door to other international companies such as Exxon Mobil and Royal Dutch Shell.
Robert Van Batenburg, the head of research at Louis Capital Markets LP in New York, explained to Bloomberg that “for foreign oil companies seeking to expand production and reserves, Russia is now off limits.” He said that the deal with BP “is probably scaring the others away.”
Pavel Molchanov, an analyst at Raymond James & Associates Inc., said that “by signing this deal, the highest levels of the Russian government, up to and including Vladimir Putin, are endorsing BP as the principal western partner of the Russian oil and gas industry. This is a big, big seal of approval for BP by Moscow and it means no other company is going to have access to the corridors of power like BP does.”
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Around the world oil fields that were discovered decades ago are starting to go into decline, and the oil majors are looking for new sites to drill in order to replace the older wells and reverse their waning production levels. Large reserves in South America and the Middle East are generally state-controlled, or too expensive to drill. Russia offered one of the best, and largest untapped regions for oil production, however now that BP has been given such a prominent role in the country’s oil industry, other international oil majors will face very little success when attempting to gain access to Russia’s reserves.
By. James Burgess of Oilprice.com
James Burgess studied Business Management at the University of Nottingham. He has worked in property development, chartered surveying, marketing, law, and accounts. He has also…