BP seeks more joint ventures in Russia

BP, one of the three biggest western oil companies, is seeking more joint ventures with Russia and other resource-rich countries as a way to deliver growth.

BP on Tuesday kicks off the reporting season for the international oil companies and is expected to report a drop of about 16 per cent cent in second-quarter profits from the equivalent period of last year.

The outlook for all international oil companies has been looking increasingly troubled, with rapidly rising costs, generally sluggish production growth, intensifying competition from national oil companies in emerging economies such as China, Brazil and India, and greater resource nationalism among the countries that hold oil and gas reserves.

Last month, following months of pressure from the Russian authorities, BP’s 50 per cent-owned joint venture TNK-BP was forced to sell its stake in the vast Kovykta gas field to Gazprom, the state-controlled gas company, at a bargain price.

But BP still sees great potential in investing in Russia, and hopes for further development of joint ventures with Gazprom and other Russian companies.

It believes that it can offer expertise in areas such as deep-water exploration and production, and access to markets in the west and in Asia, that could be offered to attract companies that control large quantities of oil and gas but need more technology and marketing know-how and networks.

As part of the Kovykta deal, BP, TNK-BP and Gazprom agreed to set up a global joint venture worth at least $3bn (€2.2bn) that could develop projects inside and outside Russia.

In a speech in Moscow shortly before that deal was signed, Tony Hayward, BP’s new chief executive, talked about what he described as the growth of “reciprocity”, which he said meant “the development of not just foreign investment into Russia, but investment by Russian companies overseas”.

Deals with Russia could involve Gazprom taking stakes in BP assets worldwide, including projects in liquefied natural gas, which is one of the Russian company’s ambitions for expansion.

Source: The Financial Times