BP and Rosneft, Russia’s leading oil producing company, have agreed a groundbreaking strategic global alliance. The two energy groups will explore and develop three license blocks – EPNZ 1,2,3 – on the Russian Arctic continental shelf. These licences were awarded to Rosneft in 2010 and cover approximately 125,000 square kilometres in a highly prospective area of the South Kara Sea. This is an area roughly equivalent in size and prospectivity to the UK North Sea.
This historic agreement creates the first major equity-linked partnership between a national and international oil company. Following completion of this agreement, Rosneft will hold 5% of BP’s ordinary voting shares in exchange for approximately 9.5% of Rosneft’s shares. The share swap component of the alliance creates strategic alignment to pursue joint projects and demonstrates mutual confidence in the growth potential of both companies.
BP and Rosneft have also agreed to establish an Arctic technology centre in Russia 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.
The aggregate value of the shares in BP to be issued to Rosneft is approximately $7.8 billion. Rosneft is Russia’s leading oil producing company. It produces some 2.4 million barrels of oil equivalent (boe) per day, and has reserves of 15.146 billion boe. It produces oil in all key regions of Russia. Rosneft reported (pre tax) profits for the year end 31st December 2009 of $8.519 billion.