BP investors warn on Rosneft alliance

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Leading UK shareholders in BP have warned against the oil major proceeding with a share swap with Russia’s Rosneft unless it also forges ahead with a strategic agreement to explore in the Arctic. They also expressed concern about the latest setback to hit BP in its dispute with its Russian partners in TNK-BP, its existing oil venture in the country, over the Rosneft alliance.

“I would get worried if they pressed home the case for doing the share swap with no alliance. It would be a departure from what the whole thing was predicated on,” said one top 10 shareholder.

“We are giving Bob Dudley [BP’s chief executive] the benefit of the doubt at the moment but it is disappointing. How fundamental it is, I don’t know,” he added.

Another investor said: “It is quite messy. BP clearly miscalculated the ease with which they could pursue a legal route through which the Rosneft transaction would get through.”

David Cumming, head of UK equities at Standard Life Investments, which is one of BP’s top 10 shareholders, told the BBC on Tuesday: “At the moment we don’t think BP has got a plan B, so unless there is some clear commercial benefit to BP shareholders for doing the deal ... we’re not supportive at the moment.”

A Stockholm arbitration court ruled on Thursday to continue an injunction on BP’s proposed tie-up with Rosneft, dealing a blow to Mr Dudley, who had positioned the deal as a source of significant growth for the UK group.

The ruling is a victory for BP’s partners in TNK-BP, known as Alfa-Access-Renova (AAR).

Shares in BP fell more than 1 per cent at one stage on Friday but rallied to close down just 0.17 per cent at 480.6p.

Igor Sechin, Rosneft chairman and Russia’s deputy prime minister, said on Friday that the company would push ahead with its plans to form an alliance with BP in spite of the arbitration ruling.

He said there was “no direct link” between the plans to explore for oil in the Arctic and the share swap.

However, he also raised the prospect of Rosneft considering demanding compensation from both AAR and BP for the breakdown in the tie-up.

“The company is assessing what is to blame for the breakdown of the deal. There are already certain losses [to Rosneft], and the partners know about this,” Mr Sechin said. He added that Rosneft had not held talks with AAR about a possible purchase of its stake in TNK-BP.

The growing dispute threatens to overshadow Mr Dudley’s first annual general meeting in less than three weeks’ time.

The board, however, remains supportive of his strategy. At a meeting on Thursday it gave its backing.

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