Oil giant BP’s £10billion share-swap with Russian state-owned Rosneft was dealt another blow yesterday after a tribunal blocked the deal until further notice.
The Stockholm tribunal has extended an injunction blocking the swap as it determines whether the deal breaches agreements with the UK company’s Russian partners in TNK-BP.
It has until April 14 to complete the deal – which would see BP own 9.5% of Rosneft’s shares, while the Russian group would have taken a 5% stake in the UK supermajor – but plans to discuss extending this deadline with Rosneft.
The embattled group has come to blows with TNK-BP shareholders, a group of Russian oligarchs known as Alfa-Access-Renova (AAR), who said BP was obliged to pursue new projects in Russia through their joint venture.
The setback comes less than a week before BP’s annual meeting, when investors are likely to hit out at its safety record following the Gulf of Mexico oil disaster last April, its bonus policy and strategy in Russia.
The deal with Rosneft – hailed by BP as historic and groundbreaking when revealed in January – would have paved the way for the firms to explore the south Kara Sea, in the Russian Arctic, jointly.
Last month, the tribunal extended its injunction on the whole deal to both the exploration and share-swap. BP then requested for the share-swap to proceed alone but this has now also been blocked.
Both the share-swap and Arctic exploration remain under injunction until the final decision has been made by the tribunal.
BP is able to ask for Rosneft’s consent to extend the cut-off date for the deal to keep the agreement alive.
Rosneft chairman Igor Sechin has said previously he is satisfied with BP as a partner, despite the ongoing dispute.
AAR said the deal had harmed BP’s reputation in Russia. Its chief executive, Stan Polovets, said: “AAR welcomes the decision of the tribunal, which we consider fair, balanced and thoughtful. We will be pleased to continue to co-operate with the tribunal and will provide any additional information and evidence it requires during the next stage of the hearings.”
The finding will come as a blow to new BP CEO Bob Dudley as the company moves to restore its reputation and financial position in the wake of the Deepwater Horizon explosion.
Mr Dudley will have to face shareholder ire at its AGM on Thursday, where some are expected to vote against the annual report and accounts.
The Association of British Insurers has given an “amber top” alert to the remuneration report, while Christian groups including the UK’s Church Investor Group are advising voting against the report.
Shareholders are also likely to question Mr Dudley over the deteriorating deal with Rosneft.
The deal tie-up would have helped BP to replace lost production from the US gulf and other assets sold off in the wake of the Deepwater Horizon explosion.
The company posted a loss of about £3.1 billion in the year to December 31 – its first in nearly two decades – after the cost of the disaster was taken into account. It promised to sell up to £18billion of assets to meet compensation requirements.