BP and Rosneft to expand strategic alliance

DAVOS, Switzerland (Reuters) - Oil major BP BP.L and Russia's top oil producer Rosneft ROSN.MM agreed on Wednesday to expand their strategic alliance beyond a share-swap and an Arctic development deal to work in third countries.

BP’s Chief Executive Bob Dudley told a news conference the pair wound work together on projects in the European refining sector and upstream projects in third countries.

“It is a historic development for BP, for our industry, for Russia and I believe for the wider world of the global energy,” Dudley told a joint news conference with Rosneft and Russian government officials on the fringes of the World Economic Forum in Davos.

Interfax reported from Davos that Russia’s Deputy Prime Minister Igor Sechin said Rosneft was ready to discuss with BP the possibility of each company having a representative on the other’s board of directors.

Dudley’s announcement came just a few hours before Russian President Dmitry Medvedev was due to open the Forum with a speech, the first ever for a Russian leader.

“Not only we are developing resources in the Arctic but extending European refining and further global upstream cooperation between our companies,” said Dudley.

Earlier in January, BP signed a multi-billion-dollar share swap and an Arctic development agreement with Rosneft ROSN.MM in a deal seen as a major boost to Russia's investment climate.

Dudley said BP, which has another large oil venture in Russia with Russia-connected billionaires, TNK-BP, would abide to all agreements with its partners and inform them shortly about the new alliance.

TNK-BP’s executives said they want additional information about the Rosneft venture because they had thought they had priority with regards to projects with BP in Russia.

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Sechin, also Russia’s top energy official, told the same news conference the new alliance between BP and Rosneft was not a blow to TNK-BP, which he called a successful independent venture.

The shares of Rosneft closed up 2.8 percent in Moscow, while BP traded 1 percent down in New York, underperforming its peers and the oil price, which was up over 1 percent.

“These joint efforts may establish a solid foundation to contribute to the growth of the entire Russian economy over the next 20 to 30 years,” said Sechin, who added he believed Russia, the world largest oil producer, would continue to grow output.

Dudley said the Rosneft venture would mainly focus on offshore projects, while TNK-BP would remain focused on onshore projects.

“TNK-BP has been and continues to be a great source of growth for BP and our partners and we remain fully committed to our agreements,” said Dudley.

He said he had heard about criticism from some U.S. congressmen about the tie-up with Rosneft, whose main assets used to belong to oil firm YUKOS, bankrupted by the Kremlin. But Dudley said he had not discussed the deal or heard criticism from U.S. government officials.

Some U.S. politicians have already branded BP “Bolshoi Petroleum” and a U.S. congressman has called for greater scrutiny of the deal, citing security concerns as BP is one of the key suppliers of the U.S. military.

“The alliance has the support of both the Russian federal government and the UK government and I truly believe it is a kind of alliance for the 21st century and it is based on the promise of the future and not the legacies of the past,” said Dudley.

In 2008, Dudley had to flee Russia amid a row with the billionaire partners in the TNK-BP venture, where he was the CEO at the time.

“It (the new deal) demonstrates BP’s confidence in the Russian investment climate and it demonstrates it with real concrete action,” said Dudley.

Reporting by Dmitry Zhdannikov, editing by Andrew Callus, Bernard Orr