Eversheds comments on oil trade agreement between BP and Rosneft

Eversheds has commented on the news that an oil trade agreement has been reached between BP and Russian oil company Rosneft.

Greg Hammond, partner at Eversheds, said: ‘While the oil trading division of an integrated oil company will frequently operate fairly independently from its E&P and refining divisions, it seems quite likely that the alliance between BP and Rosneft [forged out of last year’s TNK-BP disposal] will have played a significant role in this oil trade deal. Indeed, one should expect that over the next few years the different attributes that Rosneft and BP bring to their link-up will be repeatedly tapped for the other’s benefit.

According to Hammond, Lord Browne’s original masterstroke was to lead the way in accessing the Russian oil market so significantly through TNK-BP, in spite of the huge risks that existed at that time. He added: ‘Bob Dudley’s was to hold fast during the difficult times that followed and then to exit on such favourable terms. BP’s conversion of its investment into Rosneft is no less risky but is perfectly timed to the extent that it gives BP a key relationship with one of the world’s leading NOCs just as Rosneft’s power appears to be crystallising and its formerly hard-line position softening.

‘For Rosneft, the benefit is a link-up with an IOC that has the necessary experience of, and risk appetite for, the Russian market — and that can provide the ideas and technology required to unlock the value in its vast assets.

‘The real potential of the Rosneft-BP link-up is therefore yet to be realised. And while this oil trade deal comprises a good start, both sides will no doubt be looking for other, more significant ways to transform their respective businesses.’

Hammond said that one lesson BP will have learned in the past is that circumstances in Russia can change rapidly. ‘It will therefore no doubt be looking as quickly as possible both to understand the opportunities presented by its new link-up and to exploit its first mover advantage.’