The new
and outgoing CEOs of BP are scheduled to meet with Deputy PM Sechin today to
discuss the future of BP’s operations in the country. It will be the first time
that Robert Dudley has been in Russia since his hasty departure during the
BP-AAR dispute in 2008. There are a number of issues that we may reasonably
expect to be on the agenda. But, what we can be sure of is that Russia has a
specific agenda, i.e. a wish list, and will take full advantage of BP’s weakened
state to press that. BP’s Russian businesses have been in a cul-de-sac for some
time and its current bargaining position is a lot weaker today than it was
before the Gulf accident. On the other hand, Russia needs to attract more
investment into some areas of its energy sector and wants to promote its
national energy companies on a global scale. If negotiations proceed well then
both sides can gain considerably from recent events.
The
Kovykta gas deposit, controlled by BP via Russia Petroleum, will have to return
to state control as the deposit is expected to be the source of gas exports to
China. BP will likely be offered a strategic partnership role in that project
similar to Total’s position in Shtokman and Shell’s in Sakhalin-II. The fact
that BP owns a 50% stake in TNK-BP is a vexing issue with government as it
sticks out as the major exception to the terms of the Law on Strategic
Industries. The government may press BP to agree to a restructuring of that
interest, e.g. a merger with Gazprom Neft has long been rumoured, or it may seek
some other concessions from BP elsewhere. BP has lots of upstream and downstream
assets around the World and Russia has made no secret of its desire to see the
major state companies become more global and more diversified.
On the
other hand, BP will certainly be very keen to remain fully engaged in Russia.
Much has been made of the fact that BP is more an American than a British
company. Looking at BP’s share of production and reserves in Russia, the case
can equally be made that it is a Russian operation. If BP is going to be
squeezed more and more in the US, as recent reports suggest, then its Russian
assets will become an even more important part of its future.