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BP could be the biggest loser in the west-east stand-off over Ukraine if the situation deteriorates further, according to independent analysts. The British oil giant has come under increasing pressure from its shareholders over its close relations with Russia’s Rosneft.
BP owns a 19.75 percent stake in the Russian company following an historic deal in March 2013 when it sold off half of TNK-BP for cash and a stake in Rosneft. The deal made Rosneft the biggest public oil producer in the world, with total proved hydrocarbon reserves of 22.8 bln barrels of oil equivalent. The company’s proved reserve-to-production ratio is 25 years.
More than 25 percent of BP's oil output worldwide comes from Russia, which also accounts for more than a third of its oil and gas reserves.
At an annual general shareholders’ meeting, BP’s management was grilled over potential risks. Robert Barrett, a private shareholder, pointed to the level of dependency of BP’s production and profits on Russia. He was mostly concerned with a situation where Russia would simply nationalize its Rosneft stake.
BP’s chief executive Bob Dudley insisted the company has nothing to fear and promised to acts as a bridge between Russia and the West.
"We will seek to pursue our business activities mindful that the mutual dependency between Russia as an energy supplier and Europe as an energy consumer has been an important source of security and engagement for both parties for many decades," Dudley was quoted as saying by the International Business Times.
"Europe and Russia are integrally linked in the energy markets of electric, power, gas. Neither side can, or I believe will, just turn this off; it will be a big problem for everyone,” he added.
Speaking to TheTelegraphafter the meeting, BP’s chairman Carl-Henric Svanberg insisted any nationalization fears didn’t have any ground: “I think [Russia] see we are the largest investor in Russia and a big, big investor in Rosneft so for them it’s very important that Russia is seen as a country you can make investment in and is a reliable partner. This is a situation that we follow closely but for the time being we are not overly worried.”
However, the negative mood was allegedly one of the reasons why a large number of shareholders opposed to the executive pay for 2013.
BP has had a long relationship with Russia. Earlier this year, it presented its global energy outlook until 2035, with Russia featuring prominently thanks to its steady oil and gas production volumes and growing interest to shale gas and tight oil.
According to BP, between 2012 and 2035, Russia’s domestic energy production and consumption will grow by 21 percent and 20 percent, while its share of global energy production and consumption will both decline slightly from 10 percent to 9 percent, and from 6 percent to 5 percent, respectively.
BP believes Russia will retain the title of the “world’s largest primary energy exporter, with net exports of 736 Mtoe”. “Russia’s liquids production (11 Mb/d in 2035) will trail only Saudi Arabia and the US”, says the report. BP projects that tight oil production will start after 2020 and gradually edge up to 7 percent of the country’s total by 2035.
Author: Mikhail Vesely
