Posted by: russiaoilandgas | August 16, 2007

BP Getting Russia Right

BP TNK-BP Gazprom Rosneft Russia Russian Oil Gas PolicyLast month, BP, BP-TNK and Gazprom signed a memorandum of understanding described by BP CEO, Tony Hayward as a ‘ historic agreement [which] lays the ground for powerful co-operation [between the three companies]”.

The memorandum contained an agreement that BP, TNK-BP and Gazprom will form a strategic partnership to identify worldwide investment opportunities, work together on long term energy projects and swap assets around the world.

In Oil and Gas Eurasia’s view, this change in attitude and revised approach to the Russian energy market is a sensible move by BP and TNK-BP, and is an approach other multi-national energy giants would do well to replicate.

It has been clear for some time that the Russian government is keen to roll back the sweet deals foreign companies were handed after the collapse of communism when Russia was financially on its knees and desperate for foreign capital.  Rosneft and Gazprom have used hard-ball tactics with tacit but strong support from the Kremlin to achieve their aims in these matters. International energy majors like BP and Shell have found out to their cost that Rosneft and Gazprom always get their way in the end.

Perhaps BP is the first to realise that the best motto for dealing in Russia is “if you can’t beat ‘em, join ‘em”?

Rosneft, and especially Gazprom, have for a long time sought to cast their net beyond Russian borders by exchanging foreign companies’ involvement in Russian energy projects for Russian involvement in international projects.

By singing form Gazprom’s hymn sheet on this matter, TNK-BP is more likely to be able to forge better relations with the state controlled leviathans of the Russian energy market. And their willingness to investigate international investment opportunities on a partnership basis, enter into joint ventures in the Russian market, and swap assets to guarantee involvement in lucrative Russian projects surely bodes well to their future access to Russia’s vast oil and gas resources.

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