Comeback kids?

It seems as if world markets have reacted reasonably cautiously to the news that BP will be involved in the exploitation of oil and gas deposits in the Russian Arctic. True, the shares rose 2.4 per cent on the London Stock Exchange on Monday before retreating to a rise of 1.5 per cent later in the day.

BP has still to regain the huge losses it made after the Gulf of Mexico catastrophe of last year.

The Russian deal, backed by Russian Prime Minister Vladimir Putin, involves the creation of a joint venture and a share swap with Russian state-controlled energy company Rosneft. However, will such deals be enough to improve BP’s reputation after its annus horribilis of 2010?

The deal itself has controversial aspects. There is still a question mark over who actually owns Rosneft’s shares, given that Yukos (the company of jailed Russian oligarch Mikhail Khodorkovsky) shareholders are suing Russia in the European Court of Human Rights, following Rosneft’s acquisition of assets.

Despite the faith shown in BP by the likes of Putin (who is himself a controversial head of a controversial regime), it is still dogged by a poor reputation. The Australian government’s decision to grant BP the right to explore for oil and gas in the Great Australian Bight has provoked a furious reaction from environmental groups, who have pointed out that BP will be drilling at depths three times greater than where Deepwater Horizon was drilling in the Gulf of Mexico.

One does wonder whether becoming an ancillary of a Russian government PR operation (which is where BP will inevitably end up as part of this deal) will come to be a cute move in the long term.

Lyndon White
Editor, Processingtalk

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