Setback for BP as court blocks partnership with Russia outfit

BP had sought to put last year's Gulf of Mexico oil spill disaster behind it yesterday when it raised the prospect of long-term growth with new exploration partnerships and a fresh focus on getting oil and gas out of the ground.

But guidance for another 11 per cent drop in output in 2011, after a 9.4 per cent drop in 2010, left some analysts questioning BP's strategy.

Late yesterday BP's Russian billionaire partners in TNK-BP won an injunction blocking a plan for a share swap and exploration deal with state-controlled Rosneft.

AAR, the holding vehicle through which the oligarchs own half of TNK-BP, argued that the tie-up breached a previous agreement that BP would seek AAR's approval before embarking on any major new ventures in Russia.

A Rosneft spokesman said the court move should not derail the deal, and analysts said the dispute would eventually be resolved.

Disappointing oil production guidance and new oil spill charges overshadowed BP's results, despite a return to dividend payments for the first time since the Gulf of Mexico spill.

BP's results were in contrast to a better-than-expected increase in quarterly profit at Exxon Mobil Corp on Monday.

BP's chief executive Bob Dudley insisted that BP expected to settle the dispute with its Russian partners.

He said the oligarchs may be placated via a financial settlement, by BP including TNK-BP in the exploration venture or by BP offering TNK-BP some other strategic help.

Analysts said it was important BP settles the spat.

Dougie Youngson, analyst at Arbuthnot Securities, said: "The company has clearly pinned its hopes on Russia, but the new joint venture has already gone wrong, antagonising the TNK-BP partners. There remains substantial uncertainty surrounding the company."

Yesterday BP posted a 3.1bn loss in the year to December 31, compared with profits of 8.7bn in 2009, after the financial impact of the fatal Deepwater Horizon explosion was deducted.

BP once again upped its estimate of the cost of the disaster to 25.5bn after it took an additional 647.8m hit in the fourth quarter.

BP said it would pay a fourth-quarter dividend of 7 cents (4.36p) per share, which was in line with analysts' expectations but only half of what it was paying before the spill disaster.

Mr Youngson said: "The re-introduction of the dividend is good news for investors (even at its much lower level), but it is likely to prove inflammatory to US Gulf Coast senators whose communities are still being impacted by the spill,"

Talking about future growth, BP said it would sell two refineries in the US and invest more in oil and gas exploration.

The oil giant said the sale of its refinery in Texas City and at Carson, near Los Angeles, California, will halve the firm's refining capacity in the US. The group said it would increase significantly its investment in exploration and would seek new partnership opportunities.

But BP committed to investing in its remaining refining and marketing networks in the country, which include sites in Indiana, Washington and Ohio.

The 1,200-acre Texas City Refinery, which has a capacity of 475,000 barrels a day, was the scene of a devastating fire and explosion nearly six years ago which killed 15 workers and injured 170 others.

The refinery is the third largest in the US.

Decision 'a vindication'

The Russian partners in oil venture TNK-BP said they have been vindicated by a London court decision to put on hold BP's offshore exploration deal with Rosneft.

"The decision of the London court confirms the moral and legal justification of our position," said Alfa-Access-Renova (AAR), which sought the injunction and represents interests that own half of TNK-BP.