Setback for BP as deal put on hold

The alliance would have seen BP own 9.5 per cent of Rosneft’s shares, while the Russian group would have taken a 5 per cent stake in BP.

But an independent arbitration tribunal in Stockholm, Sweden, found the deal breached agreements in place with BP’s existing Russian subsidiary TNK-BP and extended an injunction on the tie-up.

The finding will come as a blow to BP and its new chief executive Bob Dudley as the company moves to restore its reputation and financial position in the wake of the Gulf of Mexico oil disas- ter.

The landmark deal – hailed by BP as “historic” and “groundbreaking” when unveiled in January – would have paved the way for BP and Rosneft to jointly explore the south Kara Sea in the Russian Arctic.

The region is thought to contain more than 60 billion barrels of oil and would have provided a lucrative revenue stream for decades.

But BP said it was now planning to apply for a determination on whether the share swap with Rosneft may proceed on its own, without the proposed alliance for exploration.

The ruling is a victory for TNK-BP’s shareholders, known as Alfa-Access-Renova (AAR), who had accused BP of breaking an agreement which obliges both parties to pursue new projects in Russia through the 50-50 venture with TNK-BP.

In a statement, BP said it was “disappointed” the deal could not go ahead.