Arctic cooperation lies at the heart of the Rosneft/BP deal
The partnership between Rosneft and BP could become the first project to successfully produce major volumes of oil in the Arctic, which would give the companies experience and comparative advantage over competitors.
Valdaiclub.com interview with Clifford Kupchan, Director, Europe and Eurasia, Eurasia Group
The exchange of shares between Rosneft and BP is widely regarded as the first step of strategic partnership between the largest Russian oil company and one of the world's energy leaders. What can be expected from this partnership?
The deal demonstrates growing potential for synergies between reserve-hungry international oil companies and advanced technology-hungry national oil companies. In this case, the synergy could serve as a platform for a broad and productive partnership.
BP is one of the world's leaders in advanced energy technologies and management of cutting-edge projects. Its reputation took a substantial blow from the Gulf oil spill; it will need to successfully resolve that issue and move forward to other projects. This alignment is a major step forward, and should help BP get back on track.
Rosneft has entered a partnership that offers it access to top quality project management experience and technology. The company is already a Russian industry leader, and if this deal extends to a range of global projects, it would put Rosneft on the path to becoming a major global company.
Exchange of shares between BP and Rosneft is only part of the deal. The two companies, in particular, agreed to jointly develop oil in the three segments of the Russian Arctic shelf. How do you assess the prospects of cooperation between the two largest companies in this region?
Arctic cooperation lies at the heart of this deal; the prospects for cooperation are very good because both companies will be highly motivated to successfully explore the Arctic. While the exact volume of reserves in these three blocks and in the Arctic generally is not known, the geology is very promising and the Arctic is likely to become the world's next energy frontier. The Rosneft/BP partnership could become the first project to successfully produce major volumes in the Arctic, which would give the companies experience and comparative advantage over competitors. Rosneft and BP would likely be well-positioned to develop adjacent acreage and Arctic blocs generally.
The deal between Rosneft and BP provoked much discussion and, in some countries like the US, even concern. In your opinion are these concerns, expressed by several experts and politicians in the U.S., Britain and some other European countries, justified?
Every nation has its own laws, which will be followed in this and other cases. But as a general principle, integration of Rosneft and other Russian companies into the global economy is in the interest of all parties. As Russia and the US/Europe become stakeholders in each other's economies, their relationships will be closer and the chances of political friction will drop. Also, it is very important that business constituencies for strong Russian relations with the US and Europe develop in all countries involved, as these constituencies will promote cooperative relations in many spheres.
What do you think the prospects for attracting Rosneft to foreign projects of BP and their joint participation in the implementation of oil programs in third countries?
Given the technical and financial power of the new alignment, the chances of global cooperation are high. BP has global assets, and Rosneft and Russia have access to certain markets that BP may not have entered. Regarding investments outside Russia, BP must work out an agreement with its other Russian partners AAR. But that issue aside, the prospects for global cooperation between Rosneft and BP are strong.
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