Rosneft-BP Merger
A couple of months ago, world-renowned BP signed a deal with Russia’s major oil company Rosneft to “swap shares and jointly develop oil fields in the Arctic.” Of course it will be BP reaping most of the benefits (since it will be putting up the majority of the capital) with the Russian Rosneft company taking in 5 percent of BP and BP getting double of that, at nearly 10 percent of Rosneft.
Paying for Technology
The bottom line is, it’s BP that has the technology. So effectively, Rosneft will be paying for it. It lacks both the technological and managerial know-how needed to work “some of the most promising and largely untapped oil fields in the world.” Without this, it will be incapable of maintaining its oil production levels “as output from fields in western Siberia continues to decline.”
BP Benefits?
If that’s the case, then what’s it in it for BP? In a simple word: access. Without the merger with Rosneft, BP is denied access to fields “beyond its political reach.” So Rosneft reaps financial rewards while BP gets otherwise unprecedented access to areas previously denied it due to political reasons.
Russian Energy Issues
This merger is definitely good news for Russians, the country and its economy. But that doesn’t remove its other issues, most notably how to re-educate the people on energy saving activities. Russia is known for its abundant oil and gas reserves so an incredibly lax attitude has been taken amongst the people vis-à-vis energy conservation. But this is essential even in a country with many resources since World Bank figures show that potentially Russia could go much further as with a little bit of work it could cut its energy consumption by a staggering 50 percent. Perhaps if it did this it would be in an even better bargaining position the next time a big name company such as BP approaches it for a deal.