BP shares rise on Arctic deal

LONDON – Shares in oil major BP rose yesterday as the market welcomed its deal with Russia’s Rosneft to explore the Arctic seabed, though key partners complained about being left out and US politicians warned about national security risks.

While the deal hedges BP’s production options as it faces new restrictions in the United States following the disastrous Gulf of Mexico well blowout, analysts noted it is unlikely to yield results for years.Still, BP shares shot up 2,4 per cent as the London Exchange opened yesterday before retreating to stand 1,5 per cent higher at 507 pence in late morning trading. BP shares, which traded at about 655 pence before the Gulf of Mexico disaster, climbed back above 500 pence only last week.The stock was also helped yesterday by news that BP had won exploration rights in the Ceduna Sub Basin off the south coast of Australia.The Russian deal gives Rosneft a five per cent stake in BP, which in turn takes 9,5 per cent of Rosneft shares. Rosneft shares were up four per cent on the MICEX exchange in Moscow.Analysts in London say the move is a bold on by BP, but it will have to wait years for a payoff assuming that significant oil reserves are found.’The deal looks like a typically bold BP move accessing a new region considered highly prospective,’ Evolution Securities said in a research note. However, ‘this is an exploration opportunity so while it may be a good medium- to long-term strategic investment, delivery is years away’.While the resources in the Arctic are potentially huge, analysts at Collins Stewart said BP’s profit margin would be squeezed by the high costs of operating in the South Kara Sea and other Arctic waters.’While any production arising from the new agreement is still likely to be many years away, BP’s commitment of significant additional capital to Russia is likely to be seen as a material negative shift in its risk exposure by many observers,’ Collins Stewart said.Alfa-Access-Renova, BP’s partners in the joint venture TNK-BP, protested that they were supposed to be the exclusive gateway for any BP deals in Russia, according to the Financial Times.BP said in a statement yesterday that drilling off Australia would not begin before 2013.The company’s critics in Australia said the dangers of drilling had been evident in the Montara well blowout in 2009 in the Timor Sea off the northwest coast of Australia.’BP is committed to use the intervening time to fully implement the lessons learned from the investigations into the Montara and Deepwater Horizon incidents, and is working closely with the Australian Government, the South Australian Government and industry to do so,’ BP said. – Nampa-AP