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London Evening Standard: Market report: Friday close

Mickey Clark,
22 December 2006

Oil giant BP shrugged off early selling pressure to post a rise of 4½p at 571½p despite City concerns that it may be next in the Kremlin’s firing line as it moves to reclaim Russia’s extensive oil and gas assets. 

The fears follow news that the Russians are paying rival oil explorer Royal Dutch Shell and its Japanese partners $7.5bn (£4.3bn) to buy out the Sakhalin-2 project in Siberia and hand control to Gazprom.

The deal was personally signed by President Putin as if to underline the country’s determination. The message will have been taken on board by BP management, which has ploughedbns of pounds into its TNK-BP joint venture.

City brokers say that for Royal Dutch Shell, 1p firmer at 1797p, the Sakhalin-2 move will have repercussions for the company’s oil assets which had to be written down by more than 20% two years ago. BP’s operations in the region have already faced difficulties. Earlier this year, it received a heavy backdated tax charge and faced accusations over environmental issues.

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