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Financial Times: BP seeks growth in joint ventures

By Ed Crooks
Published: July 24 2007 03:00 | Last updated: July 24 2007 03:00

BP, one of the three biggest western oil companies, is seeking more joint ventures with Russia and other resource-rich countries as a way to deliver growth.

The company today kicks off the reporting season for the international oil groups and is expected to report a drop of about 16 per cent in second-quarter profits, compared with the equivalent period of last year.

On Thursday, Royal Dutch Shell reports, with Citigroup expecting an 11 per cent rise in second quarter profits to about $6.75bn (£3.3bn), and ExxonMobil could post an increase in profits from last year’s $10.4bn second quarter record. However, Eni of Italy also reports on that day, and Citigroup is expecting a drop in its profits of 10 per cent.

The outlook for all international oil companies has been looking increasingly troubled, with rapidly rising costs, generally sluggish production growth, intensifying competition from national oil companies in emerging economies, and greater resource nationalism among oil and gas-producing countries.

Last month, following months of pressure from the Russian authorities, BP’s 50 per cent-owned joint venture TNK-BP was forced to sell its stake in the vast Kovykta gas field to Gazprom, the state-controlled gas company, at a bargain price.

Despite that move and tensions between Moscow and London over the Litvinenko poisoning case, BP still sees great potential in investing in Russia, and hopes for further joint ventures with Gazprom Russian companies.

It believes that it can offer expertise in areas such as deep-water exploration and production, and access to markets in the west and in Asia, that could be offered to attract companies that control large quantities of oil and gas but need more technology and marketing knowhow.

As part of the Kovykta deal, BP, TNK-BP and Gazprom agreed to set up a global joint venture worth at least $3bn that could develop projects inside and outside Russia.

Future deals with Russia could involve Gazprom taking stakes in BP assets worldwide, including projects in liquefied natural gas, which is one of the Russian company’s ambitions for expansion.

Copyright The Financial Times Limited 2007

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