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Royal Dutch Shell in Rosneft Arctic talks

Royal Dutch Shell has begun talks with Rosneft on “potential exploration” in the Arctic – the week after BP’s flagship deal with the Russian state oil company collapsed.

BP and Rosneft announced a £10bn share swap and Arctic exploration deal at a high-profile ceremony flanked by politicians and dignitaries in January this year. Photo: ALAMY

Rowena Mason
By Rowena Mason 6:46PM BST 25 May 2011

Peter Voser, the chief executive of Shell, was last night in Moscow for meetings with Russian deputy prime minister Igor Sechin, intensifying speculation that Rosneft is prepared to replace BP with another company.

The Russian government said the meeting focused on Shell’s current projects off Sakhalin Island, which may be extended, and the potential development of Arctic oil fields held by Rosneft.

Eduard Khudainatov Rosneft’s chief executive, was also present at the talks, placing Shell in pole position among analysts to become the Kremlin’s new foreign oil partner.

BP and Rosneft announced a £10bn share swap and Arctic exploration deal at a high-profile ceremony flanked by politicians and dignitaries in January this year.

However, they cannot proceed because BP’s existing partners, four oligarchs, successfully argued in court that they have an exclusivity agreement with with the British company on deals in Russia. BP could still manage to strike a deal if it buys out the four Russian billionaires from their joint venture TNK-BP, but so far, the two sides have failed to agree the terms of a sale.

Rosneft initially said that it is still considering BP as a partner for Arctic exploration if the issues can be resolved.

But over the weekend, Russia’s energy minister Sergei Shmatko said he does not expect the deal in its current form to be revived.

Industry experts agree that BP has the best technology and experience in deepwater drilling in extreme conditions, making it a desirable partner for Rosneft in the Arctic.

However, Rosneft has admitted talking to other parties, such as Shell, Chevron and ExxonMobil, since the frustration of the deal.

A spokesman for Shell said: “Shell welcomes the constructive talks in Moscow this week regarding potential exploration co-operation with Rosneft in the Arctic, broader strategic co-operation and technology development for the Arctic and other areas as well as opportunities for Rosneft to join Shell in developments outside Russia.”

Shell already has an “strategic agreement” with Rosneft, signed in 2007, to co-operate on exploration in Russia. The right to look for oil in the Arctic is a great prize for foreign companies as there is the potential for major discoveries in an area the size of the North Sea.

A spokesman for the Russian government said: “The negotiations touched on prospective long-term cooperation in geological exploration and the development of oil and gas resources around the Arctic shelf and the Black Sea.”

There was no discussion about any share swap.

At Shell’s annual meeting earlier this month, Mr Voser said the company had always been keen to exploit the Arctic area. “We are interested in exploring in Russia, and we have made no secret of that,” he said.

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