BP Considering Drastic Measures To Save Rosneft Pact

How desperate is BP

to save its $16 billion share swap with Russia's OAO Rosneft, that country's largest oil producer? Apparently VERY desperate, so desperate in fact that Europe's second-largest oil company is mulling pulling out of its joint venture with Russian oligarchs, TNK-BP. BP is considering the move ahead of Thursday's deadline to salvage the pact with Rosneft, the Wall Street Journal reported. Thursday is also the day of BP's shareholder meeting. BP is reportedly considering a range of options to save the Rosneft accord with one being to pull out of TNK-BP, the Journal reported, citing a source with knowledge of the matter. TNK-BP, Russia's third-largest oil producer, sued to block BP's deal with Rosneft, which was announced in January, on the grounds that it violated the venture's shareholder rights agreement with the British oil giant. Under the terms of the BP/Rosneft deal, Rosneft would acquire 5% of BP for $7.8 billion and two firms would partner to explore for oil and natural gas in three blocks of the Russian area of the Arctic Circle. Missing out on the deal would be a blow to BP because at the time partnership was announced, Rosneft said the three blocks that were to be drilled may hold up to 5 billion metric tons of oil and 10 trillion cubic feet of natural gas. Last Friday a panel of independent arbitrators left an injunction won by TNK-BP blocking BP from moving forward with Rosneft in place until further notice but gave BP permission to seek to extend the April 14 deadline for the share swap, according to the Journal. A decision to pull out of TNK-BP is not seen as likely and would probably not come easily for BP because the venture accounts for 25% of BP's output, 20% of its reserves and 10% of its profits. Making the decision even more difficult and perhaps unlikely are the handsome dividends BP collects from TNK-BP, which include a $900 million payout for the fourth quarter of 2010.