Investors in BP (LON:BP) today offered a cautious welcome to news of the oil giant’s tie-up with Russia’s state-owned Rosneft. The two sides have agreed a “strategic global alliance” that will begin with the exploration and development of three license blocks on the Russian Arctic continental shelf. These licences were awarded to Rosneft in 2010 and cover approximately 125,000 sq km in a highly prospective area of the South Kara Sea. This is an area roughly equivalent in size and prospectivity to the UK North Sea. The BP share price edged up more than 1% to 506p during the morning, continuing its progress away from the low of 302.9p reached last June in the wake of the Gulf of Mexico oil spill. BP’s shares are still way off the 655.4p trading level just prior to the GoM accident last April.

In what has been described as the first major equity-linked partnership between a national and international oil company, Rosneft will hold 5% of BP's shares (worth around $7.8bn) in exchange for approximately 9.5% of Rosneft’s shares. The companies said the share swap component of the alliance created “strategic alignment” to pursue joint projects and “demonstrated mutual confidence” in the growth potential of both sides. Investors took heart from the share swap, with analysts suggesting that it could help avoid another fall-out as witnessed in one of BP’s previous tie-ups in Russia, with TNK-BP. Press reports on Monday indicated that the Russian oligarch co-owners of TNK-BP were assessing whether the Rosneft deal contravened their agreement with the oil major over carrying out oil ventures in Russia.

In a note to investors, Evolution Securities described the deal as “a typically bold BP move” and said, in theory, by being in partnership with Rosneft, BP would hope to circumvent some of the problems it encountered with TNK and RDS encountered over Sakhalin. Adding a note of caution, Evolution said the agreement was “an exploration opportunity” so that while it may be a good medium to long term strategic investment, delivery would be “years away”.

As part of the deal, which was announced last Friday, BP and Rosneft have agreed to establish an Arctic technology centre in Russia which will work with leading Russian and international research institutes, design bureaus and universities to develop technologies and engineering practices for the safe extraction of hydrocarbon resources from…

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