BP, Rosneft Move Deadline In Bid To Save Deal

BP (NYSE: BP), Europe's second-largest oil company, and OAO Rosneft, Russia's largest oil company, have moved the deadline for completing their controversial $16 billion share swap to May 16 from April 14, giving the companies some extra time to salvage the deal.

With the deadline and BP's shareholder meeting looming on Thursday, BP was faced with the specter of a heavy financial toll and losing ground to its rivals in oil-rich Russia. BP could lose $1.6 billion if the deal isn't completed, according to Bloomberg News. The British oil giant said it will take the extra time to work out disagreements with TNK-BP, the company's joint Russian venture with billionaire investors, in attempt to get the Rosneft deal done.

Announced in January, the BP/Rosneft deal would see Rosneft acquire 5% of BP for $7.8 billion and the two companies would then partner to explore for oil and natural gas in three blocks of the Russian area of the Arctic Circle. Russian oil majors have previously been unwilling to partner with Western rivals on Arctic exploration, but have come to realize they need the expertise and technology held by their U.S. and European counterparts.

Earlier this week, Rosneft appeared as though it was expecting the worst and as though it was preparing to move forward without BP. Rosneft may pick another company to help explore the Kara Sea given BP's failure to win over its partners in the TNK-BP venture before Thursday's deadline, Bloomberg News reported.

TNK-BP, Russia's third-largest oil producer, sued to block the BP/Rosneft accord due to competitive threats and allegations that it violates TNK-BP shareholder rights agreement with BP. Last month, an a Swedish tribunal extended an injunction blocking the deal, making the prospects for success look all the more doubtful.

BP became so desperate to get the deal with Rosneft done that considered buying out the Russian investors, but those talks fell apart. The Wall Street Journal reported on Tuesday that BP may be mulling selling its half of TNK-BP. TNK-BP accounts for 25% of BP's output, 20% of its reserves and 10% of its profits.

For its part, Rosneft said it must defend its interests and the company was rumored to be talking with possible replacements for BP. Otkritie Securities said Rosneft could work with Exxon Mobil (NYSE: XOM), the largest U.S. oil company, or Royal Dutch Shell (NYSE: RDS-A), Europe's largest oil company, on the venture, Bloomberg reported.

Either firm would be a suitable replacement for BP as both have the technology Rosneft needs and both have expressed an interest in expanding in Russia. Exxon and Rosneft signed an agreement to work together in the Black Sea earlier this year.