UPDATE 3-Russia’s Rosneft to push ahead with BP Arctic pact

* Role of BP CEO questioned after Rosneft deal blocked

* Rosneft Chairman Sechin says to push on with BP deal

* Rosneft “satisfied” with BP as Arctic partner

* BP seeks further hearings on Rosneft deal -AAR

* BP shares close 0.6 pct higher, Rosneft falls 1.2 pct

(Adds AAR CEO comments, closing share prices)

By Sarah Young and Olesya Astakhova

LONDON/MOSCOW, March 25 (Reuters) – Russia’s Rosneft
(ROSN.MM: Quote, Profile, Research) vowed to push ahead with a strategic alliance with BP
(BP.L: Quote, Profile, Research), despite a block on the deal by the British oil company’s
partners in joint venture TNK-BP [TNKBP.UL].

Rosneft Chairman Igor Sechin said an arbitration panel
ruling preventing BP and the state-controlled energy giant from
jointly exploring Russia’s Arctic region and from executing a
$16 billion share swap did not void the deal. [ID:nLDE72O18E]

“The court didn’t block (the deal), it extended the
injunction until April 7. We must await the court’s verdict,”
Sechin, also Deputy Prime Minister, told reporters on Friday.

Sechin argued Rosneft had suffered losses as a result of the
actions by BP’s TNK-BP partners Access-Renova (AAR), which
pursued court action against the BP-Rosneft tie-up, arguing the
alliance violated their right of refusal.

He said Russia’s largest oil company was “satisfied” with BP
as its partner and would defend its interests.

However, Stan Polovets, AAR’s chief executive officer, told
Reuters that although BP had requested another tribunal hearing
on April 4 to argue that it should be allowed to swap its shares
with Rosneft without carrying out any joint projects together,
this would not alter the situation. [ID:nLDE72O12P]

“This is not a temporary injunction with a predetermined
‘expiration date’. We don’t expect anything to change in the
foreseeable future, not on April 4, not on December 4,” he said.

AAR, which represents BP’s billionaire partners in TNK-BP,
had hailed Thursday’s arbitration ruling as a victory in their
bid to prevent BP hooking up with Rosneft.

AAR said BP was now “prohibited from entering into any
future share arrangement with Rosneft that has any kind of
strategic component”, potentially opening the door for a rival
to step in and replace BP as Rosneft’s partner.

The ruling also raised immediate questions about BP Chief
Executive Bob Dudley’s tactics in Russia and raised the prospect
Rosneft could look elsewhere for the expertise it needs to get
oil out of Russia’s Arctic region.

“Given his (Dudley’s) past relationship in Russia, how
difficult it has been, he should have been a bit more
appreciative of how tricky it can be operating in Russia,”
Arbuthnot Securities analyst Dougie Youngson said.

Rosneft head Eduard Khudaynatov said in January the group
was awash with proposals from foreign companies for exploring in
the Arctic, and Royal Dutch Shell (RDSa.L: Quote, Profile, Research), BP’s arch rival, has
already confirmed its interest. [ID:nLDE72M222]

“The cleanest thing for Rosneft, if it wants to start
developing its offshore acreage and resource potential, is to
choose a different partner,” Sanford C. Bernstein analyst Oswald
Clint said, adding TNK-BP lacked the necessary know-how.

TNK-BP shareholders said earlier this month the joint
venture could supplant BP in the share swap with Rosneft.

This was rejected by Rosneft, which recently struck deals
with U.S. oil majors Chevron (CVX.N: Quote, Profile, Research) and Exxon Mobil (XOM.N: Quote, Profile, Research) to
explore in the Black Sea. [ID:nLDE70R0PH] [ID:nLDE72A092]

BP shares closed 0.6 percent higher, with analysts saying
many had not priced the Rosneft deal into estimates because of
uncertainty from the start. Rosneft closed 1.2 percent lower.


BREAKINGVIEWS-BP must face outcome of fiasco [ID:nLDE72O0MD]

REUTERS INSIDER-BP will bag Rosneft deal, says Unicredit


ANALYSIS-Follow the money, not the oil [ID:nLDE72O123]



BP’s embarrassment over the ruling was compounded by the
fact that chief executive Dudley had been seen as more plugged
into the complexities of Russian oil than most.

He was in charge of TNK-BP before being forced to leave
Russia in 2008 due to what he said was a campaign of harassment
by the joint venture’s co-owners.

As well as bad news for Dudley, who took over as CEO last
year following BP’s disastrous Gulf of Mexico oil spill,
Thursday’s decision was seen as a blow to the Russian
government, which has struck several deals with energy majors to
tap new oil and gas regions to sustain long-term output.

Dudley played down the impact in an internal memo, saying:
“BP’s long history in Russia demonstrates progress and growth is
not always straightforward. But it has consistently been
successful over the long term”.

Dudley said BP would seek a ruling on whether the share swap
under which it would exchange 5 percent of its own stock for a
10 percent holding in Rosneft — may proceed on its own.

“I guess they (BP) feel that over time, that (the share
swap) would allow them potentially opportunities at some stage,
but obviously it’s a sub-optimal solution relative to the
original plan,” said Barclays Capital analyst Lucy Haskins.

Few expect a quick resolution to the stand-off.

“This was always going to be a tricky situation trying to
balance a relationship with Rosneft and TNK. So, I think this is
going to run for much longer than BP has been letting on,”
Youngson at Arbuthnot Securities said.
(Additional reporting by Douglas Busvine, Melissa Akin and
Vladimir Soldatkin in MOSCOW and Stephen Jewkes in MILAN;
Writing by Alexander Smith; Editing by Dan Lalor and Sophie

UPDATE 3-Russia’s Rosneft to push ahead with BP Arctic pact