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Why did Putin choose BP?

Robert Peston | 10:41 UK time, Sunday, 16 January 2011

It is striking, to put it mildly, that - of all the companies in the world that prime minister Putin of Russia could have chosen as a partner on the exploration of an enormous area of the shallow Arctic seas - Mr Putin chose the one associated with the most disastrous offshore oil spill of modern times.

Vladimir Putin

 

Why would he pick BP as his ally in a venture seen both by hydrocarbon fans and environmental campaigners alike as of huge significance?

Given the horrified reaction of Greenpeace and of a couple of US congressmen to the deal - who allege that America's national security may in some sense be threatened by the linked transaction of BP engaging in a share swap with the semi-nationalised Russian oil giant, Rosneft - perhaps it's a manifestation of Mr Putin's mischievous sense of humour.

That however seems unlikely.

For Bob Dudley, the chief executive of BP - whom I interviewed shortly before midnight on Friday soon after the deal with Rosneft had been signed - it shows that his company has learned the important lessons of the debacle in the Gulf of Mexico (you can hear a good chunk of the interview by clicking here.

BP has set up a new safety division, to make sure that safety is a priority in all its operations. And - perhaps more importantly - it has ceased to delegate to contractors any autonomy over decisions which would have a serious impact on BP's reputation or its finances.

Although the argument may well rage in the courts for years about the balance of blame and financial liability to be distributed between BP and its contractors on the Macondo well in the Gulf of Mexico - notably Transocean and Halliburton - the big lesson for BP was that it was too trusting of Transocean and Halliburton to get it right.

Or to put it another way, Dudley argues that BP has learned the systemic lessons of the Gulf spill.

Here's the interesting thing. Let's say that the US presidential commission into the Macondo accident is correct that the accident highlights systemic risks and possible management weaknesses not only for BP and its contractors and partners, but for all the offshore oil explorers and exploiters.

This, of course, is a conclusion that BP's competitors have denied. They would reject the implication that the Macondo horror could have happened to any one of them.

However prime minister Putin would apparently beg to differ. He seems to believe that a once-bitten BP is now a highly reliable offshore explorer - and has backed that judgement with a contract of huge important to his country's ecology, finances and energy reserves.

All of which may imply that BP has - paradoxically - won some kind of competitive advantage in having been forced so publicly to show that it understands what went wrong in the Gulf and that it is a changed company.

So what should that suggest to the non-executives of Shell, Exxon and the rest? Do their companies need to demonstrate to the wider world why they're to be trusted when finding and extracting oil in challenging environments?

Comments

  • Comment number 1.

    I'm sue that environmentalists would have rejoiced that companies such as Shell or Exxon had been chosen to be partners to Rosneft given their green and non-polluting past.

    I can only assume that Rosneft and Mr. Putin are hard headed business men and could see the desperation in the eyes of BP and could negotiate very favourable terms.

    (they might also see BP as a soft touch in the event of a spill given the way they rolled over under US pressure)


  • Comment number 2.

    It wasn't a matter of BP being too trusting of Transocean and Halliburton because contracting out responsibility is now an integral part of BP's business modus operandi. It saved them money which in turn pushed up profits and improved the dividend.

  • Comment number 3.

    BP plugged the Macondo horror - it was a fantasic demonstration of engineering skill. Now they can reap their rewards.

  • Comment number 4.

    This reads like an advert for BP!

  • Comment number 5.

    Because BP offered the best T&C's and it was a good opportunity to stick two fingers up to the US. In the end don't think H&S/Environment was a big factor despite recent events.

  • Comment number 6.

    I wouldnt rule out the devil you know being the deciding factor. Personal relationships and political contacts are key to business in Russia. BP's time there may not have been a pleasant experience but at least both side know each other. This could well be the Dudley deal -former head of BP's existing Russian venture.

  • Comment number 7.

    Mr Putin is clearly a very shrewd man. Given all the events surrounding the Macondo well disaster, it is not difficult to understand his reasoning.

    It's just a pity that there has to be any exploration work undertaken in the Kara Sea. Let's hope that BP can now excel where it has previously failed.

  • Comment number 8.

    #2

    'It saved them money which in turn pushed up profits and improved the dividend.'

    well it did until the explosion, then the investors and dividend takers exited sharply (no demand for shares so price fell) the costs are pushed onto those shareholders who couldn't exit quickly enough and the customers who will pay in the longer term

  • Comment number 9.

    Sorry Robert

    Mr Putin is far more clever than that.

    Take on BP as a partner, get a large chunk of shares. then give them a lot of rope and watch them hang themselves.

    Once they've done that ( again) you can try a take over.

    Why not Mr. Putin.

    You've got Chelsea football club ....................

  • Comment number 10.

    The Gulf of Mexico disaster (involving BP, Halliburton, Transocean and others) is a blessing in disguise for the BP. America, particularly Barack Obama, had the ulterior motive of swallowing up the BP under the guise of extracting compensation for the environmental disaster caused by BP. (America does not give a damn for the environmental disaster caused by American Union Carbide, which killed more than 30000 Indians in Bhopal disaster).
    But BP managed to survive by the skin of its tooth. Subsequently Bob Dudley, the new CEO of the BP, started disinvesting from the America oilfields and extracting itself from American mafia strangehold. Now getting involved with Russian Rosneft BP has shown that it can rise from the ashes. Also Putin has shown that your enemy's enemy is your friend.

  • Comment number 11.

    BP´s problems with the Gulf of Mexico failure of its inbuilt safety systems and safety procedures are not uncommon throughout the Oil & Gas industry, insofar as Clients and Managing Contractors take the easy option of relying on their subcontractors to have both the expertise and work to the procedures in place in order to avoid such accidents. No doubt in future BP will ensure these safeguards and procedures are adhered to. There is a cost to such adherance and many clients fail to pay due attention to these costs at the time of tendering. US double standards re ecolgical disasters are a typical example of nimbyism. Mr. Putin realises that BP will do all it can to avoid any similar occurances and the incredible feat of engineering a solution to the leak at the end of the day, is a tribute to the engineering skills of BP in dealing with a first time situation.

  • Comment number 12.

    Perhaps BP gave Russia the best deal - bottom line, plain and simple.

    BP trusted too much? This has little meaning when it comes to risk analysis and management - particularly in relation to contingency planning - disaster avoidance and mitigation are more important than recovery.

  • Comment number 13.

    Why did Putin choose BP?

    -----------------------

    Maybe it was because of the level of corruption in UK politics!

    (after all, Wikileaks exposed the US's view that Russia is now a defacto mafia state)

  • Comment number 14.

    Political convenience Robert. Putin (and BP) knows BP needs to try hard next time. BP have a lot to lose if it goes wrong again and he has a lot to gain if it doesn't. And that can only boost his standing, inside and outside Russia. Smart choice. I didn't get where I am today......

  • Comment number 15.

    I think you will find most of these big companies are interwoven. BP use mostly 'subbies' (sub contractors). I was hired a few years ago by Halliburton ( Brown and Root) then shifted over to BP'S Azerbaijan pipe line project. The oil and service industry is all a bit of a tangled web, which makes it easier to hide the bodies.

  • Comment number 16.

    Would Putin or anyone else rather do a deal with a company that has been able to plug a deep sea oil well and have that experience or go with someone who has no experience of plugging a deep sea oil well, should the need re-arise? BP obviously doesn't want to do it again but it knows what is needed and Putin can make the stipulations that BP needs to put those safety measures in place. Obama is a lawyer and looks for people to blame as all lawyers do. Putin is more pragmatic as Russia controls the fifth largest oil reserves and needs the money before the world moves to other sources of energy and ditches oil.

  • Comment number 17.

  • Comment number 18.

    Rosneft have likely got themselves a very good deal, to have BP develop these reserves. What ever the failings with Macondo, they do have world leading expertise in exploiting offshore fields. However close Russia and the US may now be, there would never be a deal with one of the majors like Exxon or Chevron.The only equivalent would be Shell, who have had a fairly fraught time operating in Sakhalin - It's likely their price would be higher than a BP desperate to cut a deal.

  • Comment number 19.

    I don't believe that Putin would have done this deal just to aggravate the United States, though it's a signal that last year’s US oil spill won’t hold Russia back when dealing with BP.
    Putin seems anxious for "Rosneft" and "BP" to work together on offshore projects both in Russia and other countries. Putin apparently engaged in long conversations with BP Chief Executive Officer Robert Dudley. The two companies will likely start work in the Arctic Ocean with Russia providing tax breaks.
    The decision is somewhat surprising coming 3 years after Dudley was ousted as head of oil venture TNK-BP, this the result of a dispute between BP and its Russian BILLIONAIRE partners. Maybe not altogether surprising when you know that Dudley became BP CEO in October; he was asked to rebuild BP's reputation after the well blow-out in the Gulf of Mexico.
    Dudley seems optimistic that that BP will also get work in Kara Sea.
    In October, Rosneft received the rights to develop three Kara Sea blocks, known as East Prinovozemelsk - 1, 2 and 3. The Kara seas lies in the Arctic circle off Russia’s north coast. Rosneft is Russia’s largest CRUDE producer; therefore it's seeking partners to grow into a leading ENERGY producer. Rosneft's Chief Executive Officer Eduard Khudainatov said the company has said it may work with BP and Total SA (a French multinational oil company, one of the six "Supermajor" oil companies in the world). to develop offshore fields.
    It is more likely that Putin picked BP because he foresees the large-scale and serious impact on the global oil and gas industry. It is estimated Russia’s Arctic offshore may hold 5 billion metric tons of oil resources and 10 trillion cubic meters of natural gas.
    Dudley: “It’s my hope that you will see this step of cooperation with Rosneft as a very strong signal from BP in our confidence in the investment climate in Russia.”
    Rosneft will pay 3.1B rubles ($103 million) for five offshore licenses.
    Deputy Prime Minister Igor Sechin, Rosneft's Chairman: "They have gained a great deal of experience, including in the Gulf of Mexico clean-up operation."
    Still, I wonder what is really behind Putin's decision. Activists say a spill under Arctic ice would be far harder to clean up than the Gulf of Mexico. The deal covers huge areas of the South Kara Sea in the Arctic.
    US Rep. Markey is hollering for review of the deal. In fact the US Congress has called for a careful US government review of a share swap between BP and Russian state-owned oil company Rosneft to see if the deal could have an impact on US national security. Rep Edward Markey: "If this agreement affects the national and economic security of the United States then it should be immediately reviewed by the Committee on Foreign Investment in the United States. Additionally, the US State Department should closely monitor this transaction."
    Maybe Putin has digested "The Presidential Oil Spill Commission Report" which blamed the oil industry, CONGRESS AND PRESIDENT OBAMA for the failures that triggered last year's Gulf of Mexico oil spill. The report placed heavy blame on three firms
    - BP,
    - Transocean and
    - Haliburton.
    Why is it that three companies share the blame; yet all we hear is BP, BP, BP, BP, BP....?
    Maybe Putin has found out why.

  • Comment number 20.

    The $20B or whatever the Americans manage to rob from BP will end up funding Democratic pork-barrels and paying off Obama's Chicago cronies. However, by turning on a foreign corporate, America's only option to retain access to oil is to prop-up Saudi royals, strong-arm Brazil and likely invade Iran.

  • Comment number 21.

    Simple. Pure and simple. Putin is a chancer.

    He chose BP to show anybody that was interested that Putin has balls.

    It's all about Putin. At the moment Russia = Putin.

  • Comment number 22.

    #3 "Jacques Cartier"
    "BP plugged the Macondo horror - it was a fantasic demonstration of engineering skill. Now they can reap their rewards."

    I don't think we will ever know the full story.
    What I want to know is why "Top Kill" worked months and months after they first tried "Top Kill" when it failed.
    How was the BOP flawed?
    Did the well simply exhaust itself?
    Hardly engineering skill if they simply waited till there was very little left to come out.
    More a display of brinkmanship and deep pockets.

  • Comment number 23.

    It's not just BP, it's the coalition government that's shown itself to be cosy with the Russian oil industry. You only have to look at the recent decision to overturn the previous government's ban on oil tanker transfers in Sole Bay off Southwold. Now they can go ahead with this risky procedure just off a coastline of outstanding natural beauty. Oil transfers at sea between small Baltic tankers and massive ocean going ones are notoriously tricky, so no wonder Mr. Putin smiles kindly on BP.
    Regards, etc.

  • Comment number 24.

    #22

    Jacques is right.

    It was a fantastic demonstration of engineering skills.

    At the time, you could watch in real time and listen to all the technical updates online.

    If you go to the BP website, you can still access all the daily technical updates amongst a wide range of other material. At the time, you could watch the ROVs in action. Just ensuring accurate connection of the new relief wells to the old was extra-ordinary, 1000s of feet below the surface.

    Whatever else you might think, the engineering that stopped the leak was wondrous.

  • Comment number 25.

    I understood this deal is the culmination of several years' work. Last year's events on the Gulf have little to do with it. Of course for Russia, getting a 5% stake in a company who's share prices still hasn't fully recovered (which it will) from the 'debacle in the Gulf of Mexico' is an added bonus for them.

    Echoing point 10, the US is not being consistent: it needs to address India's concerns over Bhopal before getting vexed about the comparatively benign Macondo accident.

  • Comment number 26.

    If our government had anything to do with it, they made the right decision. We need Russia more than they need us. Don't forget that an increasing amount of the gas we use comes from there. seeing us as trading partners is no bad thing. America's idea of a trading partner is no less exploitative as I suspect the Russian Gas deal is. Cadbury's stopped making chocolate at Keynsham this week - American trade promises are unreliable too.

    Final thought. Those who want to take us out of Europe - who are we going to trade with?

  • Comment number 27.

    #22

    Watch this from July 9th

    http://bp.concerts.com/gom/sealingcapinstallationanimationwithkentwells070910.htm

    You'll probably find footage of the actual installation, if you try.

  • Comment number 28.

    Er...or Putin got them cheap because BP are at a relatively low ebb and need the business?

  • Comment number 29.

    Robert

    You say 'the most disastrous offshore oil spill of modern times'.

    Are you sure that's what it was or are you regurgitating.

    Or is there a new definition of modern that is perhaps post, say, the year 2000.

    When you use the word disastrous are you referring to size or impact or time to clean up?

  • Comment number 30.

    "his [Dudley's] company has learned...", you say. Or have they not learnt, that is my question (gramatically and otherwise).

  • Comment number 31.

    #24 mrsbloggs13c2

    Firstly checkout the meaning of the word "fantastic" before you use it.
    Secondly do you believe everything a multinational tells you on the TV?

    Back to what happened. Reality.
    After many many months the damaged riser was removed from the top of the BOP and a pipe with a shut off valve was put in its place. Bolted on. Then the valve was closed. End of spill.

    Was the pressure and flow from the well reducing at this point?
    How much oil is there now left in the reservoir?
    Could this procedure simply have been undertaken months earlier?
    In other words did this procedure work only because the pressure/flow was much reduced? Had mixed phase flow ceased at this time and there was no more pressure spiking due to gas kicks?

    Note that the "Bottom Kill" procedure was performed weeks after the well was shut in.

    AFAIK the ROV pilots were subcontracted to BP. They would have been instructed to do various tasks by BP.

    Will we ever find out why the BOP did not work?
    There is already talk of corrosion rendering BOP investigations pointless.
    I suppose it will be down to the lawyers to write history.
    And television to state "facts".

  • Comment number 32.

    keep your friends close and your enemies closer....

  • Comment number 33.

    A fact missed by Robert is surely that BP has been involved in exploration, development and production in Alaska for more than 40 years. (the Prudhoe Bay field was found in 1969.) The experience gained in that environment must be profoundly important for Russia as it seeks to develop the Arctic and makes success much more likely.

  • Comment number 34.

    @1,

    I'd recommend reading about Shells spills/cover ups in Nigeria..certainly a shocker.

  • Comment number 35.

    BP is trying a gambit that has sometimes worked for companies in dire straits: "with one bound, he was free".
    http://cityunslicker.blogspot.com/2011/01/bp-and-bear.html
    Doesn't guarantee success - but it is bold.

    Enron did the same in 1987, when it was just an ailing US gas pipeline company, with a bold overseas move, and a move into financial trading. Both ventures had their problems in the long run, but in the first 5 or 6 years they worked the trick in no uncertain terms, and the problems of 1987 were quickly put behind them.

  • Comment number 36.

    Perhaps a British company like BP is ethically more reliable than a US company. Just see how Kraft have closed the Cadbury chocolate production at Keynsham after promising to keep it open - moving production of a historic British brand overseas. This shows their desire for profit over their principles.

  • Comment number 37.

    Putin knows that with a very small pool of suitable developers ... the Russian 5% with BP will allow him and Russia to have more leverage over BP than over e.g. a US contractor?

    What we don't know for sure is whether the 5% is to be held by the Russian state or by a carefully biased selection of Russian investors ... with a confidentiality clause on the contract?

  • Comment number 38.

    Why did they choose us?simple....we are the biggest suckers of the lot to deal with and take advantage of.Basically the British officialdom is about as scary as a dead sheep especially when you are dealing with real leaders with Balls like Putin.Could you imagine the likes of Miliband,Cameron,Clegg or any British leaders locking horns with Putin?Oooooo im scared....not!

  • Comment number 39.

    The action that clinched the BP-Putin deal was BP shutting down of the Alaska Pipeline last week. That demonstrated to Putin and his minions that BP could control the oil jugular of the United States. That is why this deal was done. The Europeans are the enemies of the United States and always have been. It is a good thing for the United States that Europe is dying.

  • Comment number 40.

    #31

    Hello

    Fantastic, was Jacques' word. I repeated him word for word. Nevertheless since the definition in my OED includes excellent and extraordinary as well as fanciful. I think its reasonable.

    I tend to think that getting a 30 foot structure weighing 160,000 pounds into place rather a long way below the water surface is extraordinary.

    As it happened, I was able to watch US TV for some of the time that the Macondo Well was gushing. It didn't matter who 'the publisher' was or their geographic location, I would suggest that the coverage in newsprint, on the web and on the TV was insufficient and often inaccurate or incomplete.

    One thing I found interesting was that journalists from 'serious' newspapers attended all the technical briefings and asked questions. It was very rare to find any report of their findings in their employers organs. It was also interesting to note who didn't have a representative there to ask questions or if they were there they sat quiet

    What I also noticed was that bloggers contributed detail and over time the reporting improved a little.

    One comparatively good source of information at the time was www.theoildrum.com

    propublica.org was also good.

    In any event, the entire process yet again confirmed that you need to find as many sources of information as you can manage and sometimes more, because nothing is as it seems at first glance.

    Have a great week.

  • Comment number 41.

    What a strange article.

    Intelligent businessmen do not worry about temporary disasters, or knee-jerk reactions. Do you not think it might be because BP were the best placed partners, strategically and technically, to team up with?

    I would hate to have you on my board if you think this decision has anything to do with the Gulf of Mexico spill.

    Also, don't you think any company drilling offshore now will be exceptionally careful when it comes to safety due to what happened in America? Its hardly as though Shell or Exxon are going to be less careful is it?!

  • Comment number 42.

    Robert, I'm not convinced. I don't for one minute believe that BP's record in the Gulf of Mexico convinced Mr Putin that they were the safest pair of hands for the delicate work required in the artic. Surely the real story must lie in the prior history of BP in Russia. You're probably better placed than most to tell us what really happened, but certainly BP got their fingers burned.

    I can only imagine that BP found themselves too heavily involved in Russia to withdraw completely; particularly following the debacle off Mexico. BP badly needs new projects, ideally well away from the US coastline.

    Also, isn't BP 40% US owned? Surely the powers that be in the US must have approved this at some level? There's a good story there I'm sure.

    BP is an important company for the UK and for British pensioners. We also face a serious energy crisis. Therefore the vast majority of us can only hope that all goes well in the artic as we suck the last of the oil out of the planet.

  • Comment number 43.

    From another article:

    Mr Miliband said finding alternative forms of energy was the way ahead.
    'Clean way'

    The former climate change secretary was speaking on the BBC's Andrew Marr Show on Sunday.

    "I'd be pretty worried about this," Mr Miliband said.

    "I think that the lesson of the Deepwater Horizon, the Gulf oil spill, should be that... the task for all of us, private companies, government and so on, is not to just keep digging and digging deeper and deeper for oil.

    "It is actually to find those alternative forms of energy that can help us move forward in a clean way."


    I'd feel a whole lot better if the previous Government, of which he was a member at the critical time, had managed to force Investment Bankers bonuses to be invested in solar energy research for the forseeable future. That way society might get something of value, while the Bankers would re-learn the lost art of long term investment - calling them Investment Bankers is the biggest hoax going - they're neither.

  • Comment number 44.

    39. At 21:25pm on 16th Jan 2011, Christopher Green wrote:

    ' ... It is a good thing for the United States that Europe is dying.'

    ================================================

    We're not 'dying' - just dealing with a little local difficulty. Two years from now, it will be history. There'll be a two-tier Euro and the Yuan will be the reserve currency.

    We're not your 'enemies' - we apparently enjoy a special relationship that is strategically beneficial to the USA.

    So, what's the problem?

  • Comment number 45.

    Negative publicity can certainly be leveraged as free publicity. Best time to get involved with BP in that respect.

  • Comment number 46.

    34. At 20:25pm on 16th Jan 2011, RD wrote:

    '@1,

    I'd recommend reading about Shells spills/cover ups in Nigeria..certainly a shocker.'

    I though everyone would have seen the sarcasm

    Shell :- Nigeria
    Exxon :- Valdez

  • Comment number 47.

    I wish to post a very different comment on the risks of deepwater drilling and the need for new regulations.

    We first have to step back and take a sensible and reasonable take on the Gulf of Mexico blow out.

    With the kind of penalties bp (its lower case) is facing in the US it doesn't take much consideration to understand that bp or others will do everything possible to avoid another government jumping on them. Getting more state QUANGOs involved to further regulate and oversee is not going to make as much difference as the new scrutiny undertaked by the "interested party", bp.

    If bp, its partners, subcontractors and suppliers couldn't find an individual or entity negligent then there was no negligence. Accidents happen. If someone were at fault then bp and others could have avoided some $40b of costs.

    It is the same with the Presidential Commission. If they can only lay responsibility on systematic failure then they too could find no negligence.

    We can always find systematic failure after the event, even though the procedures prevalent at the time were third party certified and approved by regulators.

    Will we sue the regulators ie. the tax payer? No.

    Will we unleash 20 US QUANGOs to sue bp? Yes.

    But if we can find no negligence and all government regulations have been met and exceeded (the technical terms are due diligence and brownie points) then how can the US QUANGOs sue bp in the courts. And who will honour the compensation payments to the 200,000 individuals in one US state alone who have recently been granted fishing permits such that they can claim from the state demonised bp.

    Can't the state just be fair and not be hypmotised by an easy buck (or even $40b)?

    Lets remember that company fines are stealth taxes and they pay the wages of the Presidential Commission. We and the US have given sharks teeth to the OFT to bring in extra stealth taxes. We have jumped on companies for £100m's in fines for practices that have been going on for decades.

    Can't we just be fair? The UK have just taken £124m from tobacco companies for a decades old practice. The FSA have just taken £20m from Goldman for not correctly informing them that they were under investigation from the SEC althought they knew all the details from day one.

    The end result is that 5% of bp's dividends will now go to Putin's Russia and not UK and US pension funds. I'm not sure, but didn't our pension funds get 16% of their income from bp's divi.

    I don't think it is to be celebrated that Obama has grabbed one or more years bp divi from our pension funds and in future 5% will go to Russia and its energy protection racket.

    Here is the bottom line. The FTSE 100 companies make 70% of their income abroad. We are a big hitter in mining, oil and gas exploration and development, insurance, financial services, pharmaceuticals, retail and IM (information management). We all benefit from these globally competitive achievements. They fund the NHS and the welfare state. But we hate them rather than love them.

    They fund 12m UK pensioners, 5.2m wannabe pensioners, education, defence, the NHS. But all we can point to is their COE salaries and bonuses desite them paying more than half of their income in taxes.
    etc

  • Comment number 48.

    I wish to post a very different comment on the risks of deepwater drilling and the need for new regulations.

    We first have to step back and take a sensible and reasonable take on the Gulf of Mexico blow out.

    With the kind of penalties bp (its lower case) is facing in the US it doesn't take much consideration to understand that bp or others will do everything possible to avoid another government jumping on them. Getting more state QUANGOs involved to further regulate and oversee is not going to make as much difference as the new scrutiny undertaked by the "interested party", bp.

    If bp, its partners, subcontractors and suppliers couldn't find an individual or entity negligent then there was no negligence. Accidents happen. If someone were at fault then bp and others could have avoided some $40b of costs.

    It is the same with the Presidential Commission. If they can only lay responsibility on systematic failure then they too could find no negligence.

    We can always find systematic failure after the event, even though the procedures prevalent at the time were third party certified and approved by regulators.

    Will we sue the regulators ie. the tax payer? No.

    Will we unleash 20 US QUANGOs to sue bp? Yes.

    But if we can find no negligence and all government regulations have been met and exceeded (the technical terms are due diligence and brownie points) then how can the US QUANGOs sue bp in the courts. And who will honour the compensation payments to the 200,000 individuals in one US state alone who have recently been granted fishing permits such that they can claim from the state demonised bp.

    Can't the state just be fair and not be hypmotised by an easy buck (or even $40b)?

    Lets remember that company fines are stealth taxes and they pay the wages of the Presidential Commission. We and the US have given sharks teeth to the OFT to bring in extra stealth taxes. We have jumped on companies for £100m's in fines for practices that have been going on for decades.

    Can't we just be fair? The UK have just taken £124m from tobacco companies for a decades old practice. The FSA have just taken £20m from Goldman for not correctly informing them that they were under investigation from the SEC althought they knew all the details from day one.

    The end result is that 5% of bp's dividends will now go to Putin's Russia and not UK and US pension funds. I'm not sure, but didn't our pension funds get 16% of their income from bp's divi.

    I don't think it is to be celebrated that Obama has grabbed one or more years bp divi from our pension funds and in future 5% will go to Russia and its energy protection racket.

    Here is the bottom line. The FTSE 100 companies make 70% of their income abroad. We are a big hitter in mining, oil and gas exploration and development, insurance, financial services, pharmaceuticals, retail and IM (information management). We all benefit from these globally competitive achievements. They fund the NHS and the welfare state. But we hate them rather than love them.

    They fund 12m UK pensioners, 5.2m wannabe pensioners, education, defence, the NHS. But all we can point to is their COE salaries and bonuses desite them paying more than half of their income in taxes.

  • Comment number 49.

    I worked in the Oil industry on and off between 1980 and 2005 as an IT chap. When oil prices dropped to $10 a barrel in the eraly 1980's, there was big push to outsource every engineering and design activity. Costs savings were everything and Oil companies were almost becoming just specialist investment banks for the energy sector. The oil services groups grew radically as a consequence (especially Hallibuton). When I last worked in the oil business for BP five years ago, nobody in BP did anything anymore. All BP employees had become purchasing managers just involved in managing suppliers rather than delivering engineering servcies themselves. The suppliers ended up knowing a lot more than the BP staff on what was really going on. Ironically, the BP management were ridiculously OTT on safety but paranoid about chiseling suppliers for cost reductions. IMHO they allowed the pendulum to swing to far towards outsourcing and cost cutting. The way forward is to bring more real engineering decisions in-house and mitigate the risk of another gulf catastrophe by not having in-house staff managing areas of critical risk... I have nothing whatever to do with oil business anymore so I have no axe to grind, apart from not wanting to see a good British company go down the tubes...

  • Comment number 50.

    In my experience, multi-national oilfield companies have great difficulty integrating their American and rest-of-the-world operations. Partly legal issues, but mostly personnel attitudes and entrenched ways of doing things. As the American side tends to be the oldest, most efficient, safest, experienced etc etc, there is nothing to be learnt from foreigners. As a result, the US operations tend to accumulate a great weight of Good Ole Boys who, as they have been everywhere and done everything, are quite happy (for instance) to throw casing centralisers into the mud pit instead of using them down hole. (Something like this happened on Macondo.)

    I wouldn't say the incident could not happen in, say, the North Sea, but it would be very much less likely. European Putin is dealing with a European oil company.

  • Comment number 51.

    Why did BP choose Russia?

    The company has, in the past, experienced state interference in the running of a joint venture. They must also have observed how Shell also had to renegociate terms of a venture under pressure from government backed 'environmental' concerns.

    Does this mean BP will in future be lobbying the UK Government on behalf of the Russian govenment, to lobby other EU members to look favourably on Russian investments in European Gas/Oil distribution and refining?

    I am curious if the UK goverments' position on the deal is one of detachment and 'leave it to BP, as a private company, to do what it thinks is in its shareholders' interest'. Or are official frosty relations, thawing behind the scenes?

    I can't help but suspect that in 5 years time, BPs investment will be squeezed by the russian government, once the expertise has been replicated to develop these difficult to get to oil fields.

    So I concur with Comment#1 BobRocket's comment that this deal might reflect BP's current weak position and Putin's shrewdness to take advantage of their weakness.

  • Comment number 52.

    I suspect the real reason that Putin chose BP above everyone else was simply that, after the dreadful Gulf of Mexico debacle which resulted in BP being branded a global pariah, BP undercut all the competition just to get the job...

  • Comment number 53.

    I would agree that this is simply good business from Mr. Putin who is looking to get as much technical expertise from BP as possible before showing them the door as he did with Shell in Sakhalin after their appalling environmental performance on the pipeline construction and as he will do to TOTAL/STATOIL on the Shtokman Gazprom Murmansk project, eventually. The comment bleow to the effect that Macondo is "plugged" is simply incorrect. "It shows that his company has learned the important lessons of the debacle in the Gulf of Mexico." The most important lesson to learm is that you do not drill the world's deepest oil well in the worst possible combination of geological hazards imaginable (salt domes, methane hydrates, overpressured water sand layers) in the way that you did (i.e. as if it were a bog standard oil hole in the North Sea). There is clear proof and evidence that hydrocarbons are still pouring out from seafloor fractures around the wellsite from the fractured subsea casing mess. BP and the US Govt. are simply hoping the flows will stop sooner or later (so-called "geological self sealing"). However it is not in the interests of the US Govt. to let this be known too widely. Lessons Learned MY ARSE. [Unsuitable/Broken URL removed by Moderator]

  • Comment number 54.

    Perhaps Putin is more astute than we imagined and saw through American hysteria about BP. It's a pity that BP weren't as clever as Union Carbide in escaping responsibility for the real and continuing 'world's worst environmental disaster' at Bhopal.

  • Comment number 55.

    Did you actually do any investigative work here? Halliburton advised the need for more centralisers for the casing when the cement job was done, Transocean advised on the failure of the BOP stack test. All of which the BP drilling rep ignored or should I say his superiors ignored.
    I work offshore and am involved in the planning meetings that take place daily.
    NO decisions are ever made without the prior knowledge of onshore manangement.
    You are being fooled if you believe BP did not know at every stage of the operation what was happening with their well.
    Multi million pound wells are not drilled on a whim!
    as for as number 22 comments about did the well deplete and this allowed them to kill the well. No a well with the pressure assoicated with this well would tail off slowly but it would flow by its self for years before depleting. It was good not great engineering, they took big risks and they paid off. I it had not then it would not have mattered as the relief wells would have done the job eventually.
    BP is sticking two fingers up at USA and Russia seeing a good business deal have jumped onboard and are laughing up their sleeves. Everyones a winner

  • Comment number 56.

    I would be very concerned that BP have learned their lessons by setting up a new safety divisions. We all know that quality comes from within; having a separate division in any company to oversee others is rarely the correct answer.

  • Comment number 57.

    Oh come on Robert! the reason is simpler than that. You first bring BP to Russia. You are sure the biggest investments are placed on there...and... a couple of years later you buy it! why? because BP will have no choice, it will not be able to say anything, why? because Russia will be the owner of the resources and the infratructures. After buying BP, Russia will own the technology and BP will be renamed to RP.

    This is basic modern economics, pure Asian style.

    From a Spaniard has plenty of simpathy for UK.

  • Comment number 58.

    The spill could have happened to any company - they all do the same stuff.

    No commercial descision would be based on that event.

  • Comment number 59.

    I think a realistic view is now being taken of BP's capabilities both with the Russian tie up and the Australian award of deepwater exploration licenses today
    One only has to reread the Senator Waxman hearing notes to see how far out the American politicians were in their initial assessment of the Gulf spill.They jumped to conclusions whilst Tony Hayward was advising them to wait for evidence to be provided. Hopefully performance will now overcome politics.

  • Comment number 60.

    The answer is experience. BP has dealt with Russia before and knows what it's getting into. BP has had a horrible experience in the Gulf of Mexico and probably has more knowledge of the issues surrounding that disaster than any other oil company. BP is now probably less in denial as to the risks involved in dealing with dodgy subcontractors than any other oil company.

    The culture of litigation in the US makes it impossible there to accept that the disaster was the fault of everyone involved. Lawsuits require scapegoats. What is worrying is the suggestion by other oil companies that they are holier - nothing could happen to them. Given that the problems at the root of the G of M disaster were systemic, it's only a matter of time before one of the other majors allows something to blow up with disastrous consequences.

    Oh yes, and why are the Americans so reluctant to recall the Bhopal disaster?

  • Comment number 61.

    Milliband's opinion is worthless. Whilst he was running the Environmental Commissariat during Labour's reign of economic terror he and his boss Brown were claiming the UK was leading the world in renewables blah blah blah and almost saving the planet single handedly.

    However - as was revealed by Millibands predecessor fellow Labour MP Malcolm Wickes in his report on Energy Security - the reality was that Labour was investing less in energy R&D than any of our major competitors. A mere £150m or so per annum!!

  • Comment number 62.

    So BT is British again?

  • Comment number 63.

    Peston - get your facts right before you spout

    "...the one associated with the most disastrous offshore oil spill of modern times......" cleaned up in six months.

    Lakeview Gusher - 1910, 1.2MM tonnes,
    Gulf War -Iraq wellhead damage 1991/2 - 8.25K tonnes
    Macondo - estimated - 6.75k tonnes

    with several unreported West African, Siberian and Far Eastern Blowouts very likely to be larger.

  • Comment number 64.

    Maybe it was because of the level of corruption in UK politics!

    (after all, Wikileaks exposed the US's view that Russia is now a defacto mafia state)
    --------------------------------------------------------------------------------

    The trouble with this is, if you are so touchy about who you trade with these days, there are going to be precious few partners left. I think sometimes that this is the position the loony left would like to see us in - just 'growing' our economy by employing more public workers - North Korea here we come.

  • Comment number 65.

    32. At 18:40pm on 16th Jan 2011, JasonRG wrote:
    keep your friends close and your enemies closer....
    I think you have that the wrong way round Jason, from the standpoint of both Russia and BP/the UK.
    _________________________________________________________________

    It’s fairly clear that in recent times the enemy of BP/the UK has not been Russia, but the US and there are many examples of how this is manifested.

    The US acts, and has only ever acted, strictly in its own interest, and only in its own interest. And the only friendship (and special relationship) the US has is with the US$.

  • Comment number 66.

    Cost cutting in the oil industry is systematic. Does it lead to blow outs? Perhaps not directly, nothing you could really put your finger on but indirectly.....I should think so.

    All the companies pay a huge amount of time and effort on safety or at least are seen to be. Safety has always been a priority in BP operations the setting up of a new safety division looks like a PR exercise. They have their liabilities to cover but in an industry where the vast majority of subcontracts are awarded on lowest bidder wins in a highly competitive environment then cost cutting is inevitable.
    The oil companies have their shareholders to maximise profits for but so do the subcontractors. In every one of those companies you'll find one person doing the work that used to be done by three and the level of experience dropping but they are also required to provide a huge chunk of the technical expertise to drill a well.
    Oil companies no longer have the expertise to oversee the broad array of specialised services. Cost reduction seems to be the constant and prime motivator. It will be interesting to see how BP hope to provide the personnel to oversee their subcontractors technical expertise. It will inevitably lead to brain drain from the very same subcontractors.
    Perhaps if Oil companies paid the subcontractors a fair price they could expect a better level of service and could "trust" them more?

    The same reasoning may be applied to this award. Perhaps BP offered a very good deal to secure this work and increase the stock value.

  • Comment number 67.

    The bigger they are and the worst they are the bigger they get.
    History repeating itself yet again.

  • Comment number 68.

    #13. I think if you are going to make public statements like this, you need to have some evidence to back them up. Otherwise, you are open to being sued for slander.

 

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