BP's $9 billion merger with TNK-Sidanco, Russia's fourth-largest oil company, is the largest one-off investment in Russia ever. With oil reserves falling and the Middle East volatile, other super-majors are considering deals with the remaining Russian oil companies. But the Russians may not want to do deals and president Putin may not let them.
Last December, in oil industry journal World Energy, a vice-president of Exxon Mobil admitted that oil discoveries since the 1960s had fallen dramatically, while demand was still rising steeply. In other words, oil reserves were declining. As Jim Meyer, director at the Oil Depletion Analysis Centre (Odac) says: "This was perhaps the first time the super-majors had publicly acknowledged that reserves were falling."
The decline in big new oil discoveries means the super-majors need to buy companies that have reserves. As Meyer says: "Russia is a great market because it has substantial reserves left in it."
BP took a calculated risk that things have changed in Russia since 1997 when its investment in a 10% stake in Sidanco was the subject of a bitter legal battle with AAR, owners of TNK-Sidanco and now its partner in the new merged entity.