BP PLC (NYSE ADR: BP) Attempts Another Venture Into Russian Oil Industry in $16 Billion Deal

BP PLC (NYSE ADR: BP ) on Friday announced it was entering a $16 billion share swap deal with Russian oil industry giant NK Rosneft OAO (PINK: RNFTF ). The deal will give BP access to areas of the Russian Arctic that were previously off limits to foreign companies, but it will come at a political cost. The deal involves BP swapping 5% of its shares, valued at $7.8 billion, for 9.5% of state-controlled Rosneft's shares. The British oil company already owns a 1.3% stake in the Russian business. BP Chief Executive Officer Robert Dudley said the deal is the first cross-shareholding between a Russian state-owned national oil company (NOC) and western oil giant, and called the move " a new template for how business can be done in our industry. " The joint venture will make Rosneft the largest single BP shareholder. Their newly formed joint operating company will be two-thirds owned by Rosneft and one-third owned by BP. It will spend up to $2 billion in an initial phase of testing and well-drilling.