Russia Off Limits to Big Oil After BP Wins Putin Approval

By Joe Carroll and Edward Klump

Now that BP Plc (BP/) has joined with Russia’s Vladimir Putin to oversee the world’s second-biggest oil industry, other international energy companies such as Exxon Mobil Corp. (XOM) and Royal Dutch Shell Plc (RDSA) are facing dwindling access to one of the last untapped troves of crude.

BP’s agreement yesterday to sell its half of Moscow-based TNK-BP to Russia’s state-run oil company, OAO Rosneft (ROSN), for $12.3 billion in cash and almost one-fifth of Rosneft’s shares vaulted the U.K. energy producer to preeminence among foreign drillers in the Russian oil patch, said Pavel Molchanov, an analyst at Raymond James & Associates Inc. in Houston.

Although other explorers may yet strike deals to search Russia’s vast untapped reserves, none will be able to replicate BP’s “seal of approval” from Russian President Putin, or match the London-based company’s access to powerful deputies such as Rosneft boss Igor Sechin, Molchanov said in an interview yesterday. Even as Exxon and Rosneft proceed with a $3.2 billion Arctic and Black Sea drilling venture signed last year, future contracts of similar scope are out of the question for outsiders, he said....

“The vast majority of the oil produced in the world is owned by state-owned companies, and that concentration is increasing,” said Bernard Weinstein, associate director of the Maguire Energy Institute in the Cox School of Business at Southern Methodist University of Dallas. “With this consolidation, you’re going to have one company dominating the whole Russian energy sector.”...