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BP dismisses $250 oil, Russia row grows

Peter Sutherland, the chairman of BP, has branded as "apocalyptic" predictions of $250 for a barrel oil from Gazprom, Russia's state-backed energy giant, as the tortuous negotiations between BP and its own Russian partner took yet another twist.

Mr Sutherland told the European Policy Centre in Brussels that forecasts from Alexei Miller, the Gazprom chief executive, that oil prices would double within 18 months were unlikely. "Personally I don't believe in some of the more apocalyptic predictions," Mr Sutherland said. "I don't believe we're in for a spike to $250."

BP's chairman was speaking as his chief executive, Tony Hayward, predicted there would be no early resolution to discussions with AlfaAccessRenova (AAR), the Russian investors' group with which it co-owns TNK-BP.

Mr Hayward was speaking following another breakdown in talks over thefuture of the joint venture.

The four billionaire oligarch backers also announced they are to sue BP in a Stockholm arbitration court while lodging a separate suit in Moscowto oust TNK-BP's BP-nominated directors.

The power struggle between BP and AAR has been running at fever pitch since December's expiry of the venture's lock-in agreement. AAR is believed to be trying to take control of the company, which accounts for a quarter of BP's global production, to stave off a bid from the Russian state, in the form of Gazprom, that undervalued AAR's stake. Gazprom said earlier this week that it is interested in TNK-BP, although it will wait for a resolution of the current conflicts.

The problems in Russia highlight the BP chief executive's interpretation of his company's annual global energy report, published yesterday. Global production fell by 130,000 barrels per day (bpd) last year, and OECD countries' production fell for the fifth consecutive year, said the report, while energy usage of all types continued to rise. China accounted for 52 per cent of global growth, with usage up 7.7 per cent, compared with a 2.2 per cent drop in Europe.

But the big factor affecting energy supply is politics, says Mr Hayward.

"Declining oil production in the OECD highlights the fact that, while resources are not a constraint globally, the resources within reach of private investment by companies like BP are limited," he said.

"When it comes to producing more oil, the problems are above ground, not below it. They are not geological, but political."