BP share-swap blocked by tribunal

BP's £10 billion share-swap with Russian government-owned Rosneft was dealt another blow today after a tribunal blocked the deal until further notice.

The Stockholm tribunal has extended an injunction blocking the swap as it determines whether the deal breaches agreements with its existing Russian partners TNK-BP.

The oil giant currently has until April 14 to complete the deal - which would see BP own 9.5% of Rosneft's shares, while the Russian group would have taken a 5% stake in BP - but plans to discuss extending this deadline with Rosneft.

The embattled supermajor has come to blows with TNK-BP shareholders, a group of Russian oligarchs known as Alfa-Access-Renova, who said BP was obliged to pursue new projects in Russia with TNK-BP.

The setback comes less than a week before BP's annual general meeting, when investors are likely to hit out at the company's safety record following the Gulf of Mexico oil disaster last year, its bonus policy and strategy in Russia.

The deal - hailed by BP as "historic" and "groundbreaking" when unveiled in January - would have paved the way for BP and Rosneft to jointly explore the south Kara Sea in the Russian Arctic.

But last month the tribunal extended its injunction on the whole deal to both the exploration and share-swap. BP then requested for the share-swap to proceed alone but this was also blocked today.

Both the share-swap and Arctic exploration remain under injunction until the final decision has been made by the tribunal.

BP is able to ask for Rosneft's consent to extend the cut-off date for the deal to keep the agreement alive.

Rosneft chairman Igor Sechin has previously said he is "satisfied" with BP as a partner, despite the ongoing dispute.

AAR said the deal had harmed BP's reputation in Russia.

Stan Polovets, chief executive officer of AAR, said today: "AAR welcomes the decision of the tribunal, which we consider fair, balanced and thoughtful.

"We will be pleased to continue to co-operate with the tribunal and will provide any additional information and evidence it requires during the next stage of the hearings."

The finding will come as a blow to new chief executive Bob Dudley as the company moves to restore its reputation and financial position in the wake of the Deepwater Horizon explosion.

Mr Dudley will have to face shareholders' ire at the company's AGM on Thursday, where some are expected to vote against the annual report and accounts.

The Association of British Insurers has given an "amber top" alert to the remuneration report, while Christian groups including the UK's Church Investor Group are advising voting against the report.

Shareholders are also likely to question Mr Dudley over the deteriorating deal with Rosneft.

The deal tie-up would have helped BP replace lost production from the Gulf of Mexico and other assets sold off in the wake of the Deepwater Horizon explosion.

The company recently posted a loss of 4.9 billion US dollars (£3.1 billion) in the year to December 31 - its first loss in nearly two decades - after the cost of the disaster was taken into account. The company pledged to sell up to 30 billion US dollars (£18 billion) of assets to meet compensation requirements.