BP may be a glutton for punishment but there is a clear logic

BP's recent moves might suggest the company has masochistic tendencies. Having suffered one of the world's worst offshore blowout last year, BP has signed up to go hunting in remote, environmentally fragile Arctic waters.

And of all countries, it has chosen to do that in Russia, the country that Bob Dudley, the American who is now BP's chief executive, was forced to flee in 2008 saying he had suffered "sustained harassment" from the Russian authorities.

But this move from the British oil giant is just one of a trio that show the way the company is evolving. In July 2009, it cleverly acted as a stalking horse in Iraq for the Chinese, agreeing to receive only $2 a barrel to develop Rumaila, one of the world's largest oilfields.

Industry observers felt these were very stiff terms; no other company was so aggressive. Just three months later, BP reduced its share in favour of its partner, China National Petroleum Corporation.

The Macondo disaster in the Gulf of Mexico accelerated BP's transformation. To meet the estimated US$40 billion (Dh146.91bn) costs, the company shed a swathe of non-core assets in Colombia, the North Sea, Egypt, Argentina, Canada and the US.

BP also sold its businesses in Venezuela and Vietnam to TNK-BP, its Russian joint venture. But the company was not just a seller: it spent $7bn on deepwater fields in Brazil and entered the South China Sea.

In January, the second piece of the puzzle fell into place. BP swapped 5 per cent of its shares for 10.8 per cent of the Russian state oil giant Rosneft, valued at $7.8bn, and agreed on a partnership to explore the South Kara Sea, an area of the Russian Arctic thought to have similar potential to the North Sea.

BP's latest move came last month, with the company paying $7.2bn for a package of deepwater assets from India's Reliance Industries, and forming a joint venture to market gas.

There are three clear themes to these deals.

The first is the shift from mature assets to those with future potential. After the Macondo disaster, BP is shrinking to grow. Its great Achilles heel in the Gulf of Mexico - exploration in deepwater and tough environments - is being turned into a strength in Brazil, Russia and India.

Second, BP is focusing on the Bric countries, but for opposing reasons. Brazil and Russia have the oil and gas resources; India and China have the demand.

Third, BP is working with national oil companies (NOCs). They control most of the world's hydrocarbon reserves. Although increasingly confident of their ability to develop ordinary fields, they need the expertise of the international oil giants in frontier exploration.

The NOCs have political clout, either at home as with Rosneft, or abroad as with the Chinese in Iraq. Reliance is not a state company, of course, but it has some of the same characteristics: an insider with access to resources and markets.

Of course, all of the major non-state oil companies are moving closer to the NOCs, and all see the Bric countries as key. But under BP's former chief executive John Browne, BP emerged from its traditional staid approach, indistinguishable from any other big oil company.

Radically re-engineered, during the late 1990s and early 2000s BP led the way in outsourcing, super-mergers and direct investments in Russia.

Some of these moves, such as the Amoco and Arco acquisitions, were great successes. Others - its cost-cutting and consequent accidents, or being cheated by its Russian partners in Sidanco - were disastrous. Some, like TNK-BP, were both at the same time.

And so, other than perhaps the Italian multinational Eni, a Trojan horse for Libya and Russia into Italy, BP has gone further than anyone in its willingness to entwine itself with government partners.

Mr Dudley is known to fancy himself as a strategist. Yet the short-term tactical element to these deals should not be ignored either. Positive news flow takes shareholders' minds off the Macondo debacle.

And specifically in Russia, such deals form part of a continuing struggle over the future of TNK-BP. BP's initial secret overtures to Gazprom to buy out TNK-BP's Russian shareholders in 2007 were quickly thwarted by the leading oligarch Mikhail Fridman, who crowed that he had heard all about the talks the day after.

But this time, BP managed to keep the Rosneft deal quiet. AAR, BP's partner in TNK-BP, claims the alliance violates the terms of its agreement with BP, but the deputy prime minister Igor Sechin, the eminence grise of Russian oil politics, may be signalling it is time for the oligarchs to cash out.

Before the Macondo accident, BP was overexposed to the US and Russia. With additional political risk now added in Russia, India, China and Iraq, the company might seem a glutton for punishment - but it is also a lot more balanced.

Mr Dudley is betting big that a combination of political and technical skills can pay off in the new, emerging energy world.

A Robin Mills is an energy economist based in Dubai and the author of The Myth of the Oil Crisis and Capturing Carbon