BP hopes for Eastern promise

Following the Gulf spill the oil giant seems to be shifting towards emerging eastern markets

BP's centre of gravity is moving east as the troubled company seeks to shed up to US$30 billion (Dh110.19bn) of assets. The properties on offer and already sold are overwhelmingly in the Western Hemisphere. Topping the list is BP's 60 per cent stake in Argentina's Pan American Energy, for which it may be seeking $9bn. Pan American, a BP consortium with China National Offshore Oil Corporation (CNOOC) and Argentina's Bridas, is the second biggest Argentine oil and gas producer and has a presence throughout South America's "southern cone". In 2008, it produced 39.7 million barrels of oil and 240 billion cubic feet of gas. Argentina, where the majority of the assets are located, has an attractive business environment "undermined" for energy producers by "an absence of growth potential, asset maturity and unappealing risk environment", according to Business Monitor International.

CNOOC, which may prize assets yielding dependable oil and gas flows, is considered a potential buyer for the Pan American stake. Next, BP is considering cutting its 26 per cent holding in the giant Prudhoe Bay oilfield off Alaska's north coast. It hopes to raise at least $5bn, according to Bloomberg. Prudhoe Bay is mature but not tapped out. Engineers who have worked the field, however, say its aging production facilities and pipelines need investment.

Talks over a rumoured $10bn to $11bn sale of BP Alaska assets to Apache, including half the Prudhoe Bay stake, reportedly stalled last month because of uncertainties over who would operate the big oilfield. Apache may have wanted the job but this might not have pleased the other partners, ExxonMobil, Chevron and ConocoPhillips. BP is also understood to be seeking a buyer for about $850 million of oil assets in Venezuela, which has had troubled relations with foreign producers. In 2007, Hugo Chavez, the country's president, forced BP and five other international oil companies to hand operational control of Venezuelan oilfields to the state-owned Petroleos de Venezuela.

The political risks associated with Venezuela's energy sector could limit potential buyers. Cordial relations between Caracas and Beijing and increasing Venezuelan oil exports to China make the state-controlled Chinese oil companies obvious candidates. TNK-BP, the joint venture between BP and several Russian billionaires, has also shown interest. Last month, BP sold $7bn of oil and gas assets to Apache, including $3.25bn of properties in western Canada and assets in Texas and New Mexico worth $3.1bn.

In a $1.9bn deal, it sold its assets in Colombia to the national oil company Ecopetrol and Canada's Talisman Energy. That means BP has already sold $8.25bn of its Western Hemisphere assets and is trying to sell almost $15bn more. If it disposed of all the Arctic properties it reportedly offered to Apache, that figure could surpass $20bn. In the Eastern Hemisphere, BP has so far sold $250m of exploration concessions in Egypt and its French, Belgian and Dutch petrol stations for ?180m (Dh877.1m).

The company is also seeking buyers for its Vietnamese and Pakistani assets, which analysts have valued at $1bn and $850m, respectively. The tally of Eastern Hemisphere interests either sold or in play comes to $2.34bn, or less than 16 per cent of the corresponding western total. BP and Rosneft last week declined to comment on industry speculation about a rumoured sale of BP's stake in the state-controlled Russian oil producer.

Deep-pocketed entities interested in BP's Old World assets are not in short supply. They include the Indian government's Oil and Natural Gas Corporation, the state-run Kuwait Petroleum International and the Abu Dhabi Government's Mubadala Oil and Gas. "Like most oil companies that are expanding, we will be looking at what's available," David Douglas, the Abu Dhabi firm's senior vice president of finance and corporate support, said last month.

The pickings, however, may be slim. BP has already signalled it does not intend to part with its stakes in major oil and gas projects in Russia, Azerbaijan, Angola or the UAE. The company is also making large investments in gas development off the Mediterranean coast of Egypt and oil and gas exploration in Libya while it prepares to boost output from Iraq's biggest oilfield. Recently, TNK-BP joined other companies pre-qualified to bid for Iraqi gas licences this autumn.

After taking over two big US oil firms, Amoco and Arco, in the 1990s, BP's biggest asset pile lies in the US, the country that currently consumes the most oil. Repudiated in the US after its big Gulf of Mexico oil spill, BP may be purposely shifting its weight towards emerging eastern markets. tcarlisle@thenational.ae