BP Plc and Russia's state-controlled Rosneft agreed to a share swap under which they plan to jointly explore for offshore oil and gas in a deal that gives the UK company access to areas of the Arctic previously reserved for Russian oil companies.
BP, recovering from its Gulf of Mexico oil spill disaster, will swap 5 percent of its shares, valued at $7.8 billion, for 9.5 percent of Rosneft in an agreement that immediately raised concerns about U.S. economic security from at least two American lawmakers and criticism from environmentalists.
The deal covers huge areas of the South Kara Sea in the Arctic that BP said could contain billions of barrels of oil and gas and had been previously off limits to foreign companies.
The pact, which is expected to be completed in a few weeks, highlights a rebound in relations with Moscow both for BP and its Chief Executive Bob Dudley, who was forced to flee Russia in 2008 after heading BP's Russian joint venture, TNK-BP, which is half-owned by BP.
Dudley said the deal was the first significant cross-shareholding between a nationally owned oil company and an international oil company and called it "a new template for how business can be done in our industry."
Dudley had been the boss for TNK-BP's formation in 2003 and was forced to leave due to what he described as a campaign of harassment by BP-TNK's billionaire oligarch co-owners.
The issue has since been resolved and Dudley returned to Moscow for the first time this summer, following his appointment as CEO of BP, to be warmly welcomed by officials.
"It has turned from a fistfight into a lovefest," said Cliff Kupchan, a director at Eurasia Group in Washington.
Russia is a key part of BP's global operation, providing the company with a quarter of its reserves before the U.S. oil spill, so it is vital for Dudley to establish a good working relationship with the world's largest oil exporting nation.
U.S. Congressman Edward Markey, who is the top Democrat on the House Natural Resources Committee, immediately called for a review of the deal by U.S. regulators to see whether it affects the national and economic security of the United States. He noted that in 2009 BP was the top petroleum supplier to the U.S. military.
And Republican Congressman Michael Burgess, who is on the House Energy and Commerce Committee, also said the deal "deserves some analysis and scrutiny" by the government's Committee on Foreign Investment in the United States given BP's ownership of critical oil assets in the U.S.
The U.S. Treasury said it is forbidden by law to comment on investigations, planned or under way, by the committee.
Environmental group Greenpeace, noting the fragility of the Arctic, also lashed out.
"Now BP has bought its way into the Arctic by the back door. It seems the company learned nothing last year in the Gulf of Mexico," Charlie Kronick of Greenpeace said in a statement.
BP has a market capitalization of $150 billion U.S. dollars, while Rosneft is valued at about $83 billion.