BP to reward investors, revisit Arctic after Rosneft deal

British energy giant BP was set to return money to shareholders and could relaunch plans to unearth Arctic oil following a huge strategic deal agreed Monday with Russian state firm Rosneft, analysts said. BP, seeking to reposition itself after the Gulf of Mexico oil spill disaster in 2010, agreed to sell its half of Russian venture TNK-BP to Rosneft for $17.1 billion (13.1 billion euros) plus a 12.84-percent share of the state company. BP added it would spend $4.8 billion of the proceeds to buy another 5.66 percent of Rosneft from the Moscow government, bringing its total stake in the Russian company to 19.75 percent. BP currently owns 1.25 percent of Rosneft. "We see potential for a special dividend" after Monday's announcements, said Stuart Joyner, analyst at Investec financial group. "The deal will be viewed positively as it halves exposure to Russia whilst upgrading BP's partnership and reviving hopes of an Arctic entry," he added. BP's head of Russia David Peattie told Dow Jones Newswires that the group was mulling a share buyback with part of the proceeds, in order to offset the dilution of the group's value. Shares in BP ended the day down 1.54 percent at 443.4 pence on London's benchmark FTSE 100 index of top companies, which fell 0.22 percent to 5,882.91 points. Monday's events ends an often tumultuous but highly profitable TNK-BP joint venture. In Moscow, Rosneft announced it had also bought the other 50-percent in TNK-BP from key Russian investors for $28 billion. Tensions over the venture reached breaking point over BP's efforts early in 2011 to strike a separate Arctic oil tie-up with Rosneft. That Arctic deal was blocked by the BP's Russian partners in TNK-BP in a shock move which only worsened their relations with both Rosneft and BP still further. BP's chairman Carl-Henric Svanberg on Monday said that his company's near one-fifth stake in Rosneft would "deliver both cash and long term value for BP and its shareholders." He added: "It provides us with a sustainable stake in Russia's energy future and is consistent with our group strategy." For the past two years, BP has set about selling what it sees as non-core assets to help fund massive compensation costs resulting from the Gulf of Mexico disaster. Earlier this month, BP agreed to sell its ill-fated Texas City refinery and a portion of its US retail and logistics network to US-based Marathon Petroleum Corporation for $2.5 billion. The Texas City facility suffered a deadly explosion in 2005 that killed 15 workers and sparked safety concerns across BP's US operations. The British group's reputation took a far bigger hammering two and a half years ago after an explosion on the BP-leased Deepwater Horizon rig killed 11 workers and sent millions of barrels of oil spewing into the sea. The blast on April 20, 2010 sparked what has widely acknowledged to be the worst environmental catastrophe in US history. BP has so far sold assets totalling more than $35 billion to help cover the costs of the tragedy, a figure set to reach $38 billion by the end of 2013. -- BP looks to 'turn corner' -- The company's repositioning with the help of Rosneft "should facilitate the sense that BP is indeed 'turning a corner', with the potential for that sense to be reinforced... when BP should also be able to highlight volume growth in key fields in the US Gulf of Mexico" in upcoming third-quarter results, said Peter Hutton, analyst at financial group RBC Capital Markets. BP chief executive Bob Dudley said the deal "builds on BP's track record of value creation in Russia." He added: "It is consistent with our strategy of deepening our positions in the world's most prolific oil and gas regions. "BP intends to be a long term investor in Rosneft -- an investment which I believe will deliver value for our shareholders over the next decade and beyond." The deal will catapult Rosneft into becoming the world's biggest publicly-traded oil company and second in size only to Saudi Arabia's Aramco.