BP enters deal with Russia's Rosneft to explore in Arctic

British oil giant BP has formed a new partnership with state-owned Russian oil company Rosneft in hopes that  the resulting exploration rights will offset any risks associated with the deal. Under the agreement, BP has the right to explore an area in the Russian Arctic roughly the size of the North Sea.

Like all of the oil majors, BP is finding it harder to access new oil and gas reserves. They are either physically difficult to reach (in deep water or contained in Canadian oil sands) or are located in countries that are off limits (like most of the Middle East and, increasingly, Russia). BP's hopes for future growth in the US have been set back with tougher regulation coming in that country after the Gulf of Mexico disaster, not to mention a severe case of bad public backlash.

BP's reputation has taken a hammering in the US after the Deepwater Horizon disaster, but it still has the expertise that Rosneft and other Russian companies lack to explore for oil and gas in harsh offshore conditions. Rosneft is also likely to be more comfortable dealing with a company such as BP, which is used to operating in Russia, warts and all.