Embattled oil giant BP is fighting to resolve a dispute with its Russian partners as it is expected to announce its first annual loss in nearly two decades, it was reported yesterday.

The group is trying to head off a showdown with the owners of its Russian joint venture TNK-BP over a share swap and Arctic exploration deal it signed two weeks ago with Rosneft, Russia’s state-controlled oil firm, The Sunday Times said.

The owners of TNK-BP argue the new deal breaches its shareholder agreement that TNK is the “primary vehicle” for growth in Russia for both sides – however, it is understood TNK does not want to kill the Rosneft tie-up, but look for a lump-sum free from BP.

The dispute, which will be brought to court tomorrow in London, has emerged days before BP is expected to unveil its first annual loss since 1992 as it counts the costs of the Gulf of Mexico oil spill disaster. The market gave a warm welcome to BP’s £10 billion deal with Rosneft when it was announced earlier this month.

The deal gave shares a boost, which, after falling from a high of 655p in April to a low of 303p in June, have steadily climbed back to 483.7p.

The alliance will see BP take an additional 9.5 per cent stake in Russian government-owned Rosneft, while Rosneft will take a five per cent stake in the London-based company. The companies will work together to explore the Russian Arctic continental shelf in an area of the South Kara Sea covering about 125,000 square kilometres – one of the world’s last remaining unexplored basins.

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