British oil giant BP failed to lift a block on its proposed $16 billion share swap with Russia's Rosneft, but gained some breathing space to try to salvage the deal.

An arbitration panel yesterday gave BP time to try to extend an April 14 deadline for the pact. That effectively deferred a final decision over action brought by the co-owners of BP's Russian venture TNK-BP who argue the rBP-Rosneft deal violates TNK-BP's shareholder agreement.

Angered by the further delay, Russia's Deputy Prime Minister Igor Sechin, who chairs Rosneft, said time was running out and threatened unspecified legal action if no compromise can be found.

'There is a way out, and I think there is time for the parties to reflect and make their contribution,' Sechin was quoted as saying in our sister publication, the Gulf Daily News.

'After April 14 we will be working under different conditions,' Sechin added. 'Rosneft is currently in an agreement but if the agreement expires, it will take all necessary steps to defend its interests.'

The British oil major rebutted suggestions it had suffered a setback. 'This is pure and simply a deferral,' a spokesman said.

'We will continue with the arbitral process for a final ruling in our favour. As we have always said there are a number of ways to resolve the differences; so we will now also be exploring possibilities for a reasonable commercial solution with all parties.'

TNK-BP's billionaire co-owners, led by chief executive Mikhail Fridman and represented by the AAR consortium, have maintained the upper hand in the legal battle over the BP-Rosneft deal announced at the World Economic Forum in Davos in January.

'AAR welcomes the decision of the tribunal, which we consider fair, balanced and thoughtful,' Stan Polovets, CEO of AAR, said. 'We will be pleased to continue to co-operate with the tribunal.'

Analysts said yesterday's ruling did not deal a knockout blow to BP's hopes of implementing a broader agreement with the state-controlled Russian oil major to launch an Arctic offshore exploration venture.

In a first decision on March 24, the arbitration tribunal - a forum for mediating business disputes under UK law - upheld an injunction against the BP-Rosneft deal to conduct the share swap and launch the Arctic exploration effort.

This, the second round of arbitration, heard a further request from BP this week in London to consider the share swap as a standalone deal. Under the swap, BP would exchange five per cent of its equity for a 10 per cent stake in Rosneft. – TradeArabia News Service