BP, Reliance vying for stake in Canadian firm

British energy major BP and Indian conglomerate Reliance Industries are in the race to buy a majority stake in a Canadian company Value Creation, a media report says.

"The company (BP) is in talks to pay about $1.2 billion for a majority stake in Value Creation, a Canadian company that has substantial reserves of the oil-rich sand deposits," the Sunday Times reported yesterday.

The daily further said that "Reliance Industries, the Indian conglomerate, is thought to have made a rival $2 billion takeover bid, but BP is understood to be the preferred partner".

BP, however, is likely to face fierce opposition from environmentalists and some of its shareholders, as they believe that the deal is expensive and environmentally damaging, the report added.

Converting the oil in sand to usable fuel requires vast amounts of energy and destroys the landscape.

"BP seems determined to plough ahead, however," the daily said adding that last week it invited everal institutional investors to its London headquarters to put forward its case.

The company (BP) claims its steam extraction technology is far less destructive than the traditional mining approach.

As per the offer, BP might set up a joint venture with the Canadian group, and increase its oil sands holdings by as much as 50 per cent, the newspaper said.

BP declined to comment on the report.

Value Creation is in financial trouble and faces being put into receivership today.

Receivership is a type of bankruptcy that a company enters into when a "receiver" is appointed by bankruptcy courts or creditors to run the company.

"News of the negotiations with BP is expected to win it a temporary reprieve," the report added.

Meanwhile, the activist investor group Fair Pensions last week had tabled a resolution for BP's annual meeting in April questioning the financial rationale of oil sand developments and their 'unthinkable' environmental effects, the report said.

Royal Dutch Shell recently announced cuts in its own programme after a similar Fair Pensions resolution.