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. Last Updated: 07/27/2016

BP Sees an Era of New State Relations

APBP chief Tony Hayward speaking at the opening of an oil and gas conference Monday in Kuala Lumpur, Malaysia.
KUALA LUMPUR, Malaysia -- BP chief Tony Hayward, whose Russian joint venture, TNK-BP, is mired in a dispute, on Monday called for new forms of contractual relationships between national oil companies and global majors.

Hayward said that while the industry required a hefty $22 trillion of investments to meet future energy needs within 30 years, it must develop new contractual ties between state firms and international oil companies that go beyond the old model that requires ownership of reserves and production.

"These partnerships must be genuinely based on a deep sense of trust and mutual advantage, so that both sides benefit," he told an oil and gas conference in the Malaysian capital.

"I think the principle of reciprocity will gain ground in the years to come, and I don't believe relationships between NOCs [national oil companies] and IOCs [international oil companies] will purely be confined to accessing resources in the host country. Rather, I think we'll have to move into the sphere of genuine international cooperation."

The comments came as a cloud hung over the future of TNK-BP, which is embroiled in a dispute over strategy and ownership between BP and its Russian shareholders. Analysts believe the dispute was sparked by Kremlin pressure to hand a stake in TNK-BP to a state firm.

Hayward also said oil prices are unstable because markets are not well supplied, and higher taxes in producing countries are not conducive to investing in new output. "In a well functioning market where supply and demand are balanced, prices should be stable. Where prices are high, however, they show that supply is not responding adequately to rising demand ... and that is where we find ourselves today," he said.