Case 3: BP In Russia: Bad Partners or Bad Partnerships? (A) C-43Sidanko filed for bankruptcy, and in an auction of its
assets, TNK bought the western Siberian oil field of
Chernogorneft—approximately half of Sidanko’s asset
value—for a fraction of its real value. BP objected, pub-
licly accusing TNK of tampering with the courts to
“influence the bankruptcy proceedings and liquidation
sales.”^6
In response to the allegations, TNK agreed to return
the Chernogorneft oil field to Sidanko in exchange for
an equity stake of 25% plus one share (for veto power)
in the company. Under the terms of the agreement,
BP maintained its 10% stake, but its voting rights were
increased to equal to those of TNK (25% plus one share
necessary for a blocking vote)^7. Additionally, BP received
managerial authority over Sidanko and its subsidiar-
ies, effectively giving BP control over the highly prized
Chernogorneft oil field.^8
In 2002, BP purchased an additional 15% stake in
Sidanko for $375 million USD, increasing its stake to
25%; AAR maintained its 56% stake. The Chernogorneft
oil field dispute resolved, BP publicly expressed interest
in expanding its involvement in Russian oil and initi-
ated preliminary talks with AAR about buying a stake
in TNK.^9
The next year, BP agreed to invest $6.75 billion USD in
a 50/50 joint venture with AAR, to be known as TNK-BP.
The venture incorporated both companies’ holdings in
Sidanko, AAR’s controlling interest in TNK and 50% share
of Slavneft. The agreement also included the following:
Both companies’ interests in Russia Petroleum [the critical
component of which was the Kovyotka gas field license],
exploration opportunities offshore Sakhalin Island, and a
major downstream business that includes interest in five
refineries and a retail network of more than 2,100 sites in
Russia and Ukraine.^10
By December 2005, TNK-BP had completed a volun-
tary share exchange program for the minority sharehold-
ers in 14 TNK-BP subsidiaries, thereby facilitating the
accession of Sidanko, TNK, and OAO Onako to TNK-BP
Holding; the three companies were liquidated, and all
their assets and liabilities were consolidated within the
holding company.^11
In the next few years, a series of legal disputes ensued
among the Russian government, AAR, and BP. At the
time, there was speculation that TNK-BP would be
the target of a takeover by Gazprom, the largest state-
controlled gas company, which had been taking controlExhibit 1 Petroleum Production by Country in Millions of Barrels per Day, 1993 to 2010Data source: U.S. Energy Information Administration.0123456789101112199319941995199619971998199920002001200220032004200520062007200820092010Saudi ArabiaRussiaUnited StatesIranUnited Arab EmiratesKuwaitIraq