Case 3: BP In Russia: Bad Partners or Bad Partnerships? (A) C-45serves as Russia’s effective energy tsar—also played down
TNK-BP’s interest... [saying] “Russia has the right to
choose its own partner”... [and calling] plans to explore
the Arctic jointly with BP “a matter of Russian energy
security and a contribution to the energy security of
Europe and the world.”^24
On March 12, 2011, affirming its commitment to
work solely with Rosneft, BP blocked a proposal from
TNK-BP to join the alliance and share swap. “The four
BP-nominated directors on the 11-member TNK-BP
board voted against a proposal by TNK-BP manage-
ment recommending that TNK-BP join Rosneft in the
alliance.”^25
Two weeks later, the Stockholm Arbitration Tribunal
formally stopped BP’s effort to ally with Rosneft for
Arctic oil exploration. The tribunal’s ruling, which
upheld the London court ruling, officially blocked the
completion of any share swap and Arctic exploration
alliance between BP and Rosneft. This ruling further
substantiated the claims made by AAR executives that
the BP-Rosneft alliance violated the TNK-BP sharehold-
ers agreement.^26
BP’s Past Mergers and Alliances
BP had a history of creating and maintaining successful
strategic partnerships and initiating lucrative mergers.
BP’s past merges and alliances have served critical pur-
poses, as each new partner had diversified BP’s business
and expanded its share of the global oil market (Table 2).Alliance Types in the Oil Industry
Any alliance brought with it a set of expectations: to lower
costs and gain efficiencies, to gain access to customers
or partner technologies, to develop or expand internal
competencies, or to respond to actions by competitors.
In the oil and gas industry, there were five basic types of
alliances.
The first, and quite prominent, type was a consol-
idated joint venture. Partners might merge all oper-
ations, assets, and oil reserves—very similar to an
outright merger—or maintain ownership of some
reserves, operating licenses, and equipment. “Full con-
solidation of reserves and other physical assets may
offer greater value, but it also presents more hurdles, as
valuing reserves, meeting regulatory requirement, and
persuading minority shareholders to accept the consol-
idation can cause difficulties.”^27 An example of such an
alliance was BP and Tyumen Oil in TNK-BP.
When alliance partners were unwilling or unable to
combine assets, a second alliance type arose: alliances
with specialists. This type of an alliance combined com-
plementary capabilities, for example the oil resources
and technology of one firm and the knowledge and busi-
ness model of the other.^28 The BP alliance with Rosneft
on both the Sakhalin-4 and Sakhalin-5 projects, as well
as the purposed BP-Rosneft alliance for exploring the
Kara Sea, might have been included here.
A third alliance type was a supplier and contrac-
tor alliance, in which one firm provided money and/
or assistance with exploration in return for a percent-
age of production. This was the case with Mobil and
Halliburton, where the latter invested “$10 million USD
to drill five horizontal wells in Mobil’s Parks Devonian
field in west Texas in return for a percentage of produc-
tion.”^29 Halliburton invested much of the capital and
managed the project, providing the drilling, excavation,
and site equipment. In exchange, Mobil provided the site
knowledge, well supervision, and the construction of the
wellbore.^30
Companies could also serve to “orchestrate a set of
alliances and contractual relationships involving suppliers,
service providers, and even other operating companies.Table 2 BP mergers, acquisitions, and partnershipsYear Company Amount Assets acquired
1998 Amoco (purchase) $48.2 billion USD
in stockRefining and distribution1999 Atlantic Richfield (ARCO) (merger) $27.6 billion USD Prudhoe Bay gas and oil field in Alaska
2000 Burmah Castrol (purchase) $4.8 billion USD Worldwide lubricants brand
2002 Veba Oel (Germany) (purchase) $2.81 billion USD Aral
2011 Reliance Industries (India) (30% stake
and 50-50 joint venture)$7.2 billion USD Access to Indian oil reserves, new market for BP expertise in
deep water oil exploration and associated technologies
Data source: BP website.