C-46 Part 4: Case Studies
The aim was to reduce the overall system costs and cycle
times and to ensure access...to crucial technology and
inputs.”^31 A useful example of this was the Deepstar alli-
ance led by Texaco, which involved over five dozen sup-
pliers, including other oil majors, in setting standards for
well, pipeline, and platform components in oil exploration
in waters as deep as 10,000 feet.^32
A final alliance type was called an OBO (operated by
others) relationship, a joint venture in which one partner
takes on the full responsibility of operating oil explora-
tions while the other solely invests capital.
Moving Forward
In the oil industry, the go-it-alone strategy was cost
prohibitive, and access by foreign firms to existing or
newly discovered oil sources was less likely without
a domestic partner. So managing partnerships was
critical, for BP or any other company. Most new oil
and gas discoveries would be made in remote areas
of the globe, with domestic and state-run oil compa-
nies heavily invested in exploration. Short of acquir-
ing these state-owned oil companies, BP would be the
minority shareholder in any new strategic partnership.
As the demand for these resources increased in large
and rapidly growing countries such as China and India,
and the value of oil and gas reserves continued to rise,
state-owned and domestic oil companies would pre-
fer to remain independent entities to maximize their
long-term revenues.
If its behavior in Russia was any indication, BP
appeared to lack certain skills necessary for being con-
sidered a good partner. What skills would be critical for
the company to develop moving forward?NOTES
- On AAR see http://www.aar.ru/#. See also
Sergey Ilyin, “The Interests of a Small Group
are Much More Important Than Those
of the State,” What the Papers Say Weekly
Review, April 4, 2011. - “BP and Russia in Arctic Oil Deal,” BBC News
website, June 15, 2011, http://www.bbc.
co.uk/news/business-12195576 (accessed
September 9, 2011). - T.K. Das and Bing-Sheng Teng, “The
Dynamics of Alliance Conditions in the
Alliance Development Process,” Journal of
Management Studies 39, no. 5 (July 2002), 732. - Andrew Neff, “Arbitration Tribunal Rules
in Favor of AAR, Putting BP-Rosneft
Exploration and Share-Swap Deal on Ice,”
Global Insight, March 25, 2011. - Petroleum Economist website, November 30,
1999. - Neela Banerjee, “BP Reported in Agreement
to Regain Important Siberian Oil Field,”
New York Times, December 22, 1999. - Eduard Gismatullin, “TNK return
Chernogorneft to Sidanko,” St. Petersburg
Times, December 24, 1999. - Banerjee.
- Anna Raff, “BP Buys Sidanko Stake for
$375M,” Moscow Times, April 17, 2002. - “BP Plunges Deep into Russia with New
Tyumen Production Alliance,” Oil Daily,
February 11, 2003. - See Alla Startseva, “Onako Sale: Better
Times Ahead for Investors?” St. Petersburg
Times, September 22, 2000. See also Yulia
Bushuyeva and Alexander Tutushkin, “TNK,
Sibneft Forge Partnership,” Moscow Times,
October 16, 2002.- Catherine Belton and Isabel Gorst, “Police
Raid BP’s Russian Venture,” Financial Times,
March 19, 2003. - The deal collapsed due to disagreements
over the price of the sale. See Catherine
Belton and Isabel Gorst, “Police Raid BP’s
Russian Venture” and “BP in Russia:
A Timeline,” Telegraph, May 17, 2011. - Belton and Gorst, “BP in Russia: A Timeline.”
- Dudley was the chief executive of BP at the
time of the Deepwater Horizon oil spill. See
Russel Hotten, “Russians Issue Legal Threat
in BP Dispute,” Telegraph, July 24, 2008, and
Neff. - Rowena Mason, “Mikhail Fridman to
Step Down as TNK-BP Boss,” Telegraph,
November 11, 2009. - Anna Ruff, “Rosneft, TNK Eye Sakhalin,”
Moscow Times, July 25, 2002. It should
be noted that TNK also made an effort
to enter into the Sakhalin oil exploration
market with Rosneft as a partner but was
rebuffed. - Rachel Graham, “Rosneft, BP sign Sakhalin
Operating Accords: Agreements over
License Blocks at Sakhalin 4 and 5,” Platts
Oilgram News, November 24, 2006. - “BP, Rosneft give up on East Schmidt
Sakhalin-5,” New Europe, February 21, 2010.
20. Neff.
21. “BP Faces Court Challenge to Rosneft Pact,”
International Oil Daily, January 28, 2011.
22. Gordon Wilcox, “TNK-BP Makes $8.1B Bid
for BP Stake,” Benzinga, March 1, 2011.
23. “FP Deal Flow: TNK-BP’s US $8.16B Stake
Offer; Buffett Betrayed,” Financial Post,
March 2, 2011.
24. “Russia’s Rosneft Vows to Complete BP
Tie-up,” Agence France-Presse (English),
March 11, 2011.
25. Neff, “BP Rejects TNK-BP’s Proposal to Join
Rosneft Exploration Alliance,” Global Insight
website, March 14, 2011.
26. Neff, “Arbitration Tribunal Rules in Favor
of AAR.”
27. David Ernst and Andrew M.J. Steinhubl,
“Alliances in Upstream Oil and Gas,”
McKinsey Quarterly no. 2 (1997), 149.
28. Ernst and Steinhubl, “Petroleum: After the
Megamergers,” McKinsey Quarterly no. 2
(1999), 48–57.
29. Ernst and Steinhubl, “Alliances in Upstream
Oil and Gas,” 152.
30. Ernst and Steinhubl.
31. Ernst and Steinhubl, 153.
32. Paul R. Hays and G. Ray Seid “DeepStar
Enters Fifth Phase of Deepwater Mission,”
WorldOil Online, May 2000, http://www.
worldoil.com/May-2000-DeepStar-enters-
fifth-phase-of-deepwater-mission.html
(accessed June 20, 2011). See also Ernst and
Steinhubl.