Tnk-Bp: Tread with Caution

Topics: Petroleum, Peak oil, Oil reserves Pages: 32 (10654 words) Published: January 2, 2013
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Christopher T. Bluhm, Saint Mary’s College of California Mary Vradelis, Saint Mary’s College of California Catherine Li, Saint Mary’s College of California Brett Threlkeld, Saint Mary’s College of California J. Tomas Gomez-Arias, Saint Mary’s College of California CASE DESCRIPTION The primary subject matter of this case concerns the management of international joint ventures. Secondary issues examined include: business in Russia; government’s intervention in business and how it affects multinational companies; market entry and modes of market entry decisions;; and dimensions and elements of culture (Fang 2003). The case has a difficulty level appropriate for first or second year graduate level. The case is designed to be taught in one class hour and is expected to require one hour of outside preparation by students. CASE SYNOPSIS BP, one of the largest publicly listed oil companies in the world, had been operating in Russia since 1997, initially through minority stakes in Russian oil companies and, since 2003, through TNK-BP, a 50-50 joint venture with AAR, a consortium of Russian investors. This joint venture allowed BP access to extensive oil reserves in Russia and was one of BP’s most valuable assets, accounting for 25% of BP’s production in 2007. In 2008, BP and its partners in TNK-BP encountered serious disagreements about how to run the company. A string of government actions including raids by the Russian tax police on both BP and TNK-BP’s offices in Russia concluded with the cancelation of TNK-BP’s British CEO’s work visa by Russian immigration authorities. Although BP and its partners reached an agreement in principle to renew the board of TNK-BP and appoint a new CEO in December 2008, by February 2009 they had not been able to appoint a Chief Executive acceptable to both parties. INTRODUCTION In May 2009 TNK-BP, a 50-50 joint venture between BP, one of the major western oil companies, and Alfa Access/Renova, a Russian consortium, was operating without a CEO. Robert Dudley, its previous CEO, had been forced to resign from his post following a bitter dispute between the partners in the joint venture, including raids on the company’s offices by tax authorities and the revocation of Mr. Dudley’s work visa in Russia. After an agreement in principle and the election of a new board, the new CEO would have to face the challenges of the politicized business environment in Russia, a partner with a history of strained relationships, and Journal of the International Academy for Case Studies, Volume 18, Number 5, 2012

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declining oil prices. However, nine months after its previous CEO had been ousted TNK-BP was still operating under its COO, Tim Summers, as Interim CEO With his Interim CEO contract recently extended, what tools would Summers need to prevent the mistakes of the past and build a more successful business model for these very different partners? BRITISH PETROLEUM British Petroleum had its origin in the early 1900’s as the Anglo-Persian Oil Company (APOC). On May 26, 1908 at a depth of 1,180 feet in remote Persia, “a fountain of oil spewed out into the dawn sky” from what was later named the Naphtha Field ( Within a year the Anglo-Persian Oil Company was in business. By 1914 APOC was almost broke but Winston Churchill, then First Lord of the Admiralty, believed Britain needed a dedicated oil supply. He urged his colleagues to “look out upon the wide expanse of the oil regions of the world. Only the British-owned Anglo-Persian Oil Company could protect British Interests,” he said. The resolution passed easily and the British government became a major shareholder in the company. No one had long to think of the implications as two weeks later, an assassin killed the Archduke Franz Ferdinand in Sarajevo and six weeks later, Germany attacked France and World War I had begun. By the end of the Great War, “war without oil would be unimaginable.” (

References: Journal of the International Academy for Case Studies, Volume 18, Number 5, 2012
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Journal of the International Academy for Case Studies, Volume 18, Number 5, 2012
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Journal of the International Academy for Case Studies, Volume 18, Number 5, 2012
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Journal of the International Academy for Case Studies, Volume 18, Number 5, 2012
Page 56 Since inception, TNK-BP delivered record performance in the industry in terms of production, reserves growth, shareholder return.* Highest reserve replacement rate
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