BP in Russia: Bad Partners or Bad Partnerships? (A)

9 Pages Posted: 30 May 2017

See all articles by Robert E. Spekman

Robert E. Spekman

University of Virginia - Darden School of Business

Zuri Linetsky

University of Virginia

Abstract

This case pairing is used in Darden's "Business to Business Marketing" course elective. Following the Deepwater Horizon oil spill, BP seeks to expand its assets and revenues, so it looks to Russia, but a planned alliance with a Russian state-owned oil company is thwarted by objections from another Russian oil partner. This case maps BP's strategic alliances and illustrates the importance of alliance management. This is the first part of a two-part case.

Excerpt

UVA-M-0819

Rev. Dec. 19, 2012

BP IN RUSSIA: BAD PARTNERS OR BAD PARTNERSHIPS? (A)

Since entering the Russian oil market in 1997, BP plc (BP) had two main partners. The first was Rosneft, the Russian state-owned oil major. The second was Alpha Access Renova (AAR), a consortium of Soviet-born oligarchs and one of Russia's largest privately owned financial-industrial conglomerates, with interests in oil, gas, and banking.

In January of 2011, BP and Rosneft announced the formation of a new strategic partnership to develop oil and gas reserves on the continental shelf in the Russian Arctic, covering approximately 125,000 square kilometers in the Kara Sea. Yet within five months, AAR, with whom BP had already formed another partnership, would obtain a series of court injunctions, effectively scuttling the deal with Rosneft.

The failure of the BP-Rosneft alliance could be attributed to a lack of due diligence on BP's part or, perhaps more saliently, to poor alliance management. A key conditional variable of any alliance is the degree of interpartner conflict: Alliance partners' interests can diverge so much that they undermine the initial common goals of the partnership, and “effective cooperation demands a relatively low level of conflict.” In the wake of the Deepwater Horizon disaster in the Gulf of Mexico, which cost them tens of billions of U.S. dollars, BP's interest was in expanding its oil assets and revenues. AAR's interest, meanwhile, was in maintaining TNK-BP's position in the Russian oil market, which the BP-Rosneft alliance would have undermined (Table 1).

. . .

Keywords: partner, alliance, strategic, consolidated joint venture, supplier, contractor

Suggested Citation

Spekman, Robert E. and Linetsky, Zuri, BP in Russia: Bad Partners or Bad Partnerships? (A). Darden Case No. UVA-M-0819, Available at SSRN: https://ssrn.com/abstract=2974696

Robert E. Spekman (Contact Author)

University of Virginia - Darden School of Business ( email )

P.O. Box 6550
Charlottesville, VA 22906-6550
United States
434-924-4860 (Phone)

HOME PAGE: http://www.darden.virginia.edu/faculty/spekman.htm

Zuri Linetsky

University of Virginia ( email )

1400 University Ave
Charlottesville, VA 22903
United States

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