Merger of TNK-BP4
Porter’s Five Forces7
Current financial performance of TNK-BP11
TNK-BP financial objectives12
TNK- BP’s Strategies12
This report contains an analysis of “Case 28” and the firm TNK-BP (Russia) by Andrew Inkpen and Michael Moffett. TNK-BP is made up of BP and AAR both holding 50%. The company is managed by the two different business style, resulting in inefficiencies. The merger brings much needed access of resources to BP. The STEEP analysis contended that:
* Demand for energy is relative to population and economic growth, the world’s population is projected to increase by 1.4 billion over the next 20 years, while its real income is likely to grow by 100% over the same period. * Technology, new mixs of fuels, reducing carbon, transport fuel from hard to get places * Economic – Rises in GDP 4.4% Russia = increase in need for energy * Gas is likely to play a significant role in years to come due to it environmentally friendly characteristics * Pressure and friction created if BP is to take a stake in Rosneft as government pressure will be immense The Porters analysis contended that:
* Low rivalry and threat of new entrants – High Govt. Restriction * Low substitutes and low buyer power – Not many mainstream alternative sources of energy * Supplier power low – It’s a customer’s market, best bid wins contract The Competitors analysis identified:
* Immediate Competitors - Gazprom and Lukoil
* Impending Competitors - Rosneft
* Invisible Competitors – Schtokman, Statoil
BP will benefit from maintaining access to the Russian resources and experiencing great stability by letting Rosneft buy its share in TNK-BP and privatise itself.
BP, originally called the Anglo-Persian Oil Company is a multinational firm who focuses on oil and gas production. BP is known as the world’s third largest petroleum company, with current operations in several countries including, the United States, Australia, Angola, Azerbaijan, Canada, Egypt, Russia, Trinidad & Tobago and Indonesia. In addition, the company also has substantial assets globally, from a diverse range of pipeline, refinement, chemical infrastructure to retail petrol stations. TNK
TNK is one of the top 3 oil companies in Russia, with around 1400 petrol stations in Russia and Ukraine, employing around 50,000 people (TNK). TNK is dominated by a group called Alfa Access/ Renova (AAR), which is made up of three private investment companies, Russia-based Alfa Group, Renova Group and New York-based Access Industries. After finding out that Sidanco was facing huge debts and financial crises, AAR became interested in its rival. Merger of TNK-BP
November 1999, Chernogorneft declared bankruptcy and was sold to TNK for $176 million. TNK then offered BP the chance to become a strategic alliance partner with a 50% stake, guaranteeing access to the Russian resources. In 2003, TNK and BP entered into a joint venture agreement which made it become one of the top ten privately-owned oil companies in the world in crude oil production (TNK-BP 2012). With Robert Dudley as the CEO and with its headquartered located in Moscow, the company now employed around 65,000 people including 85 foreign managers globally. TNK-BP has become a vertically integrated oil company with various upstream and downstream portfolios in Russia and Ukraine (TNK-BP 2012). TNK-BP managed to produce 732 thousand barrels of oil per day and with its TNK-BP retail network it supplies close to 1,490 filling stations in Russia and Ukraine. However, this joint venture had some issues that needed to be...