Business Case Analysis of Tnk-Bp
TNK-BP is a joint venture company owned by British Petroleum, more commonly known as BP,
and the Alfa, Access/Renova group, more commonly known as AAR. Both BP and AAR each own 50% of
TNK-BP. TNK-BP was created in 2003 after a merger between BP and TNK that settled the dispute
between the two companies over Sidanco and its subsidiary Chernogorneft’s ownership that had been on-
going for years. The partnership combined BP’s knowledge, equipment, and experience; and Russia’s new
supply of oil fields. The business relationship that seemed to begin as a win-win for both parties has seen
its share of issues over the years.
Being a profitable business has not seemed to be a problem that TNK-BP has faced. From 2002-
2011 they have shown revenue growth year after year. In 2002 they showed sales revenues of $9.2 billion,
and have grown this number every year to $54.9 billion in 2011. They have also shown a positive net
income every year ranging from $1.5 billion in 2002 to $9.2 billion in 2011 (Annual Report, 2011).
Symptoms
The first issue arose in the very beginning of the merger in June 2003, Robert Dudley, TNK-BP
CEO said, “With all due respect for BP, it had a fairly vague idea about what was going on in Russia”
(Moffett, 2011). BP as a company was very interested in the huge amounts of oil that were in Russia, but
they did not do a very good job of understanding the political or economic climate of Russia at the time.
The long line of disagreements in the joint venture began in June 2003 as well when AAR
informed BP that they had issues with the bonuses and entitlement for expatriates. In 2004, AAR wanted
payments for their fraction of the company to be made sooner. In May 2008 the three oligarchs of AAR
met with Tony Hayward, then CEO of BP, and insisted that Robert Dudley be removed as CEO of TNK-
BP because he was showing favor to the BP side of the joint venture over the Russians, and the disputes
and the Alfa, Access/Renova group, more commonly known as AAR. Both BP and AAR each own 50% of
TNK-BP. TNK-BP was created in 2003 after a merger between BP and TNK that settled the dispute
between the two companies over Sidanco and its subsidiary Chernogorneft’s ownership that had been on-
going for years. The partnership combined BP’s knowledge, equipment, and experience; and Russia’s new
supply of oil fields. The business relationship that seemed to begin as a win-win for both parties has seen
its share of issues over the years.
Being a profitable business has not seemed to be a problem that TNK-BP has faced. From 2002-
2011 they have shown revenue growth year after year. In 2002 they showed sales revenues of $9.2 billion,
and have grown this number every year to $54.9 billion in 2011. They have also shown a positive net
income every year ranging from $1.5 billion in 2002 to $9.2 billion in 2011 (Annual Report, 2011).
Symptoms
The first issue arose in the very beginning of the merger in June 2003, Robert Dudley, TNK-BP
CEO said, “With all due respect for BP, it had a fairly vague idea about what was going on in Russia”
(Moffett, 2011). BP as a company was very interested in the huge amounts of oil that were in Russia, but
they did not do a very good job of understanding the political or economic climate of Russia at the time.
The long line of disagreements in the joint venture began in June 2003 as well when AAR
informed BP that they had issues with the bonuses and entitlement for expatriates. In 2004, AAR wanted
payments for their fraction of the company to be made sooner. In May 2008 the three oligarchs of AAR
met with Tony Hayward, then CEO of BP, and insisted that Robert Dudley be removed as CEO of TNK-
BP because he was showing favor to the BP side of the joint venture over the Russians, and the disputes