Filipa Florêncio Kirill Guryev Maria Meshkova Daniil Morozov

Filipa Florêncio Kirill Guryev Maria Meshkova Daniil Morozov Grigory Kopp Andrey Zyryanov BP INTERNATI ONALIZATI ON TO RUSSIAN MARKET Internation al Business S trategy, Andrey Pan ibratov

The Company 0 In 1908 William Knox D'Arcy who was granted a concession by the Iranian Shah in 1901, discovered the first commercially significant oil field in the Middle East. 0 Just in 1954 it got the name of British Petroleum Company (BP) for the first time. St. Petersburg State University - GSOM | International Business Strategy | Spring 2013

MARKETS AND FIELDS 0 During the next decades the company expanded its operations to the other regions, exploiting the oil and natural gas fields in such countries and regions as Canada, Africa, South and Central America, Europe, Alaska and New Guinea. 0 It was the first company who came to such regions as Black Africa, Alaska and the British North Sea. St. Petersburg State University - GSOM | International Business Strategy | Spring 2013

Ownership 0 From 1979 to 1987, the British government sold all the shares of British Petroleum it owned. 0 BP became fully owned by private investors, including multiple individuals and organizations specially from US, UK and rest of Europe. St. Petersburg State University - GSOM | International Business Strategy | Spring 2013

CURRENT OPERATIONAL ACTIVITY 0 Currently, BP has operations in more than 80 countries of Europe, North and South America, Asia and Oceania. BP provides: 0 fuel for transportation 0 energy for heat and light 0 retail services 0 petrochemicals products day oil per s of barrel illion 3. 4 m 21, 80 0 ser vice s tation s wor ldwid e St. Petersburg State University - GSOM | International Business Strategy | Spring 2013

CURRENT OPERATIONAL ACTIVITY Two main segments of operations: Exploration / Production - oil and natural gas exploration - field development and production - midstream transportation, storage and processing - marketing and trading of natural gas Refining / Marketing activities - supply and trading, refining, manufacturing, marketing and transportation of crude oil, petroleum and petrochemicals products and related services St. Petersburg State University - GSOM | International Business Strategy | Spring 2013

CURRENT OPERATIONAL ACTIVITY With crises, BP tryed to diversify their activity: - Food markets -Coal -Minerals -Computer industry -During 1990 -s BP looked for the opportunities to develop the alternative and renewable energy St. Petersburg State University - GSOM | International Business Strategy | Spring 2013

BP operations in Russia 0 After the downfall of the Soviet Union, western energy giants got the opportunity to enter the large and promising market. In early 1990 -s BP started its operations in Azerbaijan. The entrance into the huge and perspective Russian oil and gas market was only the question of time and strategy. St. Petersburg State University - GSOM | International Business Strategy | Spring 2013

TNK-BP 0 The main strategic decision of BP internationalization process was the creation of TNK-BP – the joint venture of British Petroleum with the consortium AAR owned by the group of Russian billionaires. 0 The deal was announced as the largest investment project in Russia in history. 0 In 2010 TNK-BP is among top ten energy companies in the world. 0 Equal opportunities are granted to both sides for participation in decision-making process St. Petersburg State University - GSOM | International Business Strategy | Spring 2013

BP SWOT analysis Strengths - Robust R&D capabilities - Vertically integrated operations - Wide geographic presence - Best in class explorer Weaknesses - Negative public perception Opportunities Threats - Various projects in developing countries - Strategic agreements and contracts - Rising fuel prices - Environmental regulations - Instability in some oil-producing regions - Saturation of resources in the North Sea St. Petersburg State University - GSOM | International Business Strategy | Spring 2013

BP IN RUSSIA THE PROMISING START It is possible to highlight certain advantages that ensure the attractiveness of investments in the oil and gas industry in Russia, which are as follows: 0 Russia has a strong resource base; 0 The demand in Asia and Europe is growing; 0 Competitive operating costs; 0 The importance of projects in oil and gas for the state. -> Better extraction of useful product from wells, exploration, and pipeline construction can be maintained only by foreign companies that have necessary innovative technologies. St. Petersburg State University - GSOM | International Business Strategy | Spring 2013

AAR BP formed an alliance with the Alfa–Access–Renova consortium in 2003. AAR seemed to stand out amongst other domestic corporate groups for several reasons: 0 AAR’s internal corporate composition was unlike any other in Russia; 0 AAR was one of the very few Russian corporate groups with control over a highly lucrative oil asset –Tyumen Oil Company or TNK in short; 0 The billionaires’ consortium had traditionally enjoyed excellent communications channels with the Kremlin, while never challenging those in power; 0 Top corporate executives from AAR (Alfa Bank, in particular) had often moved up to high positions in the Russian government; 0 AAR sought to turn its joint venture with BP into a Western company, one of which based its operations on international legal standards. St. Petersburg State University - GSOM | International Business Strategy | Spring 2013

AAR–BP CORPORATE CLASH 0 Negotiations between BP and Gazprom to replace the AAR in TNK-BP. 0 BP wanted to increase its presence in Russia and CIS. 0 However, from the point of view of AAR, BP appeared not only to have an upper hand in managing TNK-BP, but also seemed to treat the joint venture merely as its Russian regional subsidiary, focusing on projects within the former Soviet Union. AAR, on the contrary, wanted TNK-BP to become a global player, rather than regional. 0 BP’s fear to turn its Russian joint venture into a global competitor. St. Petersburg State University - GSOM | International Business Strategy | Spring 2013

The End of TNK-BP 0 In October 2012 BP’s board of directors unanimously agreed to sell its TNK-BP share to Rosneft. 0 BP has become the second largest Rosneft’s shareholder. 0 Rosneft Chief Executive Igor Sechin “invited” BP to join exploration projects with his invigorated company St. Petersburg State University - GSOM | International Business Strategy | Spring 2013

What TNK-BP means for BP 0 The case of AAR and BP joint venture was to some extent a showcase of successful partnership between international investors and large Russian business. Therefore, the Russian government was always unwilling to interfere in the relationship between the partners. 0 BP invested $8 billion when it formed TNK-BP, and received a total of $19 billion in dividends over the next decade. 0 TNK-BP accounts for approximately 30% of BP’s output, 27% of its reserves and about 10% of its profits. 0 The conflict with AAR outweighed the benefits of the joint venture. St. Petersburg State University - GSOM | International Business Strategy | Spring 2013

Conclusion o Collaboration with Rosneft is beneficial for both parties o The scenario is overshadowed by the presence of powerful competitors, BP’s shareholders’ unwillingness to stay in Russia, and lack of control over Rosneft o BP should invest into infrastructure and exploration of new wells. o Shelf projects are very attractive for BP, which has the necessary technology and experience. St. Petersburg State University - GSOM | International Business Strategy | Spring 2013

Thank you for your attention! St. Petersburg State University - GSOM | International Business Strategy | Spring 2013