Tnk-Russia (2008)
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Competitive Analysis:
Russia is the worlds largest gas producer and second largest oil producer with 50% of the nations GDP revenue and dominated by few companies: TNK-BP, Lukoil, Gazprom, Rosneft, Surgutneftegaz, and Tatneft. These companies are direct competitors for each other. By concerning the market size and important role of nations business, there is market commonality and resource similarity among the competitors. For example, BP, one of the shareholders for TNK-BP, is involved with various markets such as pipeline, refining, chemical, and retailers. Their market variety condition is similar to the typical oil and gas companies. Also, since easy oil and gas discoveries are made, BP focuses on replacing reserves with increasing production. It has same situation for all competitors in the industry for similar resources. Therefore, the company engages in joint venture strategy as TNK-BP.
In March 2006, Gazprom blocks construction of a pipeline to China while TNK-BP was accused by the Natural Resource Ministry with little production. TNK-BP has limitation of production by insufficient local demand and also by Russia petroleums license related to the pipeline construction. It is awareness which Gazprom recognizes degree of mutual interdependence. The company knows that there would be benefit beyond foreign investment competitor like TNK-BP by blocking pipeline. Hence, TNK-BP takes action to amend the license. To face the accusation by the Natural Resource Ministry and respond to blocking Chinese pipeline, the firm chooses to protect the loss. It is motivation. In October 2006, though TNK-BP Chief Executive Robert Dudley shows the confidence of survive, TNK-BP engineer with the license shot dead. In June 2007, implementation of license is failed then TNK-BP sells Kovykta Gas field 62.89% state to Gazprom. At this case, it shows Gazproms ability of the acquisition of Kovykta gas field which is key factor to compete in gas industry. TNK-BP shows poor ability to fight against the Natural Resource Ministry and finally, lost its most valuable asset to the competitor.
There is other influence that results out resource dissimilarity between Gazprom and TNK-BP. Tax and regulatory regime and a dearth of Russian foreign investment development influence the oil industry to be declined in 2008. The Russian government plays crucial to the foreign investment containing companies such as TNK-BP involved in huge tax bill in April 2005, in 2006 no allowance of auctions for new oil field and expatriate visa problems in 2008. Also, by looking into TNK-BP financial results, their revenue is heavily dealing with export duties and even in domestic market price is accumulated with contracts and regulation rates by Russian government intervention. Gazprom is owned by Russian government which takes advantage of foreign based competitors by resource dissimilarity. While TNK-BP has tough time with Russian government, Gazprom which was known for the gas company started to purchase new oil firms and perform well.
Gazprom approaches BP about a deal of alliance in 2007. Gazprom has intention to obtain the Russia outside asset of BP by asking AAR to sell their stake. As the return, they provide