TNK-BP scandal

Professor: Michael LupsorDone by: Daria ChizhovaPresented: 11.11.11

Content

Small description of the company 1st version of what happened 2nd version of what happened Final outcome Ethical Issues Bibliography

Some facts about the company

Major vertically integrated Russian oil company

Russia's third largest oil producer and among the ten largest private oil companies in the world

It is 50% owned by BP and 50% by the AAR (Alfa-Access-Renova) consortium - officially

Was founded as a merger in 2003

1st version of what happened (1)

2003: BP – 50%, TNK – 50%

BP – rule and control production side

TNK – legal and security issues, political cover

However….

1st version of what happened (2)

Russian Government decided to increase Governmental involvement into oil and gaz industry =>

Only companies having not more than 50% of foreign capital could develop new strategic fields

1st version of what happened (3)

One of the Russian actioners – Leonid Blavatnic was technically owning an American company

More than 50% of the capital was foreign

Legally, TNK-BP were not able to develop new fields

1st version of what happened (4)

BP was insisting on Russians own 50% so that they could develop the field

BUT, Russians disagreed and didn’t like the pressure and had managerial conflicts

Pushed Robert Dudley to step down

2nd version of what happened (1)

BP started to develop Arctic

fields with Rosneft

TNK not happy

BP started without TNK

knowing

TNK should pursue deals in

Russia

BP’s by that actions creating

conflict of interest

BP is not happy

TNK also violated agreement by

Renova’s operations with

Russian and Ukraine

companies

2nd version of what happened (2)

Russian wanted to fire Robert Dudley, BUT

Brits didn’t allow them to, because they were afraid that Russians will take over the company in Russia (and Brits couldn’t let it go)

Russians started to complain about the growth, prices, etc. thus provoked an open conflict

2nd version of what happened (3)

This opened conflict was contributed by the Russia-UK conflict that time

Problems with visas for top management, for leading engineers, accuse of spying for British Council, deportation, etc. Rumor that Robert Dudley accused of violation of Russian Law and will not be given visa

Finally…

Memorandum of Understanding

Dudley stepped down

Although AAR increased its

influence

Independent CEO Mikhail Barskiy

BOD changed structure

4 BP representatives

4 TNK representatives

3 Independent directors

Ethical Issues Mistrust and violation of laws led to

misunderstandings and threats of both parts that another will take over the company

-> Moral Hazard

Fiduciary principle violated (from Russian point of view) – as BP was mother company and had to work in the interest of BP

One person – Robert Dudley suffering for the whole corporate dispute of the company

Bibliography

http://www.rg.ru/2008/09/05/tnk.html http://www.rg.ru/2009/06/02/

kalif.html http://www.ecotoc.ru/scandal/d559/ http://en.wikipedia.org/wiki/TNK-BP http://www.aar.ru/en/press/articles/it

em/454-bp-dispute-with-tnk-bp-rumbles-on.html

http://rt.com/business/news/tnk-bp-aar-dispute/

Thanks for attention!