The Main Prerequisites and Outcomes of Co-opetition between Oil Companies on International Market

Involvement of the Western companies into the given projects allowed dividing and reducing the specified risks, including expenses. The Western enterprises had resources and technologies, which would be required during the development of the Arctic and deep-water reserves. The partners had a wider experience of implementation of similar projects, in particular, the companies acted as an operators of deep-water offshore projects in the Western Africa, the Barents and Northern seas and were the participant of deep-water projects in the Gulf of Mexico and Brazil.

However, strategic cooperation with the western partners was subject to risks because of the sanctions imposed in 2014 by the USA and EU as a consequence of the Ukrainian conflict. The sanctions touched in a high extent the oil & gas sector in several ways: (1) limits on financial support (restrictions on loans to be taken in Western banks), (2) embargo on importing to the Russian companies oil & gas equipment, (3) interdiction on certain joint activity in the industry examined.

Nowadays both Exxon Mobile and Eni have frozen the offshore projects in Arctic in order not to violate the Western statements. Unfortunately, one of the most “popular” objects for the sanctions appeared to be the offshore oil & gas projects (especially the equipment for oil & gas offshore extraction has fallen under sanctions), possibly, because of their extreme importance and high profitability.

Therefore, the outcomes of coopetition in the mentioned projects are still under the question. By now, it is possible to state, that political situation made impossible the future stable development of the joint oi & gas projects. However, the Russian government and oil & gas companies claimed that the Arctic region should be developed in spite of the sanctions imposed. For example, in the annual Address to the Federal Assembly of 2014 the President of the Russian Federation Vladimir Putin highlighted the importance of the intensive development of the Arctic region. Electronic source. http://www.kremlin.ru/events/president/transcripts/messages (access date: 01.05.2016) The head of Rosneft company Igor Sechin stated that despite the limited activity of the Western partners Rosneft still was keeping up with the schedule in terms of exploring the new Arctic offshore oil deposits. Сечин: Роснефть не намерена откладывать работы по участкам на шельфе Арктики. // Electronic source. http://www.arctic-info.ru/news/05-12-2014/secin?rosneft_ne-namerena-otkladivat_raboti-po?ycastkam?na-sel_fe-­?arktiki (access date: 01.05.2016)

Nevertheless, in the meantime the projects are developing very slowly in view of lack of an urgent need in extra oil & gas resources. From the point of view of foreign researchers, the main obstacle is internal political instability of Russia. Nilsson A., Filimonova N. Russian Interests in Oil and Gas Resources in the Barents Sea // Electronic source. http://www.sei-international.org/mediamanager/documents/Publications/ (access date: 01.05.2016) At the same time, sanctions against Russian fuel and energy complex became the most burning issue for the international coopetition in the region.

Although, certain foreign companies declare that they will continue working with the Russian ones as the offshore projects are to be the most profitable in the nearest future (for example, Chinese companies, which have already set a stable coopetitive relations with Rosneft, express high interest in the offshore exploration, as well as Statoil claims it will definitely continue to cooperate with Russia). Роснефть ведет переговоры о привлечении китайских компаний в Арктику. // Electronic source. http://www.vedomosti.ru/companies/news/35680891/rosneft-vedet-peregovory-­o-privlechenii?kitajskih-kompanij-v (access date: 01.05.2016)

Summing up the issue of coopetitive interaction among Russian and foreign oil & gas companies, we can notice that this phenomena takes an important place among the managerial strategies of the companies. That is common both for cooperating within the Russian projects and the projects that involve the Russian participation abroad. However, the political and economic issues matter a lot and can influence the successful outcome of such coopetition.

Latin America

The next region to be explored is that of the Latin America. In this continent the most attractive are such countries as Brazil and Venezuela. This fact can be proved with the statistics for the Latin America countries proved crude oil reserves (Figure 6).

Chart 4. South America crude oil proved reserves by country (2011) Electronic source: http://www.marcon.com/ (access date: 01.05.2016)

As a result, the major international oil & gas companies are interested in increasing their resource base; therefore, they are trying to gain certain advantages in the developing oil-keeping countries. At the same time, the South American countries lack certain opportunities, the most important of which is capital seeking. We should remind, that extraction, production, refining and even transportation of oil & gas and its' products require enormous investments.

Taking into account the level of economic development of the mentioned countries, it is not a surprise that they are willing to limit financial risks and to look for external capital inflow. So, major international oil & gas companies provide their own financing in order to get an access to foreign resources and to increase their market share. In certain cases, the majors possess the capacity of receiving huge bank loans inaccessible for the countries of producers.

The best example for such coopetitive relations among international oil & gas partners in Venezuela is the project called Petrocedeсo (previously named Sincor). It was finally established in 2008 (although the preparatory works and negotiations had started 10 years before - in 1998) for 25 years in a form of joint venture among three parties: the French oil giant Total with 30,33 per cent of share capital, the state-owned Petrуleos de Venezuela (PDVSA) carrying 70 per cent of shares, and the Norwegian Statoil with the minority interest of 9,67 per cent. Statoil official site. Electronic source. http://www.statoil.com/en/ (access date: 01.05.2016)

This project is about the exploration and the development of extra-heavy oil reserves in the Venezuela's Ornico basin (the biggest field in the world for such king of mineral resource). Heavy oil, as distinct of the high-gravity oil, is much more difficult to extract because of its' chemical characteristics and certain drilling events. This factors leads to the raise of expenses and the need of innovative technical equipment that costs a fortune. In order to provide the capital for this project, Western partners (Total and Statoil) could provide the bank loan for 1 bln. USD under the most favorable interest rate.

That was a real success for the period of low oil prices and the world financial crisis, which could have put at risk the positive NPV of the whole project. As a result, the mentioned joint venture is the largest project in the private sector in Latin America in terms of its' extraction and production capacity (200,000 oil barrels per day).

Other regions of the world are not an exception for the development of international coopetitive relations among the actors of the oil & gas market: a number of cooperation agreement between Vietnam and Venezuela (April, 2015), various contracts between the Russian Rosneft and the Azerbaijan SOCAR (for the period of 2012-2015) and many others. Good illustrative example gives Algeria (Africa) with it's 45 international contracts signed with various multinational oil & gas companies since the end of 1980s.

Summing up all the statements written above, we can conclude that the phenomena of coopetition in the international oil & gas industry is a common feature and more and more leading companies get involved in this event in different parts of the world. The most common forms for such coopetitive relations are the supply contracts for oil, gas and petroleum products between the competitors and the joint projects connected with the exploration and production of oil & gas in foreign countries, mostly based on the production share agreements.

Regarding the most common for the regions explored motives for coopetition, we could define the following: (1) the desire of entering new markets and correlating goal to get an access to extra-resources (foreign fields and deposits of mineral resources), (2) the risks diversification including the financial risks, (3) the need to attract investments, (4) the lack of required technologies and experience with regard to complex and wide-scale projects. However, this list of internal prerequisites cannot be defined as exhaustive, as the spheres of cooperation can be various.

2.3 The international coopetitive relations of the Russian OJSC “Rosneft” and its' foreign “rival” partners

In the previous parts of the given chapter the overall image of the international coopetitive interaction within the industry was provided. Different forms of possible cooperative relations among the competing parties were examined, but one popular form has not yet been mentioned - the M&A (merges and acquisitions) deals. However, in the recent years there was a single inimitable example of coopetition between two major multinational oil & gas companies that cannot be passed up: the acquisition of the TNK-BP by Rosneft with the simultaneous deal of Rosneft shares acquisition by British Petroleum. These deals took place at the end of 2012 and were successfully finished in 2013.

The companies involved in the deals can be qualified as the direct competitors on the market. The statement is ensured with the closest statistics levels depending on the volume of oil production, presented above in the previous paragraph (the 5th and the 7th places for Rosneft and British Petroleum respectively). Moreover, British Petroleum along with Rosneft has a widespread network of petroleum stations in the Russian Federation and other boundary countries. So, they are struggling for the consumers demand and for the weight of the market share.

The description of the parties involved

The Russian oil & gas major company Rosneft was established in 1993 as a state-owned enterprise. Since 2012 the CEO of the company is Igor Sechin. At the moment the company is included in the list of the strategic enterprises of Russia, it is the major tax-payer and one of the largest and most reliable employers in the country. Its main shareholder (69,50 per cent of stocks) is OJSC Rosneftegaz fully owned by the state, 19,75 per cent of the share capital are owned by the British Petroleum company, one share is owned by the state represented by the Federal Agency for State Property Management, the remained shares are in public float.

Since 2012 Rosneft is rapidly promoting its' market performance, increasing its' profits and the volumes of oil & gas production. Moreover, Rosneft is well-known for its' active international positioning. It has established various connections with a number of European, American and Asian companies. It has joint projects almost on every continent, including. But not limited to the following: in Europe it has stable relations with the Italian ENI, Total, Statoil and British Petroleum, in the Americas - with Exxon Mobil and Venezuelan PDVSA, in Asia Rosneft is maintaining stable cooperative relations with the Indian ONGC and Chinese CNPC, CNOOC (Chinese National Offshore Oil Company) and Sinopec. Electronic source: www.rosneft.ru

The British leading oil & gas company British Petroleum has entered the market in the far 1908 under the name of the English-Percian Oil Company. It has overcome several wars and a number of crises, once it has founded itself in a state of bankruptcy, but finally British Petroleum succeed to struggle against all these severities and market turbulences. Moreover, in the 1990s, the decade of merges and acquisitions in all the basic industries, the company manage to invest in such enterprises as AMOCO, Castro, Aral and some others, that allowed it to increase the market share and to enter the new markets.

For last 20th century British Petroleum has turned into the global energy company, which develops in two directions: the first deals with oil extraction and refining, the second concerns the development of alternative sources of energy. Moreover, British Petroleum pays much attention to the establishment of its' international connections with the other global energy actors: it identifies 4 key directions oil oi & gas activities - Angola, Gulf of Mexico, Azerbaijan and the North Sea. Concerning the types of oil & gas activities: the company prevails those of extractions on the large oil & gas fields (including the deep-water projects).

The overview of the deals

The preparatory works were announced to start in October, 2012. A month later the parties signed the binding agreements on the stricter of the both deals. It took both Rosneft and British Petroleum almost half a year to finalize on March, 21 2013 the performance of the two acquisition processes.

Before the acquisitions were completed, the structures of the entities were the following:

(1) TNK-BP was one of the largest Russian oil & gas companies, 50 per cent of which belonged to the British company and the other half was the property of the Russian AAR Group; РИА Новости. Россия Сегодня Electronic source. http://m.ria.ru/ (access date: 01.05.2016)

(2) Rosneft was almost fully owned by the state through OJSC ROSNEFTEGAZ with 75,16 per cent of the company's share capital, 9,53 per cent were the property of the subsidiary RN-Development Ltd., 10,19 per cent belonged to Sberbank as a nominal holder, 3,04 per cent of shares were the so-called treasury stock and the rest was owned by the minors (entities and individuals, including British Petroleum with its amount of about 1 per cent of the share capital). Electronic source. http://maxpark.com/user/2480771645/content/1623901 (access date: 01.05.2016)

The structure of the transaction was the following:

First step - Rosneft acquired 50 per cent of TNK-BP's stock giving in exchange 16,65 billion US dollars and 12,84 per cent of Rosneft shares; and 50 per cent of the stock - from the AAR Group.

Second step - British Petroleum acquired 5, 66 per cent of Rosneft shares from OJSC ROSNEFTEGAZ for 4,87 billion US dollars.

Third step - British Petroleum cut its' share in the capital of TNK-BP to zero receiving instead of it 12,48 billion US dollars (including the dividends of 0,71 billion US dollars received in December, 2012) and 18,5 per cent of stocks of Rosneft.

According to the financial rating prepared by the Dealogic company, the purchase of TNK-BP executed by Rosneft became the world's largest transaction on merges and acquisitions of 2012. The amount of transaction, according to Dealogic, equaled to 54,5 billion US dollars. РИА Новости. Россия Сегодня. Electronic source. http://m.ria.ru/ (access date: 01.05.2016) Additionally, the cumulative matter value (including the acquisition of the Rosneft shares by British Petroleum) reached almost 61 billion US dollars.

From the first sight it can be seen that the large double acquisition process resulted in (1) for British Petroleum - the increase of the overall stake in the Rosneft share capital up to 19, 75 per cent of shares (the second largest shareholder after the state) and the opportunity to appoint two members of the company's Board of Directors (the head of British Petroleum was suggested of a member of the Board and was included in the Committee on integration of TNK-BP); (2) for Rosneft - to consolidate under its' ownership 100 per cent of the whole oil & gas company TNK-BP with an extensive network of assets and facilities. Rosneft official site. Electronic source: http://www.rosneft.ru/news/ (access date: 01.05.2016)

The prerequisites of the coopetition

Speaking about the prerequisites of the companies' interaction, it is reasonable to start with the environmental preconditions: in the described case, the determinant was the position of the Russian government towards the issue because of both the overall role of the state in the energy industry regulation and its' activity as an owner of the Rosneft company. The governmental strategy was forwarded to the strengthening the national positions in the oil & gas sector in order to maintain the sectorial stability. Therefore, is supported the desire of Rosneft to gain certain competitive advantages and to fortify its position on the global energy market.

The second set of prerequisites deals with the internal attitudes of the parties involved. As it was widely highlighted by the media, the two parties were in the negotiation process during long time, but they faced certain difficulties as the rest of the TNK-BP shareholders initially were against the acquisition deal. РИА Новости. Россия Сегодня. Electronic source. http://m.ria.ru/spravka/20130927/966333085.html?rubric=_sale_shares_BP_01062012 (access date: 01.05.2016) However, that gives us a basement to state that the parties were willing to perform the set of deals and they were ready for the exchange of the assets in order to gain certain benefits.

As for the internal motives of the companies, we can identify separate list of motives for each party. From the British Petroleum point of view, it could be an excellent opportunity to get a relatively big stake (as it was said above, the amount of 19,75 per cent of the Rosneft share capital still remains the second largest stake after the state's one) in the leading Russian oil & gas company, fully supported by the state. Additionally, British Petroleum received a huge amount of cash that could be used in developing the projects in the other directions. BP official site. Electronic source. www.bp.com (access date: 01.05.2016)

The Russian party aimed to increase its domestic market share and to rise before the global oil & gas market. These goals completely correlated with the internal Company's strategy of entering new markets and developing the international inter-firm relations, because the boost in the resources base would attract the new foreign investors and create more reliable image of the company.

Under the forecasts, made by the highest management of the company, the execution of the deals would allow Rosneft to increase its' financial performance by 60-70 per cent and to gain cumulative synergetic effect of 3-5 billion US dollars. The proved reserves would grow from 23,4 to 38,3 billion barrels, extraction of liquid hydrocarbons - from 2,4 to 4,1 million barrels per day, the general extraction of hydrocarbons - from 2,6 to 4,6 million barrels of an oil equivalent per day. Rosneft official site. Electronic source. www.rosneft.ru (access date: 01.05.2016)

The outcomes of coopetition

As for the outcomes and effects of the performed deals, the benefits for each party cannot be defined as equal that corresponds the traditional understanding of the essence of coopetitive relations.

For Rosneft and the Russian oil & gas industry, the outcomes seem to be more substantial:

- Having finalized the transaction Rosneft became the world's largest public oil & gas company on volumes of oil & gas production and reserves of hydrocarbons; in other words, the company entered the top ten of the world giants on the volume of extraction of hydrocarbons in general, occupying around 5 per cent of the market and more than 40 per cent of the total Russian production (volumes of oil production made 4,1 million barrels of oil equivalent per day that exceeds indicators of the majority of the OPEC countries, including Iran with its' three million barrels daily). Electronic source. http://bcs-express.ru/novosti-i-analitika/rosneft-pogloshaet-tnk-vr.-vse-detali-sdelki-i-perspektivy-novogo-neftyanogo-giganta (access date: 01.05.2016)

- Rosneft raised to a higher level in the world oil & gas ratings; for example, according to the global rating of the oil & gas companies that takes into account the sum of the criteria, including the volume of reserves and production, profits and some others (PIW Index), the company went up for three positions (from the 19th line in 2012 to the 16th- in 2013 after the deal was done).

Table 8. The PIW Index rating of the top oil & gas companies

Electronic source: https://kapital.kz/world/23532/50-krupnejshih-neftyanyh-kompanij-mira.html (access date: 01.05.2016)

- The increase of the company's international financial ratings, for example, the international rating agency Standard&Poors placed a long-term rating of Rosneft of "BBB-" in the list on revision with possible increase, and the large American Investment Bank Merrill Lynch increased the expected cost of global depository receipts of Rosneft from 8 to 9 US dollars per piece.

- As for the synergetic effect, it was strengthen in a number of directions: extensive experience of British Petroleum brought huge advantages not only for Rosneft and its' shareholders, but for oil & gas industry in general; this union could help Rosneft to explore new fields and to enter in the new projects of a larger scale, moreover, the administrative and managerial synergy should not be undervalued as well.

- The state advantage s expressed in the consolidation of the main oil & gas resources under the supervision of the single actor that is controlled by the government.

- Inevitably, the concurrent negative outcome of such huge deals is the essential growth of a loan portfolio as the acquisitions required huge capital to be attracted (around 45 bln US dollars); therefore, under the conclusion of several business analytics, the debt/EBITDA ratio grew from 1,2 to 2,2 mainly because of the loans attracted. Electronic source: http://www.vedomosti.ru/business/articles/2013/03/21/rosneft_segodnya_kupit_100_tnkbp (access date: 01.05.2016) However, according to the presentation accompanied the Annual Report of 2013, the short-term strategy of Rosneft included the plans for gradual loan reduction with the help of profit increase.

So, there is a number of beneficial outcomes of the performed acquisitions, the key figures from the Rosneft Annual Report of 2013 are provided in the table below. The data confirms all the positive effects mentioned above and gives the comparative figures for the years, preceding the deals (2011 and 2012). Moreover, the ratio of figures in 2013/2012 and 2012/2012 differs incredibly: the first one is fluctuating from 46 per cent (for overall refining) to 132 per cent (for overall gas extraction volume) while the second data is much leaner - from minus 6,6 per cent (for EBITDA) to 28, 1 per cent (for overall gas extraction volume). More detailed information is given in the Table 8 below.

Table 9. The key figures of the Rosneft market performance in 2011-2013

Source: composed by the author based on the Annual Report Data. URL: http://www.rosneft.ru/ (access data: 10.05.2016)

The key outcomes for the British party were not so numerous, although, there are certain significant ones:

- The right to appoint a member of the Board of Directors that came after the purchase of the second larges stake in the Rosneft share capital. Therefore, the exchange of shares (Rosneft instead of TNK-BP) could be defined as a successful one, because at the moment British Petroleum is the only foreign company, which has a corporate right to fully influence all the major corporate decisions taken by the company's corporate bodies. That is an unprecedented issue in the case of the state-owned strategical company.

- British Petroleum still preserves its' position on the Russian oil & gas market through the major Russian oil & gas company (that can be seen from the table above - British Petroleum maintained its' 6th place in the global rating despite the selling of all the TNK-BP assets); that is of great importance, as the British company acknowledges the high potential of the Russian oil & gas reserves in whole and of Rosneft in particular. British Petroleum has been working in Russia for the period of more than twenty years, and within the last ten years they were the largest foreign investor in Russia through the participation in TNK-BP, so, the loss of the positions was impossible for the company.

- The deal turned out to be in good time, as in the period of Western sanctions such form of oil & gas industry participation (the steak in the share capital of the leading Russian oil & gas company) is the most stable and risk-free.

- British Petroleum is receiving the shareholders revenue in the form of dividends on the annual basis (25 per cent of the net profit, following the decision of the Russian government; moreover, the recent political tendency is to increase the state shareholders income in order to attract more investors in the strategic sectors of economy). BP official site. Electronic source. http://www.bp.com/content/dam/bp/pdf/investors/bp-strategic-report-2013.pdf (access date: 01.05.2016)

- Besides, British Petroleum received additional opportunities for development of strategic and technological cooperation, and also for cooperation within joint ventures. BP official site. Electronic source. http://www.bp.com/ru_ru/lubricants/russia/about-us/bp-in-russia.html (access date: 01.05.2016)

All in all, one of the key prerequisites for coopetitive merges and acquisitions can be the strong motivation to acquire the capital asset - the reserves of oil & gas. Moreover, we can identify one exclusive feature for the described international coopetitive interaction between oil & gas actors: despite the international substance of the relations, the coopetitive behavior in this case lead to the outcomes of different essence: Rosneft mainly benefited on the domestic market, while British Petroleum kept its' positions on the international one. Although, both parties gained mutual competitive advantage in the global terms.

3. The changes in the strategy of the international oil companies

The last chapter of the research paper covers the final outputs of the study. As the declared purpose of the work is to find out whether the coopetitive relations are common for the industry explored and to identify the substantive prerequisites and the most frequent outcomes of such coopetition, the structure of the third chapter correlates fully with the stated purpose. So, the first paragraph concerns the characteristic of the international oil & gas companies interaction on the market. The second paragraph is devoted to the main question of the study: the key prerequisites and outcomes of cooperation among the oil companies on international markets. The last paragraph of the given chapter considers the necessity of the coopetition within the oil & gas industry and gives some suggestions on what the certain company should do and why in order to establish successful long-term coopetitive relations.

3.1 The international inter-firm relations within the global oil & gas industry

As it was described in the previous chapter, the model of the intra-market relations within the oil & gas industry is the complex one: it combines both cooperative and competitive features, moreover, it turned out to be quite difficult task to identify whether there are certain key players on the market or it is equally competitive. That means that global oil & gas actors tend to interact in a cooperative way and to establish partnerships and alliances, although they remain competitors on the market. Therefore, coopetition is an innovative, but already widespread strategy on the global oil & gas market.

One of the most important observations made in the study is that the majority of coopetitive relations within the industry trace its' roots in the inter-governmental level. In other words, it is mainly the state's initiative to give the foundation for the stable cooperative interaction among the oil & gas companies.

This can be explained with the following:

- the influence of the global oil & gas industry on the macroeconomic factors and the essential interconnection of the industry and the global political and economic situation (the good example of the above stated is the last oil crisis accompanying the Ukrainian political crisis of 2014);

- the significant importance of the industry in the whole economic development of any country that defines the functioning of all other branches, and, consequently, the great dependence of the citizens' welfare on the sustainability of the oil & gas sector;

- the distinguishing feature of the oil & gas business is that all the resources required for the business performance are initially fully state-owned;

- with reference to the previous bullet, the regime of mineral resource use in every state is established by the governmental authorities in the forms of laws, decrees, codes and other legislation.

So, the strategic position of the oil & gas sector in the global economy in whole and the state economies in particular makes clear the desire of the states to regulate all the interactions that come around within the oil & gas industry. The aforesaid also explains the existence of a large number of oil & gas companies with the state share participation (in particular among the large companies taking the leading positions in ratings; for example, in 2015 the majority of the first 20 biggest oil & gas companies are fully or partly state-owned: Saudi Aramiko (fully owned by the Saudi Arabia), CNPC (100 per cent belong to China), PDVSA of the government of Venezuela, Iranian NIOC, half-governmental Rosneft and Gazprom and many others). Electronic source: http://www.investopedia.com/articles/investing/121715/worlds-biggest-state-owned-oil-companies.asp

One more evidence of the state-controlling function in force is the existence of the special tax and exploration regulations of the examined sector of economy. With such tools, governments can easily influence the activity of every actor on the market (for example, the Internal Revenue Code of the Russian Federation, provided with the on-line legal system Consultant Plus, operates with such terms as expenses for the development of natural resources, mineral extraction tax, etc.).

Summing up, the involvement of states in the relations of the oil & gas companies is inevitable. That is why such facts as the growing number of intergovernmental agreements covering the issues of oil & gas sector, the existence of international political institutions that coordinate the global oil & gas relations (e.g., OPEC) are reasonable and expectable. Therefore, coopetitive interaction within the industry is a natural result of the inter-state behavior.

The widespread usage of the coopetitive strategy by the management of both majors and smaller oil & gas companies cannot be under the question any more. The rival companies created a complex global network of cooperative relations that can be proven with an enormous number of publications in media and periodicals, on the official web sites of the companies and in newspapers (e.g., http://rosneft.ru/news/pressrelease/, http://news.exxonmobil.com/).

Moreover, the existence of coopetitive relations between to certain actors do not limit or prohibit them of cooperating with the other actors on the market at the same time. Alternatively stated, the oil & gas companies do not abstain from cooperating with as many competitors as possible, creating a coopetitive industrial network. For example, as it was already mentioned, (1) the Azerbaijan SOCAR has a common educational project for the employers with the English British Petroleum, (2) at the same time both SOCAR and British Petroleum hold the sustainable relations with the Russian Rosneft in the core activities, (3) while Rosneft acts as a partner with Italian ENI and French TOTAL (mainly under the supply contracts), (4) who have signed in 2015 the research and development agreement on the common works on ENI's refining innovative project. Electronic source: http://www.total.com/en/media/news/press-releases/eni-and-total-sign-agreement-est-technology

Therefore, the oil & gas industry is rapidly developing in the line of coopetition. This tendency is highly supported by the governmental and inter-governmental entities in order to maintain the stable and incremental development of the industry and the global economy in whole. Additionally, while coopeting, oil & gas companies establish a complex global network that involves the actors from almost every oil-producing country and creates long-term stable aggregate relationships.

All in all, it seems that actors from the global oil & gas industry are fully on the same page with the legendary Henry Ford, who declared: “Coming together is a beginning! Staying together is progress. Working together is success.” Berzina D., Rosa M. Coopetition. // Economic Development Journal. Spring, 2014. Vol. 13. No. 2. P. 7-11

3.2 The key prerequisites and the main outcomes of coopetitive relations within oil & gas industry

As it was described in the previous chapters, there is no common opinion on the matter of the most essential prerequisites and the outcomes of coopetition among oil & gas international companies. Moreover, taking into account the various types and forms of coopetitive relations within the industry (according the classifications, provided in the first chapter especially for the oil & gas companies), the preconditions and effects of such relations can differ considerably depending on the sphere of cooperation and initial motives.

However, as follows from the statistical and case study analysis, we could identify several key prerequisites and main outcomes of coopetitive relations among oil & gas companies on the international markets.

The list of key prerequisites of coopetition in the industry explored

Regarding the most substantial prerequisites of coopetition in the global oil & gas sector, we propose to use the presented above in the first chapter groups of prerequisites: macro-level (external) and micro-level (internal) ones.

As for the macro-level preconditions, additionally to the traditional ones, proposed in the theoretical part of the paper, we propose to highlight the following features that are required disregarding the sphere of coopetition among oil & gas companies:

1. the existence of stable inter-state relations;

2. the specific foreign policy of the states addressed towards the development of the oil & gas industry on the international level;

3. the number of bilateral and multilateral inter-governmental agreements on the cooperation in the energy sector.

The precondition of existence stable inter-state relations can be regarded from two perspectives: in connection with the states, which the coopetitors are residents of, and relating to the global political situation. The good example of the both cases can be the political situation of the last several years, started from the Ukrainian crisis. As for the first case, it is illustrative for the relations of the Russian Gazprom and the Ukrainian Naftogaz that had stable relations based on the gas supply contracts for quite a long time before the crisis commenced. By now, all the cooperative relations collapsed as the two states (Russia and Ukraine) have broken their diplomatic relations.

Regarding the second case, the Ukrainian crisis has influenced the coopetitive relations established between the Russian and the Western oil & gas companies. The main reason for it is the sanctions that limited in a large extent the spheres of possible cooperation (as it was stated above, the most sanctions' affected sphere is the offshore projects).

Additionally, the problematic foreign policy situation can carry a negative influence on almost all the actors of the global oil & gas market: the crash in oil prices in 2014 continued in 2015 imposed constraints on companies' ability to invest in the new projects that is declared widely in the media (e.g., about 68 major projects were delayed worldwide in 2015). Глава ОПЕК: рост цен на нефть может вызвать только сокращение инвестиций на $130 млрд. 10.11.2015. http://www.kommersant.ru/doc/2850578

The second listed prerequisite speaks of the necessity of the governmental attitude to be involved in the international oil & gas cooperation. That means that the state should provide the residential companies with the comfortable environment for coopetition. For example, during relatively long period of time the policy of the Russian Federation was directed towards attraction of FDI in the oil & gas sector (especially, in the Arctic deep-water projects) and the participation of the Russian oil & gas companies in the international projects, what can be proved with the numerous visits of the representatives of our authorities to the foreign countries over the energy issues (e.g., the visit of the Russian President Vladimir Putin in Iran in November, 2015). Визит Путина в Иран завершился одобрением 35 совместных проектов. 24.11.2015. Electronic source: http://www.rbc.ru/politics/24/11/2015/565392859a79473ddebd9d1a

The last prerequisite correlates fully with the two precedential ones and was widely covered in the previous chapter. So, the existence of the agreements in force greatly facilitate the establishment of cooperative inter-firm relations.

Additionally, taking in account the spheres of oil & gas coopetition (downstream, midstream, etc.) we can identify such prerequisites as the existence of unexplored oil & gas reserves (the key feature for the upstream coopetitive relations) or the lack of the logistical systems for transportation of crude oil, gas and petroleum products in the country (one of the main impersonal factors for partnerships in the midstream segment).

Proceeding to the internal prerequisites of coopetition in the international oil & gas sector, we are not to rest upon the so-called internal attitudes covered in the first chapter of the given work. Concerning the internal motives, it is obvious from the cases that the key motive is to increase profits through getting an access to extra resources. These resources generally can be of three types: (1) mineral resources (crude oil, gas, petroleum products, petrochemicals, etc.), (2) financial resources (investments), (3) complementary resources (knowledge, experience, equipment, etc.).

Therefore, the main internal motive can be explain as following: the companies on the international oil & gas market get involved into coopetitive relations willing to exchange the resources in order to receive mutual benefit as a result of synergy effect (mainly - to increase profits, like every commercial structures).

Additionally, some other motives could be identified:

- the market share increase mainly in forms merges and acquisitions;

- entering new markets mostly in forms of joint-ventures;

- the diversification of risks as the oil & gas activities requires high investments and the pay-back period is extremely long, etc.

Actually, the list of internal motives can be immense and detailed depending on the particular economic situation, form and type of coopetition. This is driven by the complexity and many-sidedness of the oil & gas industry in terms of coopetitive abilities: both vertical and horizontal ones.

The list of main outcomes of coopetition in the industry explored

As every relationships has its' goals and purposes, and the coopetitive ones are not an exception, the most desirable outcome is to achieve the goals set. The goals are usually driven with the internal motives of the coopetitive strategy. The majority of the examined cases and statistics shows that in the major part of the cases the outcomes of the coopetitive relations correlates with the initial motives. However, sometimes the coopetitive relations do not end with the desired outcome and can fail for certain reasons.

Therefore, we can identify the outcomes of two types: (1) the positive or desired ones (that correlates with the initial motives and foals of coopetition), and (2) the negative ones (that do not meet the purposes of the coopetitive interaction).

Among the first group's outcomes the most essential seems to be the creation of the stable global development of the oil & gas industry. This outcome fully corresponds to the cooperative goals declared by the states in the inter-governmental agreements. The list of more concise positive outcomes can include the following:

- establishing the international long-term relations within the industry;

- the growth of the market share;

- getting the higher ratings;

- receiving the corporate control over certain foreign oil & gas enterprises;

- acquiring extra resources and facilities;

- expanding the consumer segment;

- usage of innovative technologies and equipment (some oil companies can provide their partners with the perfect technologies; e.g., the Petrobras company occupies one of the leading positions in drilling technologies in the deep-water);

- the advanced training of the employees;

- enjoying certain tax benefits (e.g., the agreement signed by the Shell company in 1998 on a concession of the assets in Yemen and Colombia of 1 bln. US dollars in exchange for assets of the Oxidental Company in Malaysia and Philippines). Миловидов К.Н. Тенденции развития мирового нефтегазового бизнеса. // Российская академия наук. Институт народнохозяйственного прогнозирования. 2006.

Turning to the negative outcomes of coopetition, it is important to remind that unsuccessful coopetitive relations are not usually widely covered in the media as it is not supported by the parties involved. However, the expectances still exist, like those of the widespread joint projects' failure by the reason of the latest Western sanctions. So, the reasons of the failure can be of the external type (in the case of sanctions and unstable political environment) and internal type (for example, the cultural or cooperative incompatibility).

Among the negative outcomes the following can be mentioned:

- the collapse of the inter-firm relations;

- the financial losses (for example, in the described above cases of frozen joint projects in the Arctic region); Electronic source: http://www.mk.ru/economics/2015/07/30/izza-krakha-nefti-krupneyshie-kompanii-mira-sokrashhayut-raskhody.html

- the increase of competition on the national markets as the newcomers appeared, etc.

As we can see, the outcomes of coopetition among the oil companies on international mainly is governed the initial preconditions of the coopetitive relations. Moreover, the success of the established interaction depends on the numerous preliminary circumstances on both macro- and micro-economic levels.

3.3 The necessity of establishing coopetitive interaction between international oil companies within the industry

While the majority of oil & gas economies are sustainably developing in the direction of coopetition, the oil & gas industry in the Russian Federation appeared to be in special turbulent conditions: the huge opportunities for future cooperative development, the growing number of foreign partners among the oil & gas enterprises, and, at the same time, the restrictions under the sanctions regime that reduce and limit the coopetitive capabilities of both the Russian and the foreign companies.

However, the sustainable development of the Russian oil & gas industry is of great importance for a score of reasons. The oil & gas sector is the main structural component of the Russian economic system in a whole, the oil & gas sector industry forms 25,6% of GDP of the country in 2015 (in comparison to 30% in the previous year, the declining tendency can be explained by the Western sanctions, imposed in the recent years). Прогноз развития энергетики мира и России до 2040 года. // ИНЭИ РАН - АЦ при Правительстве Российской Федерации. Electronic source: https://www.eriras.ru/ (access date: 04.05.2016) This branch of economy makes 12-14% of an industrial output, provides 17-18% of the income to the federal budget and more than 35% of currency receipts. Electronic source: http://forexaw.com/ (access date: 04.05.2016)

Therefore, the oil & gas complex in Russia has a comparative advantage in the export of crude oil and products of its processing, plays a key role in securing oil resources worldwide, especially in Europe, and acts as a basis of economic, political and social stability in the country. For our country, research of tendencies and strategy changes of the major oil & gas players is of great importance. The oil & gas industry provides a multipliсative effect of conversion of foreign currency revenues (the so-called petro-currency) from exports of liquid hydrocarbons to the sectors of the goods and services, which are responsible for the livelihoods of the society, raising the standard of living of the population.

As it was already mentioned above, the Western sanctions have significantly touched the Russian oil & gas sector in many ways from financial to the knowledge parts. Therefore, the Russian companies found themselves in a difficult situation and they should have reconsidered their managerial strategies under the present circumstances.

The major limits were imposed on offshore joint projects. For example, the American energy companies have given up joint projects in Russia, having lost an access to multi-billion investments. Because of a ban on providing technologies and services to the Russian partners, the Western companies have left the nonconventional offshore projects in the Arctic and other regions (e.g., ExxonMobil was forced to leave all 10 joint ventures with Rosneft, including the project worth 3,2 bln US dollars in the Kara Sea). In addition, an access to new fields in Russia is still limited; the companies' future profits and the share quotations are under the threat, and already invested capital is probably completely lost.

However, the Western sanctions also do not bode well for Russian companies. The Russian oil & gas actors have lost the potential partners for future and ongoing joint projects. Therefore, companies should look for new foreign investors to work with. Within this framework, the Asian oil & gas companies seem to be the most convenient potential partners.

Among the Russia oil & gas companies, the majority has already established the basis for the potential long-term joint development with the Asian competitors (e.g., Chinese CNPC and Sinopec and Indian ONGC). However, one major oil & gas actor - Lukoil- at the period of the sanctions' imposition had stable interaction only with its' European and African competitors (according to the data provided in its' Annual report of 2014). Lukoil official site. Electronic source. http://www.lukoil.ru/materials/doc/AGSM_2015/LUKOIL_AR_rus_2014.pdf (access date: 01.05.2016) Despite the private-equity nature, Lukoil was subject to the Western sanctions along with the state-owned corporations, such as Rosneft and Gazprom.

Initially, Lukoil does not suffer considerably more than the other Russian oil & gas companies. For example, the decrease in the performance data of Lukoil is not much bigger than that of Rosneft: the decrease of profit from sales of Rosneft equaled to 36 per cent, while Lukoil's profit fell for 38 per cent (comparing the figures of 2013 versus those of 2014, taken from the companies' Annual reports of 2014). Ibid. (access date: 01.05.2016), Rosneft official site. Electronic source. http://rosneft.ru/attach/0/02/01/a_report_2014.pdf (access date: 01.05.2016) However, at the moment the data has significantly changed and in the year ended December, 31 2015 the net profit of Lukoil decreased for 26,4 per cent, while Rosneft with its' diversified coopetitive portfolio improved the net income for almost 2 per cent despite the ongoing Western sanctions and essential cut in the investments.

Table 10. Income ratio of Rosneft and Lukoil (2013-2015)

Source: Rosneft and Lukoil Consolidated financial statements for the period of 2014 and 2015. URL: www.rosneft.ru; www.lukoil.ru

Therefore, the Lukoil Company should consider the example of the other Russian leading oil & gas companies in terms of their coopetition strategy: both Rosneft and Gazprom are actively working on the establishing the long-term cooperative relations with the Asian oil & gas enterprises.

By now, Lukoil has chosen the strategy of getting rid of problematic assets rather than looking for a new strategy: coopetition with the new Asian partners. For example, the Russian company previously has the extensive retail business (several thousand petroleum station all over the world including the USA and European countries). However, during the last two years Lukoil has sold the pull of stations in the USA, Ukraine, Latvia, Lithuania, Estonia and Poland (almost 300 petroleum stations). Forbes Journal. Electronic source: http://www.forbes.ru/news/ (access date: 12.05.2016) Additionally, the company has sold its' upstream offshore assets in the Caspian Sea (Kazakhstan) to the Chinese oil & gas company Sinopec. Electronic source: http://www.bloomberg.com/news/ (access date: 12.05.2016) The major reasons are the sharp decrease in oil prices and the Western sanctions because of the Ukrainian crisis.

Therefore, the performance figures are not likely to stabilize and certainly not to take an upward trend: the Lukoil company may lose its' positions on the market, reduce its' customer segment via sales of the petroleum stations and limit its' product portfolio by quitting the projects.

Instead of the above described, and in order to develop along with the national rivals and to gain competitive advantage on the Russian and global markets, Lukoil should establish coopetitive interaction with the Asian companies, mostly China as an emerging and rapidly developing market. For this purpose, the following prerequisites are needed: