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

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GOVERNMENT OF THE RUSSIAN FEDERATION

NATIONAL RESEARCH UNIVERSITY

HIGHER SCHOOL OF ECONOMICS

FACULTY OF WORLD ECONOMY AND INTERNATIONAL AFFAIRS

MASTER OF INTERNATIONAL BUSINESS PROGRAM

MASTER THESIS

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

Student

Alina Kalanda

Research Advisor

Klochko O.A., A.P., Ph.D.

Moscow, 2016

Contents

• Introduction
• 1. The theoretical aspects of coopetition, its' prerequisites and outcomes
• 1.1 The correlation among competition, cooperation and coopetition: the theory development
• 1.2 The definition and the types of coopetition
• 1.3 The possible prerequisites and outcomes of coopetition
• 2. The tendency of coopetitive relations among international oil & gas companies: the prerequisites and outcomes
• 2.1 The overview of the global oil & gas market and its' key players
• 2.2 The recent tendency of global oil & gas companies' market behavior
• 2.3 The international coopetitive relations of the Russian OJSC “Rosneft” and its' foreign “rival” partners
• 3. The changes in the strategy of the international oil companies
• 3.1 The international inter-firm relations within the global oil & gas industry
• 3.2 The key prerequisites and the main outcomes of coopetitive relations within oil & gas industry
• 3.3 The necessity of establishing coopetitive interaction between international oil companies within the industry
• Conclusion
• References
• Appendix

Introduction

The fundamental principles of the market development as well as the inter-firm relations have been the subjects of numerous theoretical and analytical studies for ages. Traditionally, the competition is treated as an essential condition for the proper functioning of the market-driven economy. Nowadays two main forms of interaction between competitors can be distinguished: direct competition and cooperation. Cooperation between competitors arose in the 19th century, when the first cartel were created, but recently a new form of firms' cooperation - coopetition - has begun to establish the leading position in the set of managerial strategies.

The phenomena of coopetition, which in the past years has become an integral part of the economic agents' behavior, alters the traditional vision on the nature of the competitive struggle as the antagonistic rivalry for the best market conditions. More and more researches tend to notice that the majority of industries have recently faced the substantial changes in the essence of inter-firm relations.

The oil and gas (hereinafter referred as “oil & gas”) industry is not an exception. Moreover, the development of this industry calls for special attention, as nowadays the oil & gas market is considered to be the most developed and turbulent sector of both the Russian economy and the global one: the share of world energy consumption of oil & gas will remain on a high level almost until 2040 - 53.6% in 2010 and 51.4% by 2040. In absolute terms the demand for oil-fuel in 2040 in the will be up to 5.16 billion tons of oil equivalent, which is higher than the values of 2010 by 25%. As for the gas, in 2040 the global demand for gas will reach 5.34 trillion m3, which is 60% higher than in 2010. Прогноз развития энергетики мира и России до 2040 года // Институт энергетических исследований (ИНЭИ) РАН и Аналитический центр при правительстве РФ. Electronic source. http://www.eriras.ru/files/prognoz-2040.pdf (accessed date: 01.05.2016)

The Russian Federation at the given moment is the second country in the world for the extraction of oil (after Saudi Arabia) and for the output of gas (after the USA). If we consider the supply to the world market in monetary terms, for the exported petroleum Russia receives 280 billion USD and for the export of gas more than 60 billion USD annually.

Recently the companies in oil & gas market have developed in close cooperation. This tendency fully meets the requirements of the model of energy development, proposed by the Russian government and adopted by the Western countries in the middle of 2000-x yr. Thus, the coopetitive strategy is highly sought by the major oil & gas companies in different countries.

Moreover, the effective cooperation among the companies within the industry and unimpeded growth of Russian oil & gas sector itself in much determines the possibilities of the present and future development of the Russian Federation.

We propose the following hypothesis for the consideration: the coopetitive interaction is a widespread and substantial managerial strategy for the oil & gas industry with the specific industrial prerequisites and outcomes. Therefore, the key purpose of the study is to identify the main and the most common for the oil & gas industry prerequisites and outcomes of coopetitive strategy of companies' market behavior. In order to deal with the mentioned purpose, we should consider several objectives of the study:

· to explore the phenomena of coopetition strategy in comparison with the classical cooperative and competitive strategies and its' effects on the international community in whole and on the international oil & gas companies in particular;

· to generalize contemporary theoretical and empirical researches on interaction between the oil companies on the international markets;

· to figure out what kind of relations are understood under the term of “coopetition”;

· to identify the most substantial prerequisites and outcomes of establishing the cooperative relations among competitors;

· to analyze the relationships among international oil & gas companies in terms of coopetition and to figure out what the main drivers and effects of such collaboration are (with the usage of the relative data, statistics and case study method);

· to clarify the necessity and the importance of using the coopetitive strategy by international oil & gas companies.

Hence, the object of the study can be defined as the essence, the main drivers and outcomes of coopetition as a new managerial strategy, while the subject covers specifically the motives and the effects of implementing the coopetitive strategy by the international oil & gas companies.

The academic novelty of the work consist in (1) the newly developed typology and classifications of the international oil & gas coopetitive forms of relations, and (2) the identified mostly essential prerequisites and outcomes of coopetition within the international oil & gas sector.

In a modern state of economy the investigated theme is particularly relevant and practically applicable because of several reasons, which include:

· the significance of sustainable development of the mentioned sector of economy, especially in the recent unstable circumstances of oil crisis, when the new strategies of development are of great importance;

· the revenue from the activities of oil & gas companies composes more than two-thirds of the annual GDP of the Russian Federation and other oil-oriented countries.

Concerning the literature review, various sources were examined. Firstly, as it was essential to highlight certain theoretical background of the category examined, a set of scholarly works and articles of national and foreign scientists in the sphere of corporate management and development, strategic management and competitive advantages were explored (Bengtsson & Kock, Lado et al., Brandenburger & Nalebuff, Dagnino & Padula, and others). In order to clarify the role of public sector in economy and in oil & gas sector, the relative scientific papers were covered. Secondly, due to its' novelty and rapid development, the topic is a subject of numerous statistical and analytical materials of foreign information and analytical branch agencies like those of UBS, WoodMackenzie, Forbes and other open resources.

Additionally, the information base of the given research was composed of legislative regulations of the Russian Federation and other countries, the publications and reports of the governmental and international organizations: Ministry of Energy of the Russian Federation, World Bank, OPEC, certain legislative base was consulted (e.g. Consultant Plus). In order to cover the case studies, it was necessary to get acquainted with the companies' public documents, such as the annual reports, the strategy of development etc. Moreover, the majority of cooperative agreements between major oil & gas companies are traditionally widely observed and analyzed by the media, news agencies, periodicals and on the Internet.

As for the structure of the master thesis, it is split into several parts devoted to different aspects of the examined topic. The first chapter covers theoretical aspects of the issue and summarize previous researches, including the possible theoretical prerequisites and outcomes of using this strategy. The second one presents the practical issues: examples of coopetition among several international oil & gas companies, providing the analysis of its' main prerequisites, motives and desired effects. The last chapter summarizes the outcomes of the conducted research and highlights the most important factors that should be taken into account by the actors of the same industry in order to develop their market performance.

1. The theoretical aspects of coopetition, its' prerequisites and outcomes

In the following chapter theoretical aspects of the topic are covered. The first part presents the brief literature review and existing theories, by means of which the essence of coopetitive relations are described; the second paragraph is devoted to the definition and typology of the examined phenomena. However, the main question within the topic is: what are the prerequisites and the outcomes of the coopetitive strategy? These issues are examined in the third part of the given chapter through the paradigm of oil & gas companies' relationships.

1.1 The correlation among competition, cooperation and coopetition: the theory development

We can identify several types of inter-firm cooperation in a competitive environment - competition, cooperation and coopetition. Coopetition is regarded as a complex category that combines two diametrically opposed types of interaction: cooperation (in order to create a bigger “pie”) and competition (in order to divide it up). This category has been developed a while ago by the theoreticians from the traditional views on competition and cooperation as two main market tendencies.

The competition theory

Until recently, economic and managerial science and practice dominated by the conception of competition, leading its origin from Adam Smith, who believed that the free market is the path leading to the well-being of each nation. This concept was further developed by A. Marshall, J. Robinson, E. Chamberlin, J. Schumpeter, F, Hayek and other prominent economists XIX-XX centuries. Розанова И.В. Эволюция взглядов на конкуренцию и практика антимонопольного регулирования. Опыт стран с развитой рыночной экономикой. // Влияние конкуренции и антимонопольного регулирования на процессы экономической модернизации в России. / Под ред. С.Б. Авдашевой, В.Л. Тамбовцева. - М.: Теис, 2005. - С. 205-216.

The scholars found the competitive relations preferable for the market, as it was thought to undercut the goods' and services' prices for the consumer while boosting the innovation degree of the market actors. At the meantime, any cooperation or collaboration was treated in a negative way, because it lead to minimizing the overall competition and consequently supported the highest prices. Wіodzimierz Rudny. Coopetition as a new way of structuring inter-organizational relations. // Uniwersytet Ekonomiczny w Katowicach. №224б. 2015. P. 199-208.

Despite the existence of various economic models, the mentioned industrial structure was considered as the most beneficial solution and was the most sought after among the reputable European scientists at the second half of the 20th century.

As an evidence of the mentioned, it is sufficient to quote E. Rice and J. Trout (2000), authors of the famous book "Marketing Warfare": "Free private enterprise is a marketing war ... The competition becomes brutal… The true nature of marketing is ... the conflict between corporations, but not the satisfaction of human needs and desires. If the needs of nations are met by means of the rivalry, the competition is allowed to exist. Competition was usually defined as a market situation that occurs when several companies act in the same area/industry and struggle for scare resources/products/services/customers (Bengtsson & Kock, 2000; Hunt, 2007).

So, competition was regarded as one of the conditions of existence of the market. The negative outcome of the competition might be a situation where the market comes down to a single company that inevitably leads to the monopolization of the market and elimination of competition as a form of interaction.

Furthermore, the major part of the economists subscribed to the traditional view on the competition as a zero-resulted game, where the increase of profits of one party automatically lead to the boost of losses of the other. However, this traditional “winner takes all” - concept of business has experienced radical transformation in the recent years, starting from 1980s-1990s. The main reason for that was the fast-developing globalization process, which gave way to an understanding that in the networked economy companies should both cooperate and compete. Therefore, the traditional competitive environment, where firms seek the independence of both the other business units and any external influence, starts losing its' ground.

The downfall of competition as a key market strategy was developed in 1996 by J.F. Moore (1996), one of the most ingenious management experts, in his book called “The Death of Competition”. The author proposed the concept of entrepreneurial ecosystem, where the business environment was compared to the living the natural environment (ecological system) that combines not only fights among the creatures, but also the evolution, cooperation and interdependence. Moore outlined, that the old traditional type of competition “my product/service against yours” do not take into account the context of environment, where economic agents run their business. Moreover, J.F. Moore was among the first to notice the change of priorities in companies' strategies: the switch from competitive struggle to the strategy focused on a cooperation.

The mixture of competition and cooperation

Notwithstanding the fact, that such categories, as cooperation and competition, have historically been approached independently by theoreticians, both strategies recently started to be considered simultaneously. That is the way, how the term “coopetition” (also called - “coopertition”, “competitive cooperation” etc.) was created.

Competition and cooperation was considered together in 1997 by Lado et al., although the term “coopetition” was not used in the relative paper. On one hand, the authors found the competitive strategy as an engine that pushes the companies to promote new products, to improve their development, to innovate etc. Therefore, competition was regarded as a progressive factor that promotes firms' performance. On the other hand, cooperation provides the actors with an access to rare resources, knowledge, skills and networks that are necessary for their future development. Cooperation here was traditionally understood as a relationship among several companies or groups of companies, which interact with each other by means of sharing resources, knowledges, capabilities for the purpose of mutual benefit (Gnyawali et al., 2006: 507-530).

The statistics, provided in the work of Lado et al. (1997), showed that more and more enterprises got used to combining to opposite strategies of the market behavior. Therefore, cooperation and competition could not be any more regarded as to opposite sides of the coin and should be treated as two independent dimensions, that can be applied in parallel.

The Game theory

Along with Moore and Lado, other theorists in the field of development of economic strategy A. B. Brandenburger and Nalebuff, advocates of the Game theory in decision-making, also called for a fundamental change in the rules of market behavior. Бранденбургер А., Нейлбафф Б. Конкурентное сотрудничество в бизнесе. // М.: Кейс, 2012. С. 352. The basis of coopetitive strategy was widely regarded in the works devoted to the so-called Game theory. In order to understand in full all the keynotes of coopetitive strategy, it is important to consider the main aspects of the Game theory.

The Game theory was first introduced by the Hungarian mathematician and physician John von Neumann in the work named “Theory of Games and Economic Behavior”, published in the USA in 1944. A decade later the famous American mathematician John Forbes Nash Jr., who shared in 1994 a Nobel Memorial Prize on economical science for his supreme contribution in the Game theory promotion, mainly developed the Game theory.

J. Nash has shown that the traditional approach of Adam Smith to the competition, where every actor plays for its' interests, is not beneficial. The most advantageous behavior is that everyone receives better results and greater profits by means of helping the others.

The game is understood as a process, which involves two or more parties, fighting for the performance of their interests. Each party has its own purpose and use certain strategy that can lead to the loss or gain - depending on the behavior of other players. The Game theory helps to choose the best strategy taking into account the attitudes of the other participants, their resources and their possible actions. The same players at the same time can be considered differently. In the world of business, everything can suddenly change: today's competitor acts as the partner tomorrow and vice versa. Putting under the pressure interests of the competitor, the company can create problems to the future partner and lose. Важенин С.Г., Сухих В.В. Потенциал конкурентного сотрудничества компаний в реиндустриализации России. // Экономическое возрождение России. 2014. №4 (42). Теоретические проблемы экономики. С. 71-82

Moreover, we should keep in mind the in this theory business is not about winning or losing. Companies can succeed without failing the others on the market. So, the players should always keep in mind that their chances for success might be higher if they chose win-win strategy, and consider both cooperative and competitive behavior. At the same time, there is certain requirement for the resultative and mutually beneficial game - the actors (players) should be from the single “weight category”, on the same level of development.

Therefore, the Game theory provides a theoretical explanation on a business process as a repeated game, where the equal players form their material value when entering into relationships with other players. This form of relationships can provide better yields for the actors, if they exchange information and other knowledge. In other words, if they start to cooperate, while competing (Okura, 2007: 53-96). As a result, the competitive cooperators are not losers, but only winners.

In summary, any competitive cooperation is a complex category, as it is built on two diametrically opposed types of interaction. Under the coopetitive theory, the concept of competition describes the initial relative position of the actors on the market and is based on the assertion that human activity is aimed at the maximizing their own earnings, while the cooperative relations are treated as an alternative behavior to the rival one. A precondition for cooperation is that competing companies get involved in collective action in order to achieve common goals (Bengtsson & Kock, 2000).

Otherwise speaking, such cooperation can be turned into practical deeds by interaction within those directions, in which interests of the players coincide (except for price-fixing arrangement), the so-called common goals, and preservation of rivalry in order to achieve the objectives of the their own, so-called private purposes. Competition here can be used to describe the characteristics of the players as the rivals on the market, and cooperation relates to the aspects of their key relationships at the given period.

Based on this assumption, enterprises within single industry act collectively to create competitive relations of cooperation. In the framework of cooperation, the economic environment changes completely, making an emphasis on a system of strategic interdependence of firms pursuing convergent interests and extracting the mutual profit. The first attempts to explain the concept of cooperation led to the market paradigm shift from traditional to global (Dagnino & Padula, 2002).

As it was previously noted, cooperation concept as an innovative behavior of rival companies has stand out the need for inter-firm cooperative interdependence. Therefore, the firms can create and promote their competitive advantages in forms of partnerships, strategic alliances, business networks and clusters by means of the coopetitive strategy (Bengtsson & Kock, 1999).

Among the positive aspects of such cooperation, organized in the format corresponding to the simultaneous competition, researchers mostly allocate the following: (1) the economy of scale and economy of resources of the enterprises, which otherwise are distracted by the excessive competition, and (2) the improvement of service quality, provided to the consumer, as it is obvious that several cooperating companies can satisfy better all the consumer's inquiries, than the single company working independently. (I.D. Kotlyarov, 2010: 83-90).

Taking into account the above mentioned, it is obvious, that the theoretical contribution to the topic is immense, as the scientific theoretical literature concerning the complex category of coopetition comprises of profound theoretical aspects, statistics researches and productive methodological approaches. Theory covers both competitive and cooperative advantages of the complex firms' behavior, as well as highlights the benefits of the innovative strategy. However, the research on the phenomenon is still in its early and conceptual phase.

Moreover, the majority of theoretical studies is devoted to partnerships between competitors of small and medium enterprises, as well as affects the relationships among companies within specific sectors (industry, telecommunications, mobile networks, aviation and air travel, pharmaceuticals, etc.). There is a significant set of scholar works devoted to the regularities and mechanism of development of the world economy and certain industries. The essential issues of the international competitiveness and efficiency of foreign economic businesses of the enterprises are in detail considered in works of well-known domestic and foreign scientists, such as M. Porter, E. Chamberlin and others.

Speaking about the description of the international oil & gas market structure and its' basic principles, it is important to mention that this issue was of high interest since long time. For example, in the work of A.F. Alhajji and David Huettner (2000) “OPEC and World Crude Oil Market from 1973 to 1994: Cartel, Oligopoly, or Competitive?” the characteristics of the oil & gas market were investigated. The authors finally came to the conclusion that the OPEC oil & gas market cannot be identified neither as a competitive market nor as a market with one dominant producer. Moreover, none of the existing in theory traditional market strategies could not be fully applied to the oil & gas sector, so, there should be used certain mixed multi-model to explain the inter-firm relations on the market concerned, but, from the authors' point of view, it needed more deep scientific research. Therefore, they did not mention the coopetitive specific of the oil & gas sector in general, although the conclusion of the mixed multi-model was clear.

Highly appreciating the significant contribution to the detection of regularities of development of the world oil & gas market in whole and its' key players in particular, it should be noted that the possible changes of the company's strategies towards coopetition remain low-investigated. Moreover, insufficient attention is devoted to the interaction among Russian major oil & gas players and their international rivals. There is a number of scholar papers and articles covering the role of the state and the leading position of the state-owned oil & gas companies in the world economy and international oil & gas trade. The concept of the international competitiveness of companies from the considered sector of economy and the factor of their activity's efficiency are in detail explored in works of foreign economists (those of M. Farrell, D. Schwarzman, etc.).

Only two works examined briefly touched the common for the oil & gas market combination of competition and cooperation. The last overall PhD work was issued by prof. Zemlyansky in 1998 and was called “The prospects of development of the world oil market”. The other research was announced by prof. K.N. Mylovidov during the open seminar in the Russian Academy of Science in 2004 under the heading of “The tendencies of global oil & gas business development”. Миловидов К.Н. Тенденции развития мирового нефтегазового бизнеса. // Российская академия наук. Институт народнохозяйственного прогнозирования. 2006. However, the mentioned comprehensive researches dealt mainly with the general overview of the oil & gas market development and pointed little attention on the intra-firm relationships.

The majority of the scholarly papers that are devoted to the issue of cooperation within the industry concerned takes into account whether (1) the relations between two different countries in the sphere of oil & gas and identify the governmental specific of the cooperation (for example, the works of Fam Ming Kiong on the Russian-Vietnamese oil & gas cooperation, of Prytkov A.G. on cooperation between China and Russia in the energy sector and many others) or (2) the development of foreign investments in the oil & gas industry in some particular country or region covering the motives of FDI growth with its' regional specific (for example, the papers on the development of Chinese oil & gas sector or that of Asia-Pacific region). The mentioned scholarly papers and articles examined in details the features of coopetition within the industry in particular countries and regions, but do not look at the industry's tendencies in whole.

1.2 The definition and the types of coopetition

coopetition international oil company

The definition of the phenomena

As it was noticed above, the phenomena of coopetition has emerged as a relatively new concept and the study degree of the problem is moderate. That is why it is unsurprisingly that the origin of the term “coopetition” is not evident.

It is agreed, that the founder and CEO of Novell Raymond Noorda first introduced the neologism in the 1980s while describing the essence of relationships between competitors, when they combined in order to create more valuable product, service or industry (Luo, 2007; Quint, 1997). Initially the term was mostly used in the IT-sphere and in the sector of innovations and technologies.

The etymology of the term “coopetition”, obviously, is derived from the categories of competition and cooperation, which takes place at the same period of time and between the same actors. However, the phenomena of coopetitive relations appeared well ahead of this occurrence: together with the first partnerships, cartels, alliances and join-ventures.

As it was already mentioned in the preceding paragraph, in the following years, this strategy was widely developed in a number of theoretical papers. The greatest contribution was made by Brandenburger and Nalebuff in their work “Coopetition”, published in 1996. According to their work, the essence of coopetition strategies comes down to the fact, that firms aim to increase the value by complementing each others' activity at some point of their value chain, while competing at other points (Nalebuff & Brandenburger, 1996a, 1996b).

Since then, a vast number of articles and researches appeared, providing different variants of definitions, typology and other aspects of the phenomena. The key definitions are provided in the Table 1 below.

Table 1. Definitions of coopetition

The most well-known of the following was the definition, presented by Bengtsson and Kock in 2000. Nevertheless, the majority of theoreticians noticed that there are three main features of the coopetitive strategy: (1) mutual benefit, (2) trust, (3) commitment (Adler, 1967; Farelly & Quester, 2003; M.H. Morris, A. Kocak, A. Ozer, 2007; Sargeant & Lee, 2004).

As it was noticed by researches, the mutual benefit is understood as certain profits receiving by every party of the coopetitive relations, although the volume of this benefit could be unequal for the companies involved. The category of trust is widely acknowledged essential for log-term cooperative relations. Taking into account the interplay among initial competitors, the level of trust becomes of even greater concern. As for the commitment, its' existence means the willingness to support the valued relationship by means of ongoing investments of financial and non-financial nature (Morris et al., 2007; Akdogan et al., 2015).

Other researches, such as Ganguli, tend to use the definitions and descriptions of contiguous categories so as to define the phenomena of coopetition. For example he examined the relations of coexistence, competition and cooperation along with the term “coopetition” and provided the following explanations (Ganguli, 2007: p. 10):

? coexistence is the relationship among the actors of the same industry (not rivals) that include informational and social exchanges, rather than economical one;

? cooperation is the relationship among the actors of the same industry (not rivals) that provides the full range of exchanges, including knowledge, business information, experience, resources, etc. The format of such relations is more or less formal and reflects in written agreements, memos;

? competition is an interaction among competitive parties from the same market, power and interdependence are equally distributed among the parties within the industry;

? coopetition, therefore, is a relationship, that is composed of the components of every aforesaid category and can include both economic and non-economic exchanges. On one hand, the competitive side bases the power of the actors depending on their initial market position and market share. On the other hand, cooperative side derives the joint goals aimed by the parties.

Our overall theoretical review on the definitions proves that coopetition means simultaneous cooperation and competition interplay with a mutual benefit for involved partners; and in such relationship, the actors keep in mind that the success of their own does not depend on the failure of the others (Tomski, 2011).

The types of coopetition

As well as any theoretical institution, the category of coopetition is rather diversified. There is a number of different classifications, provided by the explorers.

In dependence of the levels of cooperation and competition the coopetitive relations can be called (1) national, (2) global, (3) hybrid or (4) multidimensional coopetition. The illustration of the given classification is provided on the Figure 1 below.



Figure 1. Types of coopetition in terms of the market levels

Source: Klimas. P. Multifaceted nature of coopetition inside an aviation supply chain - the case of the aviation valley. // Journal of economics and management. Vol. 17. 2014. P. 102.

According to P. Klimas (2014), the national coopetition is the simplest one and covers the interactions only at the national level; the global one intends the coopetitive relationships between major companies in the global market; the third variant of coopetition, hybrid, occurs if the actors compete on the national level and cooperate globally or vice-versa; the multidimensional coopetition, as the most complicated one, mixes all the above mentioned types of inter-firm cooperation and leads to simultaneous cooperation and competition on both the national and global markets.

Depending on the nature of initial relations between the actors, we can identify either horizontal (the relations between direct competitors) or vertical coopetition (channel relationships, where one firm is a contractor or supplier of its' direct competitor). According to M. Galvagno and F. Garraffo (2010), the major part of the researches and theoretical articles, devoted to coopetitive issues, are focused on vertical cooperation between competitors. However, as it can be seen from the next chapters, the horizontal coopetition in forms of joint ventures and strategic alliances is far more popular among oil & gas major companies.

According to Bengtsson and Kock (2000), there is no balance between the level of cooperation and competition within the coopetitive strategy. Depending on this level of cooperation/competition, three different types of coopetitive relations can be noticed: (1) cooperation-dominated relationships, (2) equal relationships and (3) competition-dominated relationships. The exact type of coopetition depend on several factors, such as the industry, the goals of the partners, the special features of the market behavior etc., but all the types lead to certain benefits for the actors. In 2005-2007 this theory was further developed by Luo X., whose classification is illustrated in the Table 3 below.

Table 2. Types of coopetition depending on relationship balance, intensity

Source: Luo X., Slotegraaf R.J., Pan X. Cross-functional “Coopetition”: the simultaneous role of cooperation and coopetition within firms. // Journal of marketing. 2006. No. 70. P. 13.

Moreover, this classification was followed by four types of actors' behavior: (1) alienator or monoplayer is involved in low competition together with the low collaboration, (2) contender prefers high level of coopetition, while the collaborative relations keep the lower pace, (3) for a partner preferable balance is low competition accompanied with the high level of collaboration, and (4) coopetitor or adapter with maximum levels of both competitive and collaborative factors (Chin et al., 2008). The last are the most ambitious and active users of coopetitive strategy as these companies mutually rely on each other to achieve their respective goals, maintaining both the highest degree of competition and the highest level of cooperation.

The fourth typology takes into account the number of possible interdependent actors and the fields of cooperation within one coopetitive structure:

(1) simple dyadic system means that relationships involve only two competitors, who decided to cooperate within two sectors of their activity;

(2) simple network coopetition is defined as relationships among multiple number of rivals at one level of production chain; and

(3) complex network combines the features of two previously described systems and means that several companies cooperate on several levels of the value chain.

It is obvious, that not every typology can be regarded from the oil & gas industry perspective. As for coopetition types in the industry explored, the most matching are regarded the following classifications:

(1) Vertical and horizontal coopetitive relations;

(2) Simple dyadic, simple network and complex network coopetitive relations.

The first classification of coopetitive relations can be fully illustrated with the examples from the oil & gas intra-industry cooperation, as one of the specific features of oil & gas companies is their vertically-integrated structure. Therefore, they are able to cooperate in every point of the production chain (both vertically and horizontally).

For instance, the relations between the Chinese CNPC and the Russian gas producing leader Gazprom on the supplies of the Russian gas to the Chinese company is a good example of vertical coopetition. China and Russia sign $400 bn gas deal. // Financial Times. May, 21 2014. Electronic source. http://www.ft.com/ (access date: 08.05.2016) As an example for horizontal coopetition we could mention any of the common projects on the form of joint ventures, like that of Saudi Aramco (Saudi Arabia) and Sinopec (China) on the oil refinery project. Saudi Aramco-Sinopec joint venture unveils new oil refinery project. January, 21 2016. Electronic source. http://www.albawaba.com/business/ (access date: 08.05.2016)

As for the second typology, it could be used for oil & gas intra-industry relations, because of the complexity of relations within the industry. For example, simple dyadic relations are established between two acting parties in certain spheres - bilateral agreements on cooperating in several spheres (British Petroleum and Kuwait Petroleum Corporation agreement on upstream and midstream cooperation). BP and Kuwait Petroleum Corporation sign agreement. March, 30 2016. Electronic source. http://www.bp.com/en/global/corporate/press/press-releases/ (access date: 08.05.2016) Simple network relations are widely presented by the upstream and downstream joint ventures, where two actors cooperate in exploration and extraction and refinery processes (for example, the Rosneft and Exxon Mobil liquid natural gas plant in the Far East region). Глава «Роснефти» принял участие в работе международного инвестиционного форума в Сочи. September, 27 2013. Electronic source. http://www.rosneft.ru/news/news_in_press/27092013.html (access date: 08.05.2016) The last type of the inter-firm coopetition - the complex network - can be illustrated with the joint activity of several oil & gas companies in Mozambique in offshore and onshore projects. The companies are the Italian ENI, the Portuguese Galp Energia, the Korean KOGAS and Empresa Nacional de Hidrocarbonetos (Mozambique) and the Chinese CNPC with the not-direct ownership. ENI official site. Electronic source. http://www.eni.com/en_IT/media/press-releases/ (access date: 08.05.2016)

Moreover, we can define several coopetitive typologies for the oil & gas sector. Firstly, according to the various spheres of the oil & gas companies' activity, it is possible to cooperate within

(1) upstream sector (exploration and extraction of the crude oil & gas offshore or onshore);

(2) midstream sector (transportation and logistics);

(3) downstream sector (refining and petroleum products production);

(4) petrochemicals production;

(5) complementary activity (e.g., cooperation in the educational sphere as that of SOCAR and British Petroleum in the sectors of operating, mechanical and electronic support of the industrial objects); SOCAR official site. Electronic source. http://www.socar.az/socar/en/ (access date: 08.05.2016)

(5) complex cooperation (involves cooperation in a number of above listed levels of the companies' activity).

Secondly, taking into account the legal form of coopetitive relations, we can identify relationships based on

(1) supply contracts (oil/gas/petroleum products/components);

(2) production share agreements (the specific regime, covering the relations with the government, tax regime, etc.; e.g. the agreements on offshore projects Sakhalin-1, Sakhalin-2);

(3) joint ventures (the most widely used form of cooperation in the foreign countries);

(4) preliminary agreements (general agreements either binding or non-binding, establishing the basic principles of the future cooperation; e.g. Memorandum of Understanding between Exxon Mobil and Mexican Pemex).

1.3 The possible prerequisites and outcomes of coopetition

According to the previous paragraphs, the phenomena of coopetition has appeared recently and has developed from the traditional concept of competition as a basis of the market driven economy. The global coopetition could not rise on its' own without any drivers and, of course, should end with certain substantial effects. Despite the sufficient theoretical papers devoted to the topic, there is no extension research over both the prerequisites and the outcomes of coopetition. Theoreticians provide various set of coopetition circumstances, its' advantages and benefits, motives and other theoretical categories that we can use while identifying the possible prerequisites and outcomes of the coopetitive strategies. The results of the conducted analysis is provided in the following paragraph.

The prerequisites of coopetition

Obviously, every process, whether it is biological, political or economic, has its' specific reasons or prerequisites. The prerequisites of coopetition are covered by numerous scholarly papers and articles. There are no one common vision upon the issue examined. Moreover, every scholar propose his/her own list of key prerequisites that almost every time overlap with each other.

Some scientists tend to create certain classification of the main prerequisites. For example, Antonio Barretta (2008), the explorer of the health-care industry, looked at the prerequisites through the paradigm of the dual essence of coopetition that included the competitive and cooperative substances. He proposed two main groups of coopetition contextual preconditions: (1) competitions determinants, and (2) cooperation determinants. The examples of the given groups are provided in the Table 4 below.

Table 3. Preconditions of coopetition divided into competitive and cooperative components (composed by the author)

Source: composed by the author.

However, the majority of the theoreticians provides the unsystemized list of possible prerequisites and preconditions of coopetitive relations. Therefore, it is important to split the category explored into several subcategories.

Each company carries out its' performance on two levels: macro and micro level. So, in order to create the most clear image of those circumstances, that drive rivals towards cooperation, we propose to divide them in two groups: (1) macro-level prerequisites, and (2) micro-level prerequisites (internal motives and attitudes of the competitors).

The first set of prerequisites covers impersonal economic and strategic factors that affect the market environment. Such factors include:

- globalization and the growing attractiveness of foreign markets resulted in promoting the interdependence and interconnection between multinational companies of the same industries;

- the developed market environment, as coopetition more often take place in highly developed countries;

- the heterogeneity and asymmetry of resources that lead to strengthening the coopetitve relations among global market players (Dagnino & Padula, 2007: 32-52);

- the existence small- or medium-sized companies, as this enterprises tend to cooperate easier due to their elasticity and mobility (Gnyawali & Park, 2009: 308-330);

- the existence of the actors, that are initially at the more or less same level of financial, technological and corporate development (according to the basic principles of the Game theory).

Thus, the above listed factors affected mostly the economic environment and the global market, where companies are to interact. All the mentioned tendencies forced market actors to change their international strategy from clearly competitive one to the complex coopetitive.

As for the international oil & gas companies, we can adapt several of the global prerequisites listed above:

- the coopetitive relations among oil & gas companies are established n consequence of globalization tendency (the oil & gas sector of economy is not an exception for the overall globalization process);

- the heterogeneity of resources (the natural resources are unequally expanded all over the world, therefore, certain companies initially have more beneficial position on the market and are attracting “cooperative” competitors);

- similar level of development of the companies (as the market entry barriers are too high in the industry, the companies operating on the market should demonstrate relatively high standards of performance and development).

Regarding the group of micro-level prerequisites, theoreticians propose quite large range of internal motives and attitudes, leading to coopetition. Among the internal attitudes of the potential coopetitors we can name the following:

- the existence of two or more parties willing to interact;

- the parties are treated as the independent market units (Kriventsova, 2006);

- each party possesses a certain value, which other parties look for;

- each party desires to get rid of some value to get, in return, some exceptional belongings from another party;

- the parties are willing to develop and maintain the long-term coopetitive relations and establish mutual behavior norms;

- the existence of inter-firm activities that are far away from the customer, as the firms tend to cooperate mostly in these sphere, while they prefer to compete within activities close to the customer (Bengtsson & Kock, 2000; Rusko, 2011);

- the parties are aware of potential positive and negative aspects of relations, that is they enter into competitive relations on the conscious basis (Zineldin, 2004).

It is worth noticing, that the mentioned attitudes can be applied to coopetitors in every industry, disregarding the types of competitive relations. Thus, all these internal factors are directly related to the oil & gas companies. In order to illustrate the given proposition, we can look at the cooperative relations of such companies as the Russian Rosneft and European Royal Dutch Shell. These two companies are independent market actors (each party has a set of assets, including extraction fields, refinery plants, retail networks, etc.), willing to interact on the ongoing long-term basis (the first joint project between the two parties was launched in the 1996 and dealt with the pipeline issues). The parties cooperate up to now in various spheres of oil & gas industry, including the exchange of resources. Mainly, the cooperative field is far enough from the final consumer: supplies of crude oil, transportation issues, oil refinery and petrochemicals production. The retail part of the value chain remains independent.

Moving to the internal firm's motives that push it towards coopetition, we should consider the stage development of any cooperative relationships, proposed by the Chinese researchers Wang Xingxiu et al. Each stage involves certain motives and concerns (Wang Xingxiu et al., 2013: 401-402).

According to their work on coopetitive relations, such interaction among the actors always start from the phase No. 1, called “selection process”. During this stage, potential partners have the possibility to evaluate the reliability, experience and the level of trust of each other and make the choice whether to cooperate or not. The second stage is devoted to the organizational interaction process, which helps to specify the parties' tasks, goals and exchangeable resources. The third stage covers the strategic interaction process, over which firms develop and reframe their strategies. Motives for coopetition are different in the specific process with distinct concerns and contents, as shown in Table 4.

Table 4. The motives depending on stages of the relations development

Source: Wang Xingxiu, Liu Hanmin,Yang Chunxia. On the Motives for Coopetition in Complex Organizations: An Explorative Analysis. // Advances in information Sciences and Service Sciences (AISS). Vol. 5, No. 9, May 2013. P. 401-402.

Speaking about the prerequisites of the coopetitive strategies, it is necessary to consider the first stage of the relations development and the motives, involved in it. Moreover, the most complex motives from those given in the Table 4 are push- and pull-based motives of coopetition. Therefore, they required special attention; extra description is presented in the Table 5 below.

Source: Wang Xingxiu, Liu Hanmin,Yang Chunxia. On the Motives for Coopetition in Complex Organizations: An Explorative Analysis. // Advances in information Sciences and Service Sciences (AISS). Vol. 5, No. 9, May 2013. P. 401-402.

The proposed paper provides the so-called “other” motives of coopetition that are essential on the forthcoming stages of coopetitive relations' development, mostly during the establishment and further development of the coopetition among the actors. These motives include, but are not limited to, the following: (1) resource heterogeneity, that is similar to the global coopetition prerequisites, stated above; (2) knowledge and experience sharing; (3) organizational goals etc. That could be explained with the source of the given “other” motives - the scholar paper by Giovanna Padula & Giovanni Battista Dagnino (2007), who identified the mentioned motives in the separate classification.

Table 5. The description of the coopetition motives

Theoreticians provide one more classification of the motives, driving the market players towards coopetitive interaction: (1) global motives and (2) private motives or interests (Quintana-Garcia & Benavides-Velasco, 204: 927-938). The following belongs to global motives:

- counterstaining to competitors from other branches of economy that offers goods-substitutes on the target market;

- creation of uniform standards of service and control of its' observance, meaning that the parties through joint efforts develop the ethical code; and in some cases create branch association which is also urged to carry out voluntary certification of the companies working in this sphere; the consumer, thus, receives the guaranteed quality of service, and the companies, that are not interested to adhere to these standards and behaving, are gradually washed away from the market.

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