Vertical (De)-Integration in the oil and gas industry in Russia - vertical boundaries

by

ACKNOWLEDGEMENT

I would like to express my thanks to my advisor, for his suggestions, comments, patience and understanding. Very special thanks to my parents, my father, my mother, my brother and my sister who were continuously supporting me throughout my life and leaving me free in all my decisions. I would also like to thank my colleagues for his technical support whenever I needed. I would like to thank to Department, all the university managers, teachers and students with whom I have worked.

I certify that the work presented in the dissertation is my own unless referenced

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DECLARATION

I, [type your full first names and surname here], declare that the contents of this dissertation/thesis represent my own unaided work, and that the dissertation/thesis has not previously been submitted for academic examination towards any qualification. Furthermore, it represents my own opinions and not necessarily those of the University.

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ABSTRACT

Russian oil industry is very specific one and has a number of distinctive features. First of all the majority of Russian oil companies are controlled and reigned by the government. Also, the whole industry has been developed in the free market only since 1990 (fall of USSR), therefore, it has been developed in a bit different way that its western rivals did. Russian oil companies are considered to be heavily over-integrated in comparison to their western competitors. In addition, the efficiency of Russian oil and gas companies is often discussed from its political aspect. Therefore, the purpose of this study is to analyse the recent trend in (de) integration process in the oil industry in Russia, as a key factor of companies' performance. I would like to compare Russian oil and gas industry with the global one, with respect to degree of its integration and trends of the future development. Also, I would like to assess how all the Russian specifics, mentioned above, affect the performance and degree of integration in the industry.

TABLE OF CONTENTS

ACKNOWLEDGEMENTII

DECLARATIONIII

ABSTRACTIV

CHAPTER 01: INTRODUCTION1

Problem Statement1

Research Aims and Objectives1

CHAPTER 02: LITERATURE REVIEW3

Overview of Russian Oil and Gas Industry4

Brief History of Russian Oil Industry5

Market Dynamics: The Key Players6

Market for Exports10

Vertical Integration11

Vertical Integration and its Types13

Backward or Upstream Vertical Integration13

Forward or Downstream Vertical Integration14

Balanced or Downstream and Upstream Vertical Integration14

Vertical Integration and Oil Industry16

De-integration, outsourcing, and networked integration20

CHAPTER 03: METHODOLOGY22

Ethical Concerns22

CHAPTER 04: DISCUSSION23

Key Facts of Russian Oil industry23

Vertical Integration and Russian Oil and Gas Industry26

Effects of vertical integration on efficiency27

Summary of the Findings29

CHAPTER 05: CONCLUSION31

The Future of the Russian Oil Industry32

REFERENCES35

APPENDIX38

Appendix A: List of Figures38

Appendix B: List of Charts40

Appendix C: List of Tables42

CHAPTER 01: INTRODUCTION

Every organisation has to face one of the most significant and strategic question which is related to the organisation's boundary and location. Every organisation must predict the activities concerning the production it must undertake internally, what products it has to procure or functions it has to contract out (Nunn and Trefler 2008, p. 27). It should also predict when it must trade the products forward to the next step of the value ...