FOCUS 14
It is important not only to recognise these trends but also to respond accordingly when approaching joint venture opportunities. For example, how should oil and gas businesses differentiate their propositions to a much more diverse and more assertive selection of potential partners – especially when their competitors may be much less familiar? In addition, is the current prevailing approach to joint ventures fi t for purpose in today’s more volatile competitive environment and able to create and protect value from a minority shareholder position?
T
he reasons why joint ventures’ are formed are well understood. What is perhaps less well known is the impact that they are having on today’s competitive landscape for the industry, and their potential to alter the balance of power across the value-chain.
In several different parts of the world, national oil and gas companies (NOCs) are no longer seeking ‘equal’ partners – even supermajors are being approached as providers of technology or project management skills, meriting only minority partner status or sometimes even contracted on a consulting- fee-per-barrel basis. At the same time, the dynamics of the industry are being altered, as companies that have previously been regarded only as ‘contractors’ are now being considered as joint venture partners.
HOW SHOULD OIL AND GAS BUSINESSES DIFFERENTIATE THEIR PROPOSITIONS TO A MUCH MORE DIVERSE AND MORE ASSERTIVE SELECTION OF POTENTIAL PARTNERS?
Today, many oil and gas companies seem to be failing to evolve their approach to joint ventures in a number of ways. First, there is often no understanding of potential benefi ts to both parent companies stemming from the joint venture. For example, if one parent company is also acting as a supplier to the joint venture it may benefi t from economies of scale or stronger negotiating positions with its own suppliers. Industry majors will increasingly need to be able to understand such factors when negotiating with new potential partners and assessing unfamiliar opportunities outside their comfort zone, such as helping NOCs to expand their businesses beyond their home countries.
To protect value and ensure infl uence in minority joint ventures, greater care also needs to be taken to look at the broadest spectrum of potential issues. Individuals with operational experience can provide the practical detail needed to ensure proposals can be implemented.
© 2013 KPMG LLP, a UK limited liability partnership, is a subsidiary of KPMG Europe LLP and a member fi rm of the KPMG network of independent member fi rms affi liated with KPMG International Cooperative, a Swiss entity. All rights reserved.
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JOINT VENTURES
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