Publications
Publications
- January 2001 (Revised May 2010)
- HBS Case Collection
BP Amoco (B): Financing Development of the Caspian Oil Fields
By: Benjamin C. Esty and Michael Kane
Abstract
British Petroleum and Amoco were the two largest members of the Azerbaijan International Oil Consortium (AIOC), an 11-firm consortium that was spending $10 billion to develop oil fields in the Caspian Sea. As of March 1999, AIOC had completed a $1.9 billion development project known as Early Oil. The two companies, however, had financed their shares of this project in different ways: BP used internal funds (traditional, on-balance sheet corporate finance), whereas Amoco was one of five AIOC partners that raised $400 million of project finance. Following the BP/Amoco merger in December 1998, managers in the combined firm's finance group had to reassess the Early Oil financing strategy and determine the best way to finance its share of the $8 billion Full Field Development Project. Should it use internal funds, project finance, or a mixture of the two?
Keywords
Investment; Policy; Capital Budgeting; Project Finance; Emerging Markets; Mergers and Acquisitions; Financing and Loans; Financial Strategy; Mining Industry; Energy Industry; United Kingdom; Europe
Citation
Esty, Benjamin C., and Michael Kane. "BP Amoco (B): Financing Development of the Caspian Oil Fields." Harvard Business School Case 201-067, January 2001. (Revised May 2010.)