Venture Partnerships In Upstream Oil And Gas Industry

Published Date: 02 Nov 2017

ABSTRACT:

Upstream Oil and Gas industry involves the exploration and production of petroleum resources for economic gains. These processes require huge capital investment and involve high degree of uncertainty with possibilities of incurring unwholesome losses. There are many categories of risks associated with this costly venture including relational and performance risks. To manage these risks, Oil and Gas companies are increasingly migrating to inter-organizational platforms through collaborative business strategy in form of Joint Ventures (JV) with host Governments and or other companies in upstream sector with the aim of spreading costs, risks and gains. The success or failure in managing these risks depends largely on the influence of trust and control. In this paper, we shall be critically evaluating the roles of trust and control in managing relational and performance risks of JV partnerships in upstream oil and gas industry by reviewing existing literatures and researches. The paper is divided into seven sections. The first section discusses the concept of strategic partnership from the perspective of JVs and the motivation behind it, including the types of risks involved in cultivating such collaboration, with focus on relational and performance risks in upstream oil and gas industry. The second section reviews the literature of such risks in JV management processes and the resource orientation of partners in risk management. The third section will examine the factors of trust and control in JV risk management of upstream oil and gas sector, highlighting specifically various trust dimensions and modes of control. Section four primarily will look at the various mechanisms of managing relational and performance risks in JV partnerships through trust and control. Finally, we shall present a discussion, draw conclusion with recommendations and state the limitations and area for further studies.

Presented To:

Dr. Evangelia Fragouli

CONTRACT CONCERNING PLAGIARISM

I, the undersigned, have read the Code of Practice regarding plagiarism contained in the Students' Introductory Handbook. I realise that this Code governs the way in which the Centre for Energy, Petroleum and Mineral Law and Policy regards and treats the issue of plagiarism. I have understood the Code and in particular I am aware of the consequences, which may follow if I breach that code. I also authorise the centre to scan the e-copy of my research paper through the Plagiarism Detection Software to detect plagiarism.

SIGNED: ____________________________

Date: May 06, 2013

Managing Relational and Performance Risks of Joint Ventures in Upstream Oil and Gas Industry: What are the Roles of Trust and Control?

Gerald Eze Ajah (13000634)

University of Dundee,

Scotland, United Kingdom

ABSTRACT:

Upstream Oil and Gas industry involves the exploration and production of petroleum resources for economic gains. These processes require huge capital investment and involve high degree of uncertainty with possibilities of incurring unwholesome losses. There are many categories of risks associated with this costly venture including relational and performance risks. To manage these risks, Oil and Gas companies are increasingly migrating to inter-organizational platforms through collaborative business strategy in form of Joint Ventures (JV) with host Governments and or other companies in upstream sector with the aim of spreading costs, risks and gains. The success or failure in managing these risks depends largely on the influence of trust and control. In this paper, we shall be critically evaluating the roles of trust and control in managing relational and performance risks of JV partnerships in upstream oil and gas industry by reviewing existing literatures and researches. The paper is divided into seven sections. The first section discusses the concept of strategic partnership from the perspective of JVs and the motivation behind it, including the types of risks involved in cultivating such collaboration, with focus on relational and performance risks in upstream oil and gas industry. The second section reviews the literature of such risks in JV management processes and the resource orientation of partners in risk management. The third section will examine the factors of trust and control in JV risk management of upstream oil and gas sector, highlighting specifically various trust dimensions and modes of control. Section four primarily will look at the various mechanisms of managing relational and performance risks in JV partnerships through trust and control. Finally, we shall present a discussion, draw conclusion with recommendations and state the limitations and area for further studies.

Keywords: Relational Risks, Performance Risk, Trust, Control, Joint Ventures, Partnerships

1.0 Introduction

The upstream sector of the Oil and Gas industry has become increasingly more competitive, coupled with the huge capital requirement and high degree of uncertainties associated with upstream petroleum business. These have stimulated various interests in the sector thereby making players to seek inter-organizational collaboration. Consequently, more and more companies are joining together in strategic partnerships (Coletti, Sedatole and Towry 2005; Das and Teng 1999). For the purpose of this research we shall be looking at these partnerships in upstream oil and gas from the perspective of Joint Ventures. According to Kogut (1988), Joint Venture arrangement is a strategic choice where two or more companies pool a portion of their assets ‘‘together within a common legal organization’’. The key motivations behind these strategic arrangements are basically to spread the costs, the risks and the profits; access key technology and technical knowledge, access a market with strong entry barriers and to maintain a competitive positioning (Hladik 1988). Joint ventures are formed on the basis of strategic match by establishing a common ground between the perceptions of the parties involved, however, keeping in mind that they typically come from different socio-cultural, technical and economic backgrounds (Kogut 1988; Lorange and Roos 1993). This form of alliances sometimes introduces new dimensions of risks which are relational and performance based due to lack of trust and issues of control (Jaeger 1959). In this paper, we shall examine the roles of trust and control in managing relational and performance risks of Joint Venture partnerships in upstream Oil and Gas industry.

Some researchers have emphasized the relevance of relationship management and risk mitigation in strategic partnerships including Joint Ventures (Wullenweber, Jahner, and Krcmar 2008; Klepper 1995). In establishing this, Trust and control are considered to be interlinked with relational and performance risks factors in Joint Ventures. In order for partnerships to work, partners should manage these risks by understanding the role of trust and control (Das and Teng 1999). Some have argued that the relegation of trust and control in management of these risks is responsible for the high failure rates of most strategic alliances including Joint Ventures (Gullati 1992).

This paper is divided into seven sections. The first section is the introduction and the second section discusses the overview of the concept of strategic partnership from the perspective of Joint Ventures and the motivation behind it. This also includes the types of risks involved in cultivating such collaboration with focus on relational and performance risks in upstream oil and gas industry. The third section reviews the literature of such risks in JV management. The fourth section will examine the factors of trust and control in JV risk management of upstream oil and gas sector, highlighting specifically various trust dimensions and modes of control, the interdependency of trust, control and risk. We will also briefly mention the risk appetite in JV operations and the need for trust and control. Section five primarily will look at the various mechanisms of mitigating relational and performance risks in JV partnerships through trust and control. Finally, we shall present a brief discussion, draw conclusion and make recommendations.

2.0 Case Overview

2.1 Joint Venture Partnerships, Key Motivations and Risks Factors in Upstream Oil and Gas Industry.

Joint Venture (JV) as a strategic choice in the management of inter-organizational businesses has attracted a lot of attention in recent years. Its increasing relevance has been demonstrated both locally and internationally by business concerns particularly in upstream Oil and Gas sector. In a bid to understand the concept of Joint Venture, various definitions have emerged. According to Kogut (1988), ‘‘JV occurs when two or more firms pool a portion of their resources within a common legal organization’’. Under these considerations, there is a common interest, a contract, and joint asset and mutual benefits to the parties involved.

In this paper we will briefly examine the various motivations behind JVs. According to Pate (1969), JV is a collusion strategy to reduce market competition. In the views of Berg and Friedman (1980), JVs are formed with the following motives; 1. Exploit economies of scale and risk diversification. 2. Overcome barriers to entry into new market. 3. Pooling together inter-firm complementary knowledge, and 4. Allay chauvinistic reactions when entering a foreign market. In the works of Kogut (1988), three theoretical approaches where examined to explain the choice of JVs and key motivations. First is the theory of transaction costs proposed by Williamson (1975, 1985), this posits that JV firms choose to transact when they can minimize the sum of production and transaction costs. Second is the theory of strategic behaviour proposed by Vickers (1985), which posits that JVs are motivated by strategic behaviour to prevent market entry or to erode competitor’s position, and the third is the theory of organizational learning which sees JV as an instrument of learning and transfer of know-how. In this view, JV is an avenue for the transfer of requisite entrenched capabilities which the firms cannot copy through licensing or usual market transactions (Dimaggio and Powell, 1983). However, it is also important to look at the factors of motivation as proposed by Hladik (1988). According to him, the key motivations behind JV in upstream oil and gas sector are; 1. To spread costs, risks and profits. 2. Access technology and technical knowledge. 3. Access markets and 4. Enhance competitive positioning. Past studies have also shown JV as a means of managing limited resources and uncertainties (Gullander 1975), reduction of risk and uncertainties have been presented as key motivation for JVs (Hill and Hellriegel 1994). These later views have element of risk and for the purpose of this paper, we will adopt them.

When JVs are formed, companies are usually sceptical about each orders competences, capabilities and level of transparency. These issues give rise to relational and performance risks. To overcome these and achieve the purpose of JV arrangements in upstream oil and gas businesses, the factors of trust and control are critical. In the next topic, we shall be examining these risks in greater details.

2.2 Risks in JV Partnerships in Upstream Oil and Gas Industry.

Risk and risk management are concepts that are taking a centre stage in the operation and management of enterprises (Lam 2003). But what is risk? According to Young and Tippins (2001), ‘‘risk is defined as variation in outcome around an expectation’’ This outcome can be positive or negative depending on risk perception which generally relate to the estimate of probabilities of various outcomes based on the nature of the uncertainties (Fraser and Simkins 2010). According to March and Shapira 1987), the negative outcomes of risky situations are of great concern to managers. Therefore risk is a very crucial element in managing strategic partnerships including JVs.

In the upstream Oil and Gas sector, companies come together to sign-off a deal to work collaboratively to achieve mutual benefits under JV arrangements. Right from the expression of interests, there is an atmosphere of uncertainty sometimes non-verbal. Each party is sceptical on the abilities and the tendency of the other to be honest and transparent. Sometimes, JV partners may not be compatible and do not share common ground on issues of perception and motivation (Edstrom et al 1984). This could lead to the failure of the partnerships. Studies have shown that the failure rate of alliances is higher than single firm (Bleeke and Ernst 1991) and that the rate of failure is as high as 80% (Gullati 1992). When a company transact business alone, there are no issues of opportunistic behaviour but when there is Joint Venture, there is a risk of partners not acting in good faith. This gives rises to relational risk and if there is a likelihood or potential of poor performance in the business, then performance risk is imminent (Das and Teng 2011). In the next topic, we shall be limiting our discussion to relational and performance risks in upstream oil and gas sector.

2.2.1 Relational Risk in Upstream Oil and Gas Industry

In upstream Oil and Gas industry, relational risks occur when partners in JV arrangement could not elicit adequate cooperation from each other. According to Das and Teng (1996), relational risk is defined as the likelihood and consequences of not having acceptable level of cooperation. This situation can be attributed to opportunistic behaviour such as cheating, falsification, appropriating resources, deception, skirting, manipulation etc. These unwholesome behaviours are likely when the partners have not established a common ground on the issues of perception, motivation and interest and as a result, conflict is inevitable.

According to Khanna et al (1998), there should be mutual benefits accruing the partners in line with the rules of engagement. If one company privately and unduly benefits outside the terms of contract, then it is regarded as conflict of interest. Companies in JV can also demonstrate lack of commitment in delivering the common goal, when one company break the secret code of another with intention of accessing their distinctive competences which are proprietary such as database, technical know-how or specialized knowledge (Herbert 1984). When this happens, the relationship between the JV partners will be strained and the JV performance negatively impacted.

2.2.2 Performance Risk in Upstream Oil and Gas Industry

Performance in upstream Oil and Gas JV operation is defined as the effectiveness in achieving the aspirations of the partners (Hill and Hellriegel 1994). The key factors that affect performance in upstream oil and gas industry are inconsistent government policies, frequent change in demand, stiff competition, new entrants into a market and relational factors (Das and Teng 2001). This proposition was tested using a contingency model as shown in figure 1.

Figure 1: A contingency model of Joint Venture Management.

Source: Hill and Hellriegel (1994)

4.0 Risks in JV Management Process in Upstream Oil and Gas

According to Das and Teng (1999), Joint Venture management is a process that consist of four stages which are; Partners selection, JV structuring, Joint Venture Operation, and Evaluation of JV Performance ( see figure 2).

Figure 2: Managing Risks and Their Impact on Performance

Source: Adopted from Das and Teng (1999).

3.0 Factors of Trust and Control of JV Risk Management in Upstream Oil and Gas Industry.

Different perspectives of trust have been presented by various researchers in literatures. According to Gambetta (1988) and supported by Boon and Holmes (1991), trust has been defined as positive expectations from others in a risky situation. However, others have highlighted it as a dependency phenomenon by defining it as confidence on others in a risky situation (Hosmer 1995). The issue of trust is a multi-level phenomenon that occurs at personal, organizational, inter-organizational and international levels (Das and Teng 2001). For the purpose of this paper we shall be focusing on the inter-organizational perspective of trust. Under JV arrangements, trust is believed to be a major factor of achieving cooperation (Sydow 1998). In the upstream oil and gas industry, it is believed that trust among JV partners will help to reduce issues of opportunistic behaviour, integrate the partners more, and reduce time and resources in formal contracting. It is also believed that the development of trust will engender true cooperation among JV partners and reduce relational and performance risks (Holmes 2004; Kanter 1994;). It has been noted that risk management culture will not survive except is built on a strong foundation of trust (Young and Tippins 2000).

Beside trust, control is another factor of risk in the management of upstream oil and gas JVs. Holmes (2004), suggested that control is any measure taken by a business to prevent, eliminate or reduce losses. According to him, it enhances the chance of profits and reduces the severity of losses. Also according to Das and Teng (2001), it is seen as process of monitoring and regulating to ensuring that organizational goals are achieved in line with proposed plan. However, Leifer and Mills (1996), defined control as ‘‘a regulatory process by which the elements of a system are made more predictable through the establishment of standards in the pursuit of some desired objective or state’’, and for the purpose of this paper, we shall be adopting this view. Control is very important in JV partnerships in upstream oil and gas industry and it can be realised through; Agreement between parties, Governance structures, and management (de Man and Roijakkers 2009).

From the foregoing, trust and control are essential elements in the management of relational and performance risks in upstream oil and gas industry as demonstrated using the inter-organizational system and decision-making process frameworks. (See figure 3).

-

-

-

-

-

-

-

+

Figure 3: The use of Inter-organizational Systems to Support Trust and Control.

Source: Adopted from Gallivan and Depledge (2003)

The next topics will examine the trust dimensions and the modes of control in upstream oil and gas industry.

3.1 TRUST DIMENSIONS

Trust is multidimensional as suggested by many researchers (Lewicki et al. 1998;). According to Sheppard and tuckinsky (1996), trust can be categories into three namely; Deterrence-based, knowledge-based, and identification-based. Young and Tippins (2000) suggested that trust is confidence in others and relates to achieving results, integrity and demonstration of concerns. In another view, Barber (1984), has suggested that trust has a dimension of goodwill which is based on ‘‘the expectation that others in our social relationships have the moral obligations and responsibility to demonstrate a special concerns for other’s interests above their own’’. On the basis of this opinion, Nooteboom (1996), suggested that ‘‘trust may concern a partner’s ability to perform according to agreements (competence trust) or his intentions to do so (goodwill trust)’’. For the purpose of this paper we shall adopt this last view on the dimension of trust.

Trust is only considered relevant in risky situations; therefore without uncertainty in the outcome, then trust is inconsequential (Coleman 1990). And the relationship between trust and risk is that trust reduces perceived risk in a JV relationship as expressed by Inkpen and Currall (1997). Subsequently, we shall examine briefly the relationship between the types of risk and the specific dimensions of trust.

3.1.1 Relational Risk and Goodwill Trust Relationship.

Goodwill trust represents when JV partner acts in good faith, good intentions, and integrity (Nooteboom, Berger and Noorderhaven 1997). This tends to reduce perceived relational risk in JV partnership because there is confidence in the union for cooperation. However, goodwill trust has no relationship with perceived performance risk.

3.1.2 Performance Risk and Competence Trust Relationship

The success of JV operation in upstream oil and gas industry is very crucial. This depends largely on the competences of the JV partners. Competence therefore relates to the strength of a company in terms of its resources and capabilities. When there is high level of competence trust on the JV partnership, the perceived performance risk is greatly reduced ensuring higher performance. However, there is no relationship between competence trust and relational risk.

3.2 Modes of Control

Researchers have shown that there are two major types of control namely; External measure-based control and internal value-based control. External control is also known as formal or objective control. It utilizes the formal rules, procedures and policies to monitor desirable performance. On the other hand, internal control is also known as clan control or informal or normative control. It utilizes the norms, values, culture and internalization of organizational goals to reward outcome and desirable behaviour (Eisenhardt 1985).

According to Ouchi and Maguire (1975), there are two modes of formal control namely; Measuring or Behaviour control and output control. Behaviour control ensures that the process is duly followed while the outcome is measured, whereas output control depends on accurate and reliable assessment of partner’s performance.

They also suggested that informal or clan control exists when task-related behaviours or outputs are not specified by the JV partners, but focuses on promoting the shared values, beliefs, and organizational goals within the group so that the proper behaviour will be reinforced and compensated. For the purpose of this paper, we will examine the relationships between the various control modes and the risks in upstream oil and gas industry.

3.2.1 Relational Risk and Behaviour Control Relationship.

Behaviour control is a process that turns proper behaviour into desirable output. It is also known as process control and measures behaviour instead of the final output. The mechanism of behaviour control is to insert clauses into JV agreement on the exchange and use of information to ensure appropriate conduct of JV partners. In so doing, behaviour control helps in the management of perceived relational risks (Das and Teng 2001).

3.2.2 Performance Risk and Output Control Relationship.

Output control emphasises the promotion of shared values, beliefs and organizational goals in JV partnership. Unlike relational risk, output control affects performance risk which relates to partners activities and is achievement oriented. According to Yan and Gray (1994), output control is applied by closely monitoring activity performance. Therefore, output control tends to draw JV managers’ attention to key performance indices so that performance risks can be averted when the threshold is exceeded. Based on this outcome, the output control is very effective in managing performance risk and has no relationship with the relational risk (Gallivan and Depledge 2003; Das and Teng, 2001). (See Table 5.1)

3.2.3 Relational Risk, Performance Risk and Social Control Relationship.

According to Kirsch (1996), social or clan control targets at reducing the differences in organizational goals choices by JV partners by establishing a uniform culture and value systems. Social control takes precedence when the output measurability and knowledge are both low. This situation nullifies the adequacy of either behaviour or output control. For successful JV performance, the establishment of the common goals is crucial (Hatfield and Pearce 1994). Therefore, social control in upstream oil and gas industry reduces both perceived relational and performance risks as shown in Table 1 (Das and Teng 2001).

3.3 Interdependency of Trust, Control, and Risk

The inter-dependencies of trust, control and risk has been a subject of controversy among researchers over time. Under this topic we shall examine the inter-dependency of trust, control and risk.

3.3.1 How Control Affects Trust

Some believe that control and trust are antithetical to each other as means of achieving successful JV partnership in oil and gas industry (Lewicki and Bunker, 1996). However, according to Das and Teng (1998, 2001), the effect of control on trust is relative. In their view, both behaviour and output controls will undermine goodwill and competences trust in a JV partnership, while social control will engender goodwill and competence trust in JV partnerships in upstream oil and gas industry.

3.3.2 How Trust Affects Control

Control affects the dimensions of trust and similarly, trust affects all control modes. According to Arrow (1974), for any economic transaction, there must be a minimum level of trust and for control to be implemented in any organizational system; a certain level of trust is required. Therefore, Goodwill and competence trusts will promote behaviour, output and social control modes in JV partnership of upstream oil and gas industry. Also worthy of note is that social control mode is most effective when the level of trust is very high.

3.3 Risk Appetite and need for Trust and Control

According to Holmes (2004), understanding the level of risk a company is ready to bear defines the boundary between those risks that are acceptable and those unacceptable. Das and Teng (2001) have established that in JV partnership, the lower the level of acceptable relational risk, the higher the goodwill trust required while keeping control level constant. On the other hand, the lower the acceptable performance risk, the higher the competence trust required, while control remains constant.

In a similar way, the lower the acceptable relational risk, the more the use of behaviour and social controls in JV partnership arrangement, while keeping the goodwill trust constant. However, the lower the acceptable performance risk, the more the use of output and social control, while competence trust remains constant.

4.0 Relational and Performance Risk Management Mechanisms in JV Partnerships for Upstream Oil and Gas Industry.

Joint Venture partnership in upstream oil and gas industry provides many advantages to the partners involved, though it can sometimes be unstable. JVs are susceptible to failure because it is a high-risk strategy, exposed to both relational and performance risks. Managing these risks can be complex due to the nature of the risks and the inter-organizational diversities inherent in JV partnerships. However, for the purpose of this paper, we shall be discussing the management of these risks in upstream oil and gas industry through mitigation using trust and control mechanisms as proposed by Das and Teng (2001). See Table 1 below.

Table 1: Risk Mitigation through Trust and Control

Source: Adapted from Das and Teng (2001)

4.1 Mitigating Relational Risk

4.1.1 Promoting Goodwill Trust

Promoting goodwill trust can be in three ways; developing mutual interest, individual and team trust, and joint dispute resolution. The application of these in mitigating or reducing relational risk in Oil and Gas JV partnership is rated high (Creed and Miles 1996) See table 1.

4.1.2 Mechanisms of Behaviour Control.

Another approach to relational risk mitigation is by behaviour control mechanisms. This involves the use of policies and procedure, reporting structure and staffing and training (Geringer and Hebert 1989). It is the most widely used approach in JV partnerships and is rated high as means of mitigating relational risk.

4.1.3 Mechanisms of Social Control

Social control is a process of eliciting partners’ commitment or cooperation through promotion of shared values, common culture and organizational goal. In JV partnership in Oil and Gas industry, partner firms create this shared values and vision through a process of joint decision-making according to Grandori (1997), or through socio-cultural activities to encourage shared norms and beliefs such as ceremonies, rituals and networking programme. The application of this has been rated high as a means of mitigating relational risk in JV partnership arrangement in upstream oil and gas industry (See table 1).

4.2 Mitigating Performance Risk

There are also three approaches to mitigating performance risk namely; competence trust, output and social control (See table 1).

4.2.1 Promoting Competence Trust

Dollinger et al (1997), have stressed the relevance of open communication in trust building process. By so doing, JV partners learn more about each other faster and this increases the willingness to cooperate. According to Sohn (1994), social knowledge concerning a JV partner is very crucial and this can be achieved by means of open and direct sharing of information with partner or through networking activities. The application of this approach has been rated high in militating against performance risk in JV partnership arrangements.

4.2.2 Mechanisms of Output Control

Geringer and Hebert (1989), have proposed two mechanisms of output control namely; objective setting and planning and Budgeting. Setting clear objectives ensures that the JV partners are satisfied in terms of the assessment of tasks against the outcomes. On the other hand, planning and budgeting also means ensures that the JV set objectives are adequately financed and supported by management.

4.2.3 Mechanisms of Social Control

The mechanism of social control that mitigates the performance risk also involves joint participation in decision making process as seen in relational risk. This works by giving partners opportunity of engage in open and honest communication in an informal way with sound outcomes. With the above trust and control mechanisms of risk mitigation, the JV managers are able to effectively reduce the relational and performance risks of Joint Venture partnerships in upstream oil and gas industry.

5.0 Discussion

Although Joint Ventures in upstream oil and gas industry have gained strategic relevance due to the various motivating factors, they sometimes fail. Studies have shown that rate of failure is as high as 80% in all alliances including JV. This could be attributed among other things to the risk factors which are relational and performance based, associated with the management of Joint Ventures partnerships in upstream oil and gas industry.

The purpose of this paper is to examine the roles of trust and control in relational and performance risks management of JV partnerships in the upstream oil and gas industry. The inter-relationships and inter-dependency of trust, control and risk are perhaps very complex constructs which were undermined by most of the previous researchers. We have adopted a critical approach to this study based on the existing researches and theories and this has produced conflicting results.

According to past literatures, some researchers have viewed trust and control as opposite and mutually interdependent constructs, while others perceived trust and control as conflicting, but interdependent mechanisms of ensuring confidence in the outcome of partnerships and to reduce relational risk. On the other hand, some perceive trust and control as mutually reinforcing constructs where increase in one also increases the other. In the views of again other researchers, trust and control are interpreted as partial substitutes for each other, but however, recognized that the specific forms of control used will affect the level of trust among partners which in turn determines the effectiveness of the control mechanisms.

In view of the apparent lack of consensus of opinion on this matter, we have therefore, adopted a framework which suggests a complex inter-relationship among the two forms of trust (goodwill and competence trust), three modes of control (behaviour, output and social control) and two dimensions of risk (relational and performance risks). This framework suggests that trust and control are two separate means of mitigating risk in JV partnerships. Trust is a more internal source of reducing perceived risk, while control is an external and more active means of mitigating perceived risk.

The main import of this integrated framework is ability to define the inter-dependency of the different dimensions of trust, control and risk, and the combinations that can achieve the mitigation of perceived relational and performance risks in JV arrangements.

Furthermore, we highlighted the mechanisms of managing relational and performance risks using mitigation approaches, with emphasis on the roles of trust and control in the process. We also mentioned the applicability of these risk reduction approaches and the relative ratings which are generally high in the management of JVs in the upstream oil and gas industry.

6.0 Conclusion, Limitations and Future Research

We have demonstrated in this paper the roles of trust and control in the management of relational and performance risks in JV partnerships of upstream oil and gas industry

However, we recommend that in upstream oil and gas industry, companies wishing to go into JV partnerships with others need to devote more time and resources towards understanding their prospective partners and how to work with them to achieve the objectives of the partnership. This we believed will help to build trust and increase cooperation, improve performance and reduce the risk of failure.

Limitation and Future Research

The limitation of this research is generalization. From this paper, it is not clear how the concepts of trust and control in managing relational and performance risk applies to different types of JVs in upstream Oil and Gas Industry particularly between National Oil Companies and Multinationals or between multinationals and Independents or between producing and service companies.

It suffices to say that there is so much to learn about the interplay of trust and control. Therefore, we propose further studies to find out the roles of trust and control in different types of relationships within the upstream oil and gas industry.