BP Business Overview and Strategy Analysis
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BP is a major British multinational oil and gas company with operations in upstream exploration and production as well as downstream refining, marketing, and trading. It faces challenges from increased regulation, climate change concerns, and negative public perception following the 2010 Deepwater Horizon oil spill. To address these issues, BP can expand partnerships through joint ventures, increase lobbying efforts, invest more heavily in renewable energy and carbon capture technology, and strengthen its marketing to highlight these sustainability initiatives.
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BP Business Overview and Strategy Analysis
- 2. 1 BP Overview • British multinational energy company headquartered in London • One of six oil and gas “Supermajors” • #6 in market capitalization • #5 in revenue generation • #6 in energy production • Primary operations include: • Upstream segment: exploration and production of gas and crude oil • Downstream segment: global oil supply, trading activities, products and service oriented activities • Business and Corporate: alternative energy business, shipping, treasury, corporate activities including centralized function
- 3. Industry Overview 2 • Oil and natural gas industry is one of the world’s largest with expected revenues of $4.6 trillion in 2014 • $2.6 trillion in 2009, yielding an annualized growth rate of 11.9% • Heightened focus on renewables but fossil fuels continue to be primary contributor of income for large oil and gas companies • Mature stage of its life cycle • Merger and acquisition activity is ongoing • Increasing oil and gas reserves • Building global supply chains
- 4. 3 Deepwater Horizon Spill • 200 million gallons of crude oil spilled into the Gulf of Mexico, April 2010 • Largest spill in American history • Death of 11 men during initial blast • Wildlife loss, including endangered species • 16,000 miles of coastline impacted • Continued Impact: • Environmental concerns • Fisheries lose business • Long-term health effects • Financial Impact to BP
- 7. Porter’s Five Forces 6 RIVALRY: High •Saudi Arabian Oil: $345B •National Iranian Oil :$154B •PetroChina: $300B •Exxon Mobil: $467B •Gazprom: $231B • Shell: $451B • BP: $379B BUYER POWER: Low • Gas Refining & Marketing • Petrochem Manufacturing • Gas Utilities • Electric Utilities • Consumers SUPPLIER POWER: Moderate • License to explore • Government regulations ENTRY THREAT: Low •Top 4 = 45% of revenue • Regulations • Investment in finding resource •License : explore & produce •Downstream: refining /marketing SUBSTITUTES: Moderate • Nuclear • Coal • Hydropower • Solar Energy • Wind • Biofuels
- 8. 7 External Analysis Economic • Western societies experiencing slow economic growth • Developing countries have rising economic power and increasing demand for energy • 56% projected increase in energy usage by 2040 Political • Fossil fuel extraction regulations differ by country, adding complexity • Partnering with stable governing bodies preferred • Lack of cooperation to align on global carbon dioxide targets • Carbon tax implementation at the local, national and global levels Technological • Declining cost of renewable energy sources • Advanced extraction techniques lead to greater access to fossil fuels • Carbon capture techniques
- 9. 8 External Analysis Social • Emphasis on environmental stability and awareness of climate change • Less reliance on vehicles in Western societies but increase demand for cars in emerging markets • Residential demand for energy increases 57% by 2040 Demographic • Half of the world’s current 7.2B people reside in just 6 countries • Global population is expected to grow by 2B people by 2040, or 28% • Aging demographic • Population growth particularly high in Africa Global • Globalization continues to shrink the world • Multinational companies expand footprint, with emphasis on emerging markets; M&A activity • Global unrest, rise of populism
- 10. Projected Global Energy Use World Energy Consumption by Fuel Type Energy Consumption by Country Group 9
- 12. 11 Value Chain • Vertically Integrated Organization • Shipping, Air Transportation, Manufacturing, Investing • Products • 15 Business Product Categories • 6 Consumer Product Categories • Consolidated across 8 Corporate functions • Corporate Vision Stretches across all functions • “10 Point Plan” • Clear Priorities & Distinctive Capabilities
- 13. 12 Value Chain
- 14. 13 Value Chain Finance and Operations Issues • Increased costs of drilling – coupled with regulation • Availability of natural resources increases cost • Increased costs of transportation • Remote sites Marketing Issues • Continued fallout from Gulf of Mexico oil spill • Renewable Energy Marketing Program • $500MM green campaign • Upstream profitability losses Legal Issues • Ongoing litigation from Gulf of Mexico oil spill • $15B spent 2013 YTD
- 15. SWOT Hostile Foreign Gvt’s Increased Fuel Economy Alternative Energy Geological Risk Political Risk • Geographically diverse • Vertically Integrated • Engineering Expertise • Superior Oil-related technology • Emerging Markets • Energy Independence • New exploration sources • Renewable Energy • Carbon Capture S W T Negative Public Perception Cost of environmental cleanup Partner with unstable Gvt’s O 14
- 17. Key Issues 16 Political and Regulatory Uncertainty Climate Change Increased Global Demand for Energy Negative Public Perception of Brand
- 18. Recommendations Joint Ventures Helps Solve Key Issues: Increasing Demand, Political Uncertainty Safety • Refrain from drilling in environmentally sensitive areas • Continue to invest in • Ensure emergency guidelines are clear 17 • New JVs with global energy companies • Larger footprint in emerging markets • Partner with government entities • Mitigate risk Lobbying • Clear CO2 targets • Carbon tax • Alternative energy tax credits • Availability of oil wells Helps Solve Key Issues: Political Uncertainty Climate Change safety Helps Solve Key Issues: Negative Perceptions
- 19. Recommendations Renewable Energy Carbon Capture Helps Solve Key Issues: Climate Change, Increasing Demand, Political Uncertainty, Negative Perceptions Helps Solve Key Issues: Climate Change, Political Uncertainty, Negative Perceptions Marketing Campaign “Beyond Petroleum” alternative energy and carbon capture initiatives around the globe 18 • Invest more heavily in alternative energy sources ; from 6% to 10% • Expand scope beyond biofuels and wind • Implement this technology for internal use and sell to third parties • Consulting arm in BP’s business segment • Live the slogan • Highlight new Helps Solve Key Issues: Negative Perceptions
- 20. Questions?
Notas do Editor
- Supermajors: Exxon, Chevron, Lukeoil, BP, Shell, Total, Conoco Phillips Operations on all continents 2013 revenue totals nearly $400B, profit of 24B
- https://www.dosomething.org/facts/11-facts-about-bp-oil-spill http://www.theatlantic.com/national/archive/2013/04/three-years-after-the-bp-spill-tar-balls-and-oil-sheen-blight-gulf-coast/275139/
- These are the upstream competitors Limited alternatives
- http://www.eia.gov/forecasts/ieo/world.cfm http://www.eia.gov/forecasts/aeo/pdf/0383%282014%29.pdf http://www.bp.com/content/dam/bp/pdf/investors/BP_Annual_Report_and_Form_20F_2013.pdf
- http://www.pewresearch.org/fact-tank/2014/02/03/10-projections-for-the-global-population-in-2050/ http://www.businessinsider.com/half-of-the-worlds-population-lives-in-only-6-countries-2014-7
- Iraq Oil Projects European Shale Gas Arctic drilling
- Political – Lobbying, JV to mitigate risk, carbon capture Climate Change – renewables, drilling in environmentally sensitive environments Increased demand for energy - Brand perception – continue with marketing campaigns
- Note: BP currently invests only in biofuels and wind in the US. Past solar operations were sold off. Not that those commitments to alternatives were ever particularly grand. Using very generous estimates, BP holds the oil industry record for the highest percentage of expenditures committed to alternatives, with just 6 percent of its overall expenditures in 2011, right before it started selling off its solar operations. Chevron and Shell run a distant second with highs of 2.5 percent; none of the others have ever even cracked 1 percent. Read more: http://www.rollingstone.com/politics/news/big-oils-big-lies-about-alternative-energy-20130625#ixzz37wCsLgXu We also believe that putting a price on carbon – one that treats all carbon equally, whether it comes out of a smokestack or a car exhaust – will make energy efficiency and conservation more attractive to businesses and individuals and lower-carbon energy sources more cost competitive. A global carbon price should be the long-term goal, but regional and national approaches are a good first step, provided temporary financial relief is given to sectors that are exposed to international competition.