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SWOT Analysis of Oil and Gas Development Company with USP, Competition,

STP (Segmentation, Targeting, Positioning) - Marketing Analysis on PETRONAS

Oil and Gas Development Company

Parent Company Petroliam Nasional Berhad (Petronas)

Category Oil and Gas

Sector Energy & Lubricant

Tagline/ Slogan Reimagining Energy

The leading Oil & Gas Industry Player in Malaysia


USP /ASEAN

STP

Corporates and individuals in Malaysia / ASEAN looking


Segment to fulfil energy needs

Enterprises looking to produce energy , people who


depend on petrol, diesel for vehicles and domestic
Target Group uses

Company engaged in the exploration, development,


production and sale of oil and gas resources in Malaysia
Positioning & ASEAN

SWOT Analysis

1.Local market leader in terms of reserves, production


and acreage, and is listed on all stock exchanges in
Malaysia and also on the London Stock Exchange
2.Petronas has attained the benchmark position as an
industry leader, in the Malaysia Oil & Gas industry
3.Company, equipped with its Strategic Business plan in
line with augmenting energy supply in the Country, has
Strengths
developed strategies to optimize reserves additions and
its production base
4. Petronas live up among major company to have been
listed at the London Stock Exchange and well-known
brand advertised in major events.
5. Over 20 thousand of people form a part of the
workforce
1.Dependence on Domestic market for growth
Weaknesses 2.Under Performance of Oil and Gas fields means limited
market share

1.Acquire overseas acreage by buying stakes in existing


viable producing fields
2. Oil & Gas opportunities and joint venture
collaborations outside Malaysia, which would include
swap of assets for reserves acquisition with percentage
of working interest in international market.
Opportunities
3. Fast track development of its current and future
projects at an aggressive pace without compromising
quality and transparency
4. Accelerate Production Growth: by continuing to
accelerate production growth through utilizing cutting
edge technologies

1. Commodity price risk can result in material and


adverse movement in the group's financial performance.
2. Compliance costs could increase and place further
Threats pressure on Company resources.
3. Exploration and drilling risks
4. Exchange rate and Reserve Depletion

Competition

1. Exxon-Mobil Petroleum Ltd


Competitors
2. Royal Dutch Shell Ltd
Porter's Five Forces Model for the Oil & Gas Industry

Porter's Five Forces framework is one useful strategic tool to evaluate potential
opportunities and threats/risks for the oil and gas industry. The five key factors of
this model are:

Competitive rivalry: The competitiveness of oil and gas industry and especially
in the upstream sector of the industry is significantly
intensive.

Threat of New Entrants: The factors that affect the newest companies to enter
oil and gas business, especially the upstream segments
are:

Huge capital required


National Oil Companies control more than 90% of the proven oil and gas
reserves
Increase of the internal competition within the industry
The big oil and gas companies can increase their R&D spending which will
give them a boost regarding innovation and improve existing
technologies. This strategy will give them a competitive advantage over
new oil and gas companies which now enter the industry. Also, to mention
that this whole strategy of the big IOCs can force the new competitors to
spend more money
The big IOCs or as we call it Integrated Oil and Gas Companies which can
easy compete with new competitors due to economics of scale
Oil and Gas prices volatility
Oil and Gas Reserves are usually located in war zones or geographical
areas with geopolitical conflicts or political instability
National and international law restrictions which can affect the new
entrance of a company in the oil and gas business

Threat of Substitutes: The main alternatives sources to oil and gas for
producing energy which used for electricity, transportation, heating, etc. are:

Nuclear Energy
Coal
Hydrogen
Biofuels and other renewables sources such as solar and wind energy

These alternative sources of energy can replace a high amount of hydrocarbons


use in the global energy mix according to their performance, quality and price of
course. This strategy requires a big amount of investments in R&D and producing
procedures, so the possibility for substitutes to dominate the global energy mix
until 2040 is very small.
Bargaining Power of Buyers: The main buyers of oil and gas products are:

Refineries

National Oil Companies

International Oil and Gas companies

Distribution companies

Traders

Countries (USA, China, Japan, countries of the EU, etc.)

The bargaining power of buyers in oil and gas industry is relatively small due to
the nature of this industry. Buyers are interested in the price and the quality of a
product. It is known, that global oil benchmarks determine the oil price, and the
Main Oil Benchmarks are:

Brent Blend

West Texas Intermediate (WTI)

Dubai/Oman

Understanding Benchmark Oils: Brent Blend, WTI and Dubai | Investopedia. (n.d.).
Retrieved February 2, 2016

So it is obvious from the above that the buyers cannot affect the oil prices.
Higher bargaining power have the buyers only which consume enormous
amounts of oil and gas such as EU, China, USA, Japan, and India in comparison
with other countries. Finally to mention that the only bargaining power of buyers
in the oil industry is only what quality of the oil they will buy.
Bargaining Power of Suppliers: Some big suppliers in the oil and gas industry are
fully integrated oil and gas industry (International and National Oil Companies)
which are active in the whole value chain of oil and gas sector.

THE GLOBAL OIL & GAS INDUSTRY: PROSPECTS & CHALLENGES IN THE NEXT DEC....
(n.d.). Retrieved February 24, 2016

These companies can be the big International oil companies such as Chevron,
Shell and Exxon Mobil or National oil companies such as Saudi Aramco, Gazprom,
and Petrobras. The ability of those companies to affect oil prices and the industry
is high due to their business involvement on all of the business segments of oil
and gas industry, so their bargaining power is significantly greater than the
buyers.

Another great player in the side of the suppliers are the oil rich countries (as they
call them oil producing countries) or else OPEC has a significant bargaining
power. OPEC nations own at least 70% or the world's oil proven reserves.
Although these oil reserves have one of the lowest cost producing price between
the oil industry in contrast with oil producing from oil sands and deep-water oil
fields which are expensive regarding costs of production.
8 reasons why the politics of oil have changed | World Economic Forum. (n.d.). Retrieved
February 24, 2016

Based on the above graph from Reuters it is obvious that OPEC controls and
more than the 30% of the world oil production per day which gives the ability to
this organization to affect the global oil prices significantly by cutting or adding
more production, so this give them also more bargaining power. On the other
hand, some countries like Iran, Venezuela, and Mexico luck in any new oil and
technologies due to the control of their oil sector from their oil stated companies.
So this situation can drive countries such as Mexico to become importers of oil
due to the fall in oil production because in the case of Mexico the oil and gas
sector of this country was close to the international oil companies until 2014.

In the case of the Venezuela, the national oil company was used as a political
tool from the political elite of the country from 2000 and beyond, specifically was
used to fund large, rich social project. This situation has driven the economy of
Venezuela and of course the government budget to increase its dependence on
oil revenues. At the same time, Venezuela has closed its oil sector to foreign oil
and gas companies with result to be close to bankruptcy at the beginning of
2016.Some general characteristics for National Oil Companies are:

Unlike the IOCs, the NOCs are governmentally controlled, and they usually
manage a country's hydrocarbons resources.

Having been given the privilege to the domestic reserves, the aim of the
NOCs is, differently than the IOCs, not monetization, but:

serving the national interests,

supporting the local economies and

even protecting the territorial environments

Source: Ledesma, D., 2009. The Changing Relationship between NOCs and IOCs in the LNG Chain
Oxford Institute for Energy Studies

The future for IOCs and NOCs is likely one in which they will both compete and
co-operate, but their bargaining power will be significant high until an alternative
source of energy will be discovered in the future which can replace
hydrocarbons.