Chevron Corporation SWOT & PESTLE Analysis

Strength

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Weakness

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Opportunity

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Threat

1. High Competition in LNG segment: Over the past seven years, Chevron Corporation has invested billions of dollars into new liquefied natural gas plants in Australia namely, Gorgon and Wheatstone, only to bring them alive during the worst oil bust in decades. But, however, the anticipated demand for LNG didn’t materialize and rival LNG companies have already overcrowded the market. Chevron is facing myriad of challenges such as high labor costs, technical hang ups, plants in Australia are expected to run $20 billion over the budget and also penalties from EPA for carbon emissions, etc. Thus, there’s stiff competition in the LNG market and company has overspent its rivals on long term projects that will take years to generate returns. Company has spent approximately $54 billion in Gorgon project.

2. Penalties for carbon emissions: GHG emissions-related laws, related regulations and the effects of operating in a potentially carbon-constrained environment may result in increased operational expenses to meet the standard compliance which varies from country to country. Non-compliance attracts repercussions like fine, penalty and ban measures by the government.
Gorgon LNG plant project of Chevron Corporation in Western Australia which is one of the world’s largest carbon capture and storage projects, have been penalized for carbon emissions. Environmental Protection Authority (EPA) singled out Gorgon as the biggest carbon emitter amongst Australia’s 10 liquefied natural gas (LNG) plants, which have been the main driver of a rise in Australia’s carbon emissions in the past two years. However, Chevron claimed it would be the lowest emitter of any LNG project in Australia once its carbon injection project starts operating at full scale, generating around 3.4-4 million tons a year of carbon dioxide. Thus, breach of environmental benchmarks, shows the company in a negative light as being irresponsible and nonchalant towards protecting the environment.

3. Economic Crisis and travel bans stemming from the novel Corona virus outbreak, resulting in tumbling oil prices: Economic crises can have vital negative effects on various parts of an economy. One of the major impacts is on the imports. In economic downturn, demand of goods and services also reduces thereby lower production or imports. For example, 2008 financial crisis had a negative impact on the oil and gas sector as it led to a decline in oil and gas prices and a contraction in credit. This decline in prices has resulted in falling revenues for oil and gas companies. Oil prices fell from $147 in the month of July 2008 to as low as $33 in the month of February 2009. Over the same given time period, gas prices also fell from $14 to $4.
Moreover, the latest outbreak of coronavirus has sent shock waves across the globe and crude oil prices have fallen significantly in a short time, shaving off the stocks of billions of dollars’ worth of major oil and gas firms. Decreasing demand due to lockdowns and global and local travel bans, driving up production due to failures in OPEC-Russia talks, infections with rigs and other travel restrictions have all exacerbated this safety crisis while crippling economies. The largest energy firm headquartered in the US has cut its 2020 budget by 20 per cent to $16 billion as it prepares for the COVID-19 outbreak impact.

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Political

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Economic

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Social

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Technological

1. Artificial intelligence and automation in oil and gas: The various potential applications for artificial intelligence and automation in the oil and gas sector are wide-ranging, from surveying and active monitoring, to planning and forecasting and improving working condition in terms of ergonomics and safety. High risk involving environments such as an offshore rig or production or drilling facility can be benefitted from the use of both artificial intelligence and autonomous system monitoring to replace human presence in such high-risk locations. Together with UiPath's robotic process automation tool, Chevron now uses Form Recognizer (part of Microsoft Azure Cognitive Services) to automate the extraction of essential data from drilling and construction reports, and transfer it to backend analysis systems.

2. Higher adoption of IoT devices and edge computing: The adoption of intelligent sensors by upstream and downstream plants has been on the rise, as a large proportion of the resulting data being collected from edge computing devices and being handled as the core data system by technology historians. These data to be used on IoT platforms to further improve the existing processes. In 2018, Chevron partnered with Microsoft to create a predictive maintenance solution to address issues in its oil fields and refineries. With the help of Microsoft’s IoT services, Chevron aims to develop multiple sensor-enabled equipment by 2024 to predict the exact time of equipment servicing and parts replacement due to wear and tear. Thus, Chevron can monitor the health of different pieces of equipment from any location by means by IoT platforms and ensure predictive maintenance before the equipment actually fails.

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Legal

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Environmental

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