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PETRONAS SWOT & PESTLE Analysis

ID : 52364853 | Apr 2018

COMPANY PROFILE - PETRONAS (Petroliam Nasional Berhad)

Business Sector : Oil & Gas

Operating Geography : Malaysia, Asia

About PETRONAS (Petroliam Nasional Berhad) : PETRONAS (Petroliam Nasional Berhad) is a wholly Malaysian Government-owned oil and gas company, which was founded on 17August 1974. The company is headquartered in PETRONAS Twin Towers in Kuala Lumpur, Malaysia and it is conferred with the entire oil and gas resources in Malaysia. It appeared in several national and international rankings and PETRONAS was ranked as one of the largest corporations in the world in Fortune Global 500 as of 2017. The company is engaged in several petroleum activities like marketing and distribution of petroleum products, exploration and production of oil and gas, refining of petroleum crude oil and purifying raw natural gas, operating gas transmission pipeline network, automotive engineering, and others. Half of the Malaysian Government budget depends on the company’s dividend and hence it is a substantial source of income for the government.

PETRONAS (Petroliam Nasional Berhad) Revenue : USD 46.06 billion (2016)

Competitive Analysis of PETRONAS (Petroliam Nasional Berhad)

The SWOT analysis for PETRONAS is presented below:
Strengths
Weaknesses
1. One of the strongest brand names to be present in several renowned International Auto Racing events
2. Operations in diversified breadth across supply chain
3. Strong foothold in LNG market and its investments initiatives
4. New research initiatives in developing advanced capabilities
1. Fatal accidents at various sites
2. Selloff of oil and gas assets in Alberta and cancellation of B.C. LNG project
Opportunities
Threats
1. Increase in crude oil prices expected
2. Increasing demand for oil and natural gas
1. The rise of US as an energy exporter
2. Increase in the number of EVs may cause next oil crisis
3. PETRONAS asked to exit operations in Myanmar due to Rohingya Crisis

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Detailed SWOT Analysis of PETRONAS (Petroliam Nasional Berhad)

 

Strength

1. One of the strongest brand names to be present in several high-class International Auto Racing events: PETRONAS has been one of the main sponsors in several high-class global Auto Racing events. PETRONAS sponsored BMW Sauber Formula One team along with many other important sponsors like Intel, and it was a supplier of fuel and lubricants to the team. It later moved from BMW Sauber to the Mercedes Grand Prix Team. PETRONAS was also one of the sponsors of the Malaysian Club Prix races and in recent times, was a major sponsor of PETRONAS TOYOTA TEAM TOM’S which participated in SUPER GT Series. In 2010, the company was the major sponsor of Mercedes Grand Prix team which won the F1 Constructors’ Championship, 4th time in a row in 2017 Formula One Season. The company also boasts three consecutive wins in Formula One’s WorldConstructors’ Championship due to its brand-new range of customized lubricants and fuels. It developed Syntium engine oil, Primax fuels and Tutela energy recovery system cooling fluid in 2010, 2011, 2015 respectively, as part of its PETRONASFluid Technology Solutions. All these sponsorship activities have made PETRONAS one of the globally renowned brand names.

2. Operations in diversifiedbreadth across supply chain: PETRONAS operates in oil and gas exploration and production to refining oil, a processing gas, and its liquefaction, operating gas transmission pipeline network and many more. It also engages in manufacturing, marketing, shipping and investment in petrochemicals. The company operates in 43 countries in the worldthrough its five business divisions which are petrochemicals, oil business, gas business, logistics and maritime, and exploration and production. The diversified operations across various geographic locations have helped it minimize risk in any particular country.

3. Strong foothold in LNG market and its investment initiatives: PETRONAS is strongly placed among top 3 exporters of LNG market, which has been one of the fastest growing markets. Leveraging on its strength, the company has bought stakes in Cairn India and Rosneft of Russia. Recently, the company is looking to invest in a gas pipeline to market Canadian gas assets from Western Canada to rest of Canada and North America. PETRONAS is also planning to buy a stake in LNG import terminal of Indian Oil Corporation which has an output of 5 million tonnes every year, to sell its global portfolio of LNG there. All these investment initiatives by the company add to its existing strength.

4. New research initiatives in developing advanced capabilities: PETRONAS invests in cutting-edge technologies to enhance its business in oil and gas value chain through its research. The company made advances in exploration technology, enhanced oil recovery (EOR), wells and facilities technology, sustainability gas, advanced materials, base oil lubricants and fuel, and Petrochemical Derivatives and Specialty Chemicals. It developed internally developed exploration tools for complex geography and fiber optics DAS Technology which optimized their Capital Expenditure. The company’s UK subsidiary Petgas Trading Limited has also planned collaborative ventures with Gazprom Marketing & Trading Limited. PETRONAS is also planning to buy stakes in Cairn India, Rosneft, LNG import terminal of IOC.

Weakness

This section is available only in the 'Complete Report' on purchase.

Opportunity

1. Increase in crude oil prices expected: Crude oil prices can rise globally as air passenger demand has increased by 7.6% in 2017, according to International Air Transport Association. As air carriers use jet fuel and the other fuel alternatives are not cost-effective, the fuel for increasing air traffic will be sourced from amiddle distillate of crude oil. As a result, jet fuel consumption is expected to increase 64% from 2017 to 2050, according to EIA in its Annual Energy Outlook 2018. This rising crude oil prices can translate into more profit for PETRONAS.

2. Increasing demand for oil and natural gas: Strong economic growth of developing countries might be one of the drivers of global and natural gas demand and it is expected to increase by 1.6% annually by 2030.Due to increasing demand for electricity, demand for natural gas is also expected to increase by 1.7% annually by 2030. The company is in agood position to take advantage of increasing demand for liquid fuels and natural gas and thus strengthen its financials.

Threat

This section is available only in the 'Complete Report' on purchase.

References

1. https://zululandobserver.co.za/afp/94094/malaysias-petronas-profit-down-47-on-oil-weakness

2. https://uk.reuters.com/article/uk-malaysia-petronas-myanmar/malaysias-petronas-asked-to-exit-myanmar-in-protest-of-rohingya-crisis-idUKKBN1D80KL

3. https://www2.deloitte.com/us/en/pages/energy-and-resources/articles/oil-and-gas-industry-outlook.html#top

4. https://www.strategyand.pwc.com/trend/2017-oil-and-gas-trends

5. https://www.rigzone.com/news/oil_gas/a/119752/fatal_accidents_at_petronas_sites_forces_relook_at_safety_standards/

6. https://www.bloomberg.com/features/2016-ev-oil-crisis/

7. http://www.petronas.com.my/investor-relations/Documents/annual-report/PETRONASAnnualReport2016.pdf

The PESTLE/PESTEL analysis for PETRONAS is presented below:
Political
Economical
1. Problems in Myanmar operations due to Rohingya Crisis
2. PETRONAS is given full authority over its major activities
1. Super group of OPEC and non-OPEC countries in the making
2. Oil Prices reduced due to US oversupply
3. Impact of global economic growth on PETRONAS
Social
Technological
1. Massive job cuts in oil sector1. New sensor technology for oil and gas industry
2. UAVs, Drones and Augmented Technology to provide helping hand
3. New drilling technologies
Legal
Environmental
1. Taxation policy of the Malaysian Government for PETRONAS
2. Regulated pricing mechanism for supply of gas to Peninsular Malaysia
3. Protection of Consumer Rights
1. Harmful effects of oil exploration on the environment
2. Environmental sustainability through technology and other initiatives
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Detailed PESTLE Analysis of PETRONAS (Petroliam Nasional Berhad)

 

Political

1. Problems in Myanmar operations due to Rohingya Crisis: PETRONAS was asked to exit operations in Myanmar following the Rohingya crisis in the country. Islam is the official religion in Malaysia and the company is a major employer there. The Rohingya Muslims there had to flee to Rakhine state as security forces responded to Rohingya militants’ attacks by burning their villages. As Malaysia has been one of the strongest critics of this incident and Malaysian MPs have signed apetition to stop operations in Myanmar. This might affect the company badly as PETRONAS owns several natural gas blocks and a cross-border pipeline transporting gas to Thailand in Myanmar.

2. PETRONAS is given full authority over its major activities: PETRONAS has the full trust of Malaysian Government and is authorized to independently conduct business. The Government chose to create the company as a state company like PETRONAS would have both supervisory powers over production activities, capital,and expertise of its own.

Economic

1. A supergroup of OPEC and non-OPEC countries in the making: The OPEC countries led by Saudi and non-OPEC countries led by Russia are planning to form asupergroup to cut a deal for long-term cooperation. Such a partnership will keep the energy markets stable as according to IEA, the growth of US shale sector will possibly overtake them next year.Such partnership can also impact the sales of PETRONAS as the oil prices may crash as a result of oversupply.

2. Oil Prices reduced due to US oversupply: Crude oil prices remained below the highs due to supply from theUS increased by 3.9 million barrels to 422.4 million as ofFebruary 2018 by data from American Petroleum Institute. Citi forecasted that oil supply will be balanced or cause amarket surplus of 0.2 million bpd in 2018. This can affect the profit margin of PETRONAS as the oil prices will keep declining as global oil supply increases.

3. Impact of global economic growth on PETRONAS: Due to geopolitical uncertainties and greater commitment by countries like India and China in renewables, business confidence will be affected.As theUS is producing more shale oil, oil prices will decline due to oversupply. But as prices improve, more projects will be sanctioned. But due to theuncertainty of oil demand, the companies remain cautious not to venture into high-cost frontiers. Due to increased production of LNG by USA and Australia, demand can be expected to grow.

Social

1. Massive job cuts in oil sector: Falling oil prices have been a reason for massive job cuts in this sector, which resulted in lower wages for the employees. Also, the pace of job creation in the oil sector is sluggish. But in case of Malaysia, the situation is different. There are plenty of jobs but the oil industry is strugglingto find local laborers and the Government has encouraged import foreign workers to make up for the deficit.

Technological

This section is available only in the 'Complete Report' on purchase.

Legal

This section is available only in the 'Complete Report' on purchase.

Environmental

This section is available only in the 'Complete Report' on purchase.

References

1. https://oilprice.com/Energy/Oil-Prices/Oil-Claws-Back-Gains.html

2. https://oilprice.com/Energy/Energy-General/SaudiRussia-Led-Oil-Supergroup-In-The-Making.html

3. http://www.imf.org/external/np/seminars/eng/2015/natrestax/pdf/syakirah.pdf

4. http://www.petronas.com.my/investor-relations/Documents/annual-report/PETRONASAnnualReport2016.pdf

5. http://www.petronas.com.my/sustainability/Documents/sustainability-report/Sustainability%20Report%202016.pdf

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PETRONAS SWOT and PESTLE analysis has been conducted by Subhadeep Chakraborty and reviewed by senior analysts from Barakaat Consulting.

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