Repsol SWOT & PESTLE Analysis

Strength

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Weakness

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Opportunity

1. Implementation of low-carbon business and recent explorations: In 2018, Repsol announced the finding of one of the largest gas reserves in Indonesia. The reserve is the largest finding for Repsol in 19 years and features in the top 10 largest findings in the world in 2018. The company is looking forward to operate and extract the reserve in 2019-20. It is estimated that the reserve will provide at least 2 Trillion Cubic feet of natural gas. This will provide a great deal for Repsol to get into the untapped Asian market. Repsol is moving towards implementation of low-carbon business through GNF (Gas Natural Fenosa) and the explorations are a massive boost to this vision. They are also looking for explorations in Norway and Russia.

2. Adoption of Natural Gas as energy source: CEO Josu Jon Imazin 2018 quoted that “Repsol is looking forward to reduce carbon-based source of energy and wants to invest on natural Oil reserves as a part of their sustainability measures. With the recent findings, this offers great advantage. Almost in all developed nations CNG is being used as fuel for automobiles and is likely to replace petrol and diesel completely. Repsol has recently acquired assets from Viesgo’s in a bid for low-emission business with the potential for massive growth and profitability that has already provided 750000 customers and has increased Repsol’s capacity to 2950 MW in 2018.

3. Downstream expansion to drive growth: Keeping in mind that chemicals demand is expected to grow by 4-4.5%p.a and for rubber, the global demand growth forecast is 2.5% per annum for the next 5 years, Repsol is planning to expand and invest more its downstream operations. The downstream expansion has been named as one of the core priorities of 2018-20 with an investment of Euro 6.3bn i.e. 45% of total Capital expenditure. Repsol has a target of Euro 1bn FCF generation downstream in 2018-20 and 27% growth target in 2020.

Threat

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Political

1. Political stability in existing markets: Since Repsol operates in so many different countries, political factor becomes important. And usually there is some political instability in one country or the other. Countries like USA and UK offer stable political conditions whereas countries like Syria, Libya, and Indonesia undergo frequent political changes. There is no stable government and hence rapidly changing laws and regulations. This creates plenty of challenges. One of them is to seek investment. A country with susceptible political scenario usually finds a fall in GDP and rising inflation. FDI and domestic inflows may not come as desired and labor availability may be low. For example, Repsol’s total equity exposure to Venezuela amounts to approximately €456 million as on December 31, 2018. Fortunately though, the global scenario is fairly impressive as of now.

2. Re-imposing of US sanctions on Iran impacting oil prices: America withdrew from the seven-nation deal to curb Iranian nuclear efforts and to curb Iran’s political and military activities across the Middle East. America is hopeful that this policy will inflict pain on Iran without raising oil prices. The Iranian exports have fallen form 2.4 million barrels a day to 1.3 million barrels. As the consequence, oil prices have increased in the initial weeks. The sanction by US has taken aim not only at Iranian export of oil but also at the shipping companies and banks and insurers. This obviously is not a good news for oil producers including Repsol which has contracts up to $39 million which were signed with the National Iran Oil Company (NIOC) in 2018.

Economic

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Social

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Technological

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Legal

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Environmental

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