Name of the Company: Saudi Aramco (أرامكو السعودية)
Business Sector: Oil & Gas
Operating Geography: Middle East, Saudi Arabia, Global
About the Company: Saudi Aramco (Saudi Arabian Oil Company) is the state owned oil and gas company of Saudi Arabia. Established in 1993, it has an estimated reserves of 261.6 bn barrels of crude oil and 297.6 trillion scf of gas. It is by far the largest energy company in the world with an estimated valuation between 2 to 3 trillion USD and employs more than 65,000 people globally.
Revenue: USD 311 Billion (FY ending March 2011) - Last officially published
Competitive Analysis of saudi aramco
|1. Huge production & refining capacity|
2. High downstream operations and marketing capabilities
3. Pioneering advancement in technology & ecologically sustainable growth
|1. High dependency of company’s profitability on crude oil sales
2. Corporate governance and transparency is an issue at Aramco with very few disclosures made by the company
|1. Global economic growth driving consumption of energy and increasing dependency on fuels |
2. Saudi Aramco’s IPO will bring out the real valuation of the company and ensure more financial and operational transparency
|1. Decrease in global market share owing to newer exploration capabilities of other countries
2. Continued focus on renewable energy and non-conventional sources of energy
1) Huge Production & refining capacity: Saudi Aramco has clocked figures of 10.2 m bpd as well as 11.2 scfd of raw gas in 2015. They have total 134 oil field discoveries with 5 new additions in the year. NGL recovery plant recently opened at Shaybah has capacity to process 2.4 m bpd of associated gas and 275000 bpd of ethane plus NGL. Wasit gas plant which is expected to go on-stream soon is expected to add 1.7 bn scfd of sales gas and 240k bpd of NGL. Midyan gas plant also likely to be on-stream soon non-associated gas to the tune 75 mn scfd and condensate of 4,500 bpd.
2) Huge downstream operations and marketing capabilities: Saudi Aramco has to partner with downstream opportunities to increase in market share and also to achieve economy of scale. It has joint ventures with Sadara chemical company, Total company of France, Sinopec of China, Japan’s Sumitomo, Lanxess of Germany and PT Pertamina from Indonesia for joint ownership and development of various refineries and petrochemical industries and formation of subsidiary companies to micromanage the business issues. Saudi Aramco has wholly owned Jazan Refinery & Terminal intended to drive economic growth of the region and creation of a refinery and associated integrated gasification combined cycle power plant likely to operable by 2018.
3) Pioneering advancement in technology & ecologically sustainable growth: Saudi Aramco focusses on sustainable growth by reducing greenhouse gas emissions, increasing operating efficiencies and increase economic opportunities for the people. They have research offices spread globally at Beijing, Detroit, Houston, Boston and Paris and technology offices in Daejeon, Aberdeen and Delft. Saudi Aramco has been granted a record number of 123 patents in the year 2015. Saudi Aramco has also ventured in health care programs with Johns Hopkins medicine, constructed Shamah Autism center for children, design and development of Shaybah wildlife sanctuary, development of Ras al-Khair Maritime Yard – shipbuilding facility and public energy efficiency programs through installation of LED lights in place of incandescent bulbs.
4) Aramco’s cost per production of a barrel of oil is one of the lowest globally, giving it the advantage in a low price environment: Aramco’s is a highly efficient oil producer with cost of production estimated between US $5-10. This gives the company a leverage in a low price environment where it can continue production without sustaining any losses.
1) Decrease in global market share owing to newer exploration capabilities of other countries: There have been huge oil field discoveries and development of domestic refineries’ capabilities worldwide that has led to rising threat of global market share of Saudi Aramco. There have been shale oil discoveries in US the recently being at Texas – Midland basin; oil field discoveries at Sheltland island of Scotland and other discoveries at Russia, Mexico and other various developing countries like India.
2) Continued focus on renewable energy and non-conventional sources of energy: Fossil fuel industry is likely to face stiff competition to the non-conventional sources of energy owing to increased focus of the government on greener technologies to reduce environmental impact and subsidies being provided to the renewable energy establishments. Global investments rose by 5% for hydel power projects while for overall renewable energy sector total investments are more than double at $285.8 bn with respect to allocations of $130 bn in coal, gas and oil field development projects.
The unpublished sections of the entire Saudi Aramco SWOT analysis is available in the 'Complete Report' on purchase.
|1. Apprehensions on the stability of the current monarchy||1. Saudi economy is highly dependent on oil
2. Oil revenue from Aramco generates steady government revenue
|1. Shortage of local talent affects Aramco |
2. Aramco deeply involved in CSR programs which help the local population.
|1. Huge cash reserves helps Aramco to continuously focus on innovation and increase efficiency
2. Investments and joint ventures by Aramco in strategic technologies
|1. Lawsuits by US under the purview of the Justice Against Sponsors of Terrorism Act (JASTA) Act||1. Major investments planned in 2017 in renewable energy sector|
1. Huge cash reserves helps Aramco to continuously focus on innovation and increase efficiency: Saudi Aramco has an ‘open innovation’ model which seeks to optimize the use of the resource base. Its research in this department is focused on upstream, downstream, and sustainability domains which help growth. However, this is possible only through the extremely high cash reserves that the company can boast of.
2. Investments and joint ventures by Aramco in strategic technologies: Continued investments by Aramco in strategic technologies and joint ventures will help in expanding its downstream business. The Saudi Aramco Energy Ventures is a subsidiary of Aramco that focuses on upstream and downstream investments in the energy efficiency, oil and gas, renewable, petrochemicals and water sectors.
1. Major investments planned in 2017 in renewable energy sector: Aramco has planned about $5 billion in 2017 in renewable energy investments to diversify from oil portfolio and also invest in the environment. This is especially important in view of the upcoming IPO as it can serve to encourage investors who will be lured in by the sustainability factor. Solar, wind and nuclear are all expected to be utilized for the production of the 10 gigawatts of renewable energy that the company is planning to produce. On a larger scale, this move by Aramco will also be a part of the country’s plan to become a “powerhouse” of renewable energy by 2030, with at least 30 percent of its energy stemming from renewable sources.
The unpublished sections of the entire Saudi Aramco PESTLE / PESTEL analysis is available in the 'Complete Report' on purchase.
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Woodside Petroleum SWOT and PESTLE analysis has been conducted by P Goutam Prasad Rao and reviewed by senior analysts from Barakaat Consulting.