Saudi Aramco SWOT and PESTLE Analysis

Strength

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Weakness

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Opportunity

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Threat

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 hydro power projects while for overall renewable energy sector total investments are more than double the amount at $285.8 bn with respect to allocations of $130 bn in coal, gas and oil field development projects.

3. War and terrorism in the Middle East region leading to drone attack on Aramco: The Middle East region has been embroiled in several wars in recent times which has made the region unstable and also led to increased terrorism. The Syrian war led to the emergence of the Islamic State. Saudi Arabia also has major animosity against Iran. The war in Yemen which is continuing as of 2019 and Saudi Arabia has been one of the major aggressors in the war against the Yemeni Houthis. One of the major repercussions of the above was felt in September 2019 when Houthi’s claimed to have attacked Aramco’s Abqaiq and Khurais facilities which caused extensive damage and knocked off over 50% of its production. Increased tensions may lead to an all-out war in the region with Iran which may majorly impact Saudi Aramco.

Political

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Economic

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Social

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Technological

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.

Legal

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Environmental

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