Global Top 10 Energy Companies

Global Top 10 Energy Companies Report: Industry, Financial and SWOT Analysis
Reference Code: DBEN0784 Publication Date: March 2011
Datamonitor. This brief is a licensed product and is not to be photocopied
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Table of Contents
TABLE OF CONTENTS
Executive Summary Industry analysis Industry definition Research highlights Market Value Value Market Share Share Market Segmentation Product Product Market Segmentation Geography Geography Five Forces Analysis Summary Buyer power Supplier power New entrants Substitutes Rivalry Top 10 Companies Landscape Companies Landscape Revenue analysis Financial performance analysis Company Reports Exxon Mobil Corporation Royal Dutch Shell Plc BP Plc China Petroleum & Chemical Corporation (Sinopec) TOTAL S.A. Chevron Corporation 7 7 7 7 8 8 9 9 10 10 11 11 12 12 14 16 18 20 21 23 23 27 28 33 33 44 58 74 84 102
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PetroChina Company Limited ConocoPhillips Eni SpA OAO Gazprom Financial Analysis Exxon Mobil Corporation Royal Dutch Shell Plc BP Plc China Petroleum & Chemical Corporation (Sinopec) TOTAL S.A. Chevron Corporation PetroChina Company Limited ConocoPhillips Eni SpA OAO Gazprom APPENDIX Methodology 113 123 131 145 161 161 164 167 170 173 176 179 182 185 188 191 191
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Table of Contents
TABLE OF FIGURES
Figure 1: Global energy industry value, $bn, 200509 Figure 2: Global energy industry share: % share, by value, 2009 Figure 3: Global energy industry segmentation: product, % share, 2009 Figure 4: Global energy industry segmentation: geography, % share, 2009 Figure 5: Forces driving competition in the global energy industry Figure 6: Drivers of buyer power in the global energy industry Figure 7: Drivers of supplier power in the global energy industry Figure 8: Factors influencing the likelihood of new entrants in the global energy industry Figure 9: Factors influencing the threat of substitutes in the global energy industry Figure 10: Drivers of degree of rivalry in the global energy industry Figure 11: Turnover of global top 10 energy companies, $m, FY2009 Figure 12: Revenue growth of global top 10 energy companies, 200709 Figure 13: Operating profit analysis, FY2009 Figure 14: Net profit analysis, FY2009 8 9 10 11 12 14 16 18 20 21 24 28 29 30
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Table of Contents
TABLES
Table 1: Global energy industry value, $bn, 200509 Table 2: Global energy industry share: % share, by value, 2009 Table 3: Global energy industry segmentation: product, % share, 2009 Table 4: Global energy industry segmentation: geography, % share, 2009 Table 5: Turnover of global top 10 energy companies, $m, FY2009 Table 6: Revenue growth of global top 10 energy companies, 200709 Table 7: Key financials of global top 10 energy companies, FY2009 Table 8: Key industry-specific ratios Table 9: Exxon Mobil Corporation: financial and operational highlights, 200509 ($m) Table 10: Exxon Mobil Corporation: key industry-specific ratios, 2005-09 Table 11: Royal Dutch Shell: financial and operational highlights, 200509 ($m) Table 12: Royal Dutch Shell: key industry-specific ratios, 2005-09 Table 13: BP: financial and operational highlights, 200509 ($m) Table 14: BP: key industry-specific ratios, 200509 8 9 10 11 23 27 28 31 161 163 164 166 167 169
Table 15: China Petroleum & Chemical Corporation (Sinopec): financial and operational highlights, 200509 ($m) 170
Table 16: China Petroleum & Chemical Corporation (Sinopec): key industry-specific ratios, 200509172 Table 17: TOTAL S.A.: financial and operational highlights, 200509 ($m) Table 18: TOTAL S.A.: key industry-specific ratios, 200509 Table 19: Chevron Corporation: financial and operational highlights, 200509 ($m) Table 20: Chevron Corporation: key industry-specific ratios, 200509 Table 21: PetroChina Company Limited: financial and operational highlights, 200509 ($m) Table 22: PetroChina Company Limited: key industry-specific ratios, 200509 Table 23: ConocoPhillips: financial and operational highlights, 200509 ($m) 173 175 176 178 179 181 182
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Table 24: ConocoPhillips: key industry-specific ratios, 200509 Table 25: Eni: financial and operational highlights, 200509 ($m) Table 26: Eni: key industry-specific ratios, 200509 Table 27: OAO Gazprom: financial and operational highlights, 200509 ($m) Table 28: OAO Gazprom: key industry-specific ratios, 200509
184 185 187 188 190
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Executive Summary
EXECUTIVE SUMMARY Industry analysis

The global energy industry had shown strong growth in recent years until it fell into a steep decline in 2009. Recovery is expected in 2010, with strong growth over the period spanning 200914. The global energy industry generated total revenues of $6,050 billion in 2009, representing a compound annual rate of change (CARC) of -0.1% for the period spanning 200509. In comparison, the European industry declined with a CARC of -4.5%, and the Asia Pacific industry increased with a compound annual growth rate (CAGR) of 3.4%, over the same period to reach respective values of $1,217.9 billion and $1,384.1 billion in 2009. Oil, gas, and consumable fuel sales proved the most lucrative for the global energy industry in 2009, generating total revenues of $5,797.6 billion, equivalent to 95.8% of the industry's overall value. In comparison, sales of energy equipment and services generated revenues of $252.3 billion in 2009, equating to 4.2% of the industry's aggregate revenues. The performance of the industry is forecast to accelerate, with an anticipated CAGR of 13.2% for the five-year period 200914, which is expected to drive the industry to a value of $11,250.4 billion by the end of 2014. Comparatively, the European and Asia Pacific industries will grow with CAGRs of 11% and 13.5% respectively, over the same period, to reach respective values of $2,047.9 billion and $2,602.5 billion in 2014.
Industry definition
The energy industry consists of oil, gas, coal, and consumable fuels, and the energy equipment and services industries. The energy equipment and services industry values reflect revenues generated from the provision of equipment and services to the oil and gas industry, including contract drilling. The oil, gas, and consumable fuel industry consists of oil, gas, coal, and related consumable fuels. Industry values reflect revenues generated from exploration, production, refining, marketing, storage, and transportation of oil and gas, and also from the coal and consumable fuels market. The coal and consumable fuels market is defined as revenues generated by the sale of coal for industry and power generation, but excludes the sale of metallurgical coal. Any currency conversions used in the creation of this report have been calculated using constant 2009 annual average exchange rates. For the purposes of this report, the global market consists of North America, South America, Western Europe, Eastern Europe, and Asia Pacific.
Research highlights
The global energy industry generated total revenues of $6,050 billion in 2009, representing a CARC of -0.1% for the period spanning 200509. The performance of the industry is forecast to accelerate, with an anticipated CAGR of 13.2% for the five-year period 200914, which is expected to drive the industry to a value of $11,250.4 billion by the end of 2014.
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Market Value
MARKET VALUE Value

The global energy industry shrank by 35.1% in 2009 to reach a value of $6,050 billion. The CARC of the industry in the period 200509 was -0.1%. Table 1: Global energy industry value, $bn, 200509 Year 2005 2006 2007 2008 2009 CAGR, 200509 Source: Datamonitor $bn 6,075.2 6,663.5 7,207.6 9,320.2 6,050.0 Ebn 4,369.0 4,792.1 5,183.4 6,702.7 4,350.9 Growth (%) 9.7% 8.2% 29.3% (35.1%) (0.1%)
DATAMONITOR
Figure 1: Global energy industry value, $bn, 200509
10,000 9,000 8,000
40% 30% 20%
7,000 6,000 $bn 5,000 4,000 3,000 -20% 2,000 1,000 0 2005 2006 2007 Year $bn
Source: Datamonitor
10% % Growth 0% -10%
-30% -40% 2008 2009
% Growth
DATAMONITOR
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Market Share
MARKET SHARE Share

Exxon Mobil Corporation is the leading player in the global energy industry, generating 5% share of the industry's value. Royal Dutch Shell accounts for a further 4.6% of the industry. Table 2: Global energy industry share: % share, by value, 2009 Company Exxon Mobil Corporation Royal Dutch Shell BP Others TOTAL Source: Datamonitor Share (%)
5.0 4.6 3.9 86.5
100.00
DATAMONITOR
Figure 2: Global energy industry share: % share, by value, 2009
Exxon Mobil 5.0%
Royal Dutch Shell 4.6% BP 3.9%
Others 86.5%
Source: Datamonitor
DATAMONITOR
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Market Segmentation Product
MARKET SEGMENTATION PRODUCT Product

Oil, gas, and consumable fuels is the largest segment of the global energy industry, accounting for 95.8% of the industry's total value. The energy equipment and services segment accounts for the remaining 4.2% of the industry. Table 3: Global energy industry segmentation: product, % share, 2009 Category Oil, Gas and Consumable Fuels Energy Equipment and Services TOTAL Source: Datamonitor Share (%)
95.8 4.2
100.0
DATAMONITOR
Figure 3: Global energy industry segmentation: product, % share, 2009
Energy Equipment and Services 4.2%
Oil, Gas and Consumable Fuels 95.8%
Source: Datamonitor
DATAMONITOR
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Market Segmentation Geography
MARKET SEGMENTATION GEOGRAPHY Geography

The Americas account for 30.2% of the global energy industry value. Asia Pacific accounts for a further 22.9% of the global industry. Table 4: Global energy industry segmentation: geography, % share, 2009 Category Americas Asia Pacific Europe Rest of the World TOTAL Source: Datamonitor Share (%)
30.2 22.9 20.1 26.8
100.0
DATAMONITOR
Figure 4: Global energy industry segmentation: geography, % share, 2009
Rest of the World 26.8%
Americas 30.2%
Europe 20.1%
Asia-Pacific 22.9%
Source: Datamonitor
DATAMONITOR
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Five Forces Analysis
FIVE FORCES ANALYSIS Summary
Figure 5: Forces driving competition in the global energy industry
Source: Datamonitor
DATAMONITOR
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Major players in the global energy industry are large vertically integrated multi-national companies such as Exxon Mobil and Royal Dutch Shell. Such companies have large scale operations, with few activities in alternative industries, which produce a high level of rivalry. The global energy industry comprises the oil, gas, and consumable fuels industry and the energy equipment and services industry. The vast majority of revenues come from oil, gas, and consumable fuels and consequently this analysis will focus majorly on this industry. The global oil, gas, and consumable fuels industry is fragmented with a substantial number of companies present, however players, such as Exxon Mobil, BP, and Royal Dutch Shell, involved in large-scale international operations are dominant, increasing the rivalry level. The size and vertical nature of such companies grants them considerable power over buyers. Buyer power is boosted by the large size of buyers and their financial strength as well as lack of product differentiation. However, the fact that oil, gas, and coal are highly important to its users tends to weaken buyers strength. Major suppliers are gas and oil equipment and services providers, including Schlumberger, Baker Hughes, or Halliburton. Limited number of suppliers and their importance to the industry increases supplier power. Entry to the industry is limited by the existence of scale economies and the significant regulatory environment. Prior to 2009, this industry was growing at an incredibly strong rate, a situation that was attractive to new entrants. However, economic difficulties in 2009 contributed to a huge decline in this industry, which hugely reduces the attractiveness of the industry. Substitutes can be considered in terms of the increasing importance of alternative energy sources. However, currently, the majority of the worlds energy production takes place with the use of non-renewable sources, primarily oil, gas, and coal, and the consequently high cost of switching weakens the threat posed by these substitutes.
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Buyer power
Figure 6: Drivers of buyer power in the global energy industry
Source: Datamonitor
DATAMONITOR
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The global oil, gas, and consumable fuels industry comprises several sectors. Large, diversified international companies are present within the industry and as their operations are highly integrated, they appear as both buyers and players within different sectors. Within the global oil and gas exploration and production sector buyers are both individual as well as institutional end users able to make large purchases. Lack of product differentiation and brand loyalty strengthens the buyer force furthermore. Commodities such as crude oil or natural gas are relatively undifferentiated products, the price of which is set according to supply and demand by the mercantile exchanges of New York, London, and Dubai, which effectively ameliorates buyer power on the basis of price. Buyer power with respect to the global oil and gas refining and marketing sector is moderate. A large number of buyers, both individual and institutional, and the importance of oil and gas products to end-users are among the several factors which weaken buyer power within the sector. Buyers backward integration is also unlikely. Buyers within the global oil and gas storage and transportation sector tend to be large diversified oil and gas companies, who can leverage their economies of scale in dealing with companies in the sector. The large size of customers and strong financial muscle strengthen buyer power. Large oil and gas companies usually conduct integrated operations, often incorporating transportation and storage activities. Such independence tends to boost buyer power. However, pipeline infrastructure is such that in certain regions oil and gas producers have no option but to use a particular pipeline, which lowers buyer power. Power generation companies are major buyers of coal. Such buyers are also large sized and have strong financial muscle. There is often little to distinguish between the products of competitors in this industry, provided they meet accepted quality criteria and brand loyalty is not of significant meaning. Buyers may also be willing to switch to a different provider if a better priced offer was presented. These factors tend to strengthen buyer power to some extent. On the other hand, the importance of the product offered within the market to the success of the buyers' businesses dilutes this power somewhat. Overall buyer power with respect to the oil global oil, gas, and consumable fuels industry is assessed as moderate.
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Supplier power
Figure 7: Drivers of supplier power in the global energy industry
Source: Datamonitor
DATAMONITOR
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Major suppliers are oil and gas equipment and services providers, including Schlumberger, Baker Hughes, and Halliburton. Typically, such suppliers are large, highly diversified companies and this therefore affords them greater bargaining power. Baker Hughes, for example, has a wide product portfolio catering to the worldwide oil and natural gas industry. The company manufactures and supplies drill bits, primarily roller cone bits, and fixed-cutter polycrystalline diamond compact (PDC) bits. It supplies them to the oil and natural gas industry worldwide. Baker Hughes also supplies drilling and evaluation services which include directional drilling, measurement-while-drilling (MWD), and logging-whiledrilling (LWD) services. The company provides formation evaluation and wireline completion and production services for oil and natural gas wells. Such suppliers are small in number, which combined with high demand from the oil and gas industry, enhances their supplier power. On the other hand, many larger oil and gas companies have backward integrated into oil and gas services operations, and use third-party service companies to supplement their own activities. This, combined with the high importance of the oil and gas industry to supplier revenues, reduces the supplier power of oil equipment and services companies. Amongst the suppliers within the global coal and consumable fuels market there are specialist equipment providers, human resources providers, as well as landowners or governments. Some of these may exert strong bargaining power due to their size. While there are a large number of companies providing specialist equipment, it may be more difficult to assure adequate reserves, as coal and metal ores are non-renewable. This means that major landowners, governments, and similar bodies can be viewed as suppliers, and these may be in a strong position. Moreover, due to the specific nature of the business, some supplies, such as specialist equipment, may be difficult to sell to any customer outside the market. Overall supplier power with respect to the global oil, gas, and consumable fuels industry is assessed as moderate.
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New entrants
Figure 8: Factors influencing the likelihood of new entrants in the global energy industry
Source: Datamonitor
DATAMONITOR
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Analysis of the threat of new entrants into the global oil, gas, and consumable fuels industry is complicated by the fact that it is possible for companies to operate in one or more parts of the supply chain. Leading oil companies, namely Exxon Mobil, Royal Dutch Shell, and BP are typically large, highly vertically-integrated, multinational companies, which use the large scale of their production and distribution networks to reduce costs and enhance profitability. Such players have invested heavily in their fleets of drilling rigs, other equipment, and technology, including product innovation. To keep up with the leading players who can utilize their scale economies, strong research and development (R&D) capability is required. The presence of such powerful incumbents acts as a significant barrier to entry and the need for substantial initial investment to set up facilities such as drilling rigs also reduces the threat of new companies establishing themselves in this sector. There is also a significant regulatory environment within the oil and gas industry, which is restrictive to the entry of players into the industry. Permission to explore new fields and extract oil and gas is generally in the hands of national governments, and obtaining it may be a lengthy process. As well as regulations surrounding taxation and the issue of whether oil and gas exploration is permitted, there are also restrictions regarding environmental impact. The industry in 2009 declined rapidly as economic difficulties were felt on a global scale. Such a dire situation could discourage potential new entrants. The gas refining and marketing sector in many countries is unbundled, with companies typically involved either in the production, supply infrastructure, or marketing. Gas production and refining is typically integrated with that of oil and therefore has equivalent barriers to entry. With respect to gas marketing, the lack of switching costs for end-users, combined with the increasing popularity of energy provider switching, increases opportunities for the entrance of new companies. Major players within the coal and consumable fuels sector can leverage the large economies of scale found in bulk coal production to minimize the per unit selling price for coal. Smaller companies within the market may therefore struggle to compete with them successfully, which promotes consolidation. The assets required for coal mining are also considerable including a large amount of specialized machinery, which constitutes a considerable barrier to entrance. In addition, the logistics of coal mining including the prohibitive start-up costs for a mine provide further barriers to entry. Overall the threat of new entrants within the global oil, gas, and consumable fuels industry is assessed as weak at present, but may change going forward as the industry begins to recover and grow.
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Substitutes
Figure 9: Factors influencing the threat of substitutes in the global energy industry
Source: Datamonitor
DATAMONITOR
Substitutes in the global oil, gas, and consumable fuels industry can be considered in terms of alternative energy sources (those other than oil and gas such as nuclear, solar, coal, and wind). Such substitutes can be seen to offer notable benefits in terms of environmental impact and sustainability. Shifting to renewable energy sources is costly and will take time, which is in short supply the world must reduce its output of carbon dioxide (CO2) by 5085% by 2050. However, currently, the majority of the worlds energy production takes place with the use of non-renewable sources, primarily oil, gas, and coal, and the consequently high cost of switching weakens the threat posed by these substitutes. There are no apparent direct substitutes for oil and gas storage and transportation. However, if oil and gas resources are developed nearer to target markets, then the requirement for storage and transportation services will be reduced. There are several substitutes for coal and consumable fuels within the power generation market like nuclear fuels and alternative energy sources. However, while power companies can alter their primary energy mix to a small extent without incurring many costs, a thoroughgoing transition to these substitutes would require investment in different generation facilities, which constitutes a very high switching cost. Overall, the threat of substitutes within the global oil, gas, and consumable fuels industry is weak but still growing.
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Rivalry
Figure 10: Drivers of degree of rivalry in the global energy industry
Source: Datamonitor
DATAMONITOR
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The threat of competition is strong within the different sectors of the global oil, gas, and consumable fuels industry. Major players are large vertically integrated multi-national companies such as Exxon Mobil and Royal Dutch Shell. Such companies have large scale operations, with few activities in alternative industries, high fixed costs, and high exit barriers. These combine to produce a high level of rivalry. The global oil, gas, and consumable fuels industry is fragmented with a substantial number of companies present, although the leading players, such as Exxon Mobil, Royal Dutch Shell, and BP, are involved in large-scale international operations. Industry players are similar in the way that they operate and the services they provide. However, some companies, especially the national oil companies, have specialized in particular locations. For example, SaudiAramco has a monopoly over upstream oil development in Saudi Arabia. Players like Exxon Mobil try to diversify the scope of their operations, engaging not only in exploration and production, but also refining, and the marketing of oil and natural gas. The company is also engaged in the production of chemicals, commodity petrochemicals, and electricity generation, and this fact tends to ease pressure when it comes to the operating performance within this particular industry. High fixed costs and the high exit barriers created by the need to divest industry specific equipment on leaving the industry both mean that competition is substantial. Within the storage and transportation sector it should be appreciated, however, that many pipelines are effectively local-monopolies for oil and gas transportation between particular regions and therefore geographical separation of companies within the sector may lessen rivalry. The coal and consumable fuels market is fragmented with companies such as China Shenhua Energy, Xstrata, BHP Billiton, and Peabody Energy benefiting from scale economies. The mining sector is capital intensive, which constitutes a significant barrier to entry, and also raises exit costs. There is a tendency towards concentration, with a few multinationals dominating in several segments. Major buyers in this sector are electricity generators. These companies will be on the lookout for cheaper and more effective substitutes for coal and metals, such as oil and gas in the energy industry, and players in this sector are therefore constantly contending with the threat of substitutes.
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Top 10 Companies Landscape
TOP 10 COMPANIES LANDSCAPE Companies Landscape

The global energy industry witnessed a sharp decline in value in 2009. The global financial crisis has affected the demand for products forcing energy companies to cut production. The American and European industries were severely affected and the companies recorded huge losses. In comparison, the Asia Pacific industry was less affected. The economic crisis has led to limited capital funding for new projects and substantially delayed new investment plans. The industry has begun to recover in 2010. The oil prices are expected to rise with increase in demand as a result of projected global economic growth, slower growth in non-OPEC (Organization of the Petroleum Exporting Countries) oil supply, and continued production restraint by members of the OPEC. In 2009, Exxon Mobil Corporation was the leading player in terms of revenues, followed by Royal Dutch Shell and BP. Table 5: Turnover of global top 10 energy companies, $m, FY2009
Ranking 1 2 3 4 5 6 7 8 9 10 Company name Exxon Mobil Corporation Royal Dutch Shell Plc BP Plc China Petroleum & Chemical Corporation (Sinopec) TOTAL S.A. Chevron Corporation PetroChina Company Limited ConocoPhillips Eni SpA OAO Gazprom Revenue ($m)* 301,500.0 278,188.0 239,272.0 192,926.3 China 183,152.6 167,402.0 149,435.9 149,341.0 140,927.4 94,933.4 France US China US Italy Russia Country US The Netherlands UK
* Currency conversions calculated using constant 2009 annual average exchange rates.
Source: Datamonitor
DATAMONITOR
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Figure 11: Turnover of global top 10 energy companies, $m, FY2009
350,000 300,000 Revenue ($m) 250,000 200,000 150,000 100,000 50,000 0 China Petroleum & Chemical PetroChina Company Exxon Mobil Royal Dutch Shell Chevron ConocoPhillips TOTAL Gazprom
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BP
Source: Datamonitor
Eni
DATAMONITOR
Exxon Mobil Corporation

Exxon Mobil Corporation (Exxon Mobil) is engaged in exploration and production, refining, and marketing of oil and natural gas. The company also manufactures and markets commodity petrochemicals and specialty products, and generates electricity. It operates worldwide through three segments: upstream, downstream, and chemicals.
Royal Dutch Shell Plc

Royal Dutch Shell (Shell) is a holding company which owns direct and indirect investments in a number of companies comprising the group. It engages in oil and gas exploration and production, transportation and marketing of natural gas and electricity, and marketing and shipping of oil products and chemicals. Shell has extensive operations in more than 90 countries around the world. It operates through two business segments: upstream and downstream.
BP Plc
BP is one of the largest vertically integrated oil and gas companies in the world with presence in more than 80 countries. The company engages in the exploration and production of gas and crude oil, and marketing and trading of natural gas, power, and natural gas liquids. It operates through two reportable business segments: exploration and production, and refining and marketing.
China Petroleum & Chemical Corporation (Sinopec)

China Petroleum & Chemical Corporation (Sinopec) is a vertically integrated energy and chemical company which operates through several subsidiaries and branches mainly located in China. The company engages in exploration, development, production, and marketing of crude oil and natural gas; oil refining and marketing; and production and sales of petrochemicals, chemical fibers, chemical fertilizers, and other chemicals. Sinopec operates through five principal business segments: exploration and production, refining, marketing and distribution, chemicals, and others.
TOTAL S.A.
TOTAL is engaged in all aspects of the petroleum industry, including upstream and downstream operations. It is also involved in the chemicals, coal mining, and power generation businesses. The company has operations in more than 130 countries. TOTAL operates through three business segments: upstream, downstream, and chemicals.
Chevron Corporation
Chevron Corporation (Chevron) is engaged in every aspect of the oil and natural gas industry, including exploration and production, refining, marketing and transportation, chemicals manufacturing and sales, geothermal, mining operations, and power generation. It has operations in more than 100 countries. Chevron operates through four business segments: upstream, downstream, chemicals, and all others.
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PetroChina Company Limited

PetroChina engages in exploration, development, and production and sales of crude oil and natural gas and refining, transportation, storage, and marketing of crude oil and petroleum products. The company is controlled by China National Petroleum Corporation (CNPC). It operates through five business segments: exploration and production, refining and chemicals, marketing, natural gas and pipeline, and others.
ConocoPhillips
ConocoPhillips is an integrated energy company which owns assets and businesses in nearly 40 countries. The company is engaged in the exploration and production of petroleum, natural gas, chemicals, and polymers businesses. It operates through six segments: exploration and production, midstream, refining and marketing, LUKOIL Investment, chemicals, and emerging businesses.
Eni SpA
Eni, an integrated energy company, engages in the oil and gas exploration and production, refining and marketing, electricity generation, natural gas distribution, petrochemicals, oilfield services, and engineering industries. The company operates in 77 countries. It operates through seven segments: exploration and production, refining and marketing, gas and power, engineering and construction, petrochemicals, corporate and financial companies, and other activities.
OAO Gazprom
Gazprom, one of the largest gas producing companies in the world, engages in exploration, production, transportation, processing, and marketing of natural gas, as well as refining and production of crude oil and gas condensate. The company has strong presence in Europe. It operates through eight business segments: production of gas, gas storage, transportation of gas, distribution of gas, refining, production of crude oil and gas condensate, electric and heat energy generation and sales, and other.
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Revenue analysis
Table 6: Revenue growth of global top 10 energy companies, 200709

Revenues ($m)* Company name Exxon Mobil Corporation Royal Dutch Shell Plc BP Plc China Petroleum & Chemical Corporation (Sinopec) TOTAL S.A. Chevron Corporation PetroChina Company Limited ConocoPhillips Eni SpA OAO Gazprom 2007 390,328.0 355,782.0 284,365.0 172,100.9 2008 459,579.0 458,361.0 361,143.0 207,189.7 2009 301,500.0 278,188.0 239,272.0 192,926.3 CAGR (200709) (%) (12) (12) (8) 6
221,400.3 214,091.0 122,617.7 187,437.0 148,359.3 76,913.8
250,999.9 264,958.0 157,254.5 240,842.0 178,208.6 104,281.3
183,152.6 167,402.0 149,435.9 149,341.0 140,927.4 94,933.4
(9) (12) 10 (11) (3) 11
* Currency conversions calculated using constant 2009 annual average exchange rates. Source: Datamonitor DATAMONITOR
The top 10 global energy companies have witnessed a sharp revenue decline during 200709. Exxon Mobil Corporation, Royal Dutch Shell, and Chevron Corporation recorded highest revenue decline at a CAGR of 12%. The decrease in revenues was primarily due to decline in general economic conditions. However, Gazprom, PetroChina Company, and China Petroleum & Chemical Corporation recorded increase in revenues at a CAGR of 11%, 10%, and 6%, respectively.
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Figure 12: Revenue growth of global top 10 energy companies, 200709
15 10 CAGR % (2007-09) 6 5 0 -5 -10 -15 -12 Exxon Mobil -12 Royal Dutch Shell TOTAL BP China Petroleum & Chemical -8 -9 -12 Chevron PetroChina Company -11 ConocoPhillips Gazprom
DATAMONITOR NPM (%) 6.52 4.57 7.00 4.90 6.57 6.31 10.45 3.31 5.26 26.54
10
11
-3
Source: Datamonitor
Financial performance analysis
Table 7: Key financials of global top 10 energy companies, FY2009

Company name Exxon Mobil Corporation Royal Dutch Shell Plc BP Plc China Petroleum & Chemical Corporation (Sinopec) TOTAL S.A. Chevron Corporation PetroChina Company Limited ConocoPhillips Eni SpA OAO Gazprom Operating profit ($m)* 35,325.0 21,178.0 27,360.0 12,378.4 21,092.4 18,556.0 21,030.3 12,005.0 16,812.3 27,198.4 OPM (%) 11.72 7.61 11.43 6.42 11.52 11.08 14.07 8.04 11.93 28.65 Net profit ($m)* 19,280.0 12,518.0 16,578.0 9,054.6 11,780.4 10,483.0 15,157.6 4,858.0 6,090.3 24,744.0
* Currency conversions calculated using constant 2009 annual average exchange rates.
Source: Datamonitor
Eni
DATAMONITOR
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Operating profit analysis
Figure 13: Operating profit analysis, FY2009
40000 35000 operating profit ($m) 30000 25000 20000 15000 10000 5000 0 Royal Dutch Shell Exxon Mobil Chevron PetroChina Company ConocoPhillips TOTAL China Petroleum & Chemical Gazprom BP Eni
40 35 30 25 20 15 10 5 0 operating profit margin (%)
operating profit
operating profit margin
Source: Datamonitor
DATAMONITOR
Operating margin is a measurement of what proportion of a company's revenue remains after paying for variable costs of production such as wages, raw materials, and so on. A healthy operating margin is required for a company to be able to pay for its fixed costs, such as interest on debt. Gazprom recorded the highest operating margin of 28.65% in FY2009. In contrast, China Petroleum & Chemical Corporation (Sinopec) recorded an operating margin of 6.42% during the same period. A low operating margin indicates scope for improving cost structure.
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Net profit analysis
Figure 14: Net profit analysis, FY2009
30,000 25,000 20,000 15,000 10,000 5,000 0 Royal Dutch Shell Exxon Mobil Chevron PetroChina Company TOTAL ConocoPhillips China Petroleum & Chemical Gazprom BP Eni
30 25 20 15 10 5 0 net profit margin (%)
net profit ($m)
net profit ($m)

Source: Datamonitor
net profit margin (%)
DATAMONITOR
The net profit margin indicates how much profit a company makes for every $1 it generates in revenue. Gazprom recorded the highest net profit margin of 26.54% in FY2009. A higher profit margin indicates a more profitable company that has better control over its costs compared to its competitors. On the other hand, ConocoPhillips recorded the lowest net margin of 3.31% during the same period. A low net profit margin suggests need for optimizing capital structure.
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Ratio analysis
Table 8: Key industry-specific ratios
Company name Exxon Mobil Corporation Royal Dutch Shell Plc BP Plc China Petroleum & Chemical Corporation (Sinopec) TOTAL S.A. Chevron Corporation PetroChina Company Limited ConocoPhillips Eni SpA OAO Gazprom Current ratio 1.06 1.14 1.14 0.64 1.45 1.42 0.76 0.99 1.02 1.61 ROA (%) 8.36 4.36 7.14 7.45 6.87 6.44 7.81 3.29 3.73 10.04 D/E ratio 0.09 0.26 0.34 0.45 0.50 0.11 0.28 0.46 0.54 0.30 Inventory turnover 16.20 9.77 9.48 8.43 6.11 16.31 4.98 22.71 10.08 4.40 DATAMONITOR
Source: Datamonitor
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Current ratio
Current ratio indicates a company's ability to meet short-term debt obligations. If the current assets of a company are more than twice the current liabilities, then the company is generally considered to have good short-term financial strength. This implies that in the short-term, Gazprom, which recorded a current ratio of 1.61 times in FY2009, is financially much stronger when compared to the other players in the industry. China Petroleum & Chemical Corporation (Sinopec) and PetroChina Company, which recorded current ratios of 0.64 and 0.76 times, respectively, may have problems meeting their short-term obligations.
Return on assets (ROA)

ROA gives an indication as to how efficient management is at using its assets to generate earnings. A higher ROA indicates the companys effectiveness to generate profits from the assets employed. Gazprom recorded the highest ROA of 10.04% in FY2009. This implies that the company is better at converting its investment into profit. In contrast, ConocoPhillips recorded lowest ROA of 3.29% in FY2009 among the top players in the industry. A weak ROA indicates the need for utilizing the assets of the company more effectively to generate income.
Debt/equity ratio (D/E ratio)

D/E ratio is a measure of a company's financial leverage. It indicates what proportion of equity and debt the company is using to finance its assets. Eni had the highest D/E ratio of 0.54 times in FY2009, followed by TOTAL with 0.50 times. A high debt/equity ratio generally means that a company has been financing its growth with debt. This can result in volatile earnings as a result of the additional interest expense. In comparison, Exxon Mobils D/E ratio was 0.09 times in FY2009, indicating that the company is exposing itself to a large amount of equity.
Inventory turnover ratio

Inventory turnover ratio represents how many times a company's inventory is sold and replaced over a period. Gazprom recorded the lowest inventory turnover ratio of 4.40 times in FY2009, implying poor sales and, therefore, excess inventory. As inventories are the least liquid form of asset, a high inventory turnover ratio is generally positive. However, ConocoPhillips unusually high inventory turnover ratio compared to the industry average could mean ineffective buying. High inventory levels are unhealthy because they represent an investment with a zero rate of return.
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COMPANY REPORTS Exxon Mobil Corporation

Company overview
Exxon Mobil is an integrated oil and gas company based in the US. It is engaged in exploration and production, refining, and marketing of oil and natural gas. The company is also engaged in the production of chemicals, commodity petrochemicals, and electricity generation. Exxon Mobil operates across the globe. It is headquartered in Irving, Texas and employs about 80,700 people. The company recorded sales and operating revenues of $301,500m in the financial year ending December 2009 (FY2009), a decrease of 34.4% compared with FY2008. The operating profit of the company was $35,325m in FY2009, a decrease of 58% compared with FY2008. The net profit was $19,280m in FY2009, a decrease of 57.4% compared with FY2008.
Business description
Exxon Mobil is an integrated oil and gas company engaged in exploration and production, refining, and marketing of oil and natural gas. The company is also a major manufacturer and marketer of commodity petrochemicals, including olefins, aromatics, polyethylene, and polypropylene plastics, and a wide variety of specialty products. It also has interests in electric power generation facilities. The company conducts its business activities across the globe. Exxon Mobil operates through three segments: upstream, downstream, and chemicals. The upstream segment explores for and produces crude oil and natural gas. The company's upstream business has operations in 36 countries and includes five global companies. These companies are responsible for the corporation's exploration, development, production, gas and power marketing, and upstream-research activities. The company's upstream portfolio includes operations in the US, Canada, South America, Europe, the Asia Pacific, Australia, the Middle East, Russia, the Caspian region, and Africa. At the end of FY2009, the company had liquid proved reserves of 11,651 million barrels and 68,007 billion cubic feet of natural gas. The company had 16,556 of crude oil and 9,760 of natural gas net production wells at the end of FY2009. Further, the companys net production of liquids, which include crude oil, natural gas liquids, synthetic oil, and bitumen for FY2009, was 2.4 million barrels/day. The companys production of natural gas and oil-equivalent for FY2009 was 9,273 million cubic feet and 3.9 million barrels/day, respectively. Moreover, for FY2009, Exxon Mobils net exploration acreage totaled 72 million acres in 33 countries. During the same year, the company replaced 133% of reserves produced, including asset sales, by adding two billion oil-equivalent barrels to proved reserves while producing 1.5 billion net oilequivalent barrels. Further, Exxons proved reserves of oil and gas during FY2009 was 23 million barrels. The company is also engaged in power generation. Exxon Mobil has interests in about 16,000 megawatts of power generation capacity worldwide. This includes a majority interest in the Castle Peak Power Company that generates electricity for consumers in Hong Kong and mainland China.
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The company's downstream activities include refining, supply, and fuels marketing. The company's refining and supply business focuses on providing fuel products and feedstock. Exxon Mobil manufactures clean fuels, lubes, and other highvalued products. The refining and supply operations encompass a global network of manufacturing plants, transportation systems, and distribution centers that provide a range of fuels, lubricants, and other products and feedstocks to its customers around the world. At the end of FY2009, the company had interests in 37 refineries across 21 countries, with distillation capacity of 6.3 million barrels per day and lubricant basestock manufacturing capacity of 143 thousand barrels per day. In FY2009, Exxon Mobil's refinery throughput was 5.4 million barrels per day. The fuels marketing business operates throughout the world. The Exxon, Mobil, Esso, and On the Run brands serve motorists at nearly 28,000 service stations and provide over one million industrial and wholesale customers with fuel products. The company supplies lube base stocks and markets finished lubricants and specialty products. The chemicals division manufactures and sells petrochemicals. Exxon Mobil Chemical is an integrated manufacturer and global marketer of olefins, aromatics, fluids, synthetic rubber, polyethylene, polypropylene, oriented polypropylene packaging films, plasticizers, synthetic lubricant base stocks, additives for fuels and lubricants, zeolite catalysts, and other petrochemical products.
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SWOT analysis Strengths

Leading market position Exxon Mobil is one of the largest oil companies in the world. The company has established a strong brand image operating for several years worldwide. Exxon Mobil was ranked fourth on the Forbes Global 2,000 ranking, conducted in 2009 and 2010. The annual ranking by Forbes magazine of the top 2,000 public companies in the world is based on a mix of four parameters: sales, profit, assets, and market value. The company has interests in oil production operations in 36 countries including five global companies; it also has majority interest in 37 refineries worldwide. Leading market position across key product lines gives the company a competitive edge with a strong brand image. Vertically integrated operations Exxon Mobil is a vertically integrated energy company and its operations include exploration and production, power generation, energy retailing and trading. In upstream, the company is actively involved in exploration, development, production, and gas and power marketing activities. In FY2009, the companys net production of liquids, which include crude oil, natural gas liquids, synthetic oil, and bitumen, was 2.4 million barrels/day. The companys production of natural gas and oil-equivalent for FY2009 was 9,273 million cubic feet and 3.9 million barrels/day respectively. The company is also involved in the natural gas supply, storage, transport, distribution activities, and marketing of natural gas and electricity. In downstream, the company produces and markets refined petroleum products. Exxon Mobil has a distillation capacity of 6.3 million barrels per day and lubricant basestock manufacturing capacity of about 143 thousand barrels per day. Exxon Mobils fuels and lubes marketing business portfolios include operations around the world, with multiple channels to market serving a globally diverse customer base. Further, the companys refineries are more than 60% larger than the industry average with more conversion capacity and more integration with chemical and lubes operations. The company's vertically integrated operations provide it with greater flexibility to optimize operations, and to produce higher-value products with lower feedstock and operating costs.
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Diversified revenue stream Exxon Mobil has wide presence across various regions. The companys revenue stream is diversified in terms of geographies. Exxon Mobil divides its geographic divisions as US and non-US. The non-US region covers Japan, Canada, the UK, Germany, Belgium, Italy, Singapore, and France. In FY2009, the company generated 29.8% of the total sales and operating revenues from the US, its core market. Revenues from Japan accounted for 7.3%, revenues from Canada accounted for 7%, and revenues from the UK accounted for 6.7% of the total revenues. Moreover, its revenue contribution for FY2009 from Belgium, Germany, Italy, France, and Singapore were 5.6%, 4.9%, 4.3%, 4%, and 2.8%, respectively. Other countries accounted for 27.5% of the remaining revenues. The companys global operations and regional brand identity gives it competitive advantage over its competitors and also indicates that the company has a wider scope in increasing its revenues by utilizing its global presence. Further, its world wide presence reduces exposure to economic conditions or political stability in any one country or region. Strong R&D capabilities Exxon Mobil has strong research and development (R&D) capability. The company conducts research to develop new products and improve existing products, as well as to enhance manufacturing and production methods and improve service. It spent $1,050m on R&D in FY2009. R&D expenses in previous years were $847m FY2008, $814m in FY2007, $733m in FY2006, and $712m in FY2005. Because of its strong R&D capabilities, the company, for instance, in April 2010, the company extended its drilling technology at its Santa Ynez unit offshore southern California, which boosted the production capacity by 5.8 million barrels of oil. Further, in January 2010, the company introduced an advanced technology to extend the production life of oil and natural gas fields in Texas, US. The company intends to recover and reinject nitrogen and other gases from the field's natural gas production, in order to enable more oil and gas to be recovered from the reservoirs. The reinjection of these gases would also reduce the plant's air emissions by almost one-third. Over the past three years the companys capital expenditure in Texas has exceeded $700m. Further in 2009, ExxonMobil Chemical applied its proprietary catalyst hydrogenation technology to produce ultra-low aromatic (ULA) fluids that comply with the most stringent environmental and regulatory requirements. In the same year, ExxonMobil Chemical developed two new grades of V series co-extruded battery separator films, which enhanced safety for hybrid and electric vehicles, power tools, and electronic devices including laptop computers. The company's strong R&D capabilities provide it with a competitive advantage and help it to innovate and launch new products.
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Weaknesses
Litigation and contingencies likely to hamper companys image The company is involved in various lawsuits, claims, and legal proceedings arising out of the conduct of the company's business. Some of these legal proceedings and claims seek damages, fines, or penalties in substantial amounts or remediation of environmental contamination. For instance, in April 2010, the companys subsidiaries Mobil Oil Guam and Mobil Oil Mariana Islands were fined $2.4m for violating the federal Clean Air Act by failing to control emissions from their facilities. Moreover, both the companies have illegally discharged hundreds of tons of volatile organic compounds annually from their gasoline terminals in Guam and Mariana Islands. Further, Exxon Mobil is currently facing allegations that it damaged the Texas oil wells it leased with cement, trash, and dynamite to prevent other producers from tapping fields it no longer wanted. Exxon Mobil plugged several wells it had drilled in the land of the O'Connor family, a Texas oil family, and it might have to pay a huge penalty of up to a $1 billion regarding this. Such litigations and lawsuits will adversely affect the image of the company besides resulting in huge financial penalties. Declining net liquids production and oil reserves The upstream division has recorded a consistent decline in its production volumes. The net liquids production volumes worldwide have been declining since FY2007. The production has declined at a CARC of 4%, from 2.6 million barrels per day in FY2007 to 2.4 million barrels per day in FY2009. Further, the company's proved oil reserves have also declined significantly over the past three years. The proved oil reserves fell from 7,744 million barrels in FY2007 to 6,469 million barrels in FY2009, at a CARC of 9%. A continuation of this trend is likely to have an adverse impact on the company's revenue growth rates. Legal proceedings leading to administrative action in Nigeria In May 2010, Exxon Mobil faced a legal hurdle from the Nigerian Ministry of Petroleum Resources, for not renewing three oil mining leases (OMLs) for 20 years and operating the leases illegally. The mining leases were operated without the signature of one of the key participant to the contract, Dr. Rilwanu Lukman, former Minister of Petroleum Resources. The government sources confirmed that Mr. Lukman declined to sign the contract because the $600m offered for renewal by Exxon Mobil was far below the valuation undertaken by a committee set up to negotiate and renew the leases. In 2009, Chinese National Offshore Oil Corporation (CNOOC) expressed its interest of acquiring 49% stake in 23 oil blocks already leased to the international oil companies (IOCs), to the federal government. The absence of a valid contract encouraged the CNOOC to offer a revised $50 billion bid for a 30% stake in the oil leases held by Exxon Mobil, along with others held by Shell Petroleum Development Company, Chevron Nigeria, and Total.
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The valuation carried out by committee on the blocks arrived at approximately $2.6 billion as a reserve value for Exxon Mobil's oil and gas reserves in the blocks, which was later revised to $1.5 billion after several consultations with Mr. Lukman and Dr. Emmanuel Egbogah, President's Special Adviser on Petroleum Matters. Exxon Mobil was therefore required to pay $600m in proportion to its 40% interest in the blocks. However, the contract still remains invalid and pending due to the absence of supervision over all operations by the minister. Such kind of violations could result in severe administrative actions affecting the company's credibility.
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Opportunities
Exploratory and development activities using alternate energy resources Unconventional energy resources, such as oil sands, are currently observed as a feasible option to conventional oil, due to the diminishing oil and natural gas reserves. Canadas oil sands have one of the largest known reserves of oil. The Canadian Association of Petroleum Producers estimates that Canadas oil sands deposits have about 175 billion barrels of economically viable oil. Exxon Mobil has dramatically increased investments in the oil sands over recent years through its stake in Imperial Oil and Exxon Mobil Canada. It has interests in Canadas oil sands deposits through Syncrude, a joint venture established to recover shallow deposits of oil sands. Imperial Oil is the owner of a 25% interest in the joint venture. Exxon Mobil has a 69.6% interest in Imperial Oil. In FY2009, Syncrudes net production of synthetic crude oil was about 259,000 barrels per day and gross production was about 280,000 barrels per day. The companys share of net production in FY2009 was about 65,000 barrels per day. Further, Syncrude recently announced plans to expand synthetic crude production capacity to 425,000 barrels per day (bbl/d) and raw bitumen production capacity to 600,000 bbl/d by 2020. In addition, Imperial Oil and Exxon Mobil Canada Properties holds 70% and 30% interest, respectively, in the Kearl oil sands project, a joint venture established to recover shallow deposits of oil sands. The Kearl project is located approximately 40 miles north of Fort McMurray, Alberta, Canada. Exxon Mobil could hence benefit on improving the unconventional resources through these investments and expand its product portfolio. Rising demand for liquid fuels Liquid fuels provide the largest share of energy supply presently due to their availability, affordability, and ease of transport. The strong economic growth in the developing countries will drive global oil and natural gas demand. The demand for liquid fuels is expected to increase to 104 million oil-equivalent barrels per day by 2030, an increase of 25% from 2005. Exxon Mobil is currently participating in LNG production in Qatar and Indonesia with a combined gross capacity of over 50 million tons per year, supplying markets in Asia, Europe, and North America. The company is also participating in the development of LNG in Australia. Further, in December 2009, Exxon Mobil announced that all the co-venturers have agreed to proceed with the development of the Papua New Guinea (PNG) LNG project, estimated to be worth around $15 billion. The company forecasts the global LNG demand to more than triple in volume from 2005 to 2030, driven by the demand in North America, Europe, and Asia Pacific markets. Hence, the PNG LNG Project will be an important supply source to meet this future demand, particularly for the economies in the fast growing Asia Pacific region. The projected increase in demand for liquid fuels and natural gas in the coming years would help the company enhance its sales and strengthen its financial base.
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Increase in capital investments Exxon Mobil plans to invest between $25 billion and $30 billion annually through 2014 to deliver major projects to meet growing world energy demand. Further, Exxon Mobil expects to spend about $28 billion in 2010, about 3% more than its previous year towards capital investments. Moreover, during FY2009, Exxon Mobil started up eight major projects which are projected to add the equivalent of 400,000 net barrels per day to the company's production in FY2010. An additional 12 major projects are expected to start production between FY2010 and FY2012. Overall, the company expects its share of production from new projects to increase by 1.5 million barrels of oil equivalent per day by FY2015. The company plans to increase its production volumes annually till FY2014, by focusing in regions such as West Africa, Middle East, and Russia. Currently, these growth areas account for about 42% of Exxon Mobils production, and are expected to generate about 50% of total volumes by FY2014. The company expects the remaining production volumes to be sourced from established areas, which include Europe, North America, and Asia Pacific. In the chemical business, the company has scaled up construction activity on world-scale petrochemical projects in Singapore. For instance, in April 2010, Exxon Mobil announced that it has plans of commencing its second petrochemical project on Jurong Island, Singapore, by early 2011. The company's petrochemical project is expected to have two 650,000 metric tones per year (mt/year) polyethylene units, a 450,000 mt/year polypropylene unit, a 300,000 mt/year specialty elastomers unit, an aromatics extraction unit to produce 340,000 mt/year of benzene, a 125,000 mt/year oxo-alcohol unit, and a paraxylene unit to produce 80,000 mt/year. These investments aim to develop new technology, bring on new upstream projects, increase the companys base refining capacity, and grow its chemical business. These investments also reinforce Exxon Mobils position as an industry leader in bringing new supplies to the market.
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Threats
Natural calamities Exxon Mobils operations may be disrupted by severe weather events and natural disasters. For example, hurricanes may damage its offshore production facilities or coastal refining and petrochemical plants in vulnerable areas. Further, in April 2010, the Deepwater Horizon Rig, owned by Transocean and leased to BP, exploded in the Gulf of Mexico, resulting in oil leakage of about 5,000 barrels every day. Exxon Mobils net acreage in the Gulf of Mexico during FY2009 was 2.2 million acres. According to the US National Weather Service, the strong winds, high tides, and waves could drive the oil into inlets, ponds and lakes in south-east Louisiana, which could be a threat to the wildlife. The incident forced the US administration to pass a bill to ban oil drilling in new areas of the US coast and in the Gulf of Mexico. Moreover, the incident has also placed the environmental protection bill in risk, which aims to reduce carbon and other greenhouse gas emissions 17% below 2005 levels by 2020. The bill supported by the US President, Mr. Obama, demands for new offshore drilling. The explosion and the growing, uncontrolled spill of oil in the Gulf of Mexico have made the path to approval of the bill even more complicated. Hence, the companys ability to mitigate the adverse impacts of these events depends substantially on the effectiveness of its rigorous disaster vigilance and business continuity planning. Environmental regulations Exxon Mobils businesses are subject to numerous laws and regulations relating to the protection of the environment. With rising awareness of the damage to the environment caused by industry, especially regarding global warming, regulatory standards have been continuously tightened in recent years. One of the most important developments in this area has been the introduction of the Kyoto Protocol for the reduction of greenhouse gases. The protocol calls on industrialized countries to reduce their greenhouse gas emissions level by 5.2% on an average annual basis during the 200812 period, compared with 1990 emissions levels. Further, in 2005, the US environmental protection agency (EPA) issued a Clean Air Interstate Rule (CAIR), to reduce the emission levels. According to the rule, the states have to reduce the allowable sulfur dioxide (SO2) emissions by 70% and reduce nitrogen oxide (NOX) emissions by 60%, by 2015 compared with the 2003 levels. The company is governed by these regulations which could impose new liabilities on the company. This could result in a material decline in Exxon Mobils profitability in the short term. Risks associated with conducting business outside the US The company operates in more than 200 countries under the names Exxon Mobil, Exxon, Esso, and Mobil. The non-US countries accounted for more than 70% of the total revenues of the company in FY2009. In these foreign locations, the company might experience fluctuations in exchange rates, complex regulatory requirements, and restrictions on its ability to repatriate investments and earnings from its foreign operations. The company might also face changes in the political or economic conditions in the foreign countries it operates in. Such instabilities could negatively impact the revenue growth of the company.
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Recent developments
Exxon Mobil, in March 2009, announced an investment between $25 billion and $30 billion annually over the next five years to meet expected long-term growth in world energy demand. In the same month, the company announced its plans to build a technology center in Shanghai, China to provide product applications support for its growing business in the Chinese and Asian markets. Exxon Mobil inaugurated its newest co-generation plant at its Antwerp refinery in Belgium, also in March 2009. Besides generating 125 MW, the new plant would reduce Belgium's carbon dioxide emissions by approximately 200,000 tonnes per year. In April 2009, Exxon Mobil Chemical applied its proprietary catalyst hydrogenation technology to produce ultra-low aromatic (ULA) fluids that comply with existing environmental and regulatory requirements. Subsequently, Exxon Mobil announced the sale of its On the Run convenience store franchise system in the US, and 43 of its company owned and operated sites in the Phoenix, Arizona to Couche-Tard. In the following month, Exxon Mobil Chemical developed two new grades of V series co-extruded battery separator films, which enhanced safety for hybrid and electric vehicles, power tools, and electronic devices including laptop computers. In June 2009, the Turkish government approved an agreement between Exxon Mobil Exploration and Production Turkey and the Turkish national oil company Turkiye Petrolleri Anonim Ortaklg (TPAO) to explore two deepwater blocks in the Black Sea. The following month, the companys subsidiary, Exxon Mobil Libya, commenced its drilling operations in deepwater exploration well in Libya. In August 2009, Petronet LNG entered into a sales and purchase agreement with the Australian subsidiary of Exxon Mobil for the long-term supply of LNG from Gorgon LNG Project in Western Australia. In the subsequent month, Qatar Petroleum and Exxon Mobil established the Qatargas 2 Train 52, one of the largest operating LNG production facilities in the world. In December 2009, Exxon Mobil and Papua New Guinea Liquefied Natural Gas (PNG LNG) Project finalized on a gas sales agreement with Tokyo Electric Power Company (TEPCO) for the long-term sale and purchase of LNG totaling approximately 1.8 million tonnes per annum. Exxon Mobils subsidiary, Exxon Mobil Iraq, signed an agreement with the Iraq Ministry of Oil to redevelop and expand the West Qurna field in southern Iraq, in January 2010. In February 2010, Qatar Petroleum and Exxon Mobil announced the commencement of operations of Al Khaleej GasPhase 2 (AKG-2) project, with 1,250 million cubic feet per day (mcfd) of sales gas capacity. The AKG-2 project involves construction of onshore gas treating, liquids recovery and fractionation facilities, and two additional offshore wellhead platforms.
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Exxon Mobil Chemical expanded its portfolio of metallocene polyethylene (mPE) resins with the introduction of Enable mPE 35-05 grade resin for high clarity films, in March 2010. Enable mPE 35-05 resin provides converters and end users with significant unprecedented combination of film processing and higher alpha olefin (HAO) performance benefits. In the same month, Exxon Mobil Exploration and Production Turkey, an Exxon Mobil affiliate, announced its plans of using the Deepwater Champion, a specially designed, newly built drillship from a subsidiary of Transocean, to explore the deepwater Black Sea offshore Turkey. In March 2010, Sinopec announced its plans of entering into a joint venture with Exxon Mobil and Saudi Aramco to build an oil refinery which could process 12 million tons of crude per year in Fujian, China. In April 2010, Exxon Mobil announced that it could start its second petrochemical project on Jurong Island, Singapore by early 2011.
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Company overview
Royal Dutch Shell (Shell) is engaged in oil and gas exploration and production, transportation and marketing of natural gas and electricity, and marketing and shipping of oil products and chemicals. The company also has interests in renewable sources of energy such as wind, solar and hydrogen. Shell has extensive operations in more than 90 countries around the world. It is headquartered in the Hague, the Netherlands and employs about 101,000 people. The company recorded revenues of $278,188m in FY2009, a decrease of 39.3% compared with FY2008. The operating profit of the company was $21,178m in FY2009, a decrease of 58.5% compared with FY2008. The net profit was $12,518m in FY2009, a decrease of 52.4% compared with FY2008.
Shell is engaged in the aspects of the oil and natural gas industry worldwide. It is a holding company which owns direct and indirect investments in a number of companies comprising the group. Shell also has interests in chemicals, power generation, and renewable energy. The company has extensive operations in more than 90 countries around the world. Shell operates through two business segments: upstream and downstream. The upstream segment explores for and recovers crude oil and natural gas around the world, along with joint venture partners. The segment also engages in liquefying natural gas by cooling and transports it to customers. It also converts natural gas to liquids (GTL) to provide cleaner burning fuels. The business also markets and trades natural gas and power in support of Shells businesses. It extracts bitumen from mined oil sands and converts it to synthetic crude oil. Moreover, the segment also develops wind power as a means to generate electricity. The upstream segment consists of the upstream international and upstream Americas businesses. The upstream international manages the upstream business outside the Americas. It also manages the global LNG business and the wind business in Europe. The upstream Americas manages the upstream business in North and South America. It also extracts bitumen from oil sands that is converted into synthetic crude oil. Additionally, it manages the US based wind business. In FY2009, the company's total hydrocarbon production totaled 3,142 thousand barrels of oil equivalent (boe) per day. During FY2009, the company participated in 345 successful exploratory wells drilled outside proved areas. Shell added acreage to its exploration portfolio mainly from new licenses in Australia, Brazil, Canada, Guyana, Italy, Jordan, Norway, and the US; and successfully bid for new exploration licenses in Egypt, South Africa, and French Guiana. In FY2009, Shell added 4,417 million boe of proved oil and gas reserves before accounting for production, of which 3,632 million boe was from its subsidiaries and 785 million boe was associated with Shells share of equity-accounted investments.
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The exploration and production business is supported by the exploration and production research and development (R&D) directorate which is engaged in application of technology to enhance the cost-efficiency and performance of the company's exploration and production activities. The directorate has two main research and development laboratories, one in the Netherlands and another in the US. Additional technology facilities are in Oman, Qatar, Norway, Canada, Germany, the UK, and India. The downstream segment manages Shells manufacturing, distribution, and marketing activities for oil products and chemicals. The segment comprises the downstream businesses of manufacturing which includes the following: refining and supply and distribution; marketing which includes retail, business to business (B2B), lubricants, and alternative energies and carbon dioxide (CO2) business; Shell Trading; and Shell Global Solutions. The segment sells a range of products including fuels, lubricants, bitumen, and liquefied petroleum gas (LPG) for home, transport, and industrial use. The chemicals business produces and markets petrochemicals for industrial customers. The downstream segment also trades Shells flow of hydrocarbons and other energy related products, supplies the downstream businesses, markets gas and power, and provides shipping services. The segment also oversees Shells interests in alternative energy (excluding wind) and CO2 management. The manufacturing portfolio of Shell includes interests in over 35 refineries, with a capacity of approximately four million barrels of crude oil per day. The distribution network includes about 250 distribution facilities, 2,500 storage tanks, and 9,000 kilometers of pipeline in about 60 countries. Shell is one of the largest single branded retailers with about 44,000 service stations spanning more than 80 countries. The company sold 1.45 billion liters of fuel in FY2009. Shell Lubricants sells lubricant products to customers across the transport sector for passenger cars, trucks, and coaches, as well as in manufacturing, mining, power generation, and agriculture and construction industries in around 100 countries. The B2B business of Shell sells fuels and special products and services to a broad range of commercial client base through six separate businesses: Shell Aviation, Shell Marine Products, Shell Gas (LPG), Shell Commercial Fuels, Shell Bitumen, and Shell Sulphur Solutions. The alternative energies and CO2 business manages the companys emerging businesses or functions to support the development of new transport fuels until the business is integrated into Shells mainstream businesses. These include GTL products, biofuels, and hydrogen. Alternative energies and CO2 is also responsible for leading energy conservation and CO2 management activities across Shell. Shell Trading, engaged in trading and shipping activities, trades about 15 million barrels of crude oil equivalent per day. Shell Global Solutions provides business and operational consultancy, technical services, and research and development expertise to Shell companies and the energy and processing industries across the world. It supports the oil products, gas and power, and chemicals businesses of Shell. The chemicals business, a part of the companys downstream business, produces and sells petrochemicals to industrial customers worldwide. These products are used in manufacturing plastics, coatings, and detergents, which in turn are used in items such as fibers and textiles, thermal and electrical insulation, medical equipment and sterile supplies, computers, vehicles, paints, and biodegradable detergents. Shell has interests in more than 30 chemical manufacturing sites worldwide, including joint ventures.
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The segment produces base chemicals such as ethylene, propylene, and aromatics; and intermediates chemicals such as styrene monomer, propylene oxide, solvents, detergent alcohols, ethylene oxide, and ethylene glycol. The chemicals portfolio of the company includes several joint ventures: Infineum, Saudi Petrochemical Company (SADAF), and Shell Petrochemicals Company (CSPCL). Infineum is a 50:50 joint venture between Shell and Exxon Mobil. It formulates, manufactures, and markets high-quality additives used in fuel, lubricants, and specialty additives and components. Infineum has manufacturing centers in seven countries: the US, Mexico, Brazil, Germany, France, Italy, and Singapore. SADAF produces base and intermediate chemicals for international markets. It is a 50:50 joint venture between Shell and Saudi Basic Industries Corporation (SABIC). CSPCL is a 50:50 joint venture between Shell and CNOOC Petrochemicals Investment. The company produces a variety of petrochemicals for the Chinese market. Shell also reports a non-operating segment, corporate, which represents the functional activities supporting the whole group. This segment consists of the following functional activities: holdings and treasury, headquarters and central functions, and Shell insurance operations. The corporate segment also includes insurance underwriting results and the functional and service-center costs that have not been allocated to the other segments. In addition, it also accounts for the interest and other income of non-operational nature, interest expense, non-trading currency exchange effects, and tax on these items.
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Strong market position Shell is one of the largest oil companies in the world. Its operations include upstream and downstream operations spanning 90 countries. The company has interests in oil production operations in several countries and majority interest in over 35 refineries worldwide. Shell operates the world's largest single-brand retail network, with about 44,000 service stations. The cornerstone of the company is its leadership position in various domains such as oil products, deep-water production, LNG, and polyolefin. The company has established a strong brand image operating for over 100 years worldwide. Shell is ranked second in 2009 Forbes Global 2000, up from sixth in 2008. It was ranked eight in 2007. The company is ranked first in 2009 Fortune Global 500 ranking up from third in 2008. The company's strong market position gives it significant bargaining power in the global oil industry. Vertically integrated operations Shells business operations are vertically integrated with presence in both upstream and downstream businesses. In upstream, the company is engaged in the exploration and production of oil and gas. In FY2009, the company's total hydrocarbon production totaled 3,142 thousand barrels of oil equivalent (boe) per day. During 2009, the company participated in 345 successful exploratory wells. The company is also involved in the natural gas supply, storage, transport, distribution activities, and marketing of natural gas and electricity. In downstream, the company produces and markets refined petroleum products. Its refining and marketing division operates 35 refineries with an installed capacity of approximately four million barrels per day. The company conducts its operations through an extensive distribution network comprising 9,000 kilometers of pipeline in about 60 countries, over 250 distribution facilities, and 2,500 storage tanks. Shell is one of the largest single branded retailers with more than 44,000 service stations spanning more than 80 countries. The company's vertically integrated operations give it significant competitive advantage in the global market in terms of economies of scale, synergies, and cross-marketing opportunities.
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Strong exploration technological capability Shell has strong exploration technological capabilities. The company has been making efforts towards enhancing its exploration technology to locate new resources of oil and gas, to meet the rising global energy demand. Shell undertakes airborne and satellite-based gathering of geophysical data and analyses it for better understanding of underground formations, which helps in the accurate exploration drilling. In FY2009, these technologies helped in Shell identify new exploration prospects in the Middle East and Africa. The companys research and development (R&D) focuses on conducting research to access oil and gas in frontier locations such as ultra deep water and the Arctic; to unlock hydrocarbon resources with complex compositions, such as oil shale and very heavy oil; and to access heavy oil resources that are mined at the surface. Shell has also been working towards increasing its access to contaminated gas resources by developing and applying technologies that lower the cost of removal of contaminants such as CO2 and hydrogen sulphide. Through its Smart Fields technologies, Shell recovers resources in locations considered to be difficult or too costly to extract. For instance, the company has been recovering oil at the Champion West field in Brunei that had remained undeveloped for more than 25 years. Shell is also implementing three advanced technology applications with its partners in Oman, across a number of fields for enhanced oil recovery (EOR) to help increase oil recovery figures. In addition, the company is also pursuing the next generation of EOR applications, such as hybrid thermal technologies in Canada, where it is looking to combine steam, solvent, and heater techniques to optimize economic recovery. The companys strong exploration technological capabilities provide it with a competitive advantage by strengthening its upstream operations.
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Weaknesses
Violation of anti-corruption laws Shell is currently under investigation by the US Securities and Exchange Commission (SEC) and the US Department of Justice for violations of the US Foreign Corrupt Practices Act. In July 2007, Shells US subsidiary, Shell Oil, was contacted by the US Department of Justice regarding Shells use of the freight forwarding firm Panalpina and potential violations of the US Foreign Corrupt Practices Act (FCPA) as a result of such use. In 2007, Shell was one of 11 oil groups asked by the SEC to detail its relationship with Panalpina, a Swiss shipping and logistics company, which the US authorities were investigating in relation to suspected irregular payments, contrary to the Foreign Corrupt Practices Act, in Nigeria, Kazakhstan, and Saudi Arabia. In March 2008, Panalpinas own internal investigations had revealed payments to Nigerian customs officials. Shell could face penalties if the allegations that bribes were paid to Nigerian customs officials on behalf of the company are proved. This could result in additional costs for the company, affecting its profits. Administrative action Shell had agreed to pay $19.5m in November 2009, in a settlement accepted by the Superior Court of California, the US, following allegations by the state government concerning some of its underground storage tanks with regards to safety norms. Previously, the company had faced an administrative action in 2008. Shell was fined $109,600 by Washington's Department of Labor and Industries, in June 2008. The company was fined for multiple safety violations in its Anacortes refinery. The refinery is the second largest of the four major facilities supplying gasoline and other petroleum products to the Puget Sound region. The Anacortes refinery employs 400 people and several hundred contractors. It processes 145,000 barrels of crude everyday into gasoline, aviation fuel, diesel, bunker oil and other products. The department cited 23 violations ranging from inadequately instructing operators on how to deal with emergencies to faulty inspections. The investigation by the department was conducted as part of a national inspection program following a lethal explosion at BP's Texas City plant in 2005. Further such safety violations could result in severe administrative actions affecting the companys credibility.
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False statement of oil and gas reserves Shell agreed to pay $120m in June 2008, to settle a class action lawsuit led by the Pennsylvania State Employees' Retirement Board and the Public School Employees' Retirement Board. There was an allegation against Shell of overstating oil and natural gas reserves and artificially inflating stock prices over a five-year period from April 1999 to March 2004. In 2004, Shell admitted to have overstated its oil reserves by about 20% (equivalent of 3.9 billion barrels). Many of the companys executives lost their jobs, including then Chief Financial Officer Judy Boynton. In April 2007, Shell agreed to pay $352.6m, plus administrative costs, to settle a lawsuit with investors outside the US who purchased the companys shares. Such huge penalties can have adverse effects on the companys profitability.
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Opportunities
Development of upstream portfolio Shell has been developing its upstream portfolio through exploration and focused acquisitions, and through divestment of non-core positions. One of the companys key strategies is to grow and upgrade the quality of its North America tight gas portfolio. Shells activities in US tight gas began in 2001, with acreage purchases in the Pinedale Anticline in Wyoming. Following the success of Pinedale, Shell has more recently expanded its tight gas acreage positions in South Texas, in the Haynesville play in Texas/Louisiana, and in Western Canada, through the 2008 acquisition of Duvernay. In FY2009, the companys North America tight gas production was about 140,000 barrels of oil equivalent per day (810 million cubic feet equivalent per day), an increase of 62% over FY2008, from a 3.7 billion boe (21 trillion cubic feet equivalent) resources base. The companys continued focus on operating efficiency has resulted in low production costs. The company has been expanding its North America tight gas portfolio. In May 2010, Shell has agreed to acquire subsidiaries which own substantially all of the business of East Resources for $4.7 billion. East Resources is a privatelyowned business with its primary activity focused on the Marcellus shale, in the northeastern US. East Resources has about 650,000 net acres (2,600 square kilometers) of highly contiguous, operated acreage in the Marcellus, and 1.05 million net acres (4,250 square kilometers) of acreage overall. East Resources also has about 60 million cubic feet equivalent per day (10,000 barrels oil equivalent per day) of production, predominantly in natural gas, with substantial medium-term growth potential. In addition, as part of its on-going acreage build strategy, Shell has acquired 250,000 net acres (1,000 square kilometers) of mineral rights in the Eagle Ford shale play, in South Texas, in 2010. These undeveloped acreage positions are in the liquids rich window of the Eagle Ford play. Shell will be the operator in this highly contiguous acreage, and will be able to integrate these new assets into its existing South Texas operations, where Shell has been active for many years. In 2010, Shell has added approximately 1.3 million acres (5,250 square kilometers) of North America tight gas acreage. Shell estimates that these new positions have the potential to yield over 16 trillion cubic feet of gas equivalent (tcfe) of resources (more than 2.7 billion boe). The companys increasing focus on its tight gas portfolio, and divestments from noncore positions across North America, will enable the company to position itself for profitable growth. Shells strong technology and capabilities will help unlock the potential from these resources and strengthen the companys position in the industry.
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Shell Eastern Petrochemicals Complex Shell completed the Shell Eastern Petrochemicals Complex (SEPC) project in Singapore in May 2010. It is the companys largest, fully-integrated refinery and petrochemicals hub. SEPC is Shells largest petrochemicals investment to date and the second world-scale petrochemicals project the company has completed in Asia in four years. The additional capacity brought on stream by the SEPC project includes: 800,000 tons per annum of ethylene, 750,000 tons per annum of monoethylene glycol, 450,000 tons per annum of propylene, 230,000 tons per annum benzene, and 155,000 tons per annum of butadiene. Shell designed the new facilities to maximize the benefits of locating refining and petrochemicals production within a single manufacturing hub on Bukom and Jurong islands, just off the Singapore coast. Jurong Island is a major petrochemical zone which provides opportunities for further integration with current and potential customers, as well as with Shells own operations. This integrated site will bring considerable synergies in terms of feedstocks, operations, and logistics. Shell has been focusing on expanding its operations in growth markets and to integrate oil and chemicals manufacturing to gain efficiencies. This project will enable the company to sustain its leading position in the Asian petrochemicals market. Investment in advanced biofuels Shell is a leader in the development of advanced biofuels. Its global program includes collaborations with Iogen Energy on the production of enzymatic cellulosic ethanol from agricultural waste, and with Codexis on enzyme conversion. The company also has a joint venture, Cellana, which undertakes research of marine algae for vegetable oil. Shell is working towards meeting government mandates for biofuel. The company is working with biofuel manufacturers to secure costeffective supply with clear social and environmental standards. In June 2010, Shell acquired an equity stake in Virent Energy Systems (Virent). The companies also collaborated on a joint technology program to convert plant sugars directly into diesel. Virents BioForming process is a leading technology for the production of sustainable advanced biofuels, including biogasoline, diesel, and jet fuel, and many chemicals. Shell and Virent have been conducting a joint research and development effort since 2007 to make biogasoline from plant sugars. As part of this effort, a pilot plant was started in 2009. The existing joint research and development agreement will also be expanded to include research into the production of diesel. Traditionally, biodiesel has been made from vegetable oils. This new joint technology program will investigate Virents BioForming process as a means for converting plant sugars directly into diesel. The sugars could eventually be sourced from a range of non-food feedstocks such as sugarcane bagasse, corn stover, and other agricultural residues. Diesel produced with the BioForming technology process would have the same properties as conventional diesel. It would not require specialized infrastructure and could be transported through existing pipelines. The fuel could also be blended with conventional diesel in higher concentrations than conventional biodiesel. Shells investment in Virent provides opportunities for the company to combine Virents expertise in the area with its own competencies to develop advanced biofuels. In addition, the expansion of the joint technology program to include research into the production of diesel from plant sugars offers considerable potential and complements Shells wider biofuels portfolio. The collaboration would help Shell sustain its leading position in the biofuels market.
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Threats
Environmental regulations Shells business is subject to numerous laws and regulations relating to the protection of the environment. With rising awareness of the damage to the environment caused by industry, especially regarding global warming, regulatory standards have been continuously tightened in recent years. One of the most important developments in this area has been the introduction of the Kyoto Protocol for the reduction of greenhouse gases. The protocol calls on industrialized countries to reduce their greenhouse gas emissions level by 5.2% on an average annual basis during the 200812 period, compared with 1990 emissions levels. The company is governed by these regulations which could impose new liabilities. This could result in a material decline in the companys profitability in the short term. Investments in Iran and Syria Shell has presence in Iran and Syria, countries against which the US government has imposed sanctions. The US laws and regulations identify certain countries, including Iran and Syria, as state sponsors of terrorism and currently impose economic sanctions against these countries. Certain activities and transactions in these countries are banned. Breaking these bans can trigger penalties including criminal and civil fines and imprisonment. For Iran, US law sets a limit of $20m in any 12 month period on certain investments knowingly made in that country, and prohibits the transfer of goods or services made with the knowledge that they will contribute materially to that countrys weapons capabilities. The law authorizes sanctions against any company violating these rules, including denial of financings by the US export/import bank, denial of certain export licenses, denial of certain government contracts, and limits of loans or credits from US financial institutions. However, compliance with this investment limit by European companies is prohibited by Council Regulation No. 2271/96 adopted by the Council of the European Union, which means the statutes conflict with each other in some respects. Shell has exceeded US imposed investment limits in the past and may exceed the US imposed investment limits in Iran in the future. As a result, the company could be subject to sanctions or other penalties in connection with these activities. This could materially affect the companys business operations as well as its financial performance.
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Risks associated with wide geographic presence The company operates in more than 90 countries in different political conditions. Its wide geographic presence exposes Shell to a wide range of political developments and resulting changes to laws and regulations. The potential developments that could affect Shell include the following: forced divestment of assets; expropriation of property; limits on production; import and export restrictions; international conflicts, including war; civil unrest and local security concerns that threaten the safe operation of company facilities; price controls, tax increases, additional windfall taxes, and other retroactive tax claims; re-writing of leases; cancellation of contract rights; and environmental regulations. The assessment of the impact of these developments on the companys operations is difficult. The sudden imposition of any of these developments could affect the employees, reputation, operational performance, and financial position of Shell.
Recent developments
Shell announced the construction of the world's largest gas to liquids (GTL) plant, Pearl GTL in Qatar, in February 2009. The plant, a joint development by Qatar Petroleum and Shell, would process about three billion barrels of oil equivalent over its lifetime from the worlds largest single non-associated gas field, the North Field, which stretched from Qatars coast out into the Persian Gulf. Subsequently, operations commenced at the Russias first liquefied natural gas (LNG) plant, a part of the Sakhalin II Project, being developed by Sakhalin Energy Investment Company (Sakhalin Energy). Sakhalin Energy was set up for implementation of the Sakhalin II Project by Gazprom (50% + 1 share), Shell (27.5% - 1 share), Mitsui & Company (12.5%), and Mitsubishi Corporation (10%). In March 2009, Shell and Codexis announced an expanded agreement to develop better enzymes that could accelerate commercialization of next generation biofuels. Shell also increased its equity stake in Codexis. Gazprom and Shell signed LNG and natural gas contracts in April 2009. The agreements include the purchase of LNG by both Shell Eastern Trading and Gazprom Global LNG from Sakhalin Energy Investment Company. They also included a new pipeline gas agreement for the delivery of an equivalent volume of gas to Shell in Europe. In June 2009, Shell International Trading & Shipping Company and Sovcomflot signed a general cooperation agreement for cooperation in potential LNG shipping projects in Russia, including on the Arctic offshore. The agreement provided for broadening of cooperation in future Sakhalin II project development, development of joint shipping solutions for natural gas fields on Yamal Peninsula, further improvement of LNG shipping technologies, including in difficult ice conditions, and development of floating storage and regasification units for gasification in remote regions of Russia. In July 2009, Shell started production at its multi-field Parque das Conchas project 110 kilometers off Brazils south-east coast. In the same month, Shell Gas & Power Developments signed a master agreement with a consortium comprising Technip and Samsung for the design, construction, and installation of multiple floating liquefied natural gas (FLNG) facilities over a period of up to fifteen years. Shell and Technip-Samsung also signed a contract for execution of the front end engineering and design (FEED) for Shell's 3.5 million tons per annum (mtpa) FLNG solution.
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In August 2009, Shell announced that it would build a new hydrodesulfurization plant at its Pernis Refinery in the Netherlands. The plant, expected to come on stream in the second half of 2011, would increase cleaner-burning, lowsulfur fuels production at the 400 thousand barrels per day refinery. Subsequently, Shell announced the construction of a major new lubricants blending plant in Torzhok in the Tver region, north-west of Moscow. The plant with a capacity of 200 million liters a year (about 180,000 tons) would be ready for commercial operation by the end of 2010. In September 2009, Shell took the final investment decision on the Gorgon LNG project signaling the start of initial construction of a liquefied natural gas facility with an annual capacity of around 15 million tonnes per year on Barrow Island, off Western Australias coast. Chevron would operate the project, with a 50% stake, with participants Shell and ExxonMobil each holding 25% shares. Subsequently, Shell agreed to sell its downstream businesses in Greece to Motor Oil (Hellas) Corinth Refineries. Under the terms of the deal, Motor Oil (Hellas) Corinth Refineries would acquire Shells shares in Shell Hellas A.E. and Shell Gas A.E.B.E.Y. In November 2009, the South African Petroleum Authorities confirmed Shell as the successful bidder for exploration rights in the Orange Basin deep-water area, off the countrys west coast. The exploration area covered approximately 37,000 square kilometers, about the size of the Netherlands. Subsequently, Shell announced the acquisition of a 33% interest in the Guyane Maritime Permit, approximately 150 kilometers off the coast of French Guiana, from an affiliate of Tullow Oil. The permit area covered approximately 32,000 square kilometers situated in water 2,000-3,000 meters deep. Further in November 2009, Qatar Petroleum International and Shell Eastern Petroleum signed a series of agreements as a result of which Qatar Petroleum International would acquire a stake in two Shell Chemicals joint ventures in Singapore. Subsequently, Shell Chemicals started operating its new world-scale monoethylene glycol (MEG) unit with a nameplate capacity of 750,000 tons of MEG per annum, at the Shell Eastern Petrochemicals Complex in Singapore. In the same month, Shell Lubricants began operating its newest lubricants complex in Asia to meet growing demand in China. The complex had a production capacity of 200 million liters a year, and the potential for a phased development to 400 million liters a year. In December 2009, the Iraqi Ministry of Oil awarded Shell and Petronas Carigali a contract for technical assistance in developing the Majnoon field. Shell would operate the development and production service contract under the terms of the second licensing round for Iraqi oil and gas contracts. Shell would hold a 45% share, and Petronas Carigali 30%. Subsequently, The South African Petroleum Authorities (Petroleum Agency) awarded Shell a technical cooperation permit for a one-year study to determine the hydrocarbon potential in parts of the Karoo Basin in central South Africa. The permit covered an area of approximately 185,000 square kilometers. Further in December 2009, Shell agreed to acquire Hess Corporations (Hess) entire upstream portfolio in Gabon and its interest in the Clair field, in British waters west of the Shetland Islands. In return, Hess would acquire Shells interest in a pair of Norwegian offshore fields, Valhall and Hod. This transaction is a strategic trade with no cash payment involved.
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In January 2010, the Iraqi Ministry of Oil, Shell, and Petronas Carigali signed a 20 year contract to provide technical assistance in the development of the Majnoon oilfield. Subsequently, The Shell Petroleum Development Company of Nigeria (SPDC) agreed to transfer its 30% interest in oil mining leases 4, 38, and 41 covering approximately 2,650 square kilometers in the north western Niger Delta to Seplat Petroleum Company, a Nigerian company jointly held by two Nigerian firms, Platform Petroleum and Shebah Petroleum Development Company, along with Maurel & Prom of France. In February 2010, Shell International Petroleum Company and Cosan signed a non-binding MOU to form a $12 billion joint venture in Brazil for the production of ethanol, sugar, and power, and the supply, distribution, and retail of transportation fuels. In March 2010, Shell announced a significant new oil discovery in the deepwater eastern Gulf of Mexico. The discovery was at the Appomattox prospect in 2,200 meters (7,217 feet) of water in Mississippi Canyon blocks 391 and 392. In the same month, CS CSG (Australia), the 50/50 joint venture company owned by Shell and a subsidiary of PetroChina, entered into an agreement to acquire Arrow Energy (Arrow). On successful completion of the acquisition, the joint venture would own Arrows Queensland CSG assets and domestic power business as well as Shells Queensland CSG assets and its site for a proposed liquefied natural gas (LNG) plant on Curtis Island at Gladstone. Further in March 2010, China National Petroleum Corporation and Shell announced plans to jointly develop and produce natural gas in Chinas Sichuan basin. Subsequently, Shell signed a sale and purchase agreement to sell its downstream business in New Zealand to a consortium of Infratil and the Guardians of New Zealand Superannuation. The deal included all of Shells downstream assets in New Zealand. As part of the agreement, Shell would sell its 17.1% shareholding in the 104,000 barrel per day refinery at Marsden Point and also its network of more than 220 retail stations. In the same month, Shell produced its first oil and natural gas from the Perdido Development, the worlds deepest offshore drilling and production facility. In April 2010, Shells floating liquefied natural gas (FLNG) technology was selected as the Sunrise joint ventures preferred option for developing the Greater Sunrise gas fields in the Timor Sea. In the same month, Shell divested its LPG business in India. In May 2010, Shell completed the Shell Eastern Petrochemicals Complex (SEPC) project in Singapore, its largest, fullyintegrated refinery and petrochemicals hub. In the same month, Qatar Petroleum signed a new exploration and production sharing agreement (EPSA) with Shell and PetroChina Company for Qatar Block D. Under the agreement, the partners will jointly explore for natural gas in Block D which covered an area of 8,089 square kilometers onshore and offshore Qatar. Further in May 2010, China National Petroleum Corporation acquired a 35% interest in Syria Shell Petroleum Development (SSPD), wholly owned by Shell. SSPD had interests in three production licenses including Deir-Ez-Zor, Fourth Annex, and Ash Sham, operated by the Al Furat Petroleum Company (AFPC). In the same month, Shell agreed to acquire subsidiaries which own substantially all of the business of East Resources for $4.7 billion, from East Resources, its private equity investor, Kohlberg Kravis Roberts & Co., and its advisors Jefferies & Company.
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In June 2010, Shell and Motor Oil (Hellas) Corinth Refineries announced the completion of the sale of Shells downstream businesses in Greece and an agreement for the continued use of the Shell brand in the Greek market. The sale included Shells retail, commercial fuels, bitumen, chemicals, supply and distribution, and LPG businesses, as well as a lubricants oil blending plant.
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BP Plc
Company overview
BP is one of the largest vertically integrated oil and gas companies in the world. The companys operations primarily include the exploration and production of gas and crude oil, as well as the marketing and trading of natural gas, power, and natural gas liquids. BP is headquartered in London, the UK and employs about 80,300 people. The company recorded revenues of $239,272m in the financial year ended December 2009 (FY2009), a decrease of 33.7% compared with FY2008. The operating profit of the company was $27,360m in FY2009, a decrease of 24.7% compared with FY2008. The net profit was $16,578m in FY2009, a decrease of 21.6% compared with FY2008.
BP is one of the worlds largest oil and gas companies. It has presence in more than 80 countries. The company operates through two reportable business segments: exploration and production; and refining and marketing. It also operates a third business segment, other businesses and corporate. The exploration and production business includes oil and natural gas exploration, field development and production (the upstream activities), together with related pipeline, transportation, and processing activities (midstream activities). It also includes the marketing and trading of natural gas (including liquefied natural gas or LNG), power, and natural gas liquids (NGLs). This segment includes upstream and midstream activities in 30 countries, including Angola, Azerbaijan, Canada, Egypt, Russia, Trinidad & Tobago (Trinidad), Norway, the UK, the US and locations within Asia Pacific, Latin America, North Africa, and the Middle East. The segments activities also include gas marketing and trading activities, primarily in Canada, Europe, and the US. Upstream activities involve oil and natural gas exploration and field development and production. Its exploration program is currently focused around Angola, Egypt, the deepwater Gulf of Mexico, Libya, the North Sea, Oman, and onshore US. Major development areas include Algeria, Angola, Asia Pacific, Azerbaijan, Egypt, and the deepwater Gulf of Mexico. During FY2009, production came from 21 countries. The principal areas of production are Angola, Asia Pacific, Azerbaijan, Egypt, Latin America, the Middle East, Russia, Trinidad, the UK, and the US.
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The midstream operations involve the ownership and management of crude oil and natural gas pipelines, processing facilities and export terminals, and LNG processing facilities and transportation. It also includes BPs NGL extraction businesses in the US, the UK, Canada, and Indonesia. Its most significant midstream pipeline interests are the TransAlaska Pipeline System in the US, the Forties Pipeline System and the Central Area Transmission System pipeline, both in the UK sector of the North Sea. The company also has a significant midstream pipeline interest in the South Caucasus Pipeline (SCP), which takes gas from Azerbaijan through Georgia to the Turkish border and in the Baku-Tbilisi-Ceyhan pipeline, running through Azerbaijan, Georgia, and Turkey. Major LNG activities are located in Trinidad, Indonesia, and Australia. BP is also investing in the LNG business in Angola. Additionally, BPs activities include the marketing and trading of natural gas, power, and natural gas liquids. BPs oil and natural gas production assets are located onshore and offshore and include wells, gathering centers, in-field flow lines, processing facilities, storage facilities, offshore platforms, export systems (transit lines), pipelines, and LNG plant facilities. Upstream operations in Argentina, Bolivia, Chile, Abu Dhabi, Kazakhstan, Venezuela and Russia, as well as some of BPs operations in Angola, Canada, and Indonesia are conducted through equity-accounted entities. The companys net proved hydrocarbon reserves, on an oil equivalent basis and excluding equity-accounted entities, comprised 12,621 million barrels of oil equivalent (mmboe) as of FY2009. Its net proved hydrocarbon reserves, on an oil equivalent basis for equity-accounted entities alone, comprised 5,671 mmboe as of FY2009. In FY2009, its total hydrocarbon production averaged 2,684 thousand barrels of oil equivalent per day (mboe/d) for subsidiaries and 1,314 mboe/d for equity-accounted entities. The total liquid production of BP as of FY2009 was 1,400 thousand barrels per day (mb/d), while liquids production on equity-accounted entities alone, was 1,135 mb/d. For the same period, the total natural gas production of BP was 7,450 million cubic feet per day (mmcf/d), while natural gas production on equity-accounted entities alone was 1,035 mmcf/d. The refining and marketing segment is responsible for the refining, manufacturing, supply and trading, marketing, and transportation of crude oil, petroleum, and petrochemicals products and related services to wholesale and retail customers. BP markets its products in more than 80 countries. It operates primarily in Europe and the US and also manufactures and markets its products across Australasia, Southern Africa, India, and China. The refining and marketing segment consists of two main business groups: fuels value chains (FVCs), and international businesses (IBs). In total, BP has interests in 16 refineries worldwide, including those partially owned. These refineries had crude distillation capacities totaled to 3,689 mboe/d in FY2009, in which BP had a share of 2,666 mboe/d. The FVCs integrate the activities of refining, logistics, marketing, supply, and trading on a regional basis. The IBs include the manufacturing, supply, and marketing of lubricants, petrochemicals, liquefied petroleum gas (LPG), and aviation fuels. The company has six integrated FVCs. They are organized regionally, covering the west coast and mid-west regions of the US, the Rhine region, Southern Africa, Australasia (ANZ), and Iberia.
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At the end of FY2009, BPs worldwide network consisted of about 22,400 retail sites operated under the brands BP, Amoco, ARCO, and Aral. In FY2009, the company sold over 600 company-owned sites to dealers, jobbers, and franchisees who continue to operate these sites under the BP brand. In addition, it sold around 1,200 sites in Greece to Hellenic Petroleum, which continue to be operated under the BP brand through a brand licensing agreement. BP also divested around 100 company-owned sites to third parties. At the end of FY2009, BPs retail network in the US comprised 11,500 branded retail sites, of which 1,200 were branded ampm. In Europe, the retail network consisted of 2,500 convenience retail sites in 10 countries. In addition, at the end of FY2009, BP had approximately 500 sites outside Europe and the US in countries such as Australia, New Zealand, and South Africa. BPs IBs provide products and offers to customers in more than 80 countries worldwide, primarily in Europe, North America, and Asia. Its products include aviation and marine fuels, lubricants, LPG, and a range of petrochemicals that are sold for use in the manufacture of other products such as fabrics, fibers, and various plastics. The company manufactures and markets lubricants and related products and services to the automotive, industrial, marine, and energy markets across the world. It sells products directly to its customers in around 46 countries. BP markets primarily through its major brands of Castrol, BP, and the Aral brand in some specific markets. BPs marine lubricants business supplies its products to many types of vessels from deep-sea fleets to marine leisurecraft. BPs industrial lubricants business is a supplier to those sectors of the market involved in the manufacture of automobiles, trucks, machinery components, and steel. BP is also a supplier of lubricants for the offshore oil and aviation industries. BPs petrochemicals operations comprise the global aromatics and acetyls businesses (A&A) and the olefins and derivatives (O&D) businesses, predominantly in Asia. In A&A, BP manufactures and markets three main product lines: purified terephthalic acid (PTA), paraxylene (PX), and acetic acid. BP has a strong global market share in the PTA and acetic markets with a major manufacturing presence in Asia, particularly China. In addition to these three main products, BP produces several other specialty petrochemicals products. It operates 14 manufacturing sites located in the UK, the US, Belgium, China, Indonesia, Korea, Malaysia, and Taiwan, including joint ventures. In O&D, BP manufactures ethylene and propylene from naphtha and also produces a number of downstream derivative products. Air BP is one of the worlds largest and best known aviation fuels suppliers, serving all the major commercial airlines as well as the general aviation and military sectors. During FY2009, BP supplied its aviation products to its customers in approximately 64 countries. BPs marine fuels business focuses on the distribution and sale of refined fuel oils to the shipping industry.
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The LPG business of BP sells bulk, bottled, automotive, and wholesale LPG products to a wide range of customers in 12 countries. Other businesses and corporate segment of the company comprises treasury (which includes interest income on the companys cash and cash equivalents) the companys aluminum asset, the alternative energy business, and shipping and corporate activities worldwide. Treasury operations of the other businesses and corporate segment of BP co-ordinates the management of the companys major financial assets and liabilities. From locations in the UK, the US, and the Asia Pacific region, it provides the link between BP and the international financial markets and makes available a range of financial services to the company, including supporting the financing of BPs projects around the world. The aluminum business is a non-integrated producer and marketer of rolled aluminum products (headquartered in Kentucky, US). BPs aluminum business engages in the supply of aluminum coil to the beverage can business, which it manufactures primarily from recycled aluminum. Under its alternative energy business, BP is engaged in wind, solar, biofuels, hydrogen power, and carbon capture and storage (CCS) technology businesses. With respect to wind power, BP has net wind generation capacity of 711 MW. The company has wind farms in the US, the Netherlands, and in Maharashtra, India. BP Solar operates the solar energy business of BP. BP Solar operates in the entire solar value chain, from the acquisition of silicon as a raw material, the production of wafers and cells, to the creation of solar panels that are then sold and distributed as solar systems on the roofs of residential homes, large commercial buildings, and on vacant land. BP Solars main production facilities are located in Maryland (the US), Xian (China), and Bangalore (India). Under its biofuels business, BP has plans to invest more than $1 billion in building its own biofuels business operations, including partnerships with other companies to develop the technologies, feedstocks, and processes required to produce advanced biofuels. These investments include a 50% stake in Tropical BioEnergia, a joint venture with Santelisa Vale and Maeda Group, to produce bioethanol from sugar cane; and a $90m investment and strategic alliance with Verenium to accelerate the development and commercialization of biofuels produced from lignocellulosic bioethanol. BP has been working with DuPont since 2003 to explore new approaches to the development of biofuels. The first product from this collaboration will be an advanced fuel molecule called biobutanol, which has a higher energy content than ethanol. BP has partnered with ABF (British Sugar) and DuPont to construct a biofuels plant in Hull. Hydrogen Energy International, a wholly owned subsidiary of BP, develops decarbonized energy projects around the world. The venture focuses on hydrogen-fuelled power generation, using fossil fuels and CCS technology to produce new large-scale supplies of clean electricity.
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Through its shipping business, BP transports its products across oceans, around coastlines, and along waterways, using a combination of BP-operated, time-chartered, and spot-chartered vessels. At the end of FY2009, BP had an international fleet of 54 vessels (37 medium-size crude and product carriers, four very large crude carriers, one North Sea shuttle tanker, eight LNG carriers, and four LPG carriers). All these ships are double-hulled. Of the eight LNG carriers, BP manages one on behalf of a joint venture in which it is a participant and operates seven LNG carriers. At the end of FY2009, BP had 104 hydrocarbon-carrying vessels above 600 deadweight tonnes on time-charter, of which 102 are double-hulled. BP spot-charters vessels, typically for single voyages.
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Dominant market position BP has a strong market position. It is one of the worlds leading oil companies on the basis of market capitalization and proved reserves. The company is the largest producer of oil, the second largest producer of gas and the largest overall producer of hydrocarbons in the UK. BP is the largest producer of oil and gas in North America. The company has a strong global market share in the purified terephthalic acid (PTA) and acetic markets with a major manufacturing presence in Asia, particularly China. Moreover, Air BP is one of the worlds largest suppliers of fuels to the aviation businesses, supplying aviation fuel to the airline, military, and general aviation sectors. It supplies customers in approximately 64 countries and has annual marketing sales of more than 25 billion liters. It has relationships with many of the major commercial airlines. BP Marine Lubricants is one of the largest global suppliers of lubricants to the marine industry. It supplies many types of vessels from bulkers to container ships to dredgers and cruise ships, with global presence in over 850 ports. BP is also one of the largest blenders and marketers of biofuels in the world. In addition, the company has established a robust brand image over 100 years of operation across the globe. Brands such as BP, Amoco, Aral, ARCO, and Castrol are well recognized and trusted by customers all over the world. The companys dominant market position gives it significant bargaining power in the global oil industry. Vertically integrated operations BP has vertically integrated operations as it is involved in upstream, midstream, and downstream oil businesses. The company operates through two business segments: exploration and production; and refining and marketing. Its upstream activities involve oil and natural gas exploration and field development and production. Its midstream operations involve the ownership and management of crude oil and natural gas pipelines, processing facilities and export terminals, and LNG processing facilities and transportation. It also includes BPs natural gas liquids (NGL) extraction businesses in the US, the UK, Canada, and Indonesia. Its most significant midstream pipeline interests are the TransAlaska Pipeline System in the US, and the Forties Pipeline System and the Central Area Transmission System pipeline in the UK sector of the North Sea, the South Caucasus Pipeline (SCP), and the Baku-Tbilisi-Ceyhan pipeline. BPs downstream activities include refining and marketing of oil and natural gas and related products. In total, BP has interests in 16 refineries worldwide, including those partially owned. At the end of FY2009, BPs worldwide network consisted of about 22,400 retail sites operated under the brands BP, Amoco, ARCO, and Aral. In the US, BPs retail network comprised approximately 11,500 branded retail sites. In Europe, the retail network consisted of 2,500 convenience retail sites in 10 countries. In addition, at the end of 2009, BP had approximately 500 sites outside Europe and the US in countries such as Australia, New Zealand, and South Africa.
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The companys vertically integrated businesses confer advantages related to operational efficiencies. Vertically integrated operations provide control over the entire value chain, which enable the company to produce products, which are used at different stages in the entire value chain. The companys vertically integrated operations give it significant competitive advantage in the global oil market. Wide geographic presence The company has a presence in over 80 countries across all major energy markets like Europe, the US, Middle East, and China, among others. Over a period of time, the company has developed diverse revenue streams and is not heavily dependent on a single market. In FY2009, the US, the companys largest geographical market accounted for 35.1% of the total revenues, while non US countries accounted for 64.9%. The company has a large consumer base across countries and therefore, a widespread revenue base. This reduces the impact of market volatility and provides economic stability.
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Weaknesses
Oil spill in the Gulf of Mexico BP is involved in one of the worst environmental disasters in the US. In April 2010, an explosion occurred on the Transocean's rig which was drilling an exploration well on BP operated license. The rig was located approximately 41 miles offshore Louisiana on Mississippi Canyon block 252. The explosion killed 11 workers. Subsequently, the rig worth over $500m sank triggering an oil spill in the Gulf of Mexico. The companys efforts to activate the well's blowout preventer failed and the well continued to spew oil. BPs repeated attempts to control the oil spill have failed. The US government, on June 15, 2010, estimated the oil flow rate from BPs ruptured oil well to be between 35,000 and 60,000 barrels per day. The flow of oil has had a catastrophic effect on the environment and wildlife killing birds, sea turtles, and dolphins. It has affected the multibillion-dollar fishing and tourist industries at a time of high unemployment, soiling the shores of all five US Gulf Coast states (Louisiana, Florida, Mississippi, Texas, and Alabama). The company is liable for the economic loss and the recovery costs. In June 2010, BP announced an agreed package of measures, including the creation of a $20 billion fund to satisfy certain obligations arising from the oil and gas spill. As of July 10, BPs total cost of response totaled $3.5 billion, including the cost of the spill response, containment, relief well drilling, grants to the Gulf states, claims paid, and federal costs. BP had paid more than 52,000 payments totaling approximately $165m from the 105,000 claims submitted until July 10, 2010. BP had placed a new, tighter-fitting cap on top of the ruptured oil well on July 12, 2010. However, the new cap is a temporary fix and cannot totally prevent the blownout well from leaking. It will enable BP to capture most of the oil, or help funnel it up to ships on the surface if necessary. The US Justice Department has launched both a criminal and civil investigation into the oil spill. The company could be subject to penalties under several laws including Clean Water Act, Migratory Bird Treaty Act, and Endangered Species Act. Furthermore, the company could be subject to penalties for criminal violations, which could be double the economic loss and recovery costs. The US government expects the clean up efforts to last few years. BP is known for its past record of safety and environment violations. The environmental damage caused due to the oil spill has considerably tarnished BPs brand image. The heavy financial penalties by the regulatory authorities and the clean up costs are likely to affect BPs profit margins significantly.
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Explosion in the Texas refinery In March 2005, an explosion and fire occurred in the isomerization unit of BP Products Texas City refinery. Fifteen workers died in the incident and many others were injured. In October 2007, the US Department of Justice (DOJ) announced that it had entered into a criminal plea agreement with BP Products related to the explosion and fire. In February 2008, BP Products pleaded guilty, pursuant to the plea agreement, to one felony violation of the risk management planning regulations promulgated under the US federal Clean Air Act. The company paid a $50m criminal fine and was sentenced to three years probation. The Texas Office of Attorney General, on behalf of the Texas Commission on Environmental Quality (TCEQ) filed a petition against BP Products asserting certain air emission and reporting violations at the Texas City refinery from 2005 to 2009, including in relation to the March 2005 explosion and fire. In September 2009, BP Products filed a petition to clarify specific required actions and deadlines under the 2005 Settlement Agreement with the Occupational Safety and Health Act (OSHA). That agreement resolved citations issued in connection with the March 2005 Texas City refinery explosion. OSHA has denied BP Products petition. In October 2009, OSHA issued the Texas City Refinery citations seeking a total of $87.4m civil penalty for alleged violations of the 2005 Agreement and alleged process safety management violations. BP Products has contested the citations and this will also be reviewed by the OSH Review Commission and possibly the federal courts. Settlement negotiations continue between BP Products and OSHA in an attempt to settle the citations for alleged violations of the 2005 settlement agreement. Such events causing environmental damage could result in heavy financial penalties for the company eroding its profits. In addition, such law suits could also tarnish its brand image. Violation of tax laws in Turkey The Turkish Finance Ministry levied a tax fine of $275m on BP in March 2009 for cross-border duty-free petrol sales between 2006 and 2008. BP is one of the largest energy companies in Turkey, serving as the operator of the Baku-TbilisiCeyhan oil pipeline, the second longest in the world. The company also operates Turkeys second-biggest chain of petrol stations. The tax fine was related to BPs operations by its dealer, Bilnam, which transported petrol over the Turkish border to Greece and Bulgaria through duty-free refueling areas for trucks used for exports. Turkey imposes a tax on trucks entering the country with more than 145.3 gallons of fuel. The authorities claimed that the retailer broke a legal limit on the amount of duty-free fuel it can sell to vehicles traveling outside of the country at filling stations on the Greek and Bulgarian borders. In addition to huge penalties, such violation of laws could affect BPs business operations in the country with tightened surveillance.
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Opportunities
Acquisition of Devon Energys assets in Brazil, Azerbaijan, and the US deepwater Gulf of Mexico In March 2010, BP announced the acquisition of Devon Energys assets in Brazil, Azerbaijan, and the US deepwater Gulf of Mexico. These include the following: interests in ten exploration blocks in Brazil, including seven in the prolific Campos basin; a major portfolio of deepwater exploration acreage and prospects in the US Gulf of Mexico; and an interest in the BP-operated Azeri-Chirag-Gunashli (ACG) development in the Caspian Sea, Azerbaijan. In addition, BP will sell a 50% stake in its Kirby oil sands interests in Alberta, Canada, to Devon Energy for $500m. The two companies will form a 50/50 joint venture, operated by Devon Energy, to pursue the development of the interest. Devon will commit to fund an additional $150m of capital costs on BPs behalf. This transaction marks the entry of BP into Brazil. The deal will give BP a diverse and broad deepwater exploration acreage position offshore Brazil with interests in eight license blocks in the Campos and Camamu-Almada basins, as well as two onshore licenses in the Parnaiba basin. The Campos basin blocks include three discoveries, namely Xerelete, presalt Wahoo and Itaipu, and the producing Polvo field. In the US Gulf of Mexico deepwater, BP will gain a high quality portfolio with interests in some 240 leases, with a particular focus on the emerging Paleogene play in the ultra-deepwater. The addition of Devons 30% interest in the major Paleogene discovery Kaskida will give BP a 100% interest in the project. The assets also include interests in four producing oil fields: Zia, Magnolia, Merganser, and Nansen. In Azerbaijan, acquisition of Devons 5.63% stake in the ACG development will increase BPs operating interest in the fields to 39.77%. Therefore, this acquisition is a strategic fit with the companys operating strengths and key interests around the world. Upon completion it will offer BP a significant additional long-term growth potential with an emphasis on high-margin oil. The acquisition will strengthen BPs position in the Gulf of Mexico, enhance its interests in Azerbaijan, and enable it to proceed with the development of Canadian assets thereby reinforcing its global position as the leading deepwater international oil company.
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Oil and gas exploration projects BP aims to grow its exploration and production business by strengthening its portfolio of leadership positions in the worlds most prolific hydrocarbon basins, enabled by the development and application of technology and the building of strong relationships based on mutual advantage. The company has made several oil discoveries in FY2009. For instance, in February 2009, BP made its seventeenth oil discovery in Ultra Deepwater Block 31 in Angola. In May 2009, BP Exploration (Angola) and Sociedade Nacional de Combustiveis de Angola (Sonangol) announced the 'Oberon' oil discovery in ultra-deepwater Block 31, offshore Angola. BP announced a giant oil discovery at its Tiber Prospect in the deepwater US Gulf of Mexico, in September 2009. BP Exploration (Angola) and Sonangol announced the 'Tebe' oil discovery in ultra-deepwater Block 31, offshore Angola, in October 2009. Furthermore, the company began production at some of its major oil and gas exploration projects during FY2009. In May 2009, BP began production from the Dorado (in which it has 75% working Interest) and King South (in which it has 100% interest and was the operator) projects in the Gulf of Mexico. In October 2009, BP Trinidad and Tobago (bpTT) announced the start of natural gas production from the Savonette field, offshore Trinidad. Such oil and gas exploration projects coupled with oil discoveries could help BP in increasing its oil and gas production. Investments in the alternative energy business In alternative energy, the company is focusing on investments in the areas of wind and solar power. It is developing advanced biofuels and low-carbon energy technologies such as hydrogen power and carbon capture and storage. In wind business, BP has added 279 MW of capacity including the construction of two wind farms in the US, Fowler Ridge II in Indiana and Titan I in South Dakota. This has increased the total capacity in commercial operation to 711 MW (1,237 MW gross) at the end of FY2009. In solar business, BP completed the restructuring of its manufacturing facilities. The company has entered into various agreements in FY2009 to develop its solar business further. In May 2009, BP Solar and SolarEdge announced a joint agreement to explore commercialization of a PV module-integrated power harvesting system embedded directly into BP Solar modules. In the same month, BP Solar partnered with RGE Energy to plan one of the world's largest solar projects. The large-scale PV installation with over 46 megawatt peak (MWp) would be built in Koethen, Saxony-Anhalt. Around 210,000 crystalline photovoltaic modules with an output of 220 watt peak each would be supplied by BP Solar and installed by RGE Energy. BPs biofuels business is investing in advanced technologies. It has its first joint-venture ethanol refinery in Brazil and another joint-venture facility is under construction in the UK. In 2009, BPs biofuels business extended its reach and capability through joint ventures with Dupont (to develop, produce, and market next-generation biofuels from biobutanol), Verenium (two 50:50 joint ventures accelerating the development and commercialization of biofuels from lignocellulosic feedstocks), and Martek Biosciences (developing technology to convert sugars into diesel). Therefore, BPs investments in its alternative energy business will help it in diversifying its product offerings, thereby increasing its revenue growth. It would also help the company in enhancing its environment-friendly image.
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Threats
Saturation of resources in the North Sea The company has extensive offshore exploration operations in the North Sea. Offshore exploration in the North Sea has been highly prospective in the past and intensive exploration work has been carried out in this region in the past few decades. Reserves in the region are maturing and are slowly getting saturated. There has been a succession of dry holes being drilled in the last few years. The saturation of reserves in this region is a key challenge for the company especially as newer exploration activity in other parts of the world is far more localized and entails significantly higher investments. Instability in some oil-producing regions BP has exploration and production interests in 30 countries. Many of these regions, including Africa, the Middle East, and South America, are prone to political instability. Though BP has been operating in these countries for a long time and understands the local environment very well, much of the geo-political risks are outside its control. Failure to anticipate some of these events or the inability to mitigate risks in these regions could seriously impair its operations and disrupt the flow of output. Environmental regulations The company is subject to various environmental laws and regulations that govern the discharge of pollutants and disposal of wastes. With rising awareness of the effect that the environment has on human health, regulatory standards have been continuously improved in recent years. In 2005, one of the most important developments in this area has been the introduction of the Kyoto Protocol for the reduction of greenhouse gas. The protocol calls on industrialized countries to reduce their annual greenhouse gas emission levels by an average of 5.2% (relative to 1990 levels) during 2008-12. In 2007, the European Union adopted important strategic objectives with regard to policies that address climate change. In the same year, the European Council adopted a European sustainability strategy based on three reference targets that must be achieved by 2020, which include a 20% reduction in carbon dioxide (CO2) emissions, an increase in the penetration of renewable energy sources (binding target) to 20%, and a reduction in demand by 20% (non-binding target). BP already has a weak record in environmental matters. The company may incur substantial costs to comply with these environmental regulations, which in turn will impact its earnings and margins.
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Risks related to exploration and production activities The companys exploration and production operations are subject to inherent hazards and risks such as fires, natural disasters, explosions, geological formations with abnormal pressures, blowouts during well drilling, collapses of wellbore casing or other tubulars, pipeline ruptures, spills, and other hazards and risks. These events could cause a loss of hydrocarbons, environmental pollution, claims for personal injury, death, property damage or business interruption, or governmental investigations, recommendations, claims, fines or penalties. In April 2010, an explosion on the Transocean's rig on an exploration well operated by BP killed 11 workers. Subsequently, the rig sank triggering an oil spill in the Gulf of Mexico. The spill has caused a multi-billion dollar damage severely affecting the environment and wildlife on the coastal shores of five US Gulf Coast states, and the fishing and tourist industries at a time of high unemployment. The company continues to work towards containing the oil spill after more than two months. BP is liable for the economic loss and the clean up and recovery costs. It had agreed to set up $20 billion fund as directed by the US Government, to satisfy certain obligations arising from the oil and gas spill. The company is considering asset sales to raise money for the clean-up fund. Further, BP faces administrative proceedings from regulatory authorities for environmental damage caused by the spill, which could result in huge penalties. Therefore, the hazards and risks could have a material adverse effect on the companys business operations, financial condition, and cash flows. Threat of a takeover BP faces the threat of a takeover in the light of the financial damage caused by the oil spill and the companys subsequent failure to contain the spill. In April 2010, an explosion occurred on a rig which was drilling an exploration well on BP operated license triggering an oil spill in the Gulf of Mexico. The companys efforts to control the oil spill over a period of two months have failed. As of July 10, BPs total cost of response from the spill totaled $3.5 billion excluding the $20 billion fund set up for the clean-up and recovery costs. The companys repeated failure to cap the leak in its deep-sea well that has been spewing oil since April 2010 has severely affected investors confidence. BPs market capitalization has eroded by about $100 billion since the well began leaking oil. Moreover, the company stands liable for royalties with respect to the oil it is collecting from its ruptured well. Currently, energy companies pay the US Government a royalty rate of up to 18.75% of the value of the oil and gas drilled in the offshore tracts. BP also faces administrative actions from regulatory authorities which could result in huge penalties for the company. With the companys market capitalization declining more than half, BP could become a target for takeover by other bigger energy companies such as Exxon Mobil and Chevron. At the end of December 2009, Exxon Mobil had cash reserves of $10,693m, and Chevron $8,716m. Any of these companies could possibly launch a take over bid on BP backed by their balance sheet strength. BP therefore faces a threat of losing its high quality assets for an undervalued price owing to the damage caused by the oil spill.
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Recent developments
In February 2009, BP and Verenium formed a fifty-fifty joint venture to develop and commercialize cellulosic ethanol from non-food feedstocks. In the following month, BP made its seventeenth oil discovery in Ultra Deepwater Block 31 in Angola. In April 2009, BP Wind Energy (a wholly owned subsidiary of BP) and Dominion (a producer and transporter of energy) announced full commercial operation of phase one of the Fowler Ridge Wind Farm in Benton County, Indiana. The first 400 MW of the project would generate enough carbon-free electricity to power about 120,000 homes. In the same month, BP Solar (a part of BP Alternative Energy) was selected to provide photovoltaic solar power systems for Wal-Mart stores in California. In May 2009, BP began production from the Dorado (in which it had 75% working Interest) and King South (in which it had 100% interest and was the operator) projects in the Gulf of Mexico. Subsequently, the Egyptian Natural Gas Holding Company (EGAS) awarded BP two blocks in the 2008 international bid round on the Egyptian Offshore Nile Delta. In the same month, BP Solar and SolarEdge announced a joint agreement to explore commercialization of a PV moduleintegrated power harvesting system embedded directly into BP Solar modules. Further in May 2009, BP Exploration (Angola) and Sociedade Nacional de Combustiveis de Angola (Sonangol) announced the 'Oberon' oil discovery in ultra-deepwater Block 31, offshore Angola. In the same month, BP Solar partnered with RGE Energy to plan one of the world's largest solar projects. The large-scale PV installation with over 46 megawatt peak (MWp) would be built in Koethen, Saxony-Anhalt, in Germany. Around 210,000 crystalline photovoltaic modules with an output of 220 watt peak each would be supplied by BP Solar and installed by RGE Energy. In June 2009, BP announced the sale of its wholly-owned subsidiary, BP West Java (BPWJ), to Indonesian state-owned oil and gas company PT Pertamina (Persero). In the same month, BP announced the sale of its ground fuels marketing business in Greece to Hellenic Petroleum for E359m (approximately $500m). BP and the State Oil Company of the Republic of Azerbaijan (SOCAR) signed a memorandum of understanding (MOU) to jointly explore and develop the Shafag and Asiman structures in the Azerbaijan sector of the Caspian Sea, in July 2009. Subsequently, BP Wind Energy moved into full construction of a second phase of the Fowler Ridge Wind Farm in Benton County, Indiana. The phase two of the project would have a capacity of 200 MW. In the same month, BP and Irving Oil announced they would not proceed with the proposed second refinery in Saint John, New Brunswick, as a result of global economic and industry conditions. In August 2009, BP and Martek Biosciences Corporation signed a joint development agreement (JDA) to work on the production of microbial oils for biofuels applications. BP announced a giant oil discovery at its Tiber Prospect in the deepwater US Gulf of Mexico in September 2009. The well, located in Keathley Canyon block 102, approximately 250 miles (400 kilometers) south east of Houston, was drilled to a total depth of approximately 35,055 feet (10,685 meters) making it one of the deepest wells ever drilled by the oil and gas industry. Further in September 2009, BP sold its subsidiary, BP Energy India, to Green Infra for INR4.622 billion (approximately $95m). BP Energy India owned and operated three wind farms in India with a total generating capacity of approximately 100 MW.
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BP Exploration (Angola) and Sonangol announced the 'Tebe' oil discovery in ultra-deepwater Block 31, offshore Angola, in October 2009. In the same month, BP announced that it would join Jordans state-owned National Petroleum Company (NPC) to exploit the onshore Risha concession in the north east of the country. Further in October 2009, BP Trinidad and Tobago (bpTT) announced the start of natural gas production from the Savonette field, offshore Trinidad. BP and China National Petroleum Corporation (CNPC) signed a technical service contract with Iraq's state-owned South Oil Company (SOC) to expand production from the Rumaila oilfield, near Basra in southern Iraq, in November 2009. In the same month, a consortium led by VICO, owned jointly by BP and ENI, signed a production sharing contract (PSC) with the Government of Indonesia for the exploration and development of coalbed methane (CBM) resources on the Sanga-Sanga block in East Kalimantan, Indonesia. In December 2009, BP divested its interest in Kazakhstan's Tengiz oil field and the Caspian Pipeline Consortium (CPC) pipeline, carrying oil between Kazakhstan and Russia, by selling its 46% stake in LUKARCO to Russias LUKOIL. In February 2010, BP received an offer from Delek Europe, a leading fuel retailer in Europe and a subsidiary of the Delek Group, to buy its French retail fuels and convenience business including selected fuels terminals. Subsequently, the company selected the Massachusetts Institute of Technology and the University of Manchester as its academic research partners to further investigate materials and corrosion science and technology. In March 2010, BP announced its decision to sell its marketing businesses in Namibia, Malawi, Tanzania, Zambia, and Botswana to focus on those countries which would offer the greatest synergies with its supply portfolio. In the same month, BP announced the acquisition of Devon Energys assets in Brazil, Azerbaijan, and the US deepwater Gulf of Mexico. These would include interests in the following: ten exploration blocks in Brazil, including seven in the prolific Campos basin; a major portfolio of deepwater exploration acreage and prospects in the US Gulf of Mexico; and an interest in the BP-operated Azeri-Chirag-Gunashli (ACG) development in the Caspian Sea, Azerbaijan. Further in March 2010, BP Solar shifted its remaining in-house manufacturing operations to its low cost joint ventures and regional supply partners. As a result, the company ceased silicon casting, wafering, and cell manufacturing at its Frederick, Maryland facility. However, BP Solar continued to maintain its US presence in sales and marketing, and research and technology, project development, as well as key business support activities. In April 2010, an explosion and fire onboard the Transocean's rig which was drilling an exploration well on BP operated license, killed 11 workers. The rig was located approximately 41 miles offshore Louisiana on Mississippi Canyon block 252 (MC252). Subsequently, the rig worth over $500m sank triggering an oil spill in the Gulf of Mexico. In May 2010, BP announced a commitment of up to $500m to an open research program studying the impact of the Deepwater Horizon incident and its associated response on the marine and shoreline environment of the Gulf of Mexico. In June 2010, BP established a $360m escrow account to fund the construction of six sections of Louisiana barrier islands approved by the US government. BP was directed to pay for the construction by the federal government. Subsequently, as part of its commitment to restore the environment and habitats in the Gulf Coast region, BP announced that it would donate the net revenue from oil recovered from the MC252 spill to create a new wildlife fund to create, restore, improve, and protect wildlife habitat along the coastline of Louisiana, Mississippi, Alabama, and Florida.
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In the same month, BP announced an agreed package of measures, including the creation of a $20 billion fund to satisfy certain obligations arising from the oil and gas spill. In July 2010, BP and Verenium Corporation (Verenium) announced an agreement under which BP Biofuels North America would acquire Verenium's cellulosic biofuels business, including the company's facilities in Jennings, Louisiana and San Diego, California for $98.3m.
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Company overview
China Petroleum & Chemical Corporation (Sinopec) is a vertically integrated energy and chemical company. China Petrochemical Corporation (Sinopec Group), a state owned company, holds a stake of 75.8% in the company. The company operates in China. It is headquartered in Beijing, China and employs over 371,300 people. The company recorded revenues of CNY1,315,915m (approximately $192,926.3m) in FY2009, a decrease of 6.9% compared with FY2008. The operating profit of the company was CNY84,431m (approximately $12,378.4m) in FY2009, compared to an operating profit of CNY26,336m (approximately $3,861.1m) in FY2008. The net profit was CNY61,760m (approximately $9,054.6m) in FY2009, compared to a net profit of CNY28,525m (approximately $4,182.1m) in FY2008.
Sinopec is a producer and marketer of oil products and petrochemical products. It is a vertically integrated energy and chemical company. The principal operations of Sinopec and its subsidiaries include exploration, development, production, and marketing of crude oil and natural gas, oil refining and marketing, and production and sales of petrochemicals, chemical fibers, chemical fertilizers, and other chemicals. The company's business activities also include storage and pipeline transportation of crude oil and natural gas, and import and export of petroleum products. Sinopec operates through five principal business segments: exploration and production; refining; marketing and distribution; chemicals; and others. The exploration and production segment of Sinopec explores and develops oil fields, produces crude oil and natural gas, and sells products to the refining segment of the company and external customers. As of December 31, 2009, the company held 193 production licenses with an aggregate acreage of 19,136 square kilometers and 318 exploration licenses for various blocks in which the company is engaged in exploration activities. At the end of 2009, Sinopec had proved oil and gas reserves of 3,943 million barrels of oil equivalent (mmboe), including 2,820 million barrels (mmbbls) of proved reserve of crude oil, and 6,739 billion cubic feet (bcf) of proved reserve of natural gas. In FY2009, the company produced an average of 962 thousand barrels of oil equivalent (boe) per day, of which approximately 85.8% was crude oil and 14.2% was natural gas. Sinopecs refining business segment processes and purifies crude oil, which is sourced from the exploration and production segment of the company and external suppliers. It also manufactures and sells petroleum products to the chemicals and marketing and distribution segments of the company and external customers. Sinopec is the largest refiner of petroleum and oil producer in China, with its refining capacity ranking third in the world. The company's major oil products include gasoline, kerosene, diesel, lube oil, chemical light feedstock, fuel oil, solvent oil, petroleum wax, asphalt, petroleum coke, liquefied petroleum gas (LPG), propylene, and benzene products. The companys refineries are mainly located in China's southeast coastal area, middle, and lower reaches of Yangtze River and North China.
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At the end of FY2009, the company's total processing capacity was 210 million tons per annum. In FY2009, the output of gasoline, kerosene, and diesel reached 113.69 million tons. The company also produced 26.87 million tons of chemical light feedstock in FY2009. The marketing and distribution segment of Sinopec owns and operates oil depots and service stations in China, and distributes and sells refined petroleum products (mainly gasoline and diesel) in China through wholesale and retail sales networks. The company operates the largest sales and distribution network for refined petroleum products in China. In FY2009, in China, it distributed and sold approximately 124.02 million tonnes of gasoline, diesel, and kerosene including jet fuel, representing a market share of approximately 60% in China. All of Sinopecs retail sales are made through a network of service stations and petroleum shops operated under the Sinopec brand. At the end of FY2009, the company owned 29,698 retail stations, among which 643 sites were under franchise agreement. In FY2009, Sinopec sold approximately 78.9 million tonnes of refined petroleum products through its retail network, representing approximately 63.6% of its total refined petroleum products sales volume. Sinopecs retail market share in FY2009 was approximately 76.7% in its principal market. Moreover, in FY2009, the company sold approximately 25.61 million tonnes of refined petroleum products, including 2.42 million tonnes of gasoline, 23.06 million tonnes of diesel, and 0.13 million tonnes of kerosene, through direct sales to commercial customers such as industrial enterprises, hotels, restaurants, and agricultural producers. In FY2009, Sinopec sold approximately 19.52 million tonnes of refined petroleum products through wholesale channels, representing approximately 15.7% of its total sales volume of refined petroleum products. Its wholesale sales include sales to large commercial or industrial customers and independent distributors as well as sales to certain long-term customers such as railway, airlines, shipping, and public utilities. Through its wholesale centers, Sinopec operates 410 storage facilities with a total capacity of approximately 14.0 million cubic meters, substantially all of which are wholly-owned by Sinopec. The companys wholesale centers are connected to its refineries by railway, waterway and, in some cases, by pipelines. The company also owns some dedicated railways, oil wharfs, and oil barges, as well as a number of rail tankers and oil trucks. The chemicals segment of Sinopec manufactures and markets petrochemical products, derivative petrochemical products, and other chemical products mainly to external customers. Sinopec is the largest petrochemicals producer in China. It produces a range of petrochemical products, including intermediate petrochemicals, synthetic resin, synthetic fiber monomers and polymers, synthetic fibers, synthetic rubber, and chemical fertilizer. At the end of FY2009, the company had 11 ethylene plants (including three joint venture companies), 29 synthetic resin plants, 13 producers of synthetic fiber monomers and polymers, eight synthetic fiber plants, five synthetic rubber plants, and six urea plants. Sinopecs others segment consists principally of trading activities of the import and export subsidiaries and research and development activities undertaken by the companys other subsidiaries.
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Market leadership position in China Sinopec enjoys a strong market position in China. It is one of the largest integrated energy and chemical companies in China. In China, the company is the largest ethylene and aromatics producer as well as the largest producer of butanol, styrene, paraxylene, vinyl acetate, phenol, and acetone. It is the largest producer of polyethylene, polypropylene, and polystyrene and supplier of major synthetic resins products and the largest producer of purified teraphthalic acid, ethylene glycol, caprolactam, and polyester in China. Sinopec is the largest producer of polyester and acrylic fibers, styrene butadiene rubber (SBR), and cis-polybutadiene rubber. The company is the only producer of isobutadiene isoprene rubber (IIR) in China. In FY2009, Sinopec had retail market share of approximately 76.7% in its principal market. Further, the company operates one of the largest sales and distribution networks for refined petroleum products in China. In FY2009, in China, Sinopec had a market share of approximately 60% in the countrys gasoline, diesel, and kerosene market. Sinopecs market leadership position in China enhances the revenues and profitability of the company. Strong marketing and distribution operations Sinopec has strong marketing and distribution operations in China. In FY2009, in China, it distributed and sold approximately 124.02 million tonnes of gasoline, diesel, and kerosene including jet fuel. All of Sinopecs retail sales are made through a network of service stations and petroleum shops operated under the Sinopec brand. At the end of FY2009, the company owned 29,698 retail stations, among which 643 sites were under franchise agreement. In FY2009, the company sold approximately 78.9 million tonnes of refined petroleum products through its retail network, representing approximately 63.6% of its total refined petroleum products sales volume. Moreover, the company sold approximately 25.61 million tonnes of refined petroleum products, including 2.42 million tonnes of gasoline, 23.06 million tonnes of diesel, and 0.13 million tonnes of kerosene, through direct sales to commercial customers such as industrial enterprises, hotels, restaurants and agricultural producers. In FY2009, Sinopec sold approximately 19.52 million tonnes of refined petroleum products through wholesale channels, representing approximately 15.7% of its total sales volume of refined petroleum products. Its wholesale sales include sales to large commercial or industrial customers and independent distributors as well as sales to certain long-term customers such as railway, airlines, shipping, and public utilities. Through its wholesale centers, Sinopec operates 410 storage facilities with a total capacity of approximately 14.0 million cubic meters, substantially all of which are wholly-owned by Sinopec. The companys wholesale centers are connected to its refineries by railway, waterway and, in some cases, by pipelines. The company also owns some dedicated railways, oil wharfs, and oil barges, as well as a number of rail tankers and oil trucks. Further, in FY2009, Sinopec generated 59.1% of its total revenues from its marketing and distribution operations.
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Sinopecs strong marketing and distribution operations provide it with a competitive edge. Vertically integrated operations Sinopec is a vertically integrated energy and chemical company with upstream, midstream, and downstream operations. As part of its upstream operations, Sinopec explores and develops oil fields, and produces crude oil and natural gas. At the end of FY2009, Sinopec had proved oil and gas reserves of 3,943 mmboe, including 2,820 mmbbls of proved reserve of crude oil, and 6,739 bcf of proved reserve of natural gas. In FY2009, the company produced an average of 962 thousand boe per day, of which approximately 85.8% was crude oil and 14.2% was natural gas. The companys midstream operations include storage and pipeline transportation of crude oil and natural gas. In downstream, Sinopec processes and purifies crude oil, and manufactures and markets petrochemical products, derivative petrochemical products, and other chemical products. The company also owns and operates oil depots and service stations in China, and distributes and sells refined petroleum products. The company's vertically integrated operations give it significant competitive advantage in terms of economies of scale, synergies, and cross-marketing opportunities.
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Weaknesses
Dependence on third party crude oil suppliers Sinopec is heavily dependant upon outside sources for its crude oil requirements. The company purchases 82.6% of its total crude oil requirements (for the refining segment), of which 75.2% are from imports and 3.5% are from China National Offshore Oil Corporation (CNOOC) and 3.8% from PetroChina Company. The company's dependence on outside sources for crude oil puts it at a disadvantage against companies sourcing all their crude oil requirements from owned production. Lack of geographical diversification Sinopec generates all its revenues from the Chinese market. Geographical concentration limits the growth potential of the company and exposes it to economic downturns in China. Lack of geographical diversification limits the growth potential of the company. Decline in crude oil reserves Sinopecs proved reserve of crude oil has seen a decline over the last three years. For the period 200609, the companys total proved crude oil reserve has declined at a negative CAGR of 5%, from 3,293 million barrels (mmbbls) in FY2006 to 2,820 mmbbls in FY2009. The companys ability to achieve sustainable development is dependent on certain extent on its ability in discovering or acquiring additional oil and natural gas reserves and further exploring its current reserve base. To obtain additional reserves, the company faces inherent risks associated with exploration and development and with acquiring activities. The company has to invest a large amount of money; however, whether the company can obtain additional reserves is not certain. If the company fails to acquire additional reserves through further exploration and development or acquisition activities, the oil and natural gas reserves and production of the company would decline further which would adversely affect the companys financial situation and operation performance.
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Opportunities
Growth through joint ventures and alliances Growth through joint ventures and alliances has long been a strategy of Sinopec. For instance, in 2008, Sinopec signed a joint venture agreement in China with Mitsubishi Chemical Corporation and Mitsubishi Engineering-Plastics Corporation to engage in manufacturing and sales of polycarbonate resin, as well as bis phenol A, the raw material used in the production of polycarbonate resin. In the same year, Sinopec and Zhejing Provincial Government signed an agreement to jointly construct China's single integrated refining and petrochemical complex in Zhejiang Province. Upon completion, the annual processing capacity would reach approximately 300,000 barrels per day. In May 2009, Praxair (China) Investment, a wholly-owned subsidiary of Praxair, set up a joint venture in Guangzhou, southern China with Sinopec. The joint venture named, Praxair-GPC Industrial Gases, would produce, sell, and distribute industrial gases such as oxygen, nitrogen, and argon for a wide range of industrial applications. Further, in November 2009, Sinopec and Mitsui Chemicals announced their plans to build two factories in Shanghai to manufacture high-performance materials for resins and synthetic rubber used in automobiles and consumer electronics. Both the companies plan to invest approximately $428m to build a plant at their fifty-fifty joint venture, Shanghai Sinopec Mitsui Chemicals Co., which would be able to annually produce 250,000 tons of phenol, a material for resins used in products, such as car headlights and LCD films. The company's joint ventures and alliances would allow it to further strengthen its existing business as well as help Sinopec to gain a strong foothold in new sectors and markets. Acquisitions to fuel growth Sinopec made a number of acquisitions in the recent past. For instance, in June 2009, Sinopec acquired 100% equity interest of Sinopec Qingdao Petrochemical Co., 41.99% equity interest in Shijiazhuang Chemical Fiber Co., property interests in eight oil product pipeline project divisions, and certain other assets related to its exploration and production, refining, and marketing and distribution segments, from Sinopec Group Company. In March 2010, Sinopec announced that it had entered into an agreement, through a wholly-owned subsidiary in Hong Kong, to acquire 55% of Sonangol Sinopec International (SSI) from Sinopec Overseas Oil & Gas, a wholly-owned subsidiary of China Petrochemical Corporation, for a consideration of $1.7 billion. SSI owns a 50% participation interest in Angola Block 18, a deep-water oil asset. This acquisition of one of its parents assets marks the entry of Sinopec into the overseas upstream exploration and production business, and forms the basis for the company to acquire future new oil and gas assets. Further, in June 2010, Zhejiang Southeast Electric Power Company announced that it would sell its entire 10% stake in a Zhejiang-based natural gas development company to a subsidiary of Sinopec. These acquisitions can help Sinopec in its topline growth.
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High demand potential in China China is the worlds second largest consumer of oil. Chinas continuing robust economic growth and accelerating industrialization will propel the demand for petroleum and petrochemical products upwards. Demand will be driven by continued petrochemical demand, agricultural and fishing activities, and construction. Together with the large demandsupply gaps for these products in China, there is much room for further expansion of both the domestic supply and the imports of these products. Aggressive investment, both domestic and foreign, is expected to be made in the industry in the next decade. Sinopec would be in an excellent position to exploit the growth in petroleum industry, boosting its revenues and solidifying its position.
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Threats
Intense competition Sinopec faces intense competition in the oil and gas industry. It competes both in China and international markets. Its main competitors in China are PetroChina Company (PetroChina) and China National Offshore Oil Corporation (CNOOC). In its exploration and production operations, Sinopec competes with CNOOC for the acquisition of desirable crude oil and natural gas prospects. The companys refining and marketing and chemicals operations compete with PetroChina and CNOOC. The companys products also face competition from imported refined products and chemical products. As a result of Chinas entry into the WTO, the competition is further intensified from foreign producers of refined products and chemical products. Such an intense competition threatens to erode the market share of the company. Government regulations and control Sinopecs operations, like those of other Chinese oil and gas companies, are subject to extensive regulations and control by the Chinese government. Although the government is gradually liberalizing the market entry regulations on petroleum and petrochemicals industry, the petroleum and petrochemical industries in China are still subject to some forms of regulations, which include issuing crude oil and nature gas production licenses. It also includes granting the licenses to market and distribute crude oil and refined petroleum products, regulating the pricing of refined petroleum products, collecting special gain levies, assessing taxes and fees payable, deciding import and export quotas and procedures for the oil and gas industry, and setting safety, quality, and environmental standards. These regulations and control affect many material aspects of the company's operations, such as exploration and production licensing, industry-specific and product-specific taxes and fees, and environmental and safety standards. As a result, Sinopec could face significant constraints on its ability to implement its business strategies, to develop or expand its business operations, or to maximize its profitability. The company's business could also be adversely affected by future changes in certain policies of the Chinese government with respect to the oil and gas industry. Such government regulations and control could have a negative impact on the operations of the company.
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Environmental laws and regulations Together with other companies in the industries in which Sinopec operates, it is subject to numerous national, regional, and local environmental laws and regulations concerning its oil and gas exploration and production operations, petroleum and petrochemical products, and other activities. These laws and regulations require an environmental evaluation report to be submitted and approved prior to the commencement of exploration, production, refining, and chemical projects. It also restricts the type, quantities, and concentration of various substances that can be released into the environment in connection with drilling and production activities. The environmental laws and regulations also limit or prohibit drilling activities within protected areas and certain other areas; and impose penalties for pollution resulting from oil, natural gas and petrochemical operations, including criminal and civil liabilities for serious pollution. These laws and regulations could also restrict air emissions and discharges to surface and subsurface water resulting from the operation of natural gas processing plants, chemical plants, refineries, pipeline systems, and other facilities that the company owns. In addition, Sinopecs operations are subject to laws and regulations relating to the generation, handling, storage, transportation, disposal, and treatment of solid waste materials. It is anticipated that the environmental laws and regulations to which the company is subject to would become increasingly strict. These environmental laws and regulations could therefore have an increasing impact on the companys operations.
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Recent developments
In March 2009, Sinopec entered into agreements with certain of its subsidiaries to acquire property rights, equity interests, submarine pipeline, cable testing and maintenance devices, and certain other assets. In the following month, Total E&P Canada, a wholly-owned subsidiary of TOTAL, sold a 10% interest in the Northern Lights Partnership (NLP) to SinoCanada Petroleum Corporation, a subsidiary of Sinopec. Praxair (China) Investment, a wholly-owned subsidiary of Praxair, set up a joint venture in Guangzhou, southern China with Sinopec, in May 2009. The joint venture, named Praxair-GPC Industrial Gases, would produce, sell, and distribute industrial gases such as oxygen, nitrogen, and argon for a wide range of industrial applications. In June 2009, Sinopec acquired 100% equity interest of Sinopec Qingdao Petrochemical Company, 41.99% equity interest in Shijiazhuang Chemical Fiber Company, property interests in eight oil product pipeline project divisions, and certain other assets related to its exploration and production, refining and marketing, and distribution segments, from Sinopec Group Company. In August 2009, Sinopec and Sinopec Asset Management Company entered into six asset transfer agreements, pursuant to which Sinopec acquired from Sinopec Asset Management Company all of the assets it held in Petroleum Exploration & Production Research Institute (PEPRIS), Research Institute of Petroleum Processing (RIPP), Beijing Chemical Institute, Shanghai Research Institute of Petrochemical Technology, Fushun Petrochemical Institute, and Qingdao Safety Research Institute. In the same month, Sinopec announced that it was planning to set up an international exploration company. In November 2009, Sinopec and Mitsui Chemicals announced their plans to build two factories in Shanghai to manufacture high-performance materials for resins and synthetic rubber used in automobiles and consumer electronics. In March 2010, 2010 Sinopec announced that the project of transmitting natural gas from Sichuan to Eastern China had been completed. In the same month, Sinopec announced that it had entered into an agreement, through a wholly-owned subsidiary in Hong Kong, to acquire 55% of Sonangol Sinopec International (SSI) from Sinopec Overseas Oil & Gas, a wholly-owned subsidiary of China Petrochemical Corporation, for a consideration of $1.7 billion. In April 2010, the Sinopec Zhenhai 1 million tonnes per annum ethylene plant was put into operation successfully. In June 2010, Zhejiang Southeast Electric Power Company announced that it would sell its entire 10% stake in a Zhejiangbased natural gas development company to a subsidiary of Sinopec.
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TOTAL S.A.
Company overview
TOTAL is one of the leading integrated oil and gas companies in the world. The company is engaged in all aspects of the petroleum industry, including upstream and downstream operations. TOTAL is also active in the chemicals, coal mining, and power generation businesses. The company has operations in more than 130 countries. TOTAL is headquartered in Courbevoie, France and employs about 96,400 people. The company recorded revenues of E131,327m (approximately $183,152.6m) in FY2009, a decrease of 27% compared with FY2008. The operating profit of the company was E15,124m (approximately $21,092.4m) in FY2009, a decrease of 36.2% compared with FY2008. The net profit was E8,447m (approximately $1,1780.4m) in FY2009, a decrease of 20.2% compared with FY2008.
TOTAL is engaged in the exploration and production of oil and gas, as well as transportation, refining, petroleum product marketing, and international crude oil and product trading. The company operates in more than 130 countries. TOTAL operates through three business segments: upstream; downstream; and chemicals. The upstream segment includes the company's exploration, development, and production activities, as well as its gas and power operations. TOTAL has exploration and production activities in over 40 countries and produces oil or gas in 30 countries. TOTALs gas and power division conducts activities downstream from production related to natural gas, liquefied natural gas (LNG), and liquefied petroleum gas (LPG), as well as power generation and trading, and other activities. The companys consolidated exploration and production subsidiaries development expenditures totaled E8 billion (approximately $11.1 billion) in FY2009. The investments were made primarily in Angola, Nigeria, Norway, Kazakhstan, Indonesia, the Republic of Congo, the UK, Gabon, Canada, the US, Thailand, Russia, and Qatar. In FY2009, TOTALs combined proved reserves of crude oil and natural gas were 10,483 million barrels of oil equivalent (Mboe), 56% of which were proved developed reserves. Liquids represented approximately 54% of these reserves and natural gas the remaining 46%. These reserves were located in Europe (primarily in Norway, and the UK) and in Africa (primarily in Angola, Nigeria, the Republic of Congo, Gabon, and Libya). The reserves were also located in the Americas (mainly in Canada, the US, Argentina, and Venezuela), in the Middle East (mainly in Oman, Qatar, the UAE, and Yemen), and in Asia (mainly in Indonesia and Kazakhstan).
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For FY2009, the companys average daily oil and gas production was 2,281 thousand barrels of oil equivalent per day (kboe/d) compared with 2,341kboe/d in FY2008. Liquids accounted for approximately 61% and natural gas accounted for approximately 39% of TOTALs combined liquids and natural gas production in FY2009. The upstream business segment also includes the gas and power division which encompasses the marketing, trading, and transport of natural gas and liquefied natural gas (LNG), LNG re-gasification and natural gas storage, and LPG shipping and trading. It also includes power generation from gas-fired combined-cycle plants and renewable energies; the trading and marketing of electricity; and the production, marketing, and trading of coal and solar power systems (through its subsidiaries Tenesol and Photovoltech). In FY2009, TOTAL traded and sold approximately 4.4 million metric ton (Mt) of LPG (butane and propane) worldwide. As a refiner and petrochemicals producer, TOTAL has interests in several cogeneration facilities. TOTAL also participates in another type of cogeneration, which combines power generation with water desalination and gas-fired electricity generation. One such example is the Taweelah A1 cogeneration plant in Abu Dhabi, in which TOTAL has a 20% interest. In France, TOTAL has an 8.33% interest in the project to build and operate the second French European Pressurized Reactor (EPR) in Penly, in the northwest of the country, in partnership with GDF Suez and EDF. In Thailand, TOTAL owns 28% of Eastern Power and Electric Company (EPEC), which operates the combined cycle gas power plant of Bang Bo, with a capacity of 350 megawatt (MW). In Nigeria, TOTAL and its partner, the state-owned Nigerian National Petroleum Corporation, are participating in two projects to construct gas-fired power generation units. TOTAL is also engaged in renewable energies, with a particular focus on solar-photovoltaic power. In solar-photovoltaic power (based on silicon-crystal technology), TOTAL is involved in upstream activities, with the manufacturing of photovoltaic cells, and, in downstream activities, with the marketing of solar modules and systems. In partnership with GDF Suez and IMEC (Interuniversity MicroElectronics Centre), TOTAL owns 50% of Photovoltech, a company specializing in manufacturing photovoltaic cells. In addition, TOTAL holds a 50% interest in Tenesol, in partnership with Electricite de France (EDF). Tenesol designs, manufactures, markets and operates solar-photovoltaic power systems. TOTAL also operates a wind farm in Mardyck (near its Flanders refinery, located in Dunkirk, France). Mardyck has a capacity of 12 MW and produced approximately 29.5 gigawatt-hours (GWh) of electricity in FY2008. TOTAL has decided to dispose of certain of its wind farm projects. In marine energy, TOTAL acquired a 10% interest in a pilot project located offshore Santona, on the northern coast of Spain, in 2005. The construction of a first buoy, with a capacity of 40 kilowatt (kW), was completed and the buoy was put into the water in September 2008. TOTAL also exports steam coal from its mines located in South Africa, primarily to Europe and Asia. The company, through its subsidiary Total Coal South Africa (TCSA), owns and operates four mines in South Africa. A fifth mine is under development in Dorstfontein with a start-up expected in late 2011. TOTAL also trades and markets steam coal through its subsidiaries Total Gas & Power, Total Energy Resources (Pacific Basin), and CDF Energie (France). TOTAL sold approximately 7.3 Mt of coal worldwide in FY2009, of which 3.6 Mt was South African steam coal. Approximately 50% of TOTALs South African coal production was sold to European utility companies and the other half in Asia.
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The downstream segment is engaged in refining, marketing, trading, and shipping activities. TOTAL is the largest refiner/marketer in Western Europe, and the largest marketer in Africa, with a market share of 10%. TOTALs refining business has interests in 24 refineries and it directly operates 12 of these refineries. These refineries are located in Europe, the US, the French West Indies, Africa, and China. The companys refineries produce a broad range of specialty products, such as lubricants, LPG, jet fuel, special fluids, bitumen, and petrochemical feedstock. As of December 31, 2009, TOTALs worldwide refining capacity was 2,594 thousand barrels per day (kb/d) and its refined products sales worldwide were 3,616 kb/d (including trading activities). The company markets a wide range of specialty products, produced from refined oil at its refineries and other facilities. TOTAL is among the leading companies in the specialty products market, in particular for bitumen, jet fuel, LPG, lubricants, marine fuels, and special fluids. The company markets its specialty products in approximately 150 countries. As of December 31, 2009, TOTALs worldwide marketing network comprised 16,299 retail stations, with more than 50% owned by the company. TOTAL is also active in the biodiesel and biogasoline biofuel sectors. In FY2009, TOTAL produced and blended 560 kilotonnes (kt) of ethanol in gasoline at twelve European refineries and 1,870 kt of vegetable-oil-methyl-ester (VOME) in diesel at fifteen European refineries and several storage sites. TOTAL, in partnership with the companies in this area, is developing second generation biofuels derived from biomass. The company is also participating in French, European, and international bioenergy development programs. The trading and shipping division of the downstream segment of TOTAL sells and markets the companys crude oil production and provides a supply of crude oil for the companys refineries. It also imports and exports the appropriate petroleum products for TOTAL, charters appropriate ships for these activities, and undertakes trading on various derivatives markets. In FY2009, the shipping division of the company chartered approximately 3,000 voyages to transport approximately 123 Mt of oil. As of December 31, 2009, TOTAL employed a fleet of 55 vessels chartered under long-term or medium-term agreements (including four LPG carriers). The fleet, consisting entirely of double-hulled vessels, has an average age of approximately four years. The chemicals segment is organized into the base chemicals (petrochemicals and fertilizers) and the specialties chemicals (including rubber processing, resins, adhesives, and electroplating activities). TOTAL is one of the worlds largest integrated chemical producers. The base chemicals division comprises TOTALs petrochemical and fertilizer businesses. TOTAL's petrochemical activities include base petrochemicals (olefins and aromatics) and their polymer derivatives (polyethylene, polypropylene, and styrenics). TOTAL's main petrochemicals sites are located in Belgium, France, the US, Singapore, and China. TOTAL holds a 50% interest in an integrated petrochemicals site located in Daesan, South Korea in partnership with Samsung. The company also holds interest in a site with a steam cracker and two polyethylene units in Mesaieed, Qatar. Through its subsidiary GPN, TOTAL manufactures and markets nitrogen fertilizers made from natural gas. TOTALs specialties chemicals division includes its business in rubber processing, resins, adhesives, and electroplating.
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Hutchinson manufactures and markets products derived from rubber processing for the automotive, aerospace, and defense industries. The consumer products business offers baby care products and household specialties. TOTAL produces and markets resins for adhesives, inks, paints, coatings and structural materials through three subsidiaries: Cray Valley, Sartomer, and Cook Composites & Polymers. TOTAL, through its subsidiary Bostik, is engaged in manufacturing adhesives for the industrial, hygiene, construction, and consumer and professional distribution markets. Atotech, which encompasses TOTALs electroplating activities, is the second largest company in this sector, based on worldwide sales. It is engaged in both the electronics and general metal finishing markets.
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Strong market position TOTAL is the fifth largest publicly-traded integrated international oil and gas company in the world. The company operates in more than 130 countries. TOTAL has exploration and production activities in over 40 countries and produces oil or gas in 30 countries. Its reserves are located for the most part in Europe, Africa, the Americas, the Middle East and Asia. TOTAL is one of the leading marketers in Western European markets, which includes countries such as France, Spain, Benelux, the UK, Germany, and Italy. It is also the largest marketer of petroleum products in Africa. The company has strong market position in the specialty products market, in particular for lubricants, LPG, jet fuel, special fluids, bitumen, and marine fuels, with products marketed in approximately 150 countries. A strong market position provides it with a significant bargaining power in the global oil and gas industry. Diversified geographical presence TOTAL has wide presence across various regions. The company has operations in more than 130 countries. The company classifies its geographic divisions as France, rest of Europe, North America, Africa, and rest of the world. In FY2009, France, TOTALs largest geographical market, accounted for 24.7% of the total revenues. Rest of Europe accounted for 45.8% of the total revenues in FY2009, Africa accounted for 7.5% and North America accounted for 7.2% of the total revenues. Rest of the world accounted for balance 14.8% of the total revenues in FY2009. The companys diversified geographical presence and regional brand identity give it competitive advantage over its competitors and also indicate that the company has a wider scope in increasing its revenues by utilizing its global presence. Further, its world wide presence reduces exposure to economic conditions or political instability in any one country or region. Strong research and development (R&D) capabilities TOTAL has strong research and development (R&D) capabilities. The company conducts research to develop new products and improve existing products, as well as to enhance manufacturing and production methods and improve service. TOTAL focuses its research and development activities on the areas of exploration and production technology, refining technology, and chemical processes. It spent E650m (approximately $906.5m) on R&D in FY2009 compared with E612m (approximately $853.5m) in FY2008. R&D expenses in previous years were E594m (approximately $828.4m) in FY2007 and E569m (approximately $793.5m) in FY2006. The number of employees dedicated to research and development activities was 4,016 in FY2009 compared with 4,285 in FY2008. The company employed 4,216 people in R&D in FY2007 and 4,091 in FY2006.
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TOTAL is engaged in extensive R&D in the areas of solar energy, biotechnology, and innovative electricity storage solutions. The company signed the IMEC Industrial Affiliation Program (IIAP) R&D agreement together with GDF SUEZ and Photovoltech (a joint subsidiary) in September 2009. The agreement concerns a research program initiated by IMEC, to reduce silicon use and still increase the efficiency of photovoltaic cells. In November 2009, the company signed a research agreement with the Massachusetts Institute of Technology to develop new stationary batteries to enable the storage of solar power. Through its strong R&D capabilities, the company launched several new products in FY2009. TOTAL launched the Shesha gas cylinders, which are lightweight, easy to handle, and fully recyclable, in France. The company launched acoustic insulation panels for aircraft, which block low frequency sound, thereby reducing propeller noise in the cabin. TOTAL has also introduced IDEE! FIX, the first removable grab adhesive, and Lumicene, a next-generation plastic. The company commissioned a pilot project for carbon dioxide capture and storage at Lacq field in January 2010. Further, TOTAL continued its research and testing programs for fuel cell and hydrogen fuel technologies. TOTAL issued approximately 250 new patents applications in FY2009. The company's strong R&D capabilities provide it with a competitive advantage and help it to improve the efficiency of its products and processes. Presence across the energy value chain TOTAL operates in a wide range of businesses worldwide and commands presence across the energy value chain. The company engages in fully integrated petroleum operations, chemicals operations, mining operations of coal, power generation, and energy services. TOTAL operates across the energy value chain through its three business segments: upstream, downstream, and chemicals. The companys upstream operations comprise exploration, development, and production activities, as well as its gas and power operations. The gas and power division encompasses the marketing, trading, and transport of natural gas and liquefied natural gas (LNG), LNG re-gasification and natural gas storage, and LPG shipping and trading. The downstream segment is engaged in refining, marketing, trading, and shipping activities. Trading activities of the segment include selling the company's crude oil production, and providing a supply of crude oil for the companys refineries. TOTAL's petrochemicals activities include base petrochemicals (olefins and aromatics) as well as their derivatives (polyethylene, polypropylene, and styrenics). The company also has interests in the coal mining, cogeneration, and electricity sectors. TOTALs presence across the energy value chain provides the company with opportunities to optimize its business while minimizing business risks.
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Weaknesses
Oil spill in the Atlantic TOTALs tanker Erika which was transporting products belonging to one of the group companies, sank in December 1999, causing an oil spill. The company was subject to proceedings in relation to marine pollution. In January 2008, the Paris Criminal Court imposed a fine on TOTAL in relation to the sinking of the tanker Erika in 1999. The tanker, carrying fuel oil owned by a TOTAL division, split in two and sank in rough seas in December 1999, spewing nearly 20,000 metric tons of oil into the Atlantic. TOTAL was found guilty of recklessness in its vessel inspection and vetting procedure. TOTAL was ordered to compensate the victims of pollution from the Erika. The compensation totaled E171.5m (approximately $239m). TOTAL had already spent E200m (approximately $279m) after the sinking to help clean up the coastline, pump out the heavy fuel oil remaining in the wreck, and treat the waste collected along the coast. In March 2010, the Paris Court of Appeal in its judgment found that TOTAL was imprudent in implementing its vessel vetting process. The court ordered the company to pay a fine of E375,000 (approximately $522,986). TOTAL has spent more than E370m (approximately $516m) to compensate and repair the damages resulting from this catastrophic accident. Such accidents could result in heavy financial penalties by the regulatory authorities and the clean up costs affect TOTALs profit margins significantly. Violation of anti-competitive laws In Europe, the European Commission commenced investigations in 2000, 2003, and 2004 into alleged anti-competitive practices involving certain products sold by Arkema. Arkema was spun off from TOTAL in May 2006 and became an independent company. In January 2005, under one of these investigations, the European Commission fined Arkema E13.5m (approximately $18.8m) and jointly fined Arkema and Elf Aquitaine, an affiliate of TOTAL, E45m (approximately $62.7m). The European Commission notified Arkema, TOTAL, and Elf Aquitaine of complaints concerning two other product lines in January and August 2005. In May 2006, the commission fined Arkema E78.7m (approximately $109.7m) and E219.1m (approximately $305.6m) as a result of each of these two proceedings. Elf Aquitaine was held jointly and severally liable for, respectively, E65.1m (approximately $85.8m) and E181.35m (approximately $253m) of these fines while TOTAL was held jointly and severally liable, respectively, for E42m (approximately $58.6m) and E140.4m (approximately $195.8m).
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Arkema and Elf Aquitaine received a statement of objections from the European Commission in August 2007 concerning alleged anti-competitive practices related to another line of chemical products. As a result, Arkema and Elf Aquitaine were jointly and severally fined in an amount of E22.7m (approximately $31.6m) and individually in an amount of E20.43m (approximately $28.5m) for Arkema and E15.89m (approximately $22.2m) for Elf Aquitaine. Further in March 2009, Arkema and Elf Aquitaine received a statement of objections from the European Commission concerning alleged anticompetitive practices related to another line of chemical products. The decision was rendered by the European Commission in November 2009. Arkema and Elf Aquitaine were jointly and severally fined in an amount of E11m (approximately $15.3m) and individually in an amount of E9.92m (approximately $13.8m) for Arkema and E7.71m (approximately $10.7m) for Elf Aquitaine. In addition to huge penalties, such violation of laws could affect TOTALs business operations in the region due to tightened surveillance.
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Company Reports
Opportunities
Partnership with ERG to develop the refining and marketing business in Italy TOTAL has formed a partnership with ERG to further strengthen its refining and marketing business in Italy. In January 2010, TOTAL and ERG signed an agreement to create a joint venture with 49% and 51% stakes, respectively, in the Italian marketing and refining business. The joint venture (TotalErg) created through the merger of TOTAL Italia and ERG Petroli, would operate under both the TOTAL and ERG brands. The transaction, however, excludes TOTAL Italia's aviation and AS 24 payment card operations and ERG Petroli's refining and marketing operations in Sicily. Upon integration, TotalErg will become one of the largest marketing operators in Italy, with a retail market share of nearly 13% and over 3,400 service stations. The fuel sales are expected to exceed 3.4 million metric tons per year, while general retail and specialties business sales will amount to roughly 3.2 million metric tons per year, with significant market shares in diesel, lubricants, LPG and bitumen. The joint venture will also be active in the refining business, with a total continental capacity of roughly 116,000 barrels per day (about 8% of national demand). TotalErg will optimize its industrial assets in this segment to achieve excellence in its industrial, environmental and safety performance. The joint venture will also operate its shareholders logistics infrastructure. The integration will further strengthen TOTAL and ERG's competitiveness in Italy by expanding the product and service portfolio for Italian consumers. The joint venture will leverage the expertise and competencies of both companies and pursue opportunities for growth. The agreement will help further strengthen TOTALs position in Italy thereby reinforcing its leading position in the European refining and marketing industry. Establishment of Jubail Refining and Petrochemical Company TOTAL signed agreements with The Saudi Arabian Oil Company (Saudi Aramco) for the establishment of a joint venture in June 2008. The joint venture, Jubail Refining and Petrochemical Company, is expected to begin operations in 2013. Saudi Aramco would initially own 62.5% of the company and TOTAL would own the remaining 37.5%. In June 2010, finances totaling $8.5 billion for the project were secured from multiple sources including $4.01 billion from the public investment fund and export credit agencies (covered and direct), and $4.49 billion from commercial financial institutions. The joint venture is to construct a full-conversion refinery with a capacity of 400,000 barrel per day in Jubail, Saudi Arabia. The refinery would process Arabian heavy crude to high-quality refined products. This full-conversion refinery would maximize the production of diesel and jet fuels. In addition, the project will produce 700,000 tons per year (t/y) of paraxylene, 140,000 t/y of benzene, and 200,000 t/y of polymer-grade propylene. Saudi Aramco and TOTAL would share the marketing of the refinerys products. This refinery is strategically located to benefit from its proximity to the Arabian heavy crude supply system. This refinery reflects the companys commitment to increase its capacity to meet the growing demand for refined products across markets. TOTAL, together with Saudi Aramco, could supply transportation fuels and petrochemicals in Asia, Middle-East, and European markets where the demand for diesel and jet fuels continues to increase.
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Oil and gas exploration projects TOTAL has entered into several agreements for oil and gas exploration projects. In April 2009, TOTALs subsidiary, TOTAL E&P USA, entered into several agreements with Cobalt International Energy to jointly explore the deepwater Gulf of Mexico. In October 2009, TOTAL signed a Heads of Agreement establishing the principles of a partnership with KazMunaiGas (KMG) for the development of the Khvalynskoye field, located offshore in the Caspian Sea on the border between Kazakhstan and Russia. TOTAL and GDF-Suez would acquire a participation of 25% (TOTAL 17%, GDF-Suez 8%) from the 50% held by KMG. In December 2009, the consortium of TOTAL and Partex was awarded a 49% interest in the Ahnet license, as part of the second bid round held by ALNAFT. TOTAL would hold a 47% interest and would appraise and develop the Ahnet finds with partners Partex (2%) and Sonatrach (51%). The company has also made several oil and gas discoveries. In June 2009, TOTAL announced the discovery of a significant gas condensate field in the Niscota block of the Andes foothills, 300 kilometers north east of Bogota, Colombia. TOTAL has a 50% interest in the block, alongside partners Talisman Energy (30%) and Hocol (operator, 20%). In December 2009, TOTALs subsidiary, Total Exploration & Production Nigeria, discovered hydrocarbons in the southern portion of the Oil Prospecting License (OPL) 223 deepwater offshore South-Eastern Nigeria. In April 2010, TEPA (Block 15/06) and its partners made two important oil discoveries in Angola at the Nzanza-1 and Cinguvu-1 wells, in the deep waters of the Angolan offshore. In June 2010, Total Exploration & Production Nigeria in association with Conoil Producing discovered hydrocarbons in the central portion of the Oil Mining Lease OML 136, offshore Western Nigeria. Such oil and gas exploration projects coupled with oil discoveries will help TOTAL in increasing its oil and gas production. Strategic initiatives in the area of biofuels and photovoltaic solar power systems TOTAL has taken several strategic initiatives in the area of biofuels and photovoltaic solar power systems. TOTAL, in partnership with the leading companies in biofuels area, is developing second generation biofuels derived from biomass. The company is also participating in French, European, and international bioenergy development programs. In this framework, the company is participating in the BioTfueL research project intended to develop a technology to transform biomass into biodiesel. In April 2009, TOTAL acquired an interest in Gevo, a US company developing a portfolio of bioproducts intended for the transportation fuel and chemicals markets. TOTAL is also involved in Futurol, an R&D project for cellulosic bioethanol, which intends to develop and promote on an industrial scale a production process for bioethanol by fermentation of lignocellulosic biomass.
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TOTAL is also increasing its footprint in the solar power systems field. In March 2009, TOTAL and GDF Suez announced that they were considering together locating a silicium wafers fabrication plant intended for the photovoltaic industry on the De Vernejoul industrial site in the Moselle region in France. The initial investment is estimated at approximately E70m (approximately $103m). In November 2009, TOTAL signed a research agreement with the Massachusetts Institute of Technology to develop new stationary batteries designed to enable the storage of solar power. TOTALs subsidiary, Total Gas & Power USA, acquired a 25.4% interest in US startup AE Polysilicon Corporation (AEP) in June 2010. AEP has developed an advanced technology to produce polysilicon for photovoltaic panels. Subsequently, Masdar, Abu Dhabis multi-faceted initiative advancing the development, commercialization, and deployment of renewable and alternative energy technologies and solutions, has appointed the bidding consortium of TOTAL and Abengoa Solar as a partner to own, build, and operate Shams 1, the worlds largest concentrated solar power plant and the first of its kind in the Middle East. Such strategic initiatives would help TOTAL in diversifying its product offerings and in turn increase its revenues.
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Threats
Environmental regulations TOTALs businesses are subject to numerous laws and regulations relating to the protection of the environment. With rising awareness of the damage to the environment caused by industry, especially regarding global warming, regulatory standards have been continuously tightened in recent years. One of the most important developments in this area has been the introduction of the Kyoto Protocol for the reduction of greenhouse gases. The protocol calls on industrialized countries to reduce their greenhouse gas emissions level by 5.2% on an average annual basis during the 200812 period, compared with 1990 emissions levels. Further, in 2005, the US environmental protection agency (EPA) issued a clean air interstate rule (CAIR), to reduce the emission levels. According to the rule, the states have to reduce the allowable sulfur dioxide (SO2) emissions by 70% and reduce Nitrous Oxide (NOX) emissions by 60%, by 2015 compared with the 2003 levels. The company is governed by these regulations which could impose new liabilities on the company. This could result in a material decline in TOTALs profitability in the short term. Regulations concerning Iran In 2006, Iran and Libya Sanction Act (ILSA), the US legislation implementing sanctions against Iran and Libya was amended and extended until December 2011. The act was amended to concern only business in Iran and renamed the Iran Sanctions Act (ISA). As per this amendment, the President of the US is authorized to initiate an investigation into the possible imposition of sanctions against persons who knowingly made investments of $20m or more in any 12 month period in the petroleum sector in Iran. The US government waived the application of sanctions for TOTALs investment in the South Pars gas field in Iran in 1998. In each of the years since the passage of ILSA, TOTAL has made investments in Iran (excluding South Pars) in excess of $20m. TOTAL may invest amounts significantly in excess of $20m per year in the country in the future. In July 2008, TOTAL postponed plans to invest in a project linked to Iran's South Pars gas field in the midst of mounting tensions over its nuclear ambitions. The US has intensified its push for tougher sanctions on Iran over the country's nuclear program. Therefore, an immediate investment in Iran amid the mounting tensions over the countrys nuclear program could increase political risks for TOTAL.
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Risks related to exploration and production activities The companys exploration and production operations are subject to inherent hazards and risks such as fires, natural disasters, explosions, geological formations with abnormal pressures, blowouts during well drilling, collapses of wellbore casing or other tubulars, pipeline ruptures, spills, and other hazards and risks. These events could cause a loss of hydrocarbons, environmental pollution, claims for personal injury, death, property damage or business interruption, or governmental investigations, recommendations, claims, fines or penalties. For instance, in April 2010, an explosion on the Transocean's rig on an exploration well operated by BP killed 11 workers. Subsequently, the rig sank triggering an oil spill in the Gulf of Mexico. The spill has caused a multi-billion dollar damage severely affecting the environment and wildlife on the coastal shores of five US Gulf Coast states, and the fishing and tourist industries at a time of high unemployment. The company is selling its asset to raise money for the $20 billion cleanup fund set up as directed by the US Government. Therefore, the hazards and risks related to exploration and production activities could have a material adverse effect on the companys business operations, financial condition, and cash flows.
Recent developments
In January 2009, TOTAL agreed to acquire a 50% stake in IDT Corporations (IDT) subsidiary, American Shale Oil (AMSO). In February 2009, TOTAL signed a MoU with Libyas National Oil Corporation (NOC) converting the existing petroleum contracts covering the blocks C17 and C137, operated by its subsidiary Mabruk Oil Operations, to exploration and production sharing agreement (EPSA) IV format. The blocks were located in the onshore Sirte Basin and the offshore Sabratha Basin, respectively, around 100 kilometers from the Libyan coast. Further in February 2009, TOTAL signed an agreement with Azerbaijans state-owned oil and gas producer, SOCAR. The exploration, development, and production sharing agreement (EDPSA) covered a license on the Absheron offshore block. This block was located in the Caspian Sea, 100 kilometers from Baku, in a water depth of around 500 meters. In March 2009, TOTAL and GDF Suez announced that they were considering locating a silicium wafers fabrication plant intended for the photovoltaic industry on the De Vernejoul industrial site in the Moselle region in France. The initial investment was estimated at approximately E70m (approximately $103m).
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Further in March 2009, TOTAL announced its plans to invest more than E1 billion (approximately $1.5 billion) in France in refining, petrochemicals, and solar energy. In the same month, TOTALs affiliate, TOTAL Exploration and Production Vietnam, signed a production sharing contract with Vietnam Oil and Gas Group (PetroVietnam) for the exploration blocks DBSCL-02 and DBSCL-03. The blocks, which were located in the Mekong Delta area onshore, would be operated by TOTAL with a 75% interest, while PetroVietnam Exploration Production (PVEP) would hold the remaining 25% interest. In April 2009, TOTAL signed agreements for a 20 year extension of its 15% participation in Abu Dhabi Gas Industries (Gasco), alongside the Abu Dhabi National Oil Company (Adnoc, 68%), Shell (15%) and Partex (2%). In the same month, TOTAL E&P Canada (TOTAL Canada), a wholly-owned subsidiary of TOTAL, sold a 10% interest in the Northern Lights Partnership (NLP) to SinoCanada Petroleum Corporation, a subsidiary of China Petroleum & Chemical Corporation (Sinopec). Subsequently in April 2009, TOTAL announced the inauguration of Qatargas 2, a LNG venture, composed of two trains of 7.8 million tons per year (Mt/y) each and for which TOTAL held a 16.7% interest in the second train, alongside the stateowned company Qatar Petroleum (65%) and ExxonMobil (18.3%). Further in April 2009, TOTALs subsidiary, TOTAL E&P USA, entered into several agreements with Cobalt International Energy (an oil and gas exploration and development company) to jointly explore the deepwater Gulf of Mexico. In the same month, TOTAL acquired an interest in Gevo, a company engaged in developing biofuels. In May 2009, TOTAL announced that the Tahiti field located in the Gulf of Mexico had started production. This deepwater field, in which Total owned a 17% interest along with StatoilHydro, was operated by Chevron Corporation. In the same month, TOTAL announced that, within the framework of the Egyptian Natural Gas Holding Company (EGAS) 2008 international bid round organized by the Egyptian authorities, it had been awarded a 90% participation in and the operatorship of Block 4 (East El Burullus Offshore) in conjunction with partner ENEL (10%). Further in May 2009, GDF SUEZ and TOTAL agreed on a partnership agreement with respective stakes of 75% and 25% to jointly own the 33.33% block of shares plus one share in the company formed to build and operate the EPR in Penly, alongside its partner, EDF, which would hold the majority of the capital. Subsequently, the South Hook LNG re-gasification Terminal, located in Milford Haven, UK, was inaugurated. The South Hook Terminal is owned and operated by South Hook LNG, a company formed through the joint venture of Qatar Petroleum (67.5%), ExxonMobil (24.15%), and TOTAL (8.35%). In June 2009, TOTAL announced the discovery of a significant gas condensate field in the Niscota block of the Andes foothills, 300 kilometers north east of Bogota, Colombia. TOTAL had a 50% interest in the block, alongside partners Talisman Energy (30%) and Hocol (operator, 20%). Subsequently, Total E&P Norge was awarded a 40% interest and operatorship in the production license PL 535 in the Barents Sea, following the twentieth licensing round organized by the Ministry of Petroleum and Energy in Norway. In the same month, TOTAL signed Heads of Agreement (HOA) with Novatek to acquire a 49% interest in Terneftegas, a Novateks wholly-owned subsidiary.
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In July 2009, Total Exploration & Production Cameroon, an affiliate of TOTAL, was awarded the Lungahe exploration block in the offshore Rio del Rey basin by the Ministry of Industry, Mining and Technological Development of Cameroon. Total Exploration & Production Cameroon would operate this block with a 100% participation stake. In August 2009, TOTAL filed a declaration of commerciality with the Bolivian authorities for the Itau gas field, operated by the company with 75% equity. Itau would produce 50 million standard cubic feet per day (1.4 million cubic meters per day). In September 2009, the Tombua and Landana fields located 80 kilometers offshore Angola, operated by Chevron and in which TOTAL had a 20% interest, started crude oil production. Subsequently, the Train B of the Qatargas 2 project started producing liquefied natural gas (LNG). TOTAL held a 16.7% interest in Train B alongside Qatar Petroleum (65%) and ExxonMobil (18.3%). In the same month, TOTAL and GDF SUEZ and their common solar cells manufacturing subsidiary, Photovoltech, joined the IMEC Industrial Affiliation Program (IIAP) on next generations of crystalline silicon solar cells. Further in September 2009, TOTAL and the partners of the Bongkot joint venture (PTTEP 44.45%, TOTAL 33.33%, and BG Group 22.22%) announced that a gas sales agreement was signed with PTT covering all gas production from the Greater Bongkot South (GBS) field in the Gulf of Thailand. In October 2009, TOTAL signed a HOA establishing the principles of a partnership with KazMunaiGas (KMG) for the development of the Khvalynskoye field, located offshore in the Caspian Sea on the border between Kazakhstan and Russia. TOTAL and GDF Suez would acquire a participation of 25% (TOTAL 17%, GDF Suez 8%) from the 50% held by KMG. The remaining 50% stake and operatorship are held by LUKOIL. Subsequently, the Algerian National Oil and Gas Development Agency (ALNAFT) approved the development plan for the Timimoun natural gas project, located between Timimoun and Adrar in southwestern Algeria. The commercial production on the project, owned by TOTAL (37.75%), Sonatrach (51%), and Cepsa (11.25%), would begin in 2013. In the same month, the Yemen LNG liquefaction plant started producing LNG). TOTAL held a 39.62% interest in Yemen LNG, alongside the state-owned company, Yemen Gas Company (16.73%), Hunt Oil Company (17.22%), SK Energy (9.55%), Korea Gas Corporation (6%), Hyundai Corporation (5.88%), and GASSP1 (5%). Further in October 2009, TOTALs subsidiary, TEPA (Block 17/06), and Sociedade Nacional de Combustiveis de Angola (Sonangol E.P.) discovered oil on Block 17/06, in the deep waters of the Angolan offshore. In November 2009, TOTAL signed a research agreement with the Massachusetts Institute of Technology (MIT) to develop new stationary batteries that are designed to enable the storage of solar power. This agreement valued at $4m over five years was part of the MIT Energy Initiative, which TOTAL joined as a member in November 2008. Subsequently, Total E&P Vietnam, and its partners on Block 15-1/05 discovered oil in the Lac Da Nau prospect, located in the southern part of the block in the Vietnamese offshore. In the same month, Total E&P Russie, a wholly-owned subsidiary of Total, announced the transfer of a 10% interest in the Kharyaga oil field to state-owned Zarubezhneft of Russia.
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In December 2009, TOTAL announces the acquisition of a 25% interest in the Guyane Maritime Permit from Hardman Petroleum France, an affiliate of Tullow Oil. The permit, located about 150 kilometers off the coast of French Guiana, covered an area of approximately 32,000 square kilometers in water depths ranging from 2,000 to 3,000 meters. Subsequently, TOTALs subsidiary, Total Exploration & Production Nigeria, discovered hydrocarbons in the southern portion of the Oil Prospecting License (OPL) 223 deepwater offshore South-Eastern Nigeria. In the same month, the consortium of TOTAL and Partex was awarded a 49% interest in the Ahnet license, as part of the second bid round held by ALNAFT. TOTAL would hold a 47% interest and would appraise and develop the Ahnet finds with partners Partex (2%) and Sonatrach (51%). In January 2010, Total E&P USA signed an agreement to enter into a joint venture with US based Chesapeake Exploration, a subsidiary of Chesapeake Energy Corporation, whereby TOTAL would acquire a 25% share in Chesapeakes Barnett shale gas portfolio located in Texas. Subsequently, TOTAL and ConocoPhillips announced the sanction of the Surmont Phase 2 SAGD (Steam Assisted Gravity Drainage) development in Canada. The project, slated to begin initial construction in 2010, would increase Surmonts (a 50/50 joint venture between ConocoPhillips Canada and Total E&P Canada) production capacity from 27,000 to 110,000 barrels of bitumen per day. In the same month, TOTAL and ERG signed an agreement to create a joint venture with 49% and 51% stakes, respectively, in the Italian marketing and refining business. Created through the merger of TOTAL Italia and ERG Petroli, the joint venture (TotalErg) would operate under both the TOTAL and ERG brands. Further in January 2010, TOTAL announced that, within the framework of Iraqs second petroleum bidding round organized by the Iraqi Ministry of Oil in December 2009, the consortium led by PetroChina Company signed a 20 year Development and Production Service Contract with Missan Oil Company for the development of the Halfaya oil field. Total E&P Iraq held an 18.75% interest in the consortium, alongside the operator PetroChina (37.5%) and partners Petronas Carigali (18.75%) and the State Partner South Oil Company (25%). TOTAL created a public affairs division in February 2010. The division comprising Public Affairs, France and NGOs; International Public Affairs; and European Public Affairs was designed to offer TOTAL stakeholders improved transparency and dialogue on all issues related to TOTALs activities and reputation in France and worldwide. In March 2010, EDF and TOTAL signed an agreement for TOTAL to reserve regasification capacity in the planned Dunkirk LNG terminal being developed by Dunkerque LNG, a wholly owned EDF subsidiary. TOTAL would also acquire an interest in the company. Subsequently, the company announced a plan to repurpose its Dunkirk refinery site as an industrial and technical facility comprising a refining operations support center, refining training center, and logistics depot. In the same month, TOTAL signed an agreement to acquire a 50% interest in Kazakhstans concession held by OilTechnoGroup (OTG), the Kazakh subsidiary of Polands Petrolinvest.
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Further in March 2010, TOTAL launched the Laggan and Tormore gas fields development in the offshore frontier region of the West of Shetland. The company also announced the acquisition of the 10% interest in Laggan and Tormore previously held by Chevron North Sea and the 20% interest previously held by ENI UK. This increased TOTALs interest in this project to 80% alongside partner DONG E&P (UK). Subsequently, TOTAL obtained the Montelimar Permit in France, an exploration permit granted for a five year period, covering a surface of 4,327 square kilometers from the south of Valence to the region of Montpellier, in the south of France. In April 2010, TEPA (Block 17/06) and Sociedade Nacional de CombustIveis de Angola (Sonangol E.P.) discovered hydrocarbons in the north-eastern area of the deep offshore block 17/06 in Angola. Subsequently, the second train of the Yemen LNG natural gas liquefaction plant started production. In the same month, TOTAL closed the sale of its consumer specialty chemicals business, Mapa Spontex, to US-based Jarden Corporation for E335m (approximately $467.2m). Further in April 2010, TEPA (Block 15/06) and its partners made two important oil discoveries in Angola at the Nzanza-1 and Cinguvu-1 wells, in the deep waters of the Angolan offshore. In the same month, Total E&P USA announced the transfer of its interests in three federal offshore lease blocks in the Gulf of Mexico to W&T Offshore, effective January 1, 2010. Under the terms of the agreement, W&T Offshore would receive TOTALs 64% interest in Viosca Knoll Blocks 822 and 823 (Virgo) and 100% interest in Mississippi Canyon Block 243 (Matterhorn). TOTAL signed an agreement for the sale of its interests in the Valhall (15.72%) and Hod (25%) fields, in the Norwegian North Sea, to BP, in April 2010. Subsequently, the company acquired an interest in Coskata, a Chicago-based company developing an innovative technology to convert syngas into fuels and chemical products using a biological process. In May 2010, TOTAL inaugurated the worlds largest olefin cracker based on ethane in Ras Laffan, Qatar. With a production capacity of 1.3 million tons of ethylene per year, the Ras Laffan Olefin Cracker (RLOC) would feed the new Qatofin polyethylene plant in Mesaieed. Total Petrochemicals, through its participations in Qapco and Qatofin, joint ventures with Qatar Petroleum, held 22.2% of RLOC, the other partners being Qatar Petroleum and Chevron Phillips Chemical Company. In the same month, TOTAL signed an agreement with ConocoPhillips to acquire a 24.5% interest in the Arafura Sea and the Amborip VI blocks in the Arafura Sea, offshore Indonesia. TOTALs subsidiary Total Gas & Power USA (SAS) acquired a 25.4% interest in US startup AE Polysilicon Corporation (AEP), in June 2010. AEP developed an advanced technology to produce polysilicon for photovoltaic panels. Subsequently, Masdar, Abu Dhabis multi-faceted initiative advancing the development, commercialization and deployment of renewable and alternative energy technologies and solutions, appointed the bidding consortium of Total and Abengoa Solar as a partner to own, build and operate Shams 1, the worlds largest concentrated solar power plant and the first of its kind in the Middle East.
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In the same month, TOTAL and Amyris, the operator of an industrial synthetic biology platform, announced a strategic partnership encompassing TOTALs investment in Amyris and a wide-spectrum master development and collaboration agreement. Subsequently, Total Exploration & Production Nigeria in association with Conoil Producing discovered hydrocarbons in the central portion of the Oil Mining Lease OML 136, offshore Western Nigeria. Further in June 2010, TOTAL acquired a 36% interest in the Block 72 production sharing agreement in Yemen, operated by DNO Yemen and located in the southern part of the Masila Basin. In the same month, TOTAL acquired a 20% interest from Shell in the BM-S-54 license in the Santos Basin. Shell held the remaining 80% and the operatorship. In July 2010, Total E&P Canada signed an agreement with UTS Energy Corporation (UTS) to acquire UTS Corporation with its main asset, a 20% interest in the Fort Hills mining project in the Athabasca region of the Canadian province of Alberta. Subsequently, TEPA (Block 15/06) and its partners made a new oil discovery in Block 15/06 with the well Cabaca SE-1, in the Angolan deep-offshore. In the same month, TOTAL signed an agreement to acquire Chevrons 45.9% interest in Block 1 in the joint development zone (JDZ). TOTAL would operate the block in partnership with Addax Petroleum JDZ 1, Dangote Energy Equity Resources and Sasol Exploration and Production Nigeria. Further in July 2010, TOTAL received approval from the UK Department of Energy and Climate Change (DECC) and the Norwegian Ministry of Petroleum & Energy (MPE) to develop its Islay gas field in the Northern North Sea, 440 kilometers north-east of Aberdeen. The Islay field, located in Block 3/15 of the UK sector and partly across the median line in Blocks 29/6a and 29/6c of the Norwegian sector, had estimated reserves of near to 17 million barrels of oil equivalent and an estimated peak gas production rate of 2.5 million standard cubic meters per day plus associated condensates. In August 2010, TOTAL launched CLOV Development on Block 17 located approximately 140 kilometers from Luanda and 40 kilometers northwest of Dalia in water depths ranging from 1,100 to 1,400 meters. The CLOV development would lead to the four fields namely Cravo, Lirio, Orquidea, and Violeta, coming on stream.
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Chevron Corporation
Company overview
Chevron Corporation (Chevron) is one of the leading integrated energy companies in the world. The company is engaged in every aspect of the oil and natural gas industry, including exploration and production, refining, marketing and transportation, chemicals manufacturing and sales, geothermal, mining operations, and power generation. It has operations in more than 100 countries including the US. Chevron is headquartered in San Ramon, California and employs about 64,000 people (including about 4,000 service station employees). The company recorded total sales and other operating revenues of $167,402m in FY2009, a decrease of 36.8% compared to FY2008. The operating profit of the company was $18,556m in FY2009, a decrease of 56.9% compared to FY2008. The net profit was $10,483m in FY2009, a decrease of 56.2% compared to 2008.
Chevron Corporation (Chevron) is a fully integrated energy company engaged in petroleum and chemicals operations. It is also actively involved in mining operations of coal and other minerals, power generation, and energy services. The company has operations in more than 100 countries including the US. Chevron operates through four business divisions: upstream, downstream, chemicals, and all others. Chevron's upstream business explores for and produces crude oil and natural gas. The companys exploration and production operations also market natural gas. Chevron has production and exploration activities in most of the worlds major hydrocarbon basins. Its upstream activities in the US are concentrated in California, the Gulf of Mexico, Louisiana, Texas, New Mexico, the Rocky Mountains, and Alaska. In Africa, the company is engaged in exploration and production activities in Angola, Chad, Democratic Republic of the Congo, and Nigeria. Major producing countries in Asia include Azerbaijan, Bangladesh, Indonesia, Kazakhstan, and the Partitioned Zone located between Saudi Arabia and Kuwait. Chevron also has upstream operations in other countries like Australia, Argentina, Brazil, Colombia, Trinidad and Tobago, Venezuela, Canada, Greenland, Denmark, Faroe Islands, the Netherlands, Norway, Poland, and the UK. At the end of FY2009, worldwide net oil equivalent reserves for consolidated operations and affiliated operations were 8.3 billion barrels and three billion barrels, respectively. The companys net proved reserves of natural gas for consolidated operations and affiliated operations in FY2009 was 22,153 billion cubic feet (Bcf) and 3,896 Bcf, respectively. Further, the companys net proved reserve of liquids, including crude oil, condensate, and natural gas liquids, for consolidated operations and affiliated operations was 4.6 billion barrels and 2.4 billion barrels, respectively. Chevron's net crude oil and natural gas production for FY2009 was 1.8 million barrels per day. The companys worldwide net oil-equivalent production was approximately 2.7 million barrels per day in FY2009. The companys net oil-equivalent production (including affiliates) from the US, Africa, Asia, and other countries averaged 717,000 barrels per day, 433,000 barrels per day, 1,044,000 barrels per day, and 484,000 barrels per day, respectively. The companys net production of natural gas and oil sands for FY2009 was five Bcf per day and 26,000 barrels per day, respectively.
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Chevron's downstream operations comprise refining crude oil into finished petroleum products and marketing crude oil and the many products derived from petroleum. It also transports crude oil, natural gas, and petroleum products by pipeline, marine vessel, motor equipment, and rail car. The company also holds interest in 16 fuel refineries and markets its products under the Chevron, Texaco, and Caltex motor fuel and lubricants brands. It sells its products through a network of approximately 22,000 retail stations, including those of affiliated companies. In FY2009, Chevron processed approximately 1.9 million barrels of crude oil per day and averaged approximately 3.3 million barrels per day of refined product sales worldwide. Downstreams most significant areas of operations are sub-Saharan Africa, Southeast Asia, South Korea, the UK, the US Gulf Coast extending into Latin America, and the US West Coast. Chevron markets petroleum products under three brands: Chevron, Texaco, and Caltex. The company also manufactures a gasoline additive under the brand name, Techron. The company supplies its products directly or through retailers and marketers to almost 9,600 branded motor vehicle retail outlets, concentrated in the mid-Atlantic, southern, and western states of the US. Approximately 500 of the outlets are company-owned or leased stations. Outside the US, Chevron supplies directly or through retailers and marketers to approximately 12,400 branded service stations, including affiliates. The company is also engaged in other global marketing businesses. Chevron markets aviation fuel at more than 1,000 airports. The company also markets an extensive line of lubricant and coolant products under brand names that include Havoline, Delo, Ursa, Meropa, and Taro. The company sells its products through a network of approximately 22,000 retail stations, including those of affiliated companies. Chevron owns and operates an extensive network of crude-oil, refined-product, chemicals, natural-gas-liquids (NGL), and natural-gas pipelines and other infrastructure assets in the US. The company also has direct or indirect interests in other US and international pipelines. Chevron also has a 15% interest in the Caspian Pipeline Consortium (CPC) affiliate. CPC operates a crude-oil export pipeline from the Tengiz Field in Kazakhstan to the Russian Black Sea port of Novorossiysk. During FY2009, CPC transported an average of approximately 743,000 barrels of crude oil per day, including 597,000 barrels per day from Kazakhstan and 146,000 barrels per day from Russia. Chemicals operations include the manufacture and marketing of commodity petrochemicals for industrial applications, and fuel and lubricating oil additives. Chevron operates in the chemicals segment via its 50%-owned affiliate Chevron Phillips Chemical Company (CPChem) and the wholly-owned Chevron Oronite Company (Chevron Oronite). CPChem has 34 manufacturing facilities in the US, Brazil, Colombia, Singapore, China, South Korea, Saudi Arabia, Qatar, and Belgium. Chevron Oronite is a fuel and lubricating-oil additives business that owns and operates facilities in the US, France, the Netherlands, Singapore, Japan, and Brazil, and has equity interests in facilities in India and Mexico. The all others segment includes Chevrons mining operations, power generation businesses, worldwide cash management and debt financing activities, corporate administrative functions, insurance operations, real estate activities, alternative fuels, and technology companies.
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Chevrons mining operations produce and market coal and molybdenum in both the US and international markets. The companys coal mining and marketing subsidiary, Chevron Mining (CMI), owns and operates two surface coal mines, McKinley, in New Mexico, and Kemmerer, in Wyoming, and one underground coal mine, North River, in Alabama. In FY2009, the company controlled approximately 193 million tons of proven and probable coal reserves in the US, including reserves of low-sulfur coal. Chevron's power generation business develops and operates commercial power projects. The companys power generation business has interests in 13 power assets with a total operating capacity of more than 3,100 megawatts, primarily through joint ventures in the US and Asia. The company also owns major geothermal operations in Indonesia and the Philippines.
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Company Reports
SWOT Analysis Strengths

Presence across the energy value chain Chevron operates in a wide range of businesses worldwide and commands presence across the energy value chain. The company engages in fully integrated petroleum operations, chemicals operations, mining operations of coal and other minerals, power generation, and energy services. Chevron operates across the energy value chain through its four divisions: downstream, upstream, chemicals, and others. Exploration and production (upstream) operations explore for, develop, and produce crude oil and natural gas and also market natural gas. Chevron's downstream operations undertake refining, fuels and lubricants marketing, supply, and trading, and transportation activities. Refining, marketing, and transportation (downstream) operations transport crude oil, natural gas, and petroleum products by pipeline, marine vessel, motor equipment, and rail car. Chemical operations include the manufacture and marketing of commodity petrochemicals, plastics for industrial uses, and fuel and lubricant oil additives. Chevron also operates in other businesses which include mining operations, power generation businesses, worldwide cash management and debt financing activities, corporate administrative functions, insurance operations, real estate activities, alternative fuels, and technology companies. The company provides administrative, financial, management, and technology support to the US and foreign subsidiaries engaged in energy services. Chevrons presence across the energy value chain provides the company with opportunities to optimize its business while minimizing business risks. Leading market position Chevron is one of the leading energy companies. The company is the second-largest integrated energy company in the US and among the largest corporations in the world, based on market capitalization. Besides the US, the company operates in 100 other countries. In 2010, Chevron was ranked 20th in the Fortune 500 list of top 2,000 companies. The company's upstream and downstream activities are conducted in North America, South America, Europe, Africa, the Middle East, Central and Far East Asia, and Australia. Strong market position in a market with high barriers to entry gives it a competitive advantage.
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Strong marketing operations Chevron markets petroleum products throughout much of the world through its strong global retail network. The company markets its products under three principal brands: Chevron, Texaco, and Caltex. As of FY2009, Chevron had an extensive marketing network supporting approximately 22,000 retail outlets. In the US, the company markets under the Chevron and Texaco brands. The company supplies directly through retailers and marketers almost 9,600 branded motor vehicle retail outlets, concentrated in the mid-Atlantic, southern, and western states. Approximately 500 of the outlets are companyowned or leased stations. Additionally, Chevron supplies directly or through retailers and marketers to approximately 12,400 branded service stations, including affiliates outside the US. Chevron also manages other marketing businesses globally. The company markets aviation fuel at over 1,000 airports. It markets an extensive line of lubricant and coolant products under brand names that include Havoline, Delo, Ursa, Meropa, and Taro. The company's strong retail network gives widespread visibility in the market. Strong marketing operations enable Chevron to penetrate into new markets and gain a stronghold. Wide geographic presence Chevron has wide presence across various regions. The companys revenue stream is diversified in terms of geographies. The company divides its geographic divisions as US and international. In the US, the companys major business operations are concentrated in California, the Gulf of Mexico, Louisiana, Texas, New Mexico, the Rocky Mountains, and Alaska. In Africa, the company performs its business activities in Angola, Chad, Democratic Republic of the Congo, and Nigeria. Major producing countries in Asia include Azerbaijan, Bangladesh, Indonesia, Kazakhstan, and the Partitioned Zone located between Saudi Arabia and Kuwait. Chevron also has operations in other countries like Australia, Argentina, Brazil, Colombia, Trinidad and Tobago, Venezuela, Canada, Greenland, Denmark, the Netherlands, Norway, Poland, and the UK. In FY2009, the company generated 42.5% of the total sales and operating revenues from the US, and the remaining 57.5% of its revenues were generated from its international operations. The companys global operations and regional brand identity gives it competitive advantage over its competitors and also indicates that the company has a wider scope in increasing its revenues by utilizing its global presence. Further, its world wide presence reduces exposure to economic conditions or political stability in any on country or region.
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Weaknesses
Underpayment of royalties Chevron and its affiliates violated the False Claims Act by deliberately underpaying royalties owed on natural gas produced from federal and Indian leases during the period 198808. In January 2010, the company agreed to the allegations and committed to pay nearly $45.6m to resolve claims. The settlement also resolves claims by the US Department of Justice (DOJ) that Chevron and its affiliates violated the rules by deducting the cost of boosting gas to pipeline pressures from royalty values, and used affiliate transactions to falsely reduce the reported value of gas taken from federal and Indian leases. Further, it also reported processed gas as unprocessed gas to reduce royalty payments. Payment of such settlement by Chevron can have a negative impact on its profitability and overall financial condition. Involvement in environmental disaster in Ecuador Chevron is currently involved in one of the worst environmental disasters in history, which led to a severe health crisis, which include cancer, birth defects, and miscarriages, to the citizens of Ecuador. A coalition of residents and indigenous nationalities has sued the company for dumped toxic waste from its oil production, which filtered into the lakes used by several people. Further, Chevron is also accused of discarding 18 billion gallons of toxic waste into the Ecuador's Amazon rainforest, during 196490. The trial, which began in 2003 and involved several judicial field inspections over several years, is expected to end in 2010. The company might have to pay damages of up to $27 billion. Chevron is also accused of using faulty test methods thereby guaranteeing its desired finding of minimal contamination. For instance, during the environmental trial in Ecuador, Chevron only tested for gasoline and diesel ranges of total petroleum hydrocarbons and excluded hydrocarbon compounds in crude oil that boil at temperatures above the diesel range. The test conducted lowered the amount of contamination reported to the court, which violates standard practice in the US and in the industry. Such kind of violations could result in severe administrative actions affecting the company's credibility as well as overall financial condition. Strain on sales of refined products Chevrons downstream division has recorded a consistent decline from its sales of refinery products. The sales of refinery products have declined from 3.7 million barrels per day in FY2005 to 3.3 million barrels per day in FY2009, recording a CARC decline of 3%. Further, the companys sales from the refinery products have also declined at a CARC of 3.4% during 200709. The significant drop was due to the decline in the sales of gasoline, jet fuel, gas oil and kerosene, residential fuel oil, and other petroleum products, during 200709, at a CARC of 1.3%, 2.5%, 4.2%, 11.7% and 0.2%, respectively. A continuation of this trend is likely to have an adverse impact on the company's revenue growth rates.
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Opportunities
Increasing investment in upstream business Chevron plans to increase its investment in the upstream business to stimulate growth. The company expects a substantial production increase in FY2010 due to its plans of shifting its production toward natural gas and Asian markets. Further, during 201012, Chevron plans to commence 25 new upstream projects with an investment of at least $1 billion. It also expects natural gas to represent 41% of total volumes by 2017, up from the current share of 31%. In FY2010, the company estimates to spend $21.6 billion towards capital expenditure. Further, it plans to spend 80%, or $17.3 billion, of its capital expenditure towards exploration and production activities, with $13.2 billion of this amount for projects outside the US. Moreover, the companys spending in FY2010 is primarily targeted for exploratory prospects in the US Gulf of Mexico and major development projects in Angola, Australia, Brazil, Canada, China, Nigeria, and Thailand. Some of the major projects lined up for FY2010 include, development of the Gorgon natural gas project in Western Australia and opportunities in the deepwater US Gulf of Mexico, offshore western Africa, and the Gulf of Thailand. The companys increasing investment in exploration and production activities will boost its returns and will also strengthen Chevrons position in the industry. Strategic initiatives in the area of biofuels and solar power systems Chevron has taken several strategic initiatives in the area of biofuel and photovoltaic solar power systems. In FY2009, Chevron built two renewable energy projects on former refinery sites: a wind farm in Casper, Wyoming, and a solar test facility in Bakersfield, California. In FY2010, Chevron Technology Ventures plans to complete a solar photovoltaic power plant in the US. Chevron Energy Solutions (CES), a Chevron subsidiary, is the nation's largest installer of solar energy systems for education institutions. Over the past decade, the company has developed several projects involving energy efficiency and renewable power for education, government, and business customers in the US. Further, in FY2009, CES completed one of the largest energy-efficiency and solar electric system at a transit facility for the Los Angeles County Metropolitan Transportation Authority (Metro). The 6,720 solar panels at Metro's central maintenance facility for buses are designed to produce 1.2 megawatts of renewable energy. Apart from the energy-efficient improvements, the project is expected to reduce the carbon emissions by more than 3,700 metric tons. Further, in August 2009, BrightSource Energy entered into a partnership with Chevron, to develop a solar-thermal installation at California. The companies plan to complete the solar thermal plant by FY2010 end. Such strategic initiatives could help Chevron in diversifying its product offerings, thereby increasing its revenues.
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Exploratory and development activities using alternate energy resources Unconventional energy resources, such as oil sands, are now observed as a feasible option to conventional oil, due to the diminishing oil and natural gas reserves. Canadas oil sands have one of the largest known reserves of oil. The Canadian Association of Petroleum Producers estimates that Canadas oil sands deposits have about 175 billion barrels of economically viable oil. The company currently holds a 20% stake in the Athabasca Oil Sands Project (AOSP) and operating interests of 60% in the Ells River Oil Sands Project. Moreover, Chevron has plans of increasing its total production of oil sands from AOSP to more than 255,000 barrels per day by FY2010 end, at a projected cost of $14.3 billion. The company could hence benefit on improving the unconventional resources through these investments and expand its product portfolio.
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Threats
Natural calamities Chevrons operations may be disrupted by severe weather events and natural disasters. For example, hurricanes may damage its offshore production facilities or coastal refining and petrochemical plants in vulnerable areas. Further, in April 2010, the Deepwater Horizon Rig, owned by Transocean and leased to BP, exploded in the Gulf of Mexico, resulting in oil leakage of about 5,000 barrels every day. The incident has placed the environmental protection bill in risk, which aims to reduce carbon and other greenhouse gas emissions 17% below 2005 levels by 2020. The bill supported by the US President, Mr. Obama, demands for new offshore drilling. The explosion and the growing, uncontrolled oil spill in the Gulf of Mexico have made the path to approval of the bill even more complicated. According to the US National Weather Service, the strong winds, high tides and waves could drive the oil into inlets, ponds and lakes in south-east Louisiana, which could be a threat to the wildlife. The incident forced the US administration to pass a bill to ban oil drilling in new areas of the US coast and in the Gulf of Mexico. Chevrons upstream activities in the US are highly concentrated in the Gulf of Mexico. For instance, in FY2009, the companys average net oil-equivalent production in the Gulf of Mexico shelf and deepwater areas and the onshore fields in the region were 243,000 barrels per day. Hence, the companys ability to mitigate the adverse impacts of these events depends substantially on the effectiveness of its rigorous disaster vigilance and business continuity planning. Environmental regulations Chevrons businesses are subject to numerous laws and regulations relating to the protection of the environment. With rising awareness of the damage to the environment caused by industry, especially regarding global warming, regulatory standards have been continuously tightened in recent years. One of the most important developments in this area has been the introduction of the Kyoto Protocol for the reduction of greenhouse gases. The protocol calls on industrialized countries to reduce their greenhouse gas emissions level by 5.2% on an average annual basis during the 200812 period, compared with 1990 emissions levels. Further, in 2005, the US environmental protection agency (EPA) issued a Clean Air Interstate Rule (CAIR), to reduce the emission levels. According to the rule, the states have to reduce the allowable sulfur dioxide (SO2) emissions by 70% and reduce Nitrous Oxide (NOX) emissions by 60% by 2015 compared with the 2003 levels. The company is governed by these regulations which could impose new liabilities. This could result in a material decline in Chevrons profitability in the short term. The level of expenditure required to comply with these laws and regulations is uncertain and is expected to vary by jurisdiction depending on the laws enacted in each jurisdiction.
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Civil unrest in Nigeria threatens crude oil production Nigeria is one of the worlds largest oil exporters. However, the violence in the country has affected the industry and the country in terms of output. Further, Nigerias current oil production is about 1.6 million barrels a day on average, compared to its average capacity of 3.2 million barrels a day. Chevron holds a 40% interest in 13 concessions in the onshore and near-offshore region of the Niger Delta. The company operates under a joint-venture arrangement in this region with the Nigerian National Petroleum Corporation, which owns a 60% interest. The company also owns varying interests in deepwater offshore blocks. The pipeline and plants of Chevron in Nigeria remains prone to severe militant attacks which have led to shut down of operations and crude oil production in the past. For instance, in January 2010, Chevron Nigeria (CNL), operator of the NNPC/CNL joint venture, shut down its 20,000 b/d of capacity in Nigeria following disrupt of a pipeline between Makaraba and Otunana in Delta State, Nigeria. Further, in May 2009, the Movement for the Emancipation of the Niger Delta (Mend), a militant group, claimed responsibility for causing damage to two pipelines which linked Chevron's refineries and power stations. The incident led to a decline in Chevron's daily crude oil production by 11,500 barrels per day. The prevailing uncertainty of such incidents in the Niger River delta region has declined the oil production in Nigeria. The prevailing instability in Nigeria has adversely affected the operations of the company and resulted in supply disruptions.
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Recent developments
In February 2009, Chevron discovered a new deepwater oil discovery at the Buckskin prospect located in the deepwater US Gulf of Mexico. In the following month, two of Chevrons subsidiaries completed the sale and transfer of their fuels marketing business in Brazil to a subsidiary of Ultrapar Participacoes (Ultrapar). In March 2009, Chevron Africa Holdings completed the sale of Chevron Nigeria Holdings to Corlay Global. Chevron Africa Holdings completed the sale of 100% of its shareholding in Chevron Uganda to Total Uganda, in April 2009. Chevron started crude oil production from its Tahiti Field, the deepest producing field in the Gulf of Mexico, in May 2009. In the same month, the company discovered an offshore discovery within the Moho-Bilondo license in the Republic of Congo. In August 2009, Chevrons affiliate, Cabinda Gulf Oil Company and its partners, made a successful exploration discovery in the Cabinda coastline in Angola, Africa. In the same month, Chevron Australia made two natural gas discoveries in the Carnarvon Basin offshore Western Australia. The Australian subsidiaries of Chevron signed three binding long-term sales and purchase agreements (SPAs) for Chevron's share of LNG from the Gorgon project, in September 2009. The agreement signed was for a total supply of nearly three million tons per annum (MTPA) of LNG to Osaka Gas, Tokyo Gas, and GS Caltex. In January 2010, Chevrons Australian subsidiaries and Nippon Oil Corporation signed a heads of agreement (HOA) for the delivery of 0.3 million metric tons per year (MTPY) of LNG for 15 years from the Chevron-operated Gorgon Project in Western Australia. In the same month, Chevrons Australian subsidiaries signed multiple agreements with Kyushu Electric Power for the delivery of LNG from the Chevron-operated Gorgon and Wheatstone natural gas projects. In February 2010, a consortium led by Chevrons Venezuelan subsidiary was selected to negotiate its participation in a project composed of three blocks in the Orinoco Oil Belt (Faja) of eastern Venezuela. In the next month, Chevron Energy Solutions, a unit of Chevron, and East Side Union High School District of California started the construction of a 3.7 megawatt solar project. In March 2010, Chevron USA commenced operations on the Discoverer Inspiration, an ultra-deepwater drillship, in the US Gulf of Mexico. The vessel has the capability to drill wells in 12,000 feet (3,650 meters) of water to a total depth of 40,000 feet (12,200 meters). In the same month, Chevron started the Perdido deepwater project, crude oil and natural gas production, located in the US Gulf of Mexico. The production from the Great White, Silvertip, and Tobago fields utilizing the Perdido hub is expected to reach full capacity of 130,000 barrels of oil-equivalent per day after the drilling of additional wells.
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Company Overview
PetroChina is engaged in production of crude oil and natural gas. The company is controlled by China National Petroleum Corporation (CNPC). PetroChina primarily operates in China. It is headquartered in Beijing, China and employs over 539,000 people. The company recorded revenues of CNY1,019,275m ($149,435.9m) in FY2009, a decrease of 5% compared with FY2008. The operating profit of the company was CNY143,444m ($21,030.3m) in FY2009, a decrease of 10.1% compared with FY2008. The net profit was CNY103,387m ($15,157.6m) in FY2009, a decrease of 9.7% compared with FY2008.
PetroChina is engaged in a range of activities related to petroleum and natural gas including the following: exploration, development, and production and sales of crude oil and natural gas; and refining, transportation, storage, and marketing of crude oil and petroleum products. These activities also include production and sale of basic petrochemical products, derivative chemical products, and other chemical products. PetroChina is controlled by China National Petroleum Corporation (CNPC), an integrated international energy company, which holds 86.285% equity interest in the company. The company primarily operates in China. PetroChina operates through five business segments: exploration and production; refining and chemicals; marketing; natural gas and pipeline; and others. The exploration and production segment is engaged in crude oil and natural gas exploration, development, production, and sales. Substantially all of the company's total estimated proved crude oil and natural gas reserves are located in China, principally in northeastern, northern, southwestern, and northwestern China. The Songliao basin, located in Heilongjiang and Jilin provinces in northeastern China, including the Daqing and Jilin oil regions, accounts for a significant portion of PetroChinas crude oil production. The company also has significant crude oil reserves and operations in the area around the Bohai Bay. The Bohai Bay basin includes the Liaohe, Dagang, Huabei, and Jidong oil regions. PetroChina's proved natural gas reserves and production are generally concentrated in northwestern and southwestern China, specifically in the Erdos, Tarim, and Sichuan basins. The company holds exploration licenses covering a total area of approximately 446.4 million acres and production licenses covering a total area of approximately 16.4 million acres. As of December 2009, the companys estimated proved developed and undeveloped reserves were approximately 11,263 million barrels of crude oil and approximately 63,244 billion cubic feet of natural gas. In FY2009, the total crude oil and natural gas output of the company was 1,195.7 million barrels of oil equivalent, including 843.5 million barrels of crude oil and 2,112.2 billion cubic feet of marketable natural gas.
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The refining and chemicals segment is engaged in the refining of crude oil and petroleum products, production and marketing of primary petrochemical products, and derivative petrochemical products and other chemical products. The chemical plants and sales companies are located in five provinces, three autonomous regions, and two municipalities in China. Most of the company's chemical plants are co-located with its refineries and are also connected with the refineries by pipelines. The company conducts its refining and chemicals operations in China through 26 refineries, 22 regional sales and distribution branch companies, and one lubricants branch company. These operations include the refining, transportation, storage, and marketing of crude oil, and the wholesale, retail, and export of refined products, including gasoline, diesel, kerosene, lubricant, paraffin, and asphalt. In FY2009, the companys refineries processed 828.6 million barrels of crude oil and produced approximately 73.20 million tons of gasoline, diesel, and kerosene. The company's refineries are located in eight provinces, four autonomous regions and one municipality in the northeastern, northwestern, and northern regions of China. In FY2009, the companys refining and chemicals segment had a market share of 38.2% in Chinas retail sector. PetroChina's exploration and production, refining and marketing, and natural gas and pipeline operations supply substantially all of the hydrocarbon feedstock requirements for its chemicals operations. The company produces petrochemicals that include propylene, ethylene, and benzene. It also produces synthetic resins, synthetic fiber, synthetic rubber, intermediates (alkylbenzene), and other chemicals (such as urea). The company's chemical products are distributed to a number of industries that manufacture components used in a range of applications, including automotive, construction, electronics, medical manufacturing, printing, electrical appliances, household products, insulation, packaging, paper, textile, paint, footwear, agriculture, and furniture industries. In FY2009, the refining and chemicals segments production of ethylene was 2.67 million tons, respectively. The marketing segment is engaged in the marketing of refined products and trading business. The company markets a wide range of refined products, including gasoline, diesel, kerosene, and lubricants, through a network of sales personnel and independent distributors and a broad wholesale and retail distribution system across China. For FY2009, the company had 17,262 service stations, of which 16,607 were owned service stations, each service station having a sales volume of 10.1. The natural gas and pipeline segment of the company is engaged in the sale of natural gas and the transmission of natural gas, crude oil, and refined products. As of December 2009, the company owned and operated 13,164 kilometers of crude oil pipeline and 8,868 kilometers of refined product pipeline. The segment owns and operates approximately 28,595 kilometers of natural gas pipelines in China, which represented the majority of China's onshore natural gas pipelines. The company's existing natural gas pipelines form regional natural gas supply networks in northwestern, southwestern, northern, and central China as well as the Yangtze River Delta. The segment also has an extensive network for the transportation, storage, and distribution of both crude oil and refined products, which covers many regions of China. The other segment comprises the assets, liabilities, income, and expenses relating to cash management, financing activities, the corporate center, research and development, and other business services to the operating business segments of the company.
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Integrated oil and gas operations PetroChina has vertically integrated operations as it is involved in both upstream and downstream oil and natural gas businesses. The company's vertically integrated business gives it advantages related to operational efficiencies. The company is engaged in crude oil and natural gas exploration, development, and production. It is also engaged in the refining, transportation, storage, and marketing of crude oil; and the wholesale, retail, and export of refined products, including gasoline, diesel, kerosene, and lubricant. PetroChina also produces and markets basic petrochemical products, derivative petrochemical products, and other chemical products. It is also a natural gas transporter and seller. PetroChina's vertically integrated operations enable the company to derive synergies across the oil and natural gas value chain. Strong operational performance PetroChina recorded a strong operational performance in FY2009. It had significant reserves in FY2009. As of December 2009, the companys estimated proved developed and undeveloped reserves were approximately 11,263 million barrels of crude oil and approximately 63,244 billion cubic feet of natural gas. The oil reserve replacement ratio of PetroChina in FY2009 was 1.05, while the gas reserve replacement ratio was 1.97, and the replacement ratio of oil and gas equivalent reserves was 1.32. In FY2009, the total crude oil and natural gas output of the company was 1,195.7 million barrels of oil equivalent, including 843.5 million barrels of crude oil and 2,112.2 billion cubic feet of marketable natural gas. Further, in FY2009, PetroChinas refineries processed 828.6 million barrels of crude oil and produced approximately 73.20 million tons of gasoline, diesel, and kerosene. For the same period, the company had 17,262 service stations, of which 16,607 were owned service stations and sales volume per service station was 10.1. PetroChina also has a strong pipeline network. As of December 2009, the company owned and operated 13,164 kilometers of crude oil pipeline and 8,868 kilometers of refined product pipeline. For the same period, the company owned and operated approximately 28,595 kilometers of natural gas pipelines. PetroChinas strong operational performance provides it with a competitive edge. Strong player in China PetroChina is one of the largest crude oil and natural gas producers and sellers in China. The company accounts for approximately 40% of China's oil refining. The company also operates 26 refineries and markets a wide range of refined products, including gasoline, diesel, kerosene, and lubricants. In FY2009, the companys refining and chemicals segment had a market share of 38.2% in Chinas retail sector. A strong market position in one of the fastest growing economies in the world gives the company a platform for future growth.
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Weaknesses
Lack of operations in eastern and southern China The eastern and southern regions of China have a higher demand for refined products and chemical products than the western and northern regions. However, most of PetroChina's refineries and chemical plants are located in the western and northern regions of China. As a result, the company incurs relatively higher transportation costs for delivery of its refined products and chemical products to certain areas of the eastern and southern regions from its refineries and chemical plants in western and northern China. While the company continues to expand the sales of these products in the eastern and southern regions of China, it faces competition from Sinopec and China National Offshore Oil Corp (CNOOC). This puts the company at a competitive disadvantage. Ownership of the company by CNPC China National Petroleum Corporation (CNPC) owns 86.285% of PetroChinas share capital. This ownership enables CNPC to elect PetroChinas entire Board of Directors without the concurrence of any of the companys other shareholders. Accordingly, CNPC is in a position to control PetroChinas policies, management, and affairs. CNPC could also affect the timing and amount of dividend payments and adopt amendments to certain of the provisions of PetroChinas articles of association. Additionally, CNPCs interests may sometimes conflict with those of some or all of PetroChinas minority shareholders. The ownership of PetroChina by CNPC limits its operations.
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Opportunities
Acquisition of Keppel Oil and Gas Services entire stake in SPC In May 2009, PetroChina, through its indirectly wholly owned subsidiary, PetroChina International (Singapore), entered into a conditional agreement with Keppel Oil and Gas Services to acquire its entire shareholding of 45.51% in Singapore Petroleum Company (SPC). SPC is a regional energy company with interests in petroleum refining and marketing and in oil and gas exploration and production. SPC has a 50% interest in Singapore Refining Company, one of the three major petroleum refiners in Singapore. SPC also conducts terminalling and distribution and trading of crude and refined petroleum products. PetroChina International (Singapore) focuses on trading in crude oil, oil products, and petrochemicals, and investment in storage facilities in Indonesia, Vietnam, Singapore, South Korea, and China. Acquisition of a stake in SPC by PetroChina International (Singapore) will provide a new platform for the implementation of PetroChinas international strategy and will provide a broader foundation and stable path for development for the company. Agreement reached to acquire Arrow Energy In March 2010, the Board of Directors at Arrow Energy (Arrow) unanimously recommended its shareholders to vote in favor of the joint proposal by PetroChina International Investment Company (a subsidiary of PetroChina) and Shell Energy Holdings Australia (a subsidiary of Royal Dutch Shell) to acquire 100% of Arrow shares. This was in pursuant to CS CSG (Australia)s, the 50/50 joint venture company owned by a subsidiary of PetroChina and Shell, entry into an agreement with Arrow for the proposed acquisition. On successful completion of the acquisition, the joint venture would own Arrows Queensland coal seam gas (CSG) assets and domestic power business as well as Shells Queensland CSG assets and its site for a proposed liquefied natural gas (LNG) plant on Curtis Island at Gladstone. After the acquisition is completed, PetroChina and Shell will facilitate the growth of Queenslands CSG and LNG industry, and help to further develop Australias LNG sector. This joint venture will enable PetroChina to build an integrated CSG and LNG business in the country. Development of overseas oil and gas resources PetroChina has been steadily implementing strategic plans to develop its overseas oil and gas resources. In the recent past, the company has entered into a number of overseas cooperation projects in this respect. For instance, in January 2010, PetroChina, Total Exploration and Production Company, and Petroliam Nasional (Petronas) formed a joint operatorship and entered into a development and production contract in respect of the Halfaya Oilfield in Iraq for a term of 20 years. The Halfaya Oilfield is located at the Southeast of Iraq. Based on the information provided by the Iraqi Government, the Halfaya Oilfield has a recoverable reserve of approximately 4.1 billion barrels and its current production output has reached 3,100 barrels per day. The joint operatorship led by PetroChina has undertaken to increase the production output of the Halfaya Oilfield to 535,000 barrels per day.
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Further, in May 2010, PetroChina along with Royal Dutch Shell signed a new exploration and production sharing agreement with Qatar Petroleum, on behalf of the Government of Qatar, for Qatar Block D. The Block D concession is for pre-Khuff geological intervals. The total term of this agreement is 30 years and starts with a five year first exploration period. During the exploration period, Shell and PetroChina will implement a work program including exploration technical studies, 2D and 3D seismic acquisition, processing, re-processing and interpretation, and drilling a number of exploration wells to the pre-Khuff formation. Development of its overseas oil and gas resources will enable PetroChina to boost the production and reserves of its oil and gas assets and contribute towards the overall business development of the company.
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Threats
Intense competition PetroChina faces intense competition in the oil and gas industry. It competes both in China and international markets. Its main competitors in China are Sinopec, including its subsidiary, China National Star Petroleum Corporation (CNSPC), and China National Offshore Oil Corporation (CNOOC). In its exploration and production operations, PetroChina competes with Sinopec for the acquisition of desirable crude oil and natural gas prospects. The companys refining and marketing, and chemicals and marketing operations compete with Sinopec and CNOOC. The companys products also face competition from imported refined products and chemical products. As a result of Chinas entry into the WTO, the competition is further intensified from foreign producers of refined products and chemical products. The companys natural gas and pipeline operations compete with the suppliers of natural gas in Beijing Municipality, Tianjin Municipality, Hebei Province, Shanghai Municipality, Jiangsu Province, Zhejiang Province, Anhui Province, Henan Province, Hubei Province, Hunan Province, and the northwestern regions of China. Such an intense competition threatens to erode the market share of the company. Government regulations and control PetroChina's operations, like those of other Chinese oil and gas companies, are subject to extensive regulations and control by the Chinese government. These regulations and control affect many material aspects of the company's operations, such as exploration and production licensing, industry-specific and product-specific taxes and fees, and environmental and safety standards. As a result, PetroChina could face significant constraints on its ability to implement its business strategies, to develop or expand its business operations or to maximize its profitability. The company's business could also be adversely affected by future changes in certain policies of the Chinese government with respect to the oil and gas industry. Such government regulations and control could have a negative impact on the operations of the company. Environmental laws and regulations Together with other companies in the industries in which PetroChina operates, it is subject to numerous national, regional, and local environmental laws and regulations concerning its oil and gas exploration and production operations, petroleum and petrochemical products, and other activities. These laws and regulations require an environmental evaluation report to be submitted and approved prior to the commencement of exploration, production, refining, and chemical projects. It also restricts the type, quantities, and concentration of various substances that can be released into the environment in connection with drilling and production activities. The environmental laws and regulations also limit or prohibit drilling activities within protected areas and certain other areas and impose penalties for pollution resulting from oil, natural gas and petrochemical operations, including criminal and civil liabilities for serious pollution.
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These laws and regulations could also restrict air emissions and discharges to surface and subsurface water resulting from the operation of natural gas processing plants, chemical plants, refineries, pipeline systems, and other facilities that the company owns. In addition, PetroChina's operations are subject to laws and regulations relating to the generation, handling, storage, transportation, disposal, and treatment of solid waste materials. It is anticipated that the environmental laws and regulations to which the company is subject to would become increasingly strict. These environmental laws and regulations could therefore have an increasing impact on the companys operations.
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Recent developments
In March 2009, PetroChina signed a joint venture agreement with its local and foreign partners for the Jiangsu liquefied natural gas (LNG) import terminal project in eastern China. In April 2009, PetroChina set up PetroChina Dalian LNG Company. The company, co-invested by PetroChina, Dalian Port (PDA), and Dalian Construction Investment, would be responsible for the construction and operation of the Dalian LNG receiving terminal project. PetroChina had a 75% stake in PetroChina Dalian LNG Company, while 20% and 5% of stakes were held by Dalian Port (PDA) and Dalian Construction Investment, respectively. In May 2009, PetroChina, through its indirectly wholly owned subsidiary, PetroChina International (Singapore), entered into a conditional agreement with Keppel Oil and Gas Services to acquire its entire shareholding of 45.51% in Singapore Petroleum Company. In the same month, PetroChina Kunlun Gas (Kunlun Gas), a wholly-owned subsidiary of PetroChina, entered into a transfer agreement with each of China Huayou Group Corporation and China Petroleum Pipeline Bureau, wholly-owned subordinated entities of CNPC, pursuant to which Kunlun Gas acquired their city gas businesses. In June 2009, the Western Pipeline Branch Company of PetroChina acquired the western pipeline assets from Western Pipeline Company, a wholly-owned subsidiary of CNPC. In August 2009, PetroChina acquired the 100% share capital in South Oil from CNPC E&D and CNPC Central Asia Petroleum Company. In the same month, PetroChina Amu Darya Natural Gas Exploration and Development (Beijing) Company, a wholly-owned subsidiary of PetroChina, and China National Petroleum Corporation International (CNPCI), a subsidiary of CNPC, entered into a contractual rights transfer agreement, pursuant to which PetroChina agreed to acquire from CNPCI the contractual rights under the production sharing contract on the Bagtyiarlyk area at Amu Darya Right Bank in Turkmenistan. Further in August 2009, asset transfer agreements were entered into between ten of PetroChinas branch companies and ten subordinated entities of CNPC (including CNPC Daqing Petrochemical Factory), pursuant to which PetroChina agreed to acquire refinery equipment assets from the ten subordinated entities of CNPC. The agreements were completed in November 2009. In November 2009, Mangistau Investments, a joint venture of CNPC Exploration and Development Company and KazMunayGas, acquired 100% of the common shares of Mangistaumunaigas. In December 2009, Kunlun Gas and Daqing Petroleum Administrative Bureau, a wholly-owned subordinated entity of CNPC, entered into an asset transfer agreement, pursuant to which Kunlun Gas acquired the city gas business from the Daqing Petroleum Administrative Bureau. In January 2010, PetroChina, Total Exploration and Production Company, and Petroliam Nasional (Petronas) formed a joint operatorship and entered into a development and production contract in respect of the Halfaya Oilfield in Iraq for a term of 20 years.
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In February 2010, PetroChina completed the acquisition of certain oil sands assets from Canadas Athabasca Oil Sands Corp. In March 2010, the Board of Directors at Arrow Energy (Arrow) unanimously recommended its shareholders to vote in favor of the joint proposal by PetroChina International Investment Company (a subsidiary of PetroChina) and Shell Energy Holdings Australia (a subsidiary of Royal Dutch Shell) to acquire 100% of Arrow shares. In May 2010, Qatar Petroleum, on behalf of the Government of Qatar, signed a new exploration and production sharing agreement with Royal Dutch Shell and PetroChina for Qatar Block D. The Block D concession is for pre-Khuff geological intervals.
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ConocoPhillips
Company overview
ConocoPhillips is the third-largest integrated energy company in the US and the second-largest refiner in the country. The company is engaged in the exploration and production of petroleum, natural gas, chemicals, and polymers businesses. It has operations in over 40 countries. ConocoPhillips is headquartered in Houston, Texas and employs about 30,000 people. The company recorded revenues of $149,341m in FY2009, a decrease of 38% compared with FY2008. The operating profit of the company was $12,005m in FY2009, a decrease of 62.8% compared with FY2008. The net profit was $4,858m in FY2009, compared with a net loss of $16,998m in FY2008.
ConocoPhillips is an international, integrated energy company. It operates worldwide with assets and businesses in nearly 40 countries. It operates through six segments: exploration and production (E&P); midstream; refining and marketing (R&M); LUKOIL Investment; chemicals; and emerging businesses. The E&P segment primarily explores for, produces, transports, and markets crude oil, natural gas, and natural gas liquids on a worldwide basis. It also mines deposits of oil sands in Canada to extract bitumen and upgrade it into synthetic crude oil. Operations to liquefy natural gas and transport the resulting liquefied natural gas (LNG) are also included in the E&P segment. Proved reserves for ConocoPhillips at year end 2008 were 8.08 billion barrels of oil equivalent (BOE). The company conducts its E&P operations in the US, Norway, the UK, Canada, Nigeria, Ecuador, offshore Timor-Leste in the Timor Sea, Australia, China, Indonesia, Algeria, Libya, Vietnam, and Russia. In FY2009, E&Ps worldwide production, including its share of equity affiliates production excluding LUKOIL, averaged about 1,854,000 barrels-of-oil-equivalent per day (BOED). During FY2009, 755,000 BOED were produced in the US and production from its international E&P operations averaged 1,099,000 BOED. The company conducts its midstream business through its 50% equity investment in DCP Midstream, a joint venture with Spectra Energy (a North American natural gas infrastructure company). The midstream business purchases raw natural gas from producers and gathers natural gas through extensive pipeline gathering systems. The gathered natural gas is then processed to extract natural gas liquids. The remaining residue gas is marketed to electrical utilities, industrial users, and gas marketing companies. Most of the natural gas liquids are fractionated and separated into individual components like ethane, butane, and propane, and marketed as chemical feedstock, fuel, or blendstock. The total natural gas liquids extracted in FY2009, including its share of DCP Midstream, was 187,000 barrels per day. DCP Midstream markets a portion of its natural gas liquids to ConocoPhillips and Chevron Phillips Chemical Company under a supply agreement that continues till December 2014.
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As on December 31, 2009, DCP Midstream owned or operated 53 natural gas liquids extraction plants, 10 natural gas liquids fractionation plants, and its gathering and transmission systems included approximately 60,000 miles of pipeline. In FY2009, its raw natural gas throughput averaged 6.2 billion cubic feet per day, and natural gas liquids extraction averaged 360,000 barrels per day. DCP midstreams assets are primarily located in the following producing regions of the US: Rocky Mountains, Midcontinent, Permian, East Texas/North Louisiana, South Texas, Central Texas, and Gulf Coast. Outside of DCP midstream, the companys US natural gas liquids business included, as of year-end 2009, a 25,000 barrel per day capacity natural gas liquids fractionation plant in Gallup, New Mexico. It also included a 22.5% equity interest in Gulf Coast Fractionators, which owns a natural gas liquids fractionation plant in Mont Belvieu, Texas (with ConocoPhillips net share of capacity at 24,300 barrels per day). It further included a 40% interest in a fractionation plant in Conway, Kansas (with ConocoPhillips net share of capacity at 43,200 barrels per day) and a 12.5% equity interest in a fractionation plant in Mont Belvieu, Texas (with ConocoPhillips net share of capacity at 26,000 barrels per day). ConocoPhillips also owns a 39% equity interest in Phoenix Park Gas Processors (Phoenix Park), a joint venture principally with the National Gas Company of Trinidad and Tobago. Phoenix Park processes natural gas in Trinidad and markets natural gas liquids in the Caribbean, Central America, and the US Gulf Coast. Its facilities include a two billion cubic feet per day gas processing plant and a 70,000 barrel per day natural gas liquids fractionator. A third gas processing train is currently under construction. A third gas processing train was completed in July 2009, which increased total processing capacity to two billion cubic feet per day. ConocoPhillips share of natural gas liquids extracted averaged 8,000 barrels per day and its share of fractionated liquids averaged 17,000 barrels per day in FY2009. The R&M segment purchases, refines, markets, and transports crude oil and petroleum products, primarily in the US, Europe, and Asia. At December 31, 2009, the R&M segment represented 24% of ConocoPhillips total assets. The segment has operations in US, Europe, and the Asia Pacific Region. As on December 31, 2009, R&M owned or had an interest in 12 operating refineries in the US, and marketed gasoline, diesel, and aviation fuel through approximately 8,500 outlets in 49 states of the US. It markets its products under the brand names of Phillips 66, Conoco, and 76 brands. At December 31, 2009, R&M owned or had an interest in five refineries outside the US. Three refineries are located in the UK, Ireland, and Malaysia, while two refineries are located in Germany. For the same period, R&M had marketing operations in five European countries. The company uses the JET brand name to market retail and wholesale products in Austria, Germany, and the UK. In addition, a joint venture in which ConocoPhillips has equity interest, markets products in Switzerland under the Coop brand name. The company also markets aviation fuels, liquid petroleum gases, heating oils, transportation fuels, and marine bunkers to commercial customers and into the bulk or spot market in these countries and Ireland. As of December 31, 2009, R&M had approximately 1,225 marketing outlets in its European operations, of which approximately 880 were company-owned and 345 were dealer-owned. Through its joint venture operations in Switzerland, the company also has interests in 225 additional sites.
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The LUKOIL Investment segment consists of ConocoPhillips equity investment in the ordinary shares of LUKOIL, an international, integrated oil and gas company headquartered in Russia. As on December 31, 2009, ConocoPhillips ownership interest in LUKOIL was 20% based on authorized and issued shares, and 20.09% based on estimated shares outstanding. However, in August 2010, ConocoPhillips decided to sell its 20% stake in Russian LUKOIL. The chemicals segment consists of ConocoPhillips 50% equity investment in Chevron Phillips Chemical Company (CPChem), a joint venture with Chevron Corporation. CPChems business is structured around two primary operating segments: olefins and polyolefins; and specialties, aromatics, and styrenics. The olefins and polyolefins segment produces and markets ethylene, propylene, and other olefin products, which are primarily consumed within CPChem for the production of polyethylene, normal alpha olefins, polypropylene, and polyethylene pipe. The specialties, aromatics, and styrenics segment manufactures and markets aromatic products, such as benzene, styrene, paraxylene, and cyclohexane. The segment also manufactures and markets polystyrene, as well as styrene-butadiene copolymers, a variety of specialty chemical products, including organosulfur chemicals, solvents, catalysts, drilling chemicals, mining chemicals, and high-performance engineering plastics and compounds. The emerging businesses segment represents ConocoPhillips investment in new technologies or businesses outside its normal scope of operations. Activities within this segment are currently focused on power generation and innovation of new technologies, such as those related to conventional and non-conventional hydrocarbon recovery (including heavy oil), refining, alternative energy, biofuels, and the environment. The segment focuses on its power business through projects including, the Immingham combined heat and power plant (CHP), a wholly-owned 730 megawatt (MW) facility in the UK. It provides steam and electricity to the Humber Refinery and steam to a neighboring refinery, as well as merchant power into the UK market. In addition, the segment owns a gas fired cogeneration plant in Orange, Texas, as well as a 50% operating interest in Sweeny Cogeneration, a joint venture near the Sweeny Refinery complex. The technology group focuses on developing new business opportunities designed to provide future growth prospects for ConocoPhillips. The focus areas include advanced hydrocarbon processes, energy efficiency technologies, new petroleum based products, renewable fuels, and carbon capture and conversion technologies.
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Strong market position The company has a strong market position. It ranks sixth amongst the non-government-controlled companies in terms of worldwide proved reserves. In the US, it is the third largest integrated energy company. The DCP Midstream, in which the company has a 50% equity investment and which conducts its midstream business, is also a large producer of natural gas liquids in the US. The companys R&M segment had the second-largest US refining capacity of 18 large refiners of petroleum products. In addition, it ranked fourth among non-government-controlled companies, worldwide. In the chemicals segment, CPChem ranks within the top 10 producers of its major product lines. Leading market position in a number of its key product lines enhances ConocoPhillips brand image. Presence across the energy value chain ConocoPhillips is an international, integrated energy company. The company operates across the energy value chain through its exploration and production, midstream, and refining and marketing business segments. The company operates in the upstream segment by exploring and producing (E&P) crude oil, natural gas, and natural gas liquids on a worldwide basis. The company conducts its E&P operations in the US, Norway, the UK, Canada, Nigeria, Ecuador, offshore Timor-Leste in the Timor Sea, Australia, China, Indonesia, Algeria, Libya, Vietnam, and Russia. In FY2009, E&Ps worldwide production, including its share of equity affiliates production excluding LUKOIL, averaged about 1,854,000 barrels-of-oil-equivalent per day (BOED). In operates in the midstream segment through its 50% equity investment in DCP Midstream, a joint venture with Spectra Energy (a North American natural gas infrastructure company). As on December 31, 2009, DCP Midstream owned or operated 53 natural gas liquids extraction plants, 10 natural gas liquids fractionation plants, and its gathering and transmission systems included approximately 60,000 miles of pipeline. As part of its downstream activities, the company purchases, refines, markets, and transports crude oil and petroleum products, primarily in the US, Europe, and Asia. As on December 31, 2009, the company owned or had an interest in 12 operating refineries in the US, and marketed gasoline, diesel, and aviation fuel through approximately 8,500 outlets in 49 states of the US. The company's presence across the energy value chain provides it with opportunities to optimize its business while minimizing business risks.
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Diverse geographic presence ConocoPhillips has wide presence across various regions. The company divides its geographic division as US, Norway, UK, Australia, Canada, and other foreign countries. ConocoPhillips holds substantial interests in key international areas that offer high exploratory potential and access to markets that are experiencing strong energy demand growth. Among these are natural gas and coal bed methane resources in Australia that support the following: both existing and proposed major liquefied natural gas (LNG) businesses; a major offshore natural gas production and LNG liquefaction and export facility in Qatar; large offshore oil development programs in China, Vietnam, and Kazakhstan; offshore gas in Indonesia; and onshore oil production in the Russian Arctic, Algeria, and Libya. The companys global operations and regional brand identity gives it competitive advantage over its competitors and also indicates that the company has a wider scope in increasing its revenues by utilizing its global presence. Further, its world wide presence reduces exposure to economic conditions or political stability in any once country or region.
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Weaknesses
Limited ability to manage risk The companys majority of the operations are through joint ventures in which ConocoPhillips shares control with its joint venture participants. There are various risks involved in carrying put operations through joint ventures including, instances where the joint venture participants have economic, business or legal interests or goals that are inconsistent with those of the joint venture or ConocoPhillips or the joint venture participants are unable to meet their economic or other obligations. Failure by the entity in which ConocoPhillips has a joint venture interest, to adequately manage the risks associated with any acquisitions or joint ventures can have a material adverse effect on the financial condition or results of operations of its joint ventures and also the business and operations.
Opportunities
Increasing demand for refined products in China Over the next 10 years, it is expected that about 60% of the worlds petrochemical demand growth will occur in Asia, with more than one-third in China alone. The demand for refined petroleum products in China is expected to rise sharply in the coming decades. China, despite substantial additions to refining capacity over the next three decades, is expected to remain a net importer of refined products in 2030. The refining capacity in China is forecast to increase from 6.2 million barrels per day in 2006 to 14.6 million barrels per day in 2030. ConocoPhillips has exploration interests in China. For instance, the company has 49% share in the Peng Lai 19-3 field in Bohai Bay Block 11-05, whose production averaged 33,000 barrels of oil per day in FY2009. The company also holds a 49% interest in the nearby Peng Lai 199 and Peng Lai 256 Fields. Its Xijiang development consists of two fields located approximately 80 miles south of Hong Kong in the South China Sea. The companys ownership in these fields ranges from 12.3% to 24.5%. Facilities include two manned platforms and a floating production, storage and offloading (FPSO) vessel. Its combined net production of oil from the Xijiang fields averaged 5,000 barrels per day in FY2009. It also has a 24.5% interest in the offshore Panyu field, also located in the South China Sea, which produced 11,000 net barrels of oil per day in FY2009. The company can, therefore, leverage its existing presence in China to export refined products or establish fresh refining capacity and take advantage of the increasing demand for refined products in the country. Increase in demand for natural gas in the US The US Energy Department has projected that the US would become more dependent on natural gas in the next two decades. According to EIA estimates, the total natural gas consumption in the US is projected to increase from around 23.3 trillion cubic feet in 2008 to 24.9 trillion cubic feet in 2035. The increase is attributed to the growth in the demand for natural gas in the transportation sector. The company can exploit the growing demand for natural gas in North America and further enhance its growth.
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Threats
Environmental regulations ConocoPhillipss businesses are subject to numerous laws and regulations relating to the protection of the environment. With rising awareness of the damage to the environment caused by industry, especially regarding global warming, regulatory standards have been continuously tightened in recent years. One of the most important developments in this area has been the introduction of the Kyoto Protocol for the reduction of greenhouse gases. The protocol calls on industrialized countries to reduce their greenhouse gas emissions level by 5.2% on an average annual basis during the 200812 period, compared with 1990 emissions levels. Further, in 2005, the US environmental protection agency (EPA) issued a clean air interstate rule (CAIR), to reduce the emission levels. According to the rule, the states have to reduce the allowable sulfur dioxide (SO2) emissions by 70% and reduce Nitrous Oxide (NOX) emissions by 60%, by 2015 compared with the 2003 levels. The company is governed by these regulations which could impose new liabilities on the company. This could result in a material decline in ConocoPhillips profitability in the short term. Risks associated with conducting business outside the US The company faces risks associated with conducting business outside the US. Approximately 67% of its hydrocarbon production in FY2009 was derived from production outside the US. For the same period, the companys 64% of proved reserves, as of December 31, 2009, were located outside the US. The company is, therefore, subject to risks associated with operations in international markets. These risks include changes in foreign governmental policies relating to the following: crude oil, natural gas, natural gas liquids; refined product pricing and taxation; other political, economic, or diplomatic developments; and changing political conditions and international monetary fluctuations. Such international political and economic developments could damage the companys operations and materially reduce its profitability and cash flows. Intense competition ConocoPhillips faces intense competition in the markets it operates in. It competes with private, public, and state-owned companies in all facets of the petroleum and chemicals businesses. Upstream, the companys E&P segment competes with numerous other companies in the industry to locate and obtain new sources of supply and to produce oil and natural gas in an efficient, cost-effective manner. The companys midstream segment, through its equity investment in DCP Midstream and the companys consolidated operations, competes with numerous other integrated petroleum companies, as well as natural gas transmission and distribution companies. Downstream, the companys R&M segment competes primarily in the US, Europe, and the Asia Pacific region. Some of the major competitors of the company include Chevron, BP, ExxonMobil, Royal Dutch Shell, Hess, Marathon Oil, and Occidental Petroleum. Such intense competition threatens to erode the market share of the company.
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Recent developments
In May 2009, ConocoPhillips and Anadarko Petroleum Corporation (an independent oil and gas exploration and production company) announced the discovery and test production from two wells in the National Petroleum Reserve-Alaska. Both wells were located in the Greater Mooses Tooth Unit, approximately 20 miles southwest of the Colville River Unit development on the North Slope of Alaska. ConocoPhillips was the operator of and held a 78% interest in the Greater Mooses Tooth Unit, while Anadarko Petroleum Corporation held the remaining 22% interest. In June 2009, ConocoPhillips, KazMunayGas, and Mubadala Development Company signed project agreements for the joint exploration and development of the Nursultan Block (N Block) located in offshore Kazakhstan. In July 2009, ConocoPhillips and Abu Dhabi National Oil Company signed the Shah Gas Field joint venture and field entry agreements to develop the Shah Gas field in Abu Dhabi. In November 2009, ConocoPhillips announced a delay in the planned upgrade of its 260,000 barrel-per-day Wilhelmshaven refinery in Germany as a part of the company's capital budget reduction plan for FY2010 to improve financial flexibility and better balance expenditures and resources. In December 2009, the Commonwealth of Kentucky issued a draft air permit for Kentucky NewGas, a planned coal-tonatural-gas facility that would be sited near Central City in Muhlenberg County. Kentucky NewGas would use ConocoPhillips proprietary E-Gas technology to produce substitute natural gas that is virtually free of impurities. In January 2010, ConocoPhillips and Statoil entered into a deal for Statoil to acquire a 25% working interest in 50 ConocoPhillips leases acquired in the Chukchi Sea federal OCS lease sale in 2008. In April 2010, ConocoPhillips completed an agreement with POSCO, a Korean steel manufacturing company, to use ConocoPhillips E-Gas Technology in POSCOs Gwangyang coal to substitute natural gas (SNG) project. In the same month, ConocoPhillips decided to end its participation in developing the Shah Gas Field with Abu Dhabi National Oil Company (ADNOC). Further in April 2010, ConocoPhillips decided to end participation in the new refinery project being built in Yanbu Industrial City by the Saudi Arabian Oil Company (Saudi Aramco). In June 2010, ConocoPhillips completed the $4.65 billion sale of its 9.03 % interest in Syncrude with subsidiaries of Sinopec International Petroleum Exploration and Production Company (SIPC). In the same month, ConocoPhillips completed the sale of its 50% partnership interest in the CFJ Properties-Flying J truck stops to Pilot Travel Centers for $626m. In July 2010, ConocoPhillips, Rompetrol Rafinare, and Rominserv announced a license and technical services agreement for the revamp of the existing delayed coker unit at Rompetrols Petromidia Refinery in Romania. In August 2010, ConocoPhillips decided to sell its 20% stake in Russian LUKOIL for $ 3.44 billion.
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Eni SpA
Company overview
Eni is an energy company engaged in oil and gas exploration and production, refining and marketing, electricity generation, natural gas distribution, petrochemicals, oilfield services, and engineering industries. The company operates in 77 countries. It is headquartered in Rome, Italy and employs about 78,500 people. The company recorded revenues of E101,050m (approximately $140,927.4m) in FY2009, a decrease of 20.9% compared with FY2008. The operating profit of the company was E12,055m (approximately $16,812.3m) in FY2009, a decrease of 34.9% compared with FY2008. The net profit was E4,367m (approximately $6,090.3m) in FY2009, a decrease of 50.5% compared with FY2008.
Eni is an integrated energy company. The company and its consolidated subsidiaries are engaged in upstream and downstream oil and gas activities, electricity generation, petrochemicals, oilfield services, and offshore engineering. The company operates in 77 countries. Eni generates revenues through seven segments: exploration and production; refining and marketing; gas and power; engineering and construction; petrochemicals; corporate and financial companies; and other activities. The exploration and production segment is engaged in the oil and natural gas exploration, field development, and production activities in 40 countries. The segment also conducts liquefied natural gas (LNG) operations in these countries. The company carries out exploration and production activities mainly in Italy, the UK, Norway, Libya, Egypt, Angola, Nigeria, Congo, the US, Kazakhstan, Russia, and Australia. At the end of December 2009, Eni's proved reserves totaled 6,571 million barrels of oil equivalent (mmboe), comprising 6,209 mmboe proved reserves of subsidiaries and 362 mmboe of Eni share of reserves of equity-accounted entities. In FY2009, Eni's subsidiaries proved reserves replacement ratio was 95%. As of December 31, 2009, Eni's mineral right portfolio consisted of 1,246 exclusive or shared rights for exploration and development in 40 countries on five continents for a total net acreage of 347,862 square kilometers. Refining and marketing operations are predominantly based on Eni's own production capacity. The refining and marketing segment undertakes refining of crude oil and marketing of refined products mainly in Italy and in the rest of Europe. As of December 31, 2009, Enis refining system had total refinery capacity (balanced with conversion capacity) of approximately 37.3 million tonnes (mmtonnes). In Italy, the company owns five refineries and has a 50% interest in the Milazzo refinery in Sicily. In the rest of Europe, Eni holds an 8.3% interest in the Schwedt refinery and a 20% interest in Bayernoil in Germany and a 32.4% stake in Ceska Rafinerska, which includes two refineries, Kralupy and Litvinov, in the Czech Republic.
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In FY2009, the company processed 34.55 mmtonnes of crude oil and other feedstock. The company sold 45.59 mmtonnes of refined products in FY2009, of which 26.68 mmtonnes were sold in Italy. Retail sales of refined product at operated service stations totaled 12.02 mmtonnes, including Italy and the rest of Europe. The retail market share of Eni in Italy through its Agip-branded network of service stations was 31.5% in FY2009. Eni operates seven (owned and co-owned) blending plants, in Italy, Europe, North and South America, and the Far East. These plants manufacture finished and fatty lubricants. Eni also sells liquefied petroleum gas (LPG) and oxygenats. The company sells refined products across Europe, operating 4,474 service stations in Italy and 1,512 in the rest of Europe. The gas and power segment undertakes the supply, transport, distribution, storage, re-gasification, and marketing of natural gas, electricity, and liquefied natural gas (LNG). The segment also includes power generation activities that are ancillary to the marketing of electricity. The company sold around 103.72 billion cubic meters (bcm) of natural gas in FY2009. This included 6.17 bcm of sales made directly by the Enis exploration and production segment in Europe and the US. Sales in Italy totaled 40.04 bcm, while sales in other European markets totaled 55.45 bcm. The natural gas transport network of the company in Italy is operated by its subsidiary, Snam Rete Gas. The network comprises high and medium pressure pipelines for natural gas transport of approximately 31,531 kilometers in length. Outside Italy, Eni holds capacity entitlements on a network of European pipelines extending for approximately 4,400 kilometers made up of high pressure pipelines to import gas from Russia, Algeria, Libya, and North European production basins to European markets. Snam Rete Gas distributes natural gas in Italy through its wholly owned subsidiary, Italgas and other subsidiaries. As of December 31, 2009, they distributed natural gas to 1,322 municipalities through a low pressure network consisting of approximately 49,973 kilometers of pipelines. Through its wholly-owned subsidiary, Stoccaggi Gas Italia, the company undertakes natural gas storage activities in Italy through eight storage fields. Eni conducts its electricity generation activities through its wholly owned subsidiary, EniPower, which owns and manages power stations with an installed capacity of 5.3 gigawatts (GW), as of December 31, 2009. The company produces electricity and steam at its operated sites of Livorno, Taranto, Mantova, Ravenna, Brindisi, Ferrera Erbognone, and Ferrara. Eni conducts all of its electricity generation in Italy and sells the bulk of the energy it produces directly to distributors. In FY2009, the company sold 33.96 terawatt-hours (TWh) of electricity. Eni operates a re-gasification terminal in Italy and holds interests in a number of LNG facilities in Europe, Egypt, and the US. Eni conducts the oilfield services, construction, and engineering activities through its subsidiary Saipem and its controlled entities. Eni owns a 42.91% interest in Saipem. The segment provides services including offshore construction, particularly fixed platform installation, subsea pipe laying and floating production systems, and onshore construction. It also provides offshore and onshore drilling services and engineering and project management services to the oil and gas, refining, and petrochemical industries. The companys petrochemical operations are concentrated in Italy and other countries in Western Europe. Eni produces olefins and aromatics, basic intermediate products, polyethylene, polystyrenes, and elastomers. In FY2009, the company sold 4.3 mmtonnes of petrochemical products.
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The corporate and financial companies segment constitutes Enis headquarter and certain Enis subsidiaries engaged in treasury, finance, and other general and business support services. Enis headquarter is the department of the parent company and performs group strategic planning, human resources management, finance, administration, information technology, legal affairs, international affairs, and corporate research and development functions. Through Eni Adfin, Eni International, and Eni Insurance, the company carries out lending, factoring, leasing, financing Enis projects around the world, and insurance activities, principally on an intercompany basis. EniServizi, Eni Corporate University, AGI, and other minor subsidiaries are engaged in providing group companies with diversified services (training, business support, real estate, and general purposes services to group companies). The other activities segment encompasses results of operations of Enis subsidiary, Syndial, which runs minor petrochemical activities and reclamation and decommissioning activities pertaining to certain discontinued businesses.
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SWOT Analysis Strengths

Strong market position in the European natural gas market Eni is one of the leading players in the European market in terms of gas sales, with a strong market position in domestic market, as well as in highly attractive markets such as the Iberian Peninsula, Turkey, and Germany. Eni is engaged in the distribution and sale of natural gas to residential and commercial customers, primarily in Italy. The company has built this position leveraging on its unique and diverse portfolio of equity and contracted gas from different countries and growing integrated LNG business with access to both liquefaction and regasification plants. The company has access to a very large set of transportation and storage assets domestically and across Europe. In Italy, it serves a strong customer base of approximately 6.88 million. Moreover, Eni operates a large network of integrated infrastructures for transporting natural gas in Europe, linking key consumption basins with the main producing areas (North Africa, Russia, and the North Sea). In Italy, Eni operates almost all the national transport network. The company operates the only LNG regasification terminal in Italy through its subsidiary, GNL Italia. Eni's strong market position in the fast-growing European gas market provides the company with a strong platform for future growth, as well as with stable and robust cash flows. Presence across the energy value chain Eni operates in a wide range of businesses worldwide and commands presence across the energy value chain through its subsidiaries. The company engages in fully integrated petroleum operations, chemicals operations, coal mining operations, power generation, and energy services. In the upstream segment, the company operates in the exploration and production of hydrocarbons in Italy, Rest of Europe (Croatia, Norway, and the UK), North Africa (Algeria, Egypt, Libya, and Tunisia), West Africa (Angola, Congo, and Nigeria), the Gulf of Mexico, and Australia. It also operates in areas with great exploration and production potential such as the Caspian Sea, the Middle and Far East, India, and Alaska. In the midstream segment, Eni operates in the supply, transport, distribution, and sale of natural gas. It is also involved in the power generation and distribution business in Italy through its subsidiary, EniPower. In the downstream segment, Eni processes and markets refined products. It leads the Italian market through the Agip brand. In addition, Eni operates in offshore and onshore drilling and construction, and in the field of engineering services to the oil, refining, and petrochemical industries. Eni also produces basic chemicals, polyethylene, and elastomers and styrenics through its subsidiary, Polimeri Europa. Enis presence across the energy value chain provides the company with opportunities to optimize its business while minimizing business risks.
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Strong research and development (R&D) capabilities Eni has strong research and development (R&D) capabilities. The company conducts research to develop technologies to tackle the environmental issues and climate change to overcome limits in accessing hydrocarbon resources. The research activities of the company are also focused on strengthening partnerships with producing countries and developing renewable sources of energy. Eni focuses its research and development activities on reducing the costs of finding and recovering hydrocarbons, upgrading heavy oils, monetizing stranded gas, and protecting the environment. It spent E207m (approximately $288.7m) on R&D in FY2009. R&D expenses in previous years were E217m (approximately $302.6m) in FY2008 and E208m (approximately $290.1m) in FY2007. To tackle environmental issues, Eni has launched the Along with Petroleum program. This program aims to identify and develop research projects on the most advanced aspects of large scale use of renewable energy sources and energy efficiency. Through this program, Eni focuses on exploitation of solar energy and the production of biofuels. Through its strong R&D capabilities, Eni has developed numerous advanced exploration techniques such as depth velocity analysis and coil shooting and drilling technologies such as dual casing running and radial drilling. The company has also developed technologies for conversion of heavy crude into lighter products (oil upgrading). Eni has also delivered innovations in the areas of petrochemicals, renewable energy sources, and environment and efficiency. Eni filed 106 applications for patents in FY2009. Eni plans to invest approximately E1.4 billion (approximately $1.9 billion) in technological research and innovation activities. The company's strong R&D capabilities provide it with a competitive advantage and help it to improve the efficiency of its products and processes.
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Weaknesses
Violation of anti-corruption laws Eni and its subsidiaries have been found guilty of engaging in corrupt practices. Snamprogetti and others faced charges from the US authorities for a series of contracts to build liquid natural gas facilities in Bonny Island, Nigeria. In July 2010, Snamprogetti Netherlands, a former indirect subsidiary of Eni and current subsidiary of Saipem, entered into a deferred prosecution agreement with the US Department of Justice (DOJ) to resolve an investigation into Snamprogetti Netherlands's activities in connection with contracts to build liquid natural gas facilities on Bonny Island, Nigeria. Pursuant to the agreement, the DOJ filed charges against Snamprogetti Netherlands including a count of conspiracy and violating certain provisions of the US Foreign Corrupt Practices Act. Snamprogetti Netherlands agreed to pay a criminal penalty of $240m. If it satisfies the terms of the agreement, the charges against Snamprogetti Netherlands will be dismissed. Eni and Saipem have also agreed to guarantee the obligations of Snamprogetti Netherlands towards the DOJ. Such violation of laws, in addition to huge penalties, could also lead to tightened surveillance of the companys business operations by the authorities. Violation of competition rules in Europe The European Commission has conducted an inspection of Eni and its subsidiaries for a possible violation of its competition rules. The inspections were intended to verify Enis limiting access to the Italian wholesale natural gas market or at sharing the market with other companies active in the sale or transport of natural gas. In March 2009, Eni received a statement of objections by the European Commission concerning an alleged unjustified refusal to grant access to the TAG (Austria), TENP/Transitgas (Germany/Switzerland) pipelines, connected with the Italian gas transport system. The Commission in the statement envisaged the possible imposition upon Eni of structural remedies and a fine. Eni after the completion of the assessment of the allegations set forth by the Commission in Statement of Objections submitted its response. In February 2010, Eni filed with the European Commission a number of structural remedies with a view to resolving the proceeding without the ascertainment of the illicit behavior and consequently without sanctions. Eni has committed to dispose of its interests in the German TENP, in the Swiss Transitgas, and in the Austrian TAG gas pipelines. The European Commission has announced its intention to submit those remedies to a market test. If the Commission rejects Enis remedies or the company decides to withdraw those remedies, the ordinary antitrust proceeding would resume. This could result in a huge penalty and/or unfavorable structural remedies for Eni. These in turn could significantly affect Enis business operations as well as profit margins.
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Opportunities
Strategic plan 2010-13 Eni aims to significantly increase its hydrocarbon production in the long term and strengthening its leadership in the European gas market. In line with this, the company, in March 2010, announced its strategic plan for 201013. The company intends to pursue these objectives by leveraging its integrated business model while maintaining a strong balance sheet. Eni plans to invest E52.8 billion (approximately $73.6 billion) during 201013, an increase of approximately 8% compared with the 200912 strategic plan. This increase will be driven entirely by the exploration and production (E&P) sector for the development of new projects, particularly in Iraq and Venezuela, which will contribute to Eni's production growth in the four-year period and beyond. In E&P, Eni aims to achieve production growth with an average annual rate of more than 2.5% for the 201013 period. To achieve this, the company will focus on organic development. Apart from the areas in which Eni has a consolidated presence, such as Africa, the Caspian region, and OECD countries, production growth will be focused on new high potential areas, particularly Iraq. In the next four years, Eni will take on stream 41 new fields. This will result in about 560,000 boe/day of new production in 2013, 75% of which will be operated by Eni. Eni will further strengthen its European gas business by leveraging on its commercial strength enhanced by the Distrigas acquisition, long term relations with supplying countries, and on the access to international transport facilities. During 201013, Eni plans to grow its international gas sales by an average higher than 3% a year, targeting annual gas sales of 118 billion cubic meters and market share in Europe of more than 22% by 2013. In refining and marketing, Eni's intends to focus on the selective strengthening of its refining system, the improvement in the quality of its marketing activities, and the widespread increase in operating efficiency. The company plans to achieve a 34% market share in Italy by 2013 more than two points higher than in 2009. This strategic plan for the next four years will help the company deliver robust long-term hydrocarbon production growth superior to the average growth of its peers, and further strengthen its leadership in the European gas market.
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Acquisition of downstream activities in Austria Eni signed an agreement to purchase ExxonMobil downstream activities in Austria in January 2010. The company signed a sale and purchase agreement for the sale of shares of Mobil Oil Austria and Esso Austria, respectively, to Agip Austria and to Eni International. The assets include a retail network with 135 service stations, the industrial and wholesale business (with 36 additional Esso branded retail service stations owned by industrial and wholesale resellers), and the aviation business at the Vienna and Linz airports, including the 28.6% share in the proprietary joint venture for logistical assets at the Vienna airport. The transaction also includes the supply and distribution business with its 33.3% participation in the Salzburg terminal joint venture. The lubricants and specialties business, however, is excluded from the transaction. Eni currently operates in Austria through its affiliate, Agip Austria. The addition of these assets will strengthen the downstream business of Eni in Austria, expand its marketing capabilities, and complement its logistic and storage activities. Increasing demand for liquefied natural gas (LNG) In Europe, Eni expects gas demand to grow at a compounded average growth rate of 1.5% by 2020, reaching 600 billion cubic meters (bcm). The usage of gas in power generation is expected to drive the growth. Most of the European gas requirement is expected to be satisfied by imports via pipeline. European gas imports will cover at least 80% of consumption from the current level of 60%, due to domestic production decrease, stressing European dependence on producing countries. Over the long-term, the company expects Italian gas demand to increase at an annual rate of slightly lower than 2% through 2020, reaching an amount of 94 bcm in 2020, driven by rising consumption in the power generation sector. In the medium-term, Eni plans to achieve sales volumes in Europe (excluding Italy) of approximately 59 bcm by 2013, with an annual growth rate of 6% from 2009. Overall, Eni plans to increase worldwide gas sales targeting a volume of 118 bcm by 2013 with an average annual growth rate higher than 3% in the 201013 period. In FY2009, Eni finalized plans to upgrade the import capacity of its two main pipelines from Russia and Algeria increasing capacity by an overall amount of 13 bcm per year (the gas pipelines TAG and TTPC), with new capacity entirely sold to third parties. A new LNG terminal with a capacity of eight bcm per year commenced operations late in 2009, operated by a consortium of competitors. Eni intends to grow international sales and increase operational efficiency to develop a global LNG business. The company is in an ideal position to exploit growing demand for LNG.
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Expansion of exploration and production operations The company has entered into several agreements and partnerships for oil and gas exploration projects. In September 2009, Eni expanded into Ghana through the acquisition of majority stakes in the offshore cape three points (OCTP) and offshore cape three points south (OCTPS) exploration licenses. In the same month, in joint venture with Pakistan Petroleum and Royal Dutch Shell, Eni won the bid tender for the exploration license of onshore Sukhpur block, located in the Sindh province north of Karachi. In October 2009, an Eni-led consortium (with Eni as operator), consisting of the US Occidental Petroleum Corporation and Korea Gaz Corporation, was awarded the license for the development of the Zubair giant field in Iraq. In November 2009, Eni entered into an agreement with Heritage to purchase its 50% interest in blocks 1 and 3A located in the Lake Albert basin in Uganda. In the same month, Eni, through its joint venture affiliate VICO CBM, was awarded a 37.8% stake in Sanga Sanga, a new coal-bed methane (CBM) production sharing contract (PSC), in Indonesia. In January 2010, Eni and PDVSA signed an agreement to develop Junin 5 heavy oil field, located in the Orinoco oil belt (Faja) in Venezuela. In May 2010, Eni and KazMunayGas (KMG) entered into an agreement to jointly study the Isatay and Shagala exploration areas located in the Caspian Sea. In August 2010, Eni signed a farm-in agreement with UK-based Surestream Petroleum to acquire 55% and operatorship in the Ndunda block located in the Bassin Cotier along onshore region of the Lower Congo Basin. These investments aim to develop its production assets and thereby increase the companys production capacity.
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Threats
Environmental regulations Enis business is subject to numerous laws and regulations relating to the protection of the environment. With rising awareness of the damage to the environment caused by industry, especially regarding global warming, regulatory standards have been continuously tightened in recent years. One of the most important developments in this area has been the introduction of the Kyoto Protocol for the reduction of greenhouse gases. The protocol calls on industrialized countries to reduce their greenhouse gas emissions level by 5.2% on an average annual basis during the 200812 period, compared with 1990 emissions levels. The company is governed by these regulations which could impose new liabilities. This could result in a material decline in the companys profitability in the short term. Regulations concerning Iran In 2006, Iran and Libya Sanction Act (ILSA), the US legislation implementing sanctions against Iran and Libya was amended and extended until December 2011. The act was amended to concern only business in Iran and renamed the Iran Sanctions Act (ISA). As per this amendment, the President of the US is authorized to initiate an investigation into the possible imposition of sanctions against persons to have knowingly made investments of $20m or more in any 12 month period in the petroleum sector in Iran. Eni has incurred capital expenditures in excess of $20m in Iran in each of the last 10 years. The company may invest amounts significantly in excess of $20m per year in the country in the future. The US has intensified its push for tougher sanctions on Iran over the country's nuclear program. Therefore, operations in Iran amid the mounting tensions over Irans nuclear program could increase political risks for the company. Disruptions in Nigeria Nigeria is the world's eighth-biggest oil exporter. However, the violence in the country has affected the industry leading to a decline in the output since early 2006, and increasing the oil prices. Enis pipelines in Nigeria were attacked in July 2008. The attacks stemmed from a community dispute with foreign oil companies. Residents in Nigeria's restive Niger Delta blew up the pipeline linking the Tebidaba flowstation and Brass River export terminal on July 16, 2008. The pipelines feed the Brass terminal, the country's main oil-export terminal. Following the attack, Eni shut 47,000 barrels a day of production after two pipelines attacked suffered a sudden loss of pressure. The company continues to experience continuing social unrest in Nigeria leading to a number of disruptions at certain of its oil producing facilities in the country. The companys oil and gas production in FY2009 declined with security problems impacting the operations. Such disruptions could force the companies operating in the country to declare force majeure on their shipments. Consequently, the company could be affected with defaults in fulfilling its contractual obligations to clients.
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Liberalization of the Italian natural gas market The Italian natural gas market was liberalized by passing a decree in January 2003. Consequently, Italian customers are free to choose their supplier of natural gas. Eni has a presence across all the phases of the natural gas chain. The decree introduced rules which could significantly impact Enis operations. Eni has been experiencing rising competition in its natural gas business since the liberalization process of the Italian natural gas market. This resulted in lower sales margins for the company. Some of its competitors are supplied by the company itself on the basis of long-term contracts. To comply with the regulatory thresholds relating to volumes supplied through the national transport network and sales volumes in Italy, Eni sold part of its gas availability under its take-or-pay supply contracts to third parties importing to Italy and marketing them to Italian customers. These antitrust thresholds are effective until December 31, 2010. Eni expects these antitrust thresholds to be renewed when they expire in 2010. Eni expects its margins on gas sales in Italy to remain under pressure in the future considering Enis gas availability under its take-or-pay supply contracts, build-up of Enis supplies to the competitors. In addition, entry of new competitors into the Italian market and capital projects to expand the transport capacity of import pipelines to Italy and to build new import infrastructures, particularly LNG terminals would add to the pressure. Therefore, liberalization of the Italian natural gas market and the evolution of Italian regulations in the natural gas sector, represent risk with regards to the gas sales margins. Consequently, Enis results of operations and cash flows could be adversely affected.
Recent developments
Eni and Angola's state oil company, Sonangol, signed three deals aimed to boost hydrocarbon exploration and energy infrastructure of the African country, in February 2009. In the same month, Eni sold the Stogit and Italgas units to the natural gas grid company, Snam Rete Gas, as part of its effort to exit these regulated activities. In March 2009, Gazprom received permission from Federal Antimonopoly Service to purchase a 20% stake in Gazprom Neft from Eni. In the same month, Eni discovered a new hydrocarbons deposit on the concession of Abu Qir in Egypt that would allow a growth in the production of gas in the order 30% corresponding to 1.8 million cubic meters of gas and 850 condensed barrels per day. In April 2009, Eni signed under the patronage of the Russian government, several cooperation agreements in Russia and abroad with the main Russian energy companies Gazprom, Inter Rao UES, Rosneft, Transneft, and Stroytransgas. Eni would start a wide program of strategic cooperation involving different activities in the energy field with these companies. In the same month, Eni completed the sale of 20% stake of Gazprom Neft to Gazprom. Eni completed the acquisition of Distrigas, through its 100% controlled subsidiary, Eni Gas & Power Belgium (Eni Belgium), in May 2009. In the same month, Eni executed a strategic alliance with Quicksilver Resources, an independent US natural gas producer, to acquire a 27.5% interest in the Alliance area, located between the cities of Fort Worth and Dallas in Northern Texas. Subsequently, Eni was awarded the operatorships and participating interests in two exploration licenses in the Barents Sea, offshore Norway, and a participating interest in another license in the same area.
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In June 2009, Eni completed the sale of its 100% stake in the joint stock of the companies, Italgas and Stogit to Snam Rete Gas for E4.5 billion (approximately $5.6 billion). In July 2009, Eni started production from the Thunder Hawk oil field located in the US Central Gulf of Mexico in Mississippi Canyon Block 734, approximately 145 miles southeast of New Orleans in 1700 meters of water depth. In August 2009, Eni signed a strategic agreement with the Democratic Republic of Congo to cooperate in the exploration and development of the significant hydrocarbon resources in the Cuvette basin and in the eastern regions of the country (great lakes, northern Kivu and Tanganika lake). Subsequently, the company started up sub-sea gas production in North Bardawil field, within the North Bardawil Concession, located in the Mediterranean offshore of Egypt. Eni started crude oil production at the Tombua-Landana project, located 80 kilometers (50 miles) offshore Angola in September 2009. Subsequently, the company started production from the Blacktip gas field, located in the southern Bonaparte Gulf, offshore Northern Territory in Australia. The field, 100% owned and operated by Eni, would deliver gas to the Northern Territorys Power Water Corporation for over a period of 25 years. In the same month, Gazprom completed the acquisition of the 51% stake in SeverEnergia from Eni and Enel, in line with previously established agreements announced in April 2007 and May 2009. Further in September 2009, Eni expanded into Ghana through the acquisition of majority stakes in the offshore cape three points (OCTP) and offshore cape three points south (OCTPS) exploration licenses. In the same month, in joint venture with Pakistan Petroleum and Royal Dutch Shell, Eni won the bid tender for the exploration license of onshore Sukhpur block, located in the Sindh province north of Karachi. In October 2009, an Eni-led consortium (with Eni as operator), consisting of the US Occidental Petroleum Corporation and Korea Gaz Corporation, was awarded the license for the development of the Zubair giant field in Iraq. Subsequently, Eni made a gas discovery at its Perla field, located in the Cardon IV block, in the Gulf of Venezuela. The field was estimated to have a reserve potential higher than the 6 trillion cubic feet of gas (1 billion of barrels of oil equivalent). Eni and Sonangol announced an important oil discovery at the Cabaca Norte-1 well, 350 km North of Luanda, offshore Angola, in October 2009. In November 2009, Eni started production from its Longhorn gas field located in the Gulf of Mexico, Mississippi Canyon Blocks 502/546, 60 miles off the Louisiana coast. Subsequently, Eni signed a cooperation agreement with state oil company of Kazakhstan KazMunayGas on exploration and production activities and strategic industrial facilities in Kazakhstan. Further in November 2009, Eni and the Croatian oil and gas company INA, through the joint operator INAgip, started gas production from six wells of Annamaria, a platform located in the Croatian waters of the Adriatic Sea. Subsequently, Eni entered into an agreement with Heritage to purchase its 50% interest in blocks 1 and 3A located in the Lake Albert basin, in Uganda for $1.35 billion. In the same month, Eni signed a cooperation agreement with the Republic of Turkmenistan to promote and strengthen cooperation in the development of the countrys petroleum industry.
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Later in November 2009, Eni, through its joint venture affiliate VICO CBM, was awarded a 37.8% stake in Sanga Sanga, a new coal-bed methane (CBM) production sharing contract (PSC), in Indonesia. In December 2009, Eni and Gazprom signed an agreement to allow the entry of EDF in the South Stream project, which would link Russia to the European Union across the Black Sea and significantly contribute to improving the security of energy supply for Europe. Subsequently, Allied Energy (57.5%) and Eni (40%), through its affiliate, Nigerian Agip Exploration, started the production of the Oyo oil field, located in the Niger Delta Deep offshore, about 75 kilometers off the Nigerian coast. In the same month, Eni and the Consiglio Nazionale delle Ricerche (CNR), the national council of researches, signed a framework agreement for strategic co-operation in the field of scientific and technologic research. Eni signed an agreement to purchase ExxonMobil downstream activities in Austria, in January 2010. The company signed a sale and purchase agreement for the shares of Mobil Oil Austria and Esso Austria, respectively to Agip Austria and to Eni International. Subsequently, Eni, Occidental Petroleum Corporation and Korea Gas Corporation signed a contract with Iraq's state-owned South Oil Company and Missan Oil Company, to redevelop the Zubair field, near Basra in southern Iraq. Further in January 2010, Eni and PDVSA signed three strategic agreements that included an agreement for the development of Junin 5, a technology agreement and an MoU for the construction of a 1 GW power plant in the Guiria peninsula. Eni presented a set of structural remedies related to some international gas pipelines to the European Commission in February 2010. With prior agreement from its partners, Eni committed to dispose of its interests in both the German Tenp gas pipeline and in Switzerlands Transitgas pipeline. In March 2010, Gazprom completed the payment of $1.182 billion to Artic Russia (in which Eni held 60% and Enel 40%) as the second and final tranche owed by Gazprom in respect of the sale and purchase agreement of a 51% participation interest in SeverEnergia, signed in June 2009. The total consideration paid by Gazprom, including the first tranche paid in September 2009, totaled approximately $1.6 billion (Enis share $940m). Further in March 2010, Agip (Suisse), the Swiss subsidiary of Eni, changed its name to Eni Suisse. In April 2010, Eni started production on its offshore gas platform Annamaria B in the A.C11.AG concession (Eni operator 90%, Ligestra 10%). Subsequently, Eni and Sonangol made two new oil discoveries in Block 15/06 with the exploration wells Nzanza-1 and Cinguvu-1, offshore Angola. In the same month, Eni successfully drilled the Perla 2 well, located in the Cardon IV Block, in the shallow water of the Gulf of Venezuela. The results largely exceeded pre-drill expectations, increasing the initial resource estimations by 30%, with potential for further improvement.
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Further in April 2010, Eni started the development of the Kitan oil field, located in the permit 06-105 of the joint petroleum development area (JPDA) between Timor-Leste and Australia, approximately 250 kilometers south of the Timor-Leste capital of Dili and 500 kilometers north of Darwin, Australia. In May 2010, Massachusetts Institute of Technology (MIT) and Eni opened the Eni-MIT Solar Frontiers Center (SFC), to promote research in advanced solar technologies through projects ranging from new materials to hydrogen production from solar energy. Subsequently, Eni reached an agreement to sell its 100% participation interest in Gas Brasiliano Distribuidora, a company engaged in marketing and distribution of natural gas in Brazil, to Petrobras Gas, a subsidiary of Petroleo Brasileiro for $250m. In the same month, Eni and KazMunayGas (KMG) entered into an agreement to jointly study the Isatay and Shagala exploration areas located in the Caspian Sea, the optimization of gas usage in the Republic of Kazakhstan, and several industrial initiatives including a gas sweetening plant, a gas turbine power plant, a drydock shipyard and the upgrading of the Pavlodar refinery. In June 2010, Eni and Gazprom signed a MoU permitting EDF to enter South Stream. EDF would acquire a stake in the Italian-Russian joint venture, formed to build the infrastructure across the Black Sea. Subsequently, Eni launched a strategic partnership with Columbia University's Earth Institute to promote sustainable development in Africa. Further in June 2010, Eni successfully appraised the Jangkrik gas discovery in offshore Indonesia, in the Muara Bakau PSC, Kutei Basin, East Kalimantan. The well encountered more than 80 m of net gas pay in excellent quality reservoir sands of Pliocene age. In July 2010, Eni and AcegasAps executed an agreement for the take-over of the power business of IRIS Isontina Reti Integrate e Servizi ((Eni-70% and AcegasAps-30%,), a multi-utility company working in the Province of Gorizia. In the same month, Eni (35% working interest and Operator) and Sonangol announced a new major oil discovery in Block 15/06, located offshore Angola. Subsequently, Eni started gas production from the Tuna field (Eni held 50% participating interest), within the Temsah Concession, located in the Mediterranean off the coast of Egypt. In the same month, Eni signed a strategic framework agreement for cooperation with two Egyptian state oil and gas companies EGPC and EGAS. The agreement covered the development of joint initiatives in the fields of exploration, production and transportation of hydrocarbons. Further in July 2010, Eni started oil production from the new Arcadia field, located in the Meleiha Concession (in which Eni owned 56% participating interest) in the Western Desert of Egypt, 45 days after its discovery. In August 2010, Eni reached an agreement with Gas Plus to sell its 100% stake of Padana Energy, a company that held exploration permits and concessions for development and production of hydrocarbons in Northern Italy, for E175m (approximately $244.1m). Subsequently, Eni signed a farm-in agreement with UK-based Surestream Petroleum to acquire 55% and operatorship in the Ndunda block located in the Bassin Cotier along onshore region of the Lower Congo Basin.
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OAO Gazprom
Company overview
Gazprom is one of the largest gas producing companies in the world. The companys core activities include exploration, production, transportation, processing, and marketing of natural gas, as well as refining and production of crude oil and gas condensate. The company primarily operates in Europe. It is headquartered in Moscow, Russia and employs about 386,000 people. The company recorded revenues of RUR2,990,971m (approximately $94,933.4m) in FY2009, a decrease of 9% compared with FY2008. The operating profit of the company was RUR856,912m (approximately $27,198.4m) in FY2009, a decrease of 32% compared with FY2008. The net profit was RUR779,585m (approximately $24,744m) in FY2009, an increase of 4.9% over FY2008.
Gazprom is a vertically integrated energy company. It is engaged in gas exploration, processing, transport, and marketing. The company is also involved in the refining and production of crude oil and gas condensate. It operates Russia's domestic gas pipeline network and delivers gas to countries across Central Asia and Europe. Gazprom relies heavily on Western exports. Gazprom primarily operates in Europe. The companys operates through eight business segments: production of gas; gas storage; transportation of gas; distribution of gas; refining; production of crude oil and gas condensate; electric and heat energy generation and sales; and other. Gazprom is involved in the exploration and production of natural gas and hydrocarbons. It is the world's largest company in terms of natural gas reserves. Major natural gas reserves (over 90%) are concentrated in the 14 largest fields: those being developed - the Urengoyskoye, Yamburgskoye, Zapolyarnoye, Medvezhye, Komsomolskoye, Yamsoveyskoye, Orenburgskoye, Astrakhanskoye, and YuzhnoRusskoye fields; those ready for the development - the Bovanenkovskoye, Kharasaveyskoye, and Shtokmanovskoye fields; and those being explored - the Severo-Kamennomysskoye and Kamennomysskoye-more fields. For FY2009, the company had natural gas reserves of 33.6 trillion cubic meters (tcm), 1,785 million tons of oil, and 1,325.1 million tons of condensate. The incremental increase in reserves of natural gas due to the geologic exploration work totaled 468.8 bcm, increase in reserves of condensate totaled 38.5 million tons, and increase in oil reserves totaled 57.5 million tons. The natural gas production of Gazprom accounts for about 14.5% of global output. Gazprom produced 461.5 bcm of natural and associated gas in FY2009. During the year, gas condensate production in Russia totaled 10.1 million tons whereas oil production totaled 31.6 million tons. The associated companies production equal to the share owned by Gazprom amounted to 0.7 million tons of gas condensate and 19.1 million tons of oil (including 16.9 million tons of oil produced by Gazprom Nefts associated companies) in 2009.
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Gazprom operates 25 underground gas storage facilities (UGSF) in Russia with an aggregate active capacity of 65.2 bcm as of December 31, 2009. In FY2009, 15.7 bcm of natural gas were pumped into and 30 bcm were withdrawn from UGSF in Russia. The company's gas transportation system includes a vast network of trunk pipelines, compressor stations, and UGSFs. Gazprom owns the world's largest gas transportation system capable of long-distance transportation of natural gas to consumers in Russia and abroad. The average transportation distance in FY2009 was 2,504 kilometers (km) for gas supplied to Russian consumers and 3,292 km for gas export supplies. As on December 31, 2009, the length of Gazprom's gas trunk pipelines was 160.4 thousand km which included 46 thousand km of pipeline branches. The company had 215 compressor stations in operation and which were used for gas transportation. The installed capacity of the company's 3,675 gas pumping units is 42,000 megawatts (MW). In FY2009, Gazprom's gas transportation system received 589.7 bcm of natural gas. The company transported 60 bcm of natural gas to companies outside the Gazprom group in FY2009. Gazproms gas distribution subsidiaries own and maintain over 462,000 km of gas distribution pipelines, which transport 168.2 bcm of natural gas, while its associated gas distribution subsidiaries own and maintain 149,100 km of gas distribution pipelines, which transport 49.2 bcm of gas. Gazprom sells gas in the domestic and foreign markets. The company sells over 50% of its natural gas in the domestic market. It is the only supplier of natural gas to the regulated domestic market. In FY2009, the company sold 262.5 bcm of gas in Russia, 67.7 bcm of gas in the FSU countries (Republics of the former USSR, except for the Russian Federation), and 167.6 bcm of gas in far abroad countries (foreign countries, excluding FSU Countries). Gazprom refines its hydrocarbon raw materials using the facilities of the group's gas production and gas refining subsidiaries and Gazprom Neft's companies. Gazprom performs primary refining of purchased hydrocarbon raw materials and produces final products based on processing agreements signed with various refining organizations. As on December 31, 2009, Gazprom's aggregate hydrocarbon processing and refining capacity comprised 52.5 bcm of natural gas and 75.4 million tons of unstable gas condensate and oil (including the capacity of Gazprom Neft) per year. Gazprom operates the following six refineries: the Astrakhan Gas Refinery, the Orenburg Gas Refinery, the Sosnogorsky Gas Refinery, the Orenburg Helium Plant, the Urengoi Condensate Preparation Plant, and the Surgut Condensate Stabilization Plant. Gazprom Neft operates crude oil refining facilities. Its major refinery is Omsk Oil Refinery with the installed capacity of 19.5 million tons of crude oil per year. Gazprom Neft also controls 38.63% of shares in Moscow Oil Refinery (with the installed capacity of 12.2 million tons per year). It also has a 50% shareholding in Slavneft-Yaroslavnefteorgsintez (50%) and the D.I. Mendeleyev Yaroslavl Oil Refinery (50%).
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Gazprom operates in the power generation sector through Mosenergo (with a generating capacity of 11,918 MW), OGK-2 (with a generating capacity of 8,695 MW), OGK-6 (with a generating capacity of 9,052 MW), and Kaunasskaya teplofikatsionnaya elektrostantsiya (with a generating capacity of 170 MW in Lithuania). Gazprom also owns a 51.79% shareholding in OAO TGK-1, the third largest territorial generating company in Russia in terms of its installed capacity (6,313 MW as of December 31, 2009). At the end of December 2009, Gazprom's electricity generation capacity was 36,148 MW and heat generation capacity was 54,556 gigacalorie per hour (Gcalh). The company generated 138.5 billion kilowatt-hour (KWh) of power and 73.4 million gigacalorie (Gcal) of heat in FY2009.
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Strong market position in the natural gas market Gazprom has large natural gas and hydrocarbon reserves. Gazprom is the largest natural gas producer in Russia accounting for 80% of Russias natural gas production. The companys exploration and production activities account for about one-fifth of natural gas reserves and production globally. Gazprom owns both natural gas fields and oil wells, and pumps the oil-and-gas equivalent of the entire Saudi Arabian petroleum output. Gazprom produced 461.5 bcm of natural and associated gas in FY2009, accounting for about 14.5% of global output. In FY2009, the company commissioned one comprehensive gas processing unit (CGPU) with a capacity of 3.48 billion cubic meters (bcm) per year at the second trial area of the Achimovsk formations of the Urengoyskoye field; two compressor stations with an aggregate capacity of 48 megawatt (MW) designed to utilize the associated petroleum gas (APG); 64 new gas-producing wells; and 115 previously idle gas-producing wells. Gazprom drilled 358.2 thousand meters of gasproducing wells were drilled. The company's strong market position in the natural gas market gives it significant competitive advantage, and provides it with a platform for growth. Strong gas transportation network Gazprom owns the worlds largest gas transportation system, the Unified Gas Supply System (UGSS) of Russia. Gazproms gas transportation system includes a vast network of trunk pipelines, compressor stations, and underground gas storage facilities (UGSF). The length of Gazproms gas trunk pipelines is 160.4 thousand kilometers (km), which includes 46 thousand km of pipeline branches. Moreover, it has 215 compressor stations which are currently in operation and which are used for gas transportation. The installed capacity of the companys 3,675 gas pumping units is 42,000 MW. In FY2009, Gazprom's gas transportation system received 589.7 bcm of natural gas. The company transported 60 bcm of natural gas to companies outside the Gazprom group in FY2009. Gazprom is also active in distribution markets in Austria, Belgium, the Netherlands, and throughout Eastern Europe. The companys gas transportation network allows it direct control over its natural gas distribution and transportation activities. Furthermore, the company leverages its pipeline network to trade its natural gas in European markets.
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Strong long term contract portfolio Gazprom sells natural gas in Europe under long-term contractual obligations. These contracts are entered into considering a pricing formula, which takes into account changes in prices for oil products for the previous six to nine months. The terms and conditions of the contract prevent unilateral termination of contracts except for cases of long-lasting force majeure circumstances. The take-or-pay conditions cover a significant volume of contracts and imply that a buyer pays for the volumes not taken during the year. However, the buyer can take them later after procuring the minimum annual volumes provided in the contracts for the respective year and making relevant additional payment. The companys long-term contracts portfolio (excluding the potential volumes to be supplied through the South Stream gas pipeline) currently provides the sales of 3.1 trillion cubic meters (tcm) of natural gas at a minimum level of obligations to far abroad countries for the period until the expiration of the contracts, which equals to export revenues of $1 trillion at current prices. The companys strong long term contract portfolio ensures consistent revenues in the medium term.
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Weaknesses
Aging of pipelines Gazprom needs to replace its pipelines since it is over dependent on pipelines aged between 21 and 33 years and above 33 years for transporting the gas. About 44.5% of the companys pipelines are aged between 21 and 33 years, 27.4% are aged over 33 years, 18.3% are aged between 11 and 20 years, and 9.8% of trunk pipelines are aged less than 10 years. The refurbishment of these pipelines calls for additional capital expenditure. In FY2009, Gazprom invested RUR36.5 billion (approximately $1.2 billion) towards the reconstruction and technical refurbishment of its Unified Gas Supply System (UGSS). The additional capital expenditure on refurbishment of pipeline impacts the expansion plans and would add to the margin pressures for the company. Maturing gas fields The companys natural gas production from its major fields in Western Siberia (Urengoyskoye, Yamburgskaya and Medvezhye) has been declining over the past few years. The decrease in natural gas production at the Urengoyskoye and Medvezhye fields and the Yamburgskaya area was caused both by the natural decrease in production and the limited natural gas withdrawal. Despite the fact that the company has been investing heavily in developing new fields, the maturing fields will impact Gazproms gas production in the near term.
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Opportunities
Investment in methane extraction One of the major directions in implementation of Gazproms strategy for the expansion of its resource base is to establish a new industry of methane production at coal fields in Russia. Estimates show that forecast methane resources located in coal beds in Russia are comparable with traditional natural gas fields in terms of their volumes and amount to 50 trillion cubic meters (tcm). The Kuzbass field with its forecast methane resources of 13 tcm is currently the most suitable for commercial production. In some areas of Kuzbass, the density of methane resources reaches up to 3 bcm per square km, which is comparable with that at natural gas fields in the Northern areas of the Tyumen Region. Its advantages in geologic and production parameters, the availability of infrastructure, and natural gas consumers located as close as 15 to 150 km from the Kuzbass field determines the economic efficiency of commercial production of methane there. Gazprom has been carrying out experiments since 2003 testing technologies for methane production from coal beds. Forecast annual production volumes at the available licensed area may reach up to 5 bcm in the period from 2010 through 2012 and up to 20 bcm after 2020. The methane extraction project at Kuzbass field is being implemented by the companys subsidiary, Gazprom Dobycha Kuznetsk, whose licensed mining area contains about 6 tcm of methane resources located in coal beds. The Taldinskoye field was discovered within the licensed area in 2009. The company drilled seven exploration wells in 2009 as part of the project and their trial operation began, with the gas being utilized at automobile CNG filling stations. The wells have an aggregate daily output of about 10 million cubic meters (mcm). The investment in methane extraction would materially diversify the companys product base and enhance the overall competitiveness of Gazproms products.
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Prudent acquisitions Gazprom follows an aggressive acquisition strategy. Gazprom Neft acquired a 54.71 % interest in Sibir Energy in 2009. Sibir Energy engages in exploration, production, refining and sales of hydrocarbons and refined products. Its production assets are located in the Khanty-Mansiisk autonomous region. It also owns a 38.63 % interest in the Moscow Oil Refinery and controls a network of 134 gasoline stations in the Moscow region. Gazprom Neft also acquired a controlling shareholding in a diversified oil company NIS (Serbia). It acquired an oils and lubricant plant from Chevron Global Energy in the city of Bari (Italy) with a capacity of 30,000 tons of oils and 6,000 tons of lubricants per year. Further in 2009, Gazprom Neft acquired a 20% shareholding in Russian National Oil Consortium, established to implement oil production projects in Latin America by five large Russian oil companies with equal shareholdings. In September 2009, Gazprom acquired a 51% stake in SeverEnergia worth approximately $1.6 billion from the consortium of Italian companies, ENI and Enel. SeverEnergiya controls a number of companies that hold licenses for the development and production of hydrocarbons in Western Siberia. In December 2009, Gazprom Energoholding acquired a 23.09% shareholding in TGK-1 increasing its stake to 51.787%. OAO TGK-1 is the leading electric and thermal power producer and supplier in the North-Western region of Russia and the third largest territorial generating company in Russia in terms of its installed capacity. Such prudent acquisitions significantly strengthen the companys product portfolio and would drive the top line growth in the coming years. In addition, they will diversify the companys geographical presence by expanding its international operations. Growth through alliances and joint ventures Growth through joint ventures and alliances acquisitions and alliances has long been a strategy of Gazprom. In March 2009, Gazprom and Siirtec Nigi (an Italian company dealing with the adoption of proper and attracted technologies for sulfur recovery, acid gas removal and ecological purification) signed an engineering and construction contract for a gas treatment unit (GTU). The unit is to be installed at the Portovaya compressor station (CS) of the Nord Stream gas trunkline. In the same month, the company and MFB (Hungarian Development Bank) signed a basic cooperation agreement for the construction of a gas pipeline and transit of natural gas across Hungary within the South Stream project. Gazprom and Royal Dutch Shell signed LNG and natural gas supply contracts in April 2009. The agreements included the purchase of liquid natural gas (LNG) by both Shell Eastern Trading and Gazprom Global LNG from Sakhalin Energy Investment Company. In May 2009, Gazprom and Verbundnetz Gas signed an agreement to set up a consortium as part of the joint venture creation project for dealing with natural gas storage, particularly, for constructing a gas storage near Bernburg (Katharina UGS facility). In June 2009, Gazprom and StatoilHydro signed a MoU to jointly engage in geological exploration, development and production of hydrocarbon resources in northern regions. In the same month, Gazprom and Kogas signed an agreement to jointly explore a gas supply project. Subsequently, Gazprom and the Nigerian National Petroleum Corporation signed an agreement on setting up a joint venture to execute large-scale projects in hydrocarbon exploration, production and transportation, construction and engineering of an associated gas gathering and processing system and building of power generation facilities in Nigeria.
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Further in January 2010, Gazprom, PGNiG, and EuRoPol GAZ signed a long-term agreement of cooperation in gas sector. The agreement included extending the contract for natural gas supply from the Russian Federation to Poland until 2037 as well as potentially increasing natural gas supplies to Poland starting 2010 up to 11 bcm per year depending on the Polish market demand. Further in June 2010, Gazprom and Siemens signed a MoU on cooperation in the field of liquefied natural gas (LNG). In the same month, Gazprom and Sovcomflot signed a cooperation agreement on marine transportation of the Shtokman field LNG. The company's joint ventures and alliances would allow it to further strengthen its existing business as well as help Gazprom to gain a strong foothold in new sectors and markets.
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Threats
Regulation The Russian Federation controls 50.002% of Gazproms shares. The government through its representatives on the companys board exercises control over its cash flows, financial plan, and the investment program. In accordance with the Federal Law On Natural Monopolies the Gazproms gas transportation via pipelines is regulated as natural monopoly operations. The Russian Government regulates wholesale prices for gas which Gazprom applies to the major portion of domestic sales, tariffs for trunk pipeline transportation services provided to independent producers, tariffs for transportation services via gas distribution networks, and charges for procurement and sale services, as well as retail prices for gas. In addition, despite the current liberalization, the state is still regulating part of tariffs at electricity market. Therefore, regulation by the government could pose the risk of unfavorable pricing policies resulting in loss for the company. Additionally, the governments control over the company could come in the way of the companys growth plans with the consumers interest being the primary concern of the government. Therefore, extensive regulation could affect the growth plans, operational results and financial condition of the company.
Weather sensitivity Gazprom produces a significant portion of its gas in Western Siberia, where a severe climate complicates production and increases the cost of natural gas. The fields in Western Siberia that are being developed by Gazprom are located at a large distance from its sales regions. This has resulted in higher gas transportation costs for the company. Furthermore, the development of fields on the Yamal Peninsula and the continental shelf of Russia are being carried out in even more severe climate conditions. This could result in an increase in the actual costs than expected. Gas retrieval and Gazprom's revenues denominated in foreign currency can be considerably influenced by weather conditions both within a short-term period (within one year) and in the long-term outlook. Fluctuations in crude oil and natural gas prices Gazprom's operations could be affected by changes in crude oil and natural gas prices. Crude oil prices continue to be affected by political developments worldwide, pricing decisions and production quotas of OPEC, and volatile trading patterns in the commodity futures markets. Natural gas prices also continue to be highly volatile. In periods of sharply lower commodity prices, Gazprom could curtail production and capital spending projects, as well as delay or defer drilling wells in certain areas because of lower cash flows. Decline in crude oil and natural gas prices and the corresponding declining demand could affect Gazprom's level of production and lead to decline in overall topline growth for the company.
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Recent developments
An agreement was signed between Gazprom and the Leningrad Oblast Government for 2009, in February 2009. Pursuant to the agreement the parties would continue comprehensive development of the Leningrad Oblast gas supply system with due regard of the Nord Stream gas trunkline project. In the same month, Gazprom and Thales Alenia Space (European leader in satellite systems and a major player in orbital infrastructures), signed the contract for manufacturing and delivering two Yamal-400 new generation communications satellites. In the following month, Gazprom and Siirtec Nigi (an Italian company dealing with the adoption of proper and attracted technologies for sulfur recovery, acid gas removal, and ecological purification) signed an engineering and construction contract for a gas treatment unit (GTU). The unit would be installed at the Portovaya compressor station (CS) of the Nord Stream gas trunkline. In the same month, Gazprom and MFB (Hungarian Development Bank) signed a basic cooperation agreement for the construction of a gas pipeline and transit of natural gas across Hungary within the South Stream project. Gazprom and Royal Dutch Shell signed LNG and natural gas supply contracts in April 2009. The agreements included the purchase of liquid natural gas (LNG) by both Shell Eastern Trading and Gazprom Global LNG from Sakhalin Energy Investment Company. In May 2009, Gazprom and Bulgarian Energy Holding signed a cooperation agreement with regard to a gas pipeline for natural gas transit through the territory of Bulgaria as part of the South Stream project. In the same month, DESFA (operator, developer, and exploiter of the national gas transportation system in Greece) and Gazprom signed a basic cooperation agreement on implementation of the South Stream project on the territory of Greece. Further in May 2009, Gazprom and Srbijagas, signed a basic cooperation agreement on implementation of the South Stream project on the territory of Serbia. Further in May 2009, Enel and Eni agreed to sell a 51% stake in Russian company SeverEnegia to Gazprom for about $1.5 billion. In the same month, Gazprom and Verbundnetz Gas signed an agreement to set up a consortium as part of the joint venture creation project for dealing with natural gas storage, particularly, for constructing a gas storage near Bernburg (Katharina UGS facility). In June 2009, Gazprom and E.ON Ruhrgas signed an asset exchange agreement in the area of gas production and trade, transferring 49% of Gerosgaz to Gazprom. Through this agreement, Gerosgazs 2.93% ownership stake in Gazprom got transferred fully from E.ON Ruhrgas to Gazprom. In return, E.ON would receive 25% of the charter capital of Severneftegazprom by the end of the year. Subsequently, Gazprom and StatoilHydro signed a MoU to jointly engage in geological exploration, development and production of hydrocarbon resources in northern regions. In the same month, Gazprom and Kogas signed an agreement to jointly explore a gas supply project. The agreement was signed as an extension to the Intergovernmental Agreement of Cooperation in the gas sector and the MoU on natural gas supplies from Russia to Korea between Gazprom and Kogas. Further in June 2009, the company launched the drilling of first exploration in the eastern area of the Talda coalbed methane (CBM) field, Kemerovo Oblast. Subsequently, Gazprom and the Nigerian National Petroleum Corporation signed an agreement on setting up a joint venture on a parity basis. The joint venture would execute large-scale projects in
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hydrocarbon exploration, production and transportation, construction and engineering of an associated gas gathering and processing system and building of power generation facilities in Nigeria. In July 2009, the company launched drilling of the first production gas well in the Nizhne-Kvakchinskoye gas condensate field (GCF) located near the settlement of Sobolevo on the western coast of the Kamchatka Peninsula. The drilling operations were a part of the Gas Supply to the Kamchatka Oblast, Phase 1 Gas Supply to Petropavlovsk-Kamchatsky project. Subsequently, Gazprom commenced exploration drilling in the Kirinskoye field offshore the Sakhalin Island. In the same year, Gazprom launched the construction of Sakhalin Khabarovsk Vladivostok gas transmission system. The Dzuarikau Tskhinval gas pipeline was commissioned in August 2009. Gazprom completed the second string of Minsk Vilnius Kaunas Kaliningrad gas pipeline in September 2009. The project was part of Gazproms Action Plan aimed at supplying the Kaliningrad Oblast with 2.5 billion cubic meters of natural gas by 2010, in compliance with the Russian Federation Government orders. Subsequently, TGC-1, in which Gazprom owned a strategic shareholding, commissioned a new turbine unit with the capacity of 50 MW (100 Gcal/hr) at the Vasileostrovskaya combined heat and power plant (CHPP). In the same year, Gazprom completed the acquisition of a 51% stake in SeverEnergia worth approximately $1.6 billion. Further in September 2009, Gazprom signed a memorandum of cooperation to support execution of the Russian Energy Strategy until 2030 in the Urals Federal Okrug. Subsequently, Gazprom and Yamal-Nenets Autonomous Okrug (YaNAO) signed an agreement of cooperation for 2010. The YaNAO Administration would assist Gazprom and its subsidiaries in the geological investigation of subsurface resources, exploration and production of hydrocarbons, survey and construction activities in the Okrug, and facilitation of the land allocation procedure by the local authorities. Gazprom and its subsidiaries would secure reliable supplies of natural gas and hydrocarbon feedstock products to the regional consumers. Further in September 2009, Gazprom launched the construction of Dzhubga Lazarevskoye Sochi gas pipeline and the Adler Combined Heat and Power Station (CHPS) in Russia. In the beginning of October 2009, Gazprom and DONG Energy signed a contract for the supply of additional Russian gas volumes to Denmark through the Nord Stream pipeline. According to the contract, DONG Energy starting from 2012 would additionally receive 1 billion cubic meters of gas per annum within a period of 18 years via the second string of the offshore gas pipeline. Subsequently, Gazprom and the State Oil Company of Azerbaijan Republic (SOCAR) signed a natural gas purchase and sale contract. Pursuant to the long-term contract, Gazprom would initially purchase 500 million cubic meters with a subsequent increase according to the Azerbaijani partys export potential. In the same month, Gazprom and Murmansk Oblast Government signed a six-year agreement of cooperation promoting the bilateral relations within Gazproms strategic projects in the Murmansk Oblast including, the Shtokman gas condensate field (GCF) comprehensive development project, construction of an offshore gas pipeline and gas processing facilities.
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Further in October 2009, Gazprom and state-owned Srbijagas signed an agreement to set up a joint engineering company (JEC), South Stream Serbia (Gazprom - 51% and Srbijagas 4%), to deal with engineering, construction and operation of the South Stream gas pipeline in Serbia. Subsequently, the company commissioned the Kasimovskoye UGS Voskresensk CS gas trunkline in the Voskresensk District, Moscow Oblast. In the same month, Gazprom and GDF SUEZ signed an agreement of cooperation in personnel training, covering the training and probation programs for their employees in Russia and France. Later in October 2009, Gazprom launched its first stand-alone project on gas production from the Achimov deposits. The company brought comprehensive gas treatment unit No.22 (CGTU-22) into pilot operation to develop the Achimov deposits in the Urengoy oil and gas condensate field. Towards the end of October 2009, Gazprom and E.ON closed the asset swap deal. During the same period, Gazprom and PGNiG settled the Russian-Polish cooperation issues in the gas sector. The parties agreed to increase the volumes of Russian gas supply to Poland and to extend the existing supply contract until 2037. In addition, they resolved the issues relevant to EuRoPol GAZ management and its tariff policy when transmitting Russian hydrocarbons. In November 2009, Gazprom and Srbijagas created South Stream Serbia joint venture to implement the South Stream project in Serbia. Gazprom and Samara Oblast Government signed an agreement of cooperation in December 2009. The agreement covered cooperation between the parties in the region for securing stable gas supplies to consumers, gasifying population centers, developing capacities to utilize natural gas as a motor fuel, designing and adopting gas-saving technologies, promoting sci-tech cooperation in the area of gas-pumping equipment design and production at local enterprises, and providing environmental security. Subsequently, Gazprom and Vologda Oblast signed an agreement of cooperation confirming their mutual interest in performing Gazproms strategic projects in the region. They include construction of the Northern Tyumen Regions Torzhok (SRTO Torzhok), the Gryazovets Vyborg, the Pochinki Gryazovets gas pipelines and the Ukhta Torzhok gas trunkline system. In the same month, Gazprom and Eni signed a MoU allowing EDF accession to the South Stream project. Subsequently, Gazprom and Petrovietnam signed an agreement of strategic partnership to continue joint activities in the blocks of Vietnams continental shelf as part of the previously signed oil and gas contracts and explore the possible ways of cooperation with Vietnam in free licensed blocks. Further in December 2009, Gazprom brought onstream an inter-settlement gas pipeline from the Osinovka gas distribution station (GDS) to the settlement of Gidrostroitel, Bratsk. Subsequently, Gazprom and Saint Petersburg signed an agreement of cooperation to cooperate in the following fields: comprehensive development of the Saint Petersburg gas distribution system, construction and reconstruction of heat supply systems in the Kurortny, Petrodvortsovy and Petrogradsky districts of the city, as well as execution of the gas supply program for Saint Petersburg over 2007 to 2015 with a potential extension till 2025. In the same month, Gazprom resolved to transfer the rights to use the subsurface resources of the Novoportovskoye oil, gas and condensate field and the Eastern block of the Orenburg oil, gas and condensate field to Gazprom Neft.
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Towards the end of December 2009, Gazprom and Uztransgaz entered into a gas purchase and sale agreement for 2010. Gazproms portfolio would additionally receive 15.5 billion cubic meters of Uzbek gas in 2010. In January 2010, Gazprom launched regular operation of Obskaya Bovanenkovo railroad on Yamal. The railroad would allow transportation of up to 3 million tons of cargoes per annum, including materials required to develop the Bovanenkovo and other fields on Yamal, as well as to construct and operate the Bovanenkovo Ukhta gas trunkline system. Subsequently, Gazprom established a new department to coordinate the execution of South Stream project. In the same month, the company began the construction of the Portovaya compressor station (CS), a part of the Gryazovets Vyborg gas trunkline. Subsequently, Gazprom and Leningrad Oblast Government signed an agreement of cooperation for the development of the Leningrad Oblast gas supply system and execution of the Gryazovets Vyborg gas pipeline project in the region. Further in January 2010, Gazprom, PGNiG and EuRoPol GAZ signed a long-term agreement of cooperation in gas sector. The agreement included extending the contract for natural gas supply from the Russian Federation to Poland until 2037 as well as potentially increasing natural gas supplies to Poland starting 2010 up to 11 billion cubic meters per year depending on the Polish market demand. Subsequently, Gazprom and the Russian Technologies State Corporation signed an agreement to coordinate the development, production and supply of modern high-tech import-substituting equipment and other products by the Russian Technologies Group of companies for Gazprom. In the same month, Gazprom and MFB created South Stream Hungary Zrt joint venture company to implement the South Stream project in Hungary. Gazprom launched Russias first facility for CBM production in the Taldinskoye field in February 2010. In the same month, Gazprom and SAP signed a corporate license agreement aimed at optimizing the total ownership cost of SAP software solutions and ensure flexibility in fulfilling the key initiatives of the Gazprom Informatization Strategy. In March 2010, Gazprom and GDF SUEZ signed a memorandum on additional supplies of Russian natural gas and on the entry of GDF SUEZ into the Nord Stream project. Under the agreement, up to 1.5 billion cubic meters of additional gas per year would be supplied to GDF SUEZ from 2015 via the Nord Stream. Subsequently, Gazprom and Governor of the Perm Krai signed an agreement of cooperation to arrange steady gas supply to consumers, gasifying population centers, and develop and improve the sustainable gas supply system, among other objectives. In the same month, Gazprom and ONGC signed an addendum to MoU to cooperate within the integrated LNG project based on the Yamal Peninsula fields located in the Russian Federation.
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Further in March 2010, Gazprom commenced drilling of the first prospecting well (Rhourde Sayah-2) in Africa within the El Assel license area of Algerias Berkine basin, in compliance with its obligations under the contract with the Algerian National Agency for the Valorization of Hydrocarbon Resources (ALNAFT). Subsequently, Nord Stream together with its shareholders in the consortium, Gazprom, BASF/Wintershall, E.ON Ruhrgas and Nederlandse Gasunie announced the successful signing of Phase I financing of the pipeline project. The E3.9 billion financing for Phase I totaled would pave the way for construction of the first line of Nord Stream. In the same month, Gazprom began the construction of the offshore section of the Dzhubga Lazarevskoye Sochi gas pipeline in the Black Sea near the city of Tuapse. In April 2010, Gazprom and Transbaikal Krai Government signed an accord to jointly develop and implement the Transbaikal Krai gasification program. Subsequently, the company began the construction of Nord Stream gas pipeline in the Baltic Sea. In the same month, Gazprom signed addenda to contract on gas supply to Ukraine, increasing the annual contract volume of gas in 2010 to 36.5 billion cubic meters. Further in April 2010, Gazprom and OMV signed a framework agreement of cooperation under the South Stream project on the territory of the Republic of Austria. Gazprom and OMV would set up on a parity basis a JEC for design, financing, construction and operation of Austrias section of South Stream with a minimum annual capacity of 5-10 billion cubic meters. In June 2010, Gazprom and the Orel Oblast Government signed an agreement to initiate a set of actions in the region to increase the number of utility service, agricultural, and other motor vehicles powered by natural gas. Subsequently, Gazprom and the company DESFA (Hellenic Gas Transmission System Operator) signed a charter of the joint venture company South Stream Greece, established on parity basis by both the companies for the implementation of the Greek section of the South Stream project. In the same month, Gazprom and Tyumen Oblast signed a cooperation agreement to ensure uninterruptedly gas supply to consumers, gasifying population centers, and executing a program for the use of gas as a transport fuel, amongst others. Further in June 2010, Gazprom and Siemens signed a MoU on cooperation in the field of liquefied natural gas (LNG). In the same month, Gazprom and Sovcomflot signed a cooperation agreement on marine transportation of the Shtokman field LNG. Subsequently in June 2010, Gazprom and Statoil signed an agreement on scientific and technical cooperation. The companies would cooperate in such areas as geological exploration and development of hydrocarbon fields, hydrocarbons production and treatment before transportation, technologies and equipment for the hydrocarbons transportation, environmental protection of the Northern seas and territories, Health, Safety and Environment issues under northern conditions, energy saving, renewable energy sources, gas processing; project management and corporate governance. In the same month, Gazprom and Novatek signed a cooperation agreement for LNG production on Yamal Peninsula. This was followed by another agreement with Foundation Project Delta Group for cooperation in the energy sector, including gas production, transportation, and underground storage and processing.
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Further in June 2010, Gazprom and Gasunie signed a MoU on strategic cooperation in the areas of gas transmission infrastructure, underground gas storage, and construction of the Nord Stream gas pipeline to ensure reliable and efficient delivery of necessary volumes of gas to European consumers. Subsequently, Gazprom and GDF SUEZ signed a MoU to cooperate in energy saving and energy efficiency areas. Subsequently, GDF SUEZ joined Nord Stream project. In the same month, Gazprom, Eni and EDF signed a MoU on South Stream project facilitating EDFs entry into the project through a reduction in Enis stake in the joint venture. Further in June 2010, Gazprom and Yaroslavl Oblast Government signed a partnership agreement for 201014. Both the parties would continue the comprehensive development of the Yaroslavl Oblast, and would partner in the regional gasification according to the annually approved schedules, as well as to promote the use of natural gas as a transportation fuel. The company opened a representative office in Latvia in July 2010. Subsequently, Gazprom approved the development plan for Yakutian Chayanda field. The field would serve as the basis for shaping the Yakutia gas production center within the Eastern Gas Program. In the same month, Gazprom brought onstream first stage of gas lateral to Khunzakh settlement in Dagestan Republic. The gas pipeline would gasify 62 population centers in the Khunzakh and Gumbet Districts of the Republic. Further in July 2010, Gazprom komplektatsiya, a subsidiary of Gazprom, signed an agreement of intent to purchase 10 Sukhoi Superjets from Sukhoi Civil Aircraft Company between 2012 and 2015.
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FINANCIAL ANALYSIS Exxon Mobil Corporation
Table 9: Exxon Mobil Corporation: financial and operational highlights, 200509 ($m)
Parameters Income Statement Total Revenue Cost of Goods and Services Gross Profit Operating Expense Operating Income Net Income Balance Sheet Total Current Assets Total Assets Total Current Liabilities Total Liabilities Total Shareholders Equity Cash Flow Cash from Operating Activities Cash from Investing Activities Cash from Financing Activities Closing Cash Balance Key Statistics Total Common Shares Outstanding Year-end Share Price Market Capitalization Enterprise Value Number of Employees Free Cash Flow Key Ratios P/E Ratio Earnings per Share (EPS) EV/EBITDA EV/Sales Profitability Ratios Gross Margin Operating Margin Net Income Margin Resource Management Return on Equity Return on Capital Employed
Currency
Unit
2009
2008
2007
2006
2005
$ $ $ $ $ $
Million Million Million Million Million Million
301,500.0 (187,854.0) 113,646.0 (87,407.0) 35,325.0 19,280.0
459,579.0 (288,810.0) 170,769.0 (104,479.0) 84,070.0 45,220.0
390,328.0 (232,852.0) 157,476.0 (99,821.0) 71,879.0 40,610.0
365,467.0 (213,255.0) 152,212.0 (95,273.0) 69,107.0 39,500.0
358,955.0 (213,002.0) 145,953.0 (96,951.0) 60,727.0 36,130.0
$ $ $ $ $
Million Million Million Million Million
55,235.0 233,323.0 52,061.0 122,754.0 110,569.0
72,266.0 228,052.0 49,100.0 115,087.0 112,965.0
85,963.0 242,082.0 58,312.0 120,320.0 121,762.0
75,777.0 219,015.0 48,817.0 105,171.0 113,844.0
73,342.0 208,335.0 46,307.0 97,149.0 111,186.0
$ $ $ $
Million Million Million Million
28,438.0 (22,419.0) (27,283.0) 10,693.0
59,725.0 (15,499.0) (44,027.0) 31,437.0
52,002.0 (9,728.0) (38,345.0) 33,981.0
49,286.0 (14,230.0) (36,210.0) 28,244.0
48,138.0 (10,270.0) (26,941.0) 28,671.0
NA $ $ $ NA $
Million Absolute Million Million Absolute Million
4,727.0 68.2 322,334.1 326,069.1 80,700.0 5,947.0
4,976.0 79.8 397,234.1 379,780.1 79,900.0 40,407.0
5,382.0 93.7 504,239.6 484,106.6 80,800.0 36,615.0
5,729.0 76.6 439,013.3 422,920.3 82,100.0 33,824.0
6,133.0 56.2 344,490.6 327,337.6 83,700.0 34,299.0
NA $ NA NA
Absolute Absolute Absolute Absolute
16.7 4.1 6.9 1.1
8.8 9.1 3.9 0.8
12.4 7.5 5.8 1.2
11.1 6.9 5.3 1.2
9.5 5.9 4.6 0.9
NA NA NA
% % %
37.7% 11.7% 6.5%
37.2% 18.3% 10.2%
40.3% 18.4% 10.7%
41.6% 18.9% 11.1%
40.7% 16.9% 10.3%
NA NA
% %
17.3% 19.5%
38.5% 47.0%
34.5% 39.1%
35.1% 40.6%
32.5% 37.5%
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Return on Assets Financial Strength Quick Ratio Interest Coverage Ratio Debt to Equity Ratio Operational Efficiency Asset Turnover Ratio Receivable Turnover Ratio Inventory Turnover Ratio Revenue per Employee Net income per Employee Other Capex to Revenues Capex Revenue by Segment Upstream Downstream Chemical Corporate and financing Revenues by Geography The US Canada Japan The UK Belgium Germany France
NA
8.4%
19.2%
17.6%
18.5%
17.3%
NA NA NA
Absolute Absolute Absolute
0.8 64.5 0.1
1.2 124.9 0.1
1.3 179.7 0.1
1.3 105.7 0.1
1.4 122.4 0.1
NA NA NA $ $
Absolute Absolute Absolute Absolute Absolute
1.3 14.7 16.2
2.0 18.6 25.4
1.7 14.0 21.4 4,830,792.1 502,599.0
1.7 14.9 21.3 4,451,486.0 481,120.6
1.7 15.0 22.9 4,288,590.2 431,660.7
3,736,059.5 5,751,927.4 238,909.5 565,957.4
NA $
% Million
7.5% 22491
4.2% 19318
3.9% 15387
4.2% 15462
3.9% 13839
$ $ $ $
24,761.0 249,871.0 26,847.0 21.0
39,113.0 382,060.0 38,388.0 18.0
28,656.0 324,816.0 36,826.0 30.0
32,875.0 298,457.0 34,098.0 37.0
30,054.0 297,680.0 31,186.0 35.0
$ $ $ $ $ $ $
Million Million Million Million Million Million Million
89,847.0 21,151.0 22,054.0 20,293.0 16,857.0 14,839.0 12,042.0
137,615.0 33,677.0 30,126.0 29,764.0 25,399.0 20,591.0 18,530.0
121,144.0 27,284.0 26,146.0 25,113.0 20,550.0 17,445.0 14,287.0
112,787.0 25,281.0 27,368.0 24,646.0 16,271.0 19,458.0 13,537.0
110,553.0 28,842.0 28,963.0 24,805.0 11,281.0 21,653.0 14,412.0
Source: Datamonitor, company reports NA Not Applicable.
DATAMONITOR
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Financial Analysis
Table 10: Exxon Mobil Corporation: key industry-specific ratios, 2005-09
Financial Ratios Current Ratio Quick Ratio Net Working Capital Ratio Return on Asset Return on Equity Net Income Margin Operating Margin (Return on Sales) Asset Turnover Ratio Inventory Turnover Ratio Receivable Turnover Ratio Debt to Equity Ratio Interest Coverage Ratio Dividend Per Share Earning Per Share Market to Book Ratio Price Earning Ratio Return on Capital Employed Long Term Debt Ratio Total Debt Ratio Dividend Yield Dividend Payout Enterprise Value / EBIT Enterprise Value / EBITDA CAPEX to Revenues
2009 1.06 0.84 0.01 8.4% 17.3% 6.5% 11.7% 1.31 16.20 14.75 0.09 64.46 1.70 4.08 2.92 16.72 19.5% 0.04 0.05 0.02 0.42 9.23 6.90 7.5%
2008 1.47 1.23 0.10 19.2% 38.5% 10.2% 18.3% 1.96 25.41 18.58 0.08 124.92 1.62 9.09 3.52 8.78 47.0% 0.04 0.05 0.02 0.18 4.52 3.94 4.2%
2007 1.47 1.28 0.11 17.6% 34.5% 10.7% 18.4% 1.69 21.36 13.98 0.08 179.70 1.42 7.55 4.14 12.42 39.1% 0.04 0.05 0.02 0.19 6.74 5.75 3.9%
2006 1.55 1.33 0.12 18.5% 35.1% 11.1% 18.9% 1.71 21.29 14.94 0.07 105.67 1.33 6.89 3.86 11.11 40.6% 0.04 0.05 0.02 0.19 6.12 5.25 4.2%
2005 1.58 1.38 0.13 17.3% 32.5% 10.3% 16.9% 1.72 22.85 15.05 0.07 122.43 1.17 5.89 3.10 9.53 37.5% 0.04 0.05 0.02 0.20 5.39 4.61 3.9%
Source: Datamonitor, company reports
DATAMONITOR
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Financial Analysis
Table 11: Royal Dutch Shell: financial and operational highlights, 200509 ($m)
Parameters Income Statement Total Revenue Cost of Goods and Services Gross Profit Operating Expense Operating Income Net Income Balance Sheet Total Current Assets Total Assets Total Current Liabilities Total Liabilities Total Shareholders Equity Cash Flow Cash from Operating Activities Cash from Investing Activities Cash from Financing Activities Closing Cash Balance Key Statistics Total Common Shares Outstanding Year-end Share Price Market Capitalization Enterprise Value Number of Employees Free Cash Flow Key Ratios P/E Ratio Earnings per Share (EPS) EV/EBITDA EV/Sales Profitability Ratios Gross Margin Operating Margin Net Income Margin Resource Management Return on Equity Return on Capital Employed Return on Assets Financial Strength
Currency
Unit
2009
2008
2007
2006
2005
$ $ $ $ $ $
278,188.0 (228,376.0) 49,812.0 (35,191.0) 21,178.0 12,518.0
458,361.0 (385,152.0) 73,209.0 (33,787.0) 50,989.0 26,277.0
355,782.0 (285,474.0) 70,308.0 (32,618.0) 50,459.0 31,331.0
318,845.0 (262,104.0) 56,741.0 (19,063.0) 44,780.0 25,442.0
306,731.0 (252,034.0) 54,697.0 (17,356.0) 44,772.0 25,618.0
$ $ $ $ $
96,457.0 292,181.0 84,789.0 155,750.0 136,431.0
116,570.0 282,401.0 105,529.0 155,116.0 127,285.0
115,397.0 269,470.0 94,384.0 145,510.0 123,960.0
91,885.0 235,276.0 76,748.0 129,550.0 105,726.0
97,892.0 219,516.0 84,964.0 128,592.0 90,924.0
$ $ $ $
21,488.0 (26,234.0) (829.0) 9,719.0
43,918.0 (28,915.0) (9,394.0) 15,188.0
34,461.0 (14,570.0) (19,393.0) 9,656.0
31,696.0 (20,861.0) (13,741.0) 9,002.0
30,113.0 (8,761.0) (18,573.0) 11,730.0
NA $ $ $ NA $
6,122.3 60.1 368,011.1 395,029.1 101,000.0 (5,028.0)
6,121.7 52.9 324,082.8 333,744.8 102,000.0 8,853.0
6,210.3 84.2 522,907.3 533,358.3 104,000.0 9,885.0
6,308.7 70.8 446,592.9 462,582.9 108,000.0 8,600.0
6,525.0 61.5 401,222.3 409,408.3 109,000.0 14,197.0
NA $ NA NA
29.4 2.0 11.1 1.4
12.3 4.3 5.2 0.7
16.7 5.0 8.4 1.5
17.6 4.0 8.1 1.5
15.7 3.9 7.2 1.3
NA NA NA
% % %
17.9% 7.6% 4.6%
16.0% 11.1% 5.8%
19.8% 14.2% 9.0%
17.8% 14.0% 8.3%
17.8% 14.6% 8.7%
NA NA NA
% % %
9.5% 10.2% 4.4%
20.9% 28.8% 9.5%
27.3% 28.8% 12.4%
25.9% 28.2% 11.2%
28.2% 33.3% 11.7%
03/2011
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Quick Ratio Interest Coverage Ratio Debt to Equity Ratio Operational Efficiency Asset Turnover Ratio Receivable Turnover Ratio Inventory Turnover Ratio Revenue per Employee Net income per Employee Other Capex to Revenues Capex Revenue by Segment Exploration and production Gas and power Oil sands Oil products Chemicals Corporate Upstream Revenues by Geography Europe The US Other Americas Rest of the world Africa, Asia, Australia/Oceania
NA NA NA
0.8 39.1 0.3
0.9 43.2 0.2
0.9 45.5 0.1
0.9 39.0 0.1
0.9 41.9 0.1
NA NA NA $ $
1.0 3.9 9.8
1.7 5.9 15.2
1.4 6.8 10.4 3,420,980.8 301,259.6
1.4 10.5 12.2 2,952,268.5 235,574.1
1.4 10.3 12.7 2,814,045.9 235,027.5
2,754,336.6 4,493,735.3 123,940.6 257,617.6
NA $
% Million
9.5% 26516
7.7% 35065
6.9% 24576
7.2% 23096
5.2% 15916
$ $ $ $ $ $ $
88.0 27,996.0
39.0 45,975.0
57.0 32,014.0
16,750.0 16,035.0 1,159.0 248,581.0 36,306.0 14.0 -
23,970.0 13,766.0 237,210.0 31,018.0 767.0 -
$ $ $ $ $
103,424.0 60,721.0 33,645.0 80,398.0
184,809.0 100,818.0 51,845.0 120,889.0
138,089.0 87,548.0 40,004.0 90,141.0
136,307.0 80,974.0 24,666.0 76,898.0 -
122,684.0 101,308.0 21,351.0 61,388.0 -
DATAMONITOR
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Financial Analysis
Table 12: Royal Dutch Shell: key industry-specific ratios, 2005-09
2009 1.14 0.81 0.04 4.4% 9.5% 4.6% 7.6% 0.97 9.77 3.94 0.26 39.07 1.72 2.04 2.70 29.40 10.2% 0.15 0.17 0.03 0.84 18.65 11.09 9.5%
2008 1.10 0.92 0.04 9.5% 20.9% 5.8% 11.1% 1.66 15.15 5.87 0.18 43.17 1.55 4.29 2.55 12.33 28.8% 0.08 0.13 0.03 0.36 6.55 5.16 7.7%
2007 1.22 0.89 0.08 12.4% 27.3% 9.0% 14.2% 1.41 10.43 6.76 0.15 45.54 1.45 5.05 4.22 16.69 28.8% 0.07 0.10 0.02 0.29 10.57 8.38 6.9%
2006 1.20 0.89 0.06 11.2% 25.9% 8.3% 14.0% 1.40 12.19 10.49 0.15 38.97 1.29 4.03 4.22 17.55 28.2% 0.06 0.10 0.02 0.32 10.33 8.06 7.2%
2005 1.15 0.92 0.06 11.7% 28.2% 8.7% 14.6% 1.40 12.74 10.29 0.14 41.92 1.62 3.93 4.41 15.66 33.3% 0.06 0.10 0.03 0.41 9.14 7.21 5.2%
Source: Datamonitor, Company reports
DATAMONITOR
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Financial Analysis
BP Plc
Table 13: BP: financial and operational highlights, 200509 ($m)
Parameters Income Statement Total Revenue Cost of Goods and Services Gross Profit Operating Expense Operating Income Net Income Balance Sheet Total Current Assets Total Assets Total Current Liabilities Total Liabilities Total Shareholders Equity Cash Flow Cash from Operating Activities Cash from Investing Activities Cash from Financing Activities Net Change in Cash Key Statistics Total Common Shares Outstanding Year-end Share Price Market Capitalization Enterprise Value Number of Employees Free Cash Flow Key Ratios P/E Ratio EPS EV/EBITDA EV/Sales Profitability Ratios Gross Margin Operating Margin Net Profit Margin/(loss) Resource Management Return on Equity Return on Investments
Currency
Unit
2009
2008
2007
2006
2005
$ $ $ $ $ $
239,272.0 (186,974.0) 52,298.0 (31,012.0) 27,360.0 16,578.0
361,143.0 (293,738.0) 67,405.0 (36,232.0) 36,347.0 21,157.0
284,365.0 (224,991.0) 59,374.0 (32,409.0) 33,284.0 20,845.0
265,906.0 (210,476.0) 55,430.0 (28,241.0) 34,898.0 22,315.0
239,792.0 (184,618.0) 55,174.0 (26,171.0) 34,084.0 22,026.0
$ $ $ $ $
67,653.0 235,968.0 59,320.0 134,355.0 101,613.0
66,384.0 228,238.0 69,793.0 136,935.0 91,303.0
80,202.0 236,076.0 77,231.0 142,386.0 93,690.0
75,339.0 217,601.0 75,352.0 132,977.0 84,624.0
75,290.0 206,914.0 71,997.0 127,253.0 79,661.0
$ $ $ $
27,716.0 (18,133.0) (9,551.0) 8,339.0
38,095.0 (22,767.0) (10,509.0) 8,197.0
24,709.0 (14,837.0) (9,035.0) 3,562.0
28,172.0 (9,518.0) (19,071.0) 2,590.0
26,721.0 (1,729.0) (23,303.0) 2,960.0
NA $ $ $ NA $
18,760 9.6 179,258.6 206,046.6 80,300 7,407.0
18,730 7.6 142,649.2 168,462.2 92,000 7,395.0
18,923 12.3 232,436.1 260,881.1 98,100 4,068.0
19,510 11.1 216,937.7 239,198.7 97,000 10,941.0
20,657 10.7 221,261.2 238,252.2 96,200 12,572.0
NA $ NA NA
10.81 0.9 5.22 0.86
6.74 1.1 3.56 0.47
11.15 1.1 5.95 0.92
9.72 1.1 5.43 0.90
10.05 1.1 5.56 0.99
NA NA NA
% % %
21.9% 11.4% 7.0%
18.7% 10.1% 6.0%
20.9% 11.7% 7.4%
20.8% 13.1% 8.5%
23.0% 14.2% 9.3%
NA NA
% %
17.2% 15.5%
22.9% 22.9%
23.4% 21.0%
27.2% 24.5%
27.6% 25.3%
03/2011
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Financial Analysis
Return on Assets Financial Strength Quick Ratio Interest Coverage Ratio Debt to Equity Ratio Operational Efficiency Asset Turnover Receivable Turnover Inventory Turnover Revenue per Employee Net income per Employee Other Capex to Revenues Capex Revenues by Segment Exploration and production Refining and marketing Other businesses and corporate Gas, power and renewables Innovene operations Revenues by Geography UK Rest of Europe US Rest of world Non US
NA
7.1%
9.1%
9.2%
10.5%
10.6%
NA NA NA
0.76 24.65 0.34
0.71 23.50 0.36
0.69 23.89 0.33
0.75 48.60 0.28
0.77 44.79 0.24
NA NA NA $ $
1.03 10.52 9.48
1.56 12.93 13.54
1.25 8.69 9.90 2,898,725.8 212,487.3
1.25 8.05 10.88 2,741,299.0 230,051.5
1.16 7.14 9.34 2,492,640.3 228,960.5
2,979,726.0 3,925,467.4 206,450.8 229,967.4
NA $
% Million
8.5% 20,309.0
8.5% 30,700.0
7.3% 20,641.0
6.5% 17,231.0
5.9% 14,149.0
$ $ $ $ $
25,086.0 212,229.0 1,957.0 -
40,239.0 318,121.0 2,783.0 -
33,657.0 248,307.0 2,401.0 -
16,429.0 228,779.0 1,009.0 19,689.0 -
14,604.0 201,919.0 13,044.0 22,601.0 (12,376.0)
$ $ $ $ $
83,982.0 155,290.0
81,773.0 82,031.0 123,364.0 73,975.0 -
61,149.0 66,342.0 102,319.0 54,555.0 -
54,576.0 61,947.0 94,903.0 54,480.0 -
49,085.0 54,652.0 93,011.0 43,044.0 -
Source: Datamonitor, Company reports
DATAMONITOR
03/2011
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Financial Analysis
Table 14: BP: key industry-specific ratios, 200509
2009 1.14 0.76 0.04 7.1% 17.2% 7.0% 11.4% 1.03 9.48 10.52 0.34 24.65 0.56 0.88 1.76 10.81 15.5% 0.14 0.20 0.06 0.63 7.53 5.22 8.5%
2008 0.95 0.71 -0.01 9.1% 22.9% 6.0% 10.1% 1.56 13.54 12.93 0.36 23.50 0.55 1.13 1.56 6.74 22.9% 0.11 0.21 0.07 0.49 4.63 3.56 8.5%
2007 1.04 0.69 0.01 9.2% 23.4% 7.4% 11.7% 1.25 9.90 8.69 0.33 23.89 0.43 1.10 2.48 11.15 21.0% 0.10 0.20 0.03 0.39 7.84 5.95 7.3%
2006 1.00 0.75 0.00 10.5% 27.2% 8.5% 13.1% 1.25 10.88 8.05 0.28 48.60 0.39 1.14 2.56 9.72 24.5% 0.08 0.17 0.04 0.34 6.85 5.43 6.5%
2005 1.05 0.77 0.02 10.6% 27.6% 9.3% 14.2% 1.16 9.34 7.14 0.24 44.79 0.36 1.07 2.78 10.05 25.3% 0.08 0.14 0.03 0.33 6.99 5.56 5.9%
DATAMONITOR
03/2011
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Financial Analysis
Table 15: China Petroleum & Chemical Corporation (Sinopec): financial and operational highlights, 200509 ($m)
Parameters Income Statement Total Revenue Cost of Goods and Services Gross Profit Operating Expense Operating Income Net Income Balance Sheet Total Current Assets Total Assets Total Current Liabilities Total Liabilities Total Shareholders Equity Cash Flow Cash from Operating Activities Cash from Investing Activities Cash from Financing Activities Closing Cash Balance Key Statistics Total Common Shares Outstanding Year-end Share Price Market Capitalization Enterprise Value Number of Employees Free Cash Flow Key Ratios P/E Ratio Earnings per Share (EPS) EV/EBITDA EV/Sales Profitability Ratios Gross Margin Operating Margin Net Income Margin Resource Management Return on Equity Return on Capital Employed
Currency
Unit
2009
2008
2007
2006
2005
$ $ $ $ $ $
192,926.3 (146,757.2) 46,169.1 (38,062.4) 12,378.4 9,054.6
207,189.7 (189,774.3) 17,415.4 (25,568.2) 3,861.1 4,182.1
172,100.9 (143,976.0) 28,124.9 (20,790.5) 12,588.5 8,288.3
151,724.9 (126,409.9) 25,315.0 (18,187.1) 11,821.5 7,858.7
117,179.4 (96,412.5) 20,766.9 (15,662.2) 10,005.5 6,077.7
$ $ $ $ $
29,509.7 128,700.4 45,950.4 73,624.8 55,075.7
24,249.0 114,234.4 42,026.6 66,162.6 48,071.8
27,139.9 107,424.8 38,903.7 62,352.1 45,072.8
21,476.9 89,554.1 31,722.3 50,800.1 38,754.0
21,560.0 80,494.8 25,658.4 47,610.0 32,884.8
$ $ $ $
22,295.7 (17,012.5) (5,027.8) 1,282.8
9,752.1 (16,132.2) 6,277.8 1,027.4
17,533.7 (16,653.0) (778.5) 1,128.3
13,562.5 (15,157.3) 421.9 1,035.5
11,467.0 (11,365.6) (711.2) 2,062.7
NA $ $ $ NA $
86,702.4 2.1 179,104.3 205,811.9 371,333.0 6,166.7
86,702.4 1.0 89,234.3 115,538.4 358,304.0 (6,118.5)
86,702.4 3.4 297,829.1 319,148.7 334,377.0 1,511.8
86,702.4 1.3 115,928.4 135,477.9 340,886.0 1,261.4
86,702.4 0.7 59,235.3 78,203.7 364,528.0 2,128.0
NA $ NA NA
19.8 0.1 10.4 1.1
21.3 0.0 10.8 0.6
35.9 0.1 16.9 1.9
14.8 0.1 8.1 0.9
9.7 0.1 5.3 0.7
NA NA NA
% % %
23.9% 6.4% 4.9%
8.4% 1.9% 1.8%
16.3% 7.3% 5.0%
16.7% 7.8% 5.3%
17.7% 8.5% 5.6%
NA NA
% %
17.6% 15.0%
9.0% 5.3%
19.8% 18.4%
21.9% 20.4%
18.5% 18.2%
03/2011
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Financial Analysis
Return on Assets Financial Strength Quick Ratio Interest Coverage Ratio Debt to Equity Ratio Operational Efficiency Asset Turnover Ratio Receivable Turnover Ratio Inventory Turnover Ratio Revenue per Employee Net income per Employee Other Capex to Revenues Capex Revenue by Segment Exploration and production Refining Marketing and distribution Chemicals Corporate and others Operating Income by Segment Exploration and production Refining Marketing and distribution Chemicals Corporate and others
NA
7.5%
3.8%
8.4%
9.2%
7.6%
NA NA NA
% % %
0.2 11.4 0.4
0.2 2.2 0.5
0.3 11.7 0.4
0.2 11.4 0.4
0.3 11.5 0.5
NA NA NA $ $
1.6 66.5 8.4 519,550.6 24,384.1
1.9 78.6 12.2 578,251.1 11,671.8
1.7 61.6 9.3 514,691.3 24,787.3
1.8 69.5 9.4 445,089.9 23,053.9
1.5 54.6 7.3 321,455.0 16,672.8
NA $
% Million
8.4% 16,129.0
7.7% 15,870.5
9.3% 16,021.8
8.1% 12,301.0
8.0% 9,338.9
$ $ $ $ $
2,835.7 14,044.1 114,123.7 28,256.9 33,665.9
3,870.9 19,383.2 117,701.0 32,213.6 34,021.0
2,996.3 17,190.9 96,696.9 31,880.6 23,336.2
2,922.8 16,819.8 86,209.9 28,739.1 17,033.3
2,933.1 12,140.8 67,336.8 23,572.4 11,196.3
$ $ $ $ $
2,880.0 3,383.3 4,442.3 1,996.1 (323.3)
9,759.7 (9,329.5) 5,647.3 (1,898.6) (317.7)
7,149.6 (1,532.4) 5,237.9 1,950.8 (217.4)
9,263.1 (3,769.3) 4,432.6 2,119.7 (224.6)
7,086.2 (518.4) 1,517.4 2,095.9 (175.6)
DATAMONITOR
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Financial Analysis
Table 16: China Petroleum & Chemical Corporation (Sinopec): key industry-specific ratios, 200509
2009 0.64 0.19 -0.13 7.5% 17.6% 4.9% 6.4% 1.59 8.43 66.49 0.45 11.44 0.02 0.10 3.25 19.78 15.0% 0.19 0.30 0.01 0.22 16.63 10.40 8.4%
2008 0.58 0.24 -0.16 3.8% 9.0% 1.8% 1.9% 1.87 12.21 78.65 0.51 2.21 0.02 0.05 1.86 21.34 5.3% 0.18 0.34 0.02 0.44 29.92 10.85 7.7%
2007 0.70 0.26 -0.11 8.4% 19.8% 5.0% 7.3% 1.75 9.31 61.63 0.42 11.74 0.02 0.10 6.61 35.93 18.4% 0.18 0.27 0.01 0.25 25.35 16.85 9.3%
2006 0.68 0.24 -0.11 9.2% 21.9% 5.3% 7.8% 1.78 9.35 69.48 0.45 11.36 0.02 0.09 2.99 14.75 20.4% 0.16 0.30 0.01 0.21 11.46 8.09 8.1%
2005 0.84 0.33 -0.05 7.6% 18.5% 5.6% 8.5% 1.46 7.35 54.57 0.50 11.52 0.02 0.07 1.80 9.75 18.2% 0.19 0.30 0.03 0.25 7.82 5.34 8.0%
DATAMONITOR
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Financial Analysis
TOTAL S.A.
Table 17: TOTAL S.A.: financial and operational highlights, 200509 ($m)
Currency
Unit
2009
2008
2007
2006
2005
$ $ $ $ $ $
183,152.6 (100,073.1) 83,079.5 (61,987.1) 21,092.4 11,780.4
250,999.9 (155,902.9) 95,097.0 (62,062.4) 33,034.6 14,769.1
221,400.3 (123,681.4) 97,718.9 (62,433.4) 35,285.5 18,382.6
214,496.9 (116,310.7) 98,186.1 (64,533.7) 33,652.4 16,412.0
191,910.9 (97,688.3) 94,222.6 (60,515.8) 33,706.8 17,116.3
$ $ $ $ $
69,392.6 178,168.2 47,986.4 104,877.6 73,290.6
65,628.5 164,998.7 47,873.5 96,673.0 68,325.7
67,274.2 158,347.7 49,735.3 95,787.4 62,560.3
59,672.0 146,747.2 46,750.8 90,514.3 56,232.9
61,019.2 148,031.6 46,619.7 91,346.9 56,684.7
$ $ $ $
17,237.6 (14,320.1) (3,999.8) 16,264.2
26,036.3 (15,417.6) (1,105.9) 17,183.2
24,665.4 (14,177.8) (4,660.9) 8,351.0
22,399.2 (13,352.2) (10,330.0) 3,476.8
20,457.8 (14,095.5) (7,065.2) 6,022.0
NA $ $ $ NA $
2,348.4 62.8 147,399.5 169,373.3 96,387.0 (1,379.3)
2,371.8 54.3 128,706.3 146,208.9 96,959.0 7,013.6
2,395.5 79.3 189,862.3 209,865.4 96,442.0 8,317.6
2,425.8 76.2 184,883.6 210,497.4 95,070.0 5,870.0
615.1 72.8 44,806.0 64,655.8 112,877.0 4,844.9
NA $ NA NA
12.5 5.0 5.5 0.9
8.7 6.2 3.5 0.6
10.3 7.7 4.8 0.9
11.3 6.8 5.1 1.0
2.6 27.8 1.5 0.3
NA NA NA
% % %
45.4% 11.5% 6.6%
37.9% 13.2% 6.1%
44.1% 15.9% 8.5%
45.8% 15.7% 7.9%
49.1% 17.6% 9.2%
NA NA NA
% % %
16.6% 16.2% 6.9%
22.6% 28.2% 9.1%
30.9% 32.5% 12.1%
29.1% 33.7% 11.1%
30.2% 33.2% 11.6%
03/2011
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Financial Analysis
Quick Ratio Interest Coverage Ratio Debt to Equity Ratio Operational Efficiency Asset Turnover Ratio Receivable Turnover Ratio Inventory Turnover Ratio Revenue per Employee Net income per Employee Other Capex to Revenues Capex Revenue by Segment Upstream Downstream Chemicals Corporate Operating Income by Segment Upstream Downstream Chemicals Corporate Revenues by Geography France Rest of Europe North America Africa Asia Pacific and rest of world Rest of world
NA NA NA
1.0 28.5 0.5
1.1 23.7 0.5
1.0 14.2 0.4
0.9 13.9 0.5
0.9 19.9 0.4
NA NA NA $ $
1.1 8.5 6.1
1.6 10.5 9.5
1.5 8.7 6.9 2,295,683.4 190,608.0
1.5 8.3 6.8 2,256,199.5 172,630.8
1.3 7.0 5.5 1,700,176.7 151,636.7
1,900,179.2 2,588,722.3 122,220.2 152,323.5
NA $
% Million
10.2% 18,616.9
7.6% 19,022.8
7.4% 16,347.9
7.7% 16,529.2
8.1% 15,612.9
$ $ $ $
22,414.5 140,185.4 20,537.3 15.3
33,828.1 189,005.8 28,101.8 64.2
27,482.6 166,256.6 27,620.6 40.4
28,983.2 158,830.2 26,655.6 27.9
29,131.0 139,371.0 23,381.0 27.9
$ $ $ $
17,932.2 3,119.8 771.2 (730.8)
32,729.2 1,152.0 (80.9) (765.7)
27,199.5 6,727.7 1,986.0 (627.6)
28,320.8 4,702.7 1,389.1 (760.1)
25,690.5 7,107.0 1,560.6 (651.3)
$ $ $ $ $ $
45,237.6 83,873.0 13,269.9 13,678.5 27,093.5
60,828.2 115,421.0 19,527.6 17,407.8 37,815.4
52,924.8 102,863.7 17,299.0 14,505.5 33,807.2
51,447.9 99,007.6 18,173.4 14,066.2 31,801.7 -
47,922.3 74,929.3 24,633.3 11,581.0 32,844.9 -
DATAMONITOR
03/2011
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Financial Analysis
Table 18: TOTAL S.A.: key industry-specific ratios, 200509
2009 1.45 1.04 0.12 6.9% 16.6% 6.6% 11.5% 1.07 6.11 8.47 0.50 28.54 3.02 5.02 2.01 12.51 16.2% 0.21 0.28 0.05 0.60 8.03 5.46 10.2%
2008 1.37 1.09 0.11 9.1% 22.6% 6.1% 13.2% 1.55 9.53 10.46 0.49 23.69 2.91 6.23 1.88 8.71 28.2% 0.19 0.28 0.05 0.47 4.43 3.51 7.6%
2007 1.35 0.96 0.11 12.1% 30.9% 8.5% 15.9% 1.45 6.93 8.69 0.43 14.19 2.63 7.67 3.03 10.33 32.5% 0.19 0.25 0.03 0.34 5.95 4.82 7.4%
2006 1.28 0.93 0.09 11.1% 29.1% 7.9% 15.7% 1.46 6.83 8.31 0.50 13.94 2.30 6.77 3.29 11.27 33.7% 0.20 0.28 0.03 0.34 6.26 5.08 7.7%
2005 1.31 0.93 0.10 11.6% 30.2% 9.2% 17.6% 1.30 5.52 7.02 0.44 19.91 7.96 27.83 0.79 2.62 33.2% 0.19 0.24 0.11 0.29 1.92 1.53 8.1%
DATAMONITOR
03/2011
Page 175
Financial Analysis
Chevron Corporation
Table 19: Chevron Corporation: financial and operational highlights, 200509 ($m)
Currency
Unit
2009
2008
2007
2006
2005
$ $ $ $ $ $
167,402.0 (100,995.0) 66,407.0 (52,085.0) 18,556.0 10,483.0
264,958.0 (172,566.0) 92,392.0 (57,382.0) 43,057.0 23,931.0
214,091.0 (134,632.0) 79,459.0 (53,832.0) 32,440.0 18,688.0
204,892.0 (129,515.0) 75,377.0 (48,106.0) 32,497.0 17,138.0
193,641.0 (128,711.0) 64,930.0 (43,714.0) 25,775.0 14,099.0
$ $ $ $ $
37,216.0 164,621.0 26,211.0 72,707.0 91,914.0
36,722.0 161,165.0 32,023.0 74,517.0 86,648.0
39,377.0 148,786.0 33,798.0 71,698.0 77,088.0
36,304.0 132,628.0 28,409.0 63,693.0 68,935.0
34,336.0 125,833.0 25,011.0 63,157.0 62,676.0
$ $ $ $
19,373.0 (16,572.0) (3,546.0) 8,716.0
29,632.0 (17,081.0) (10,400.0) 9,347.0
24,977.0 (13,933.0) (14,295.0) 7,362.0
24,323.0 (12,219.0) (11,848.0) 10,493.0
20,105.0 (11,561.0) (7,668.0) 10,043.0
NA $ $ $ NA $
2,007.7 77.0 154,574.5 156,718.5 64,000.0 (470.0)
2,004.2 74.0 148,253.0 147,935.0 67,000.0 9,966.0
2,090.4 93.3 195,100.2 194,768.2 65,000.0 8,299.0
2,164.6 73.5 159,160.0 158,440.0 62,500.0 10,510.0
2,232.7 56.8 126,749.6 129,452.6 59,000.0 11,404.0
NA $ NA NA
14.7 5.2 5.1 0.9
6.2 11.9 2.8 0.6
10.4 8.9 4.7 0.9
9.3 7.9 4.0 0.8
9.0 6.3 4.1 0.7
NA NA NA
% % %
39.7% 11.1% 6.3%
34.9% 16.3% 9.1%
37.1% 15.2% 8.8%
36.8% 15.9% 8.4%
33.5% 13.3% 7.3%
NA NA NA
% % %
11.7% 13.4% 6.4%
29.2% 33.3% 15.4%
25.6% 28.2% 13.3%
26.0% 31.2% 13.3%
22.5% 25.6% 11.2%
03/2011
Page 176
Financial Analysis
Quick Ratio Interest Coverage Ratio Debt to Equity Ratio Operational Efficiency Asset Turnover Ratio Receivable Turnover Ratio Inventory Turnover Ratio Revenue per Employee Net income per Employee Other Capex to Revenues Capex Revenue by Segment Upstream Downstream Chemicals All other Intersegment sales Revenues by Geography The US International Intersegment revenues
NA NA NA
1.2 662.7 0.1
0.9 NA 0.1
1.0 195.4 0.1
1.1 72.1 0.1
1.2 53.5 0.2
NA NA NA $ $
1.0 10.0 16.3
1.7 13.8 28.4
1.5 10.7 27.0 3,293,707.7 287,507.7
1.6 11.8 29.5 3,278,272.0 274,208.0
1.5 11.3 31.2 3,282,050.8 238,966.1
2,615,656.3 3,954,597.0 163,796.9 357,179.1
NA $
% Million
11.9% 19,843.0
7.4% 19,666.0
7.8% 16,678.0
6.7% 13,813.0
4.5% 8,701.0
$ $ $ $ $
51,328.0 142,854.0 1,893.0 1,701.0 (30,374.0)
82,318.0 219,938.0 2,170.0 1,817.0 (41,285.0)
65,221.0 178,274.0 1,959.0 1,606.0 (32,969.0)
59,829.0 170,748.0 1,799.0 1,304.0 (28,788.0)
48,537.0 166,198.0 1,489.0 1,181.0 (23,764.0)
$ $ $
Million Million Million
84,145.0 113,631.0 (30,374.0)
133,658.0 172,585.0 (41,285.0)
108,482.0 138,578.0 (32,969.0)
104,713.0 128,967.0 (28,788.0)
105,167.0 112,238.0 (23,764.0)
DATAMONITOR
03/2011
Page 177
Financial Analysis
Table 20: Chevron Corporation: key industry-specific ratios, 200509
2009 1.42 1.21 0.07 6.4% 11.7% 6.3% 11.1% 1.03 16.31 9.98 0.11 662.71 2.64 5.22 1.68 14.75 13.4% 0.07 0.07 0.03 0.51 8.45 5.11 11.9%
2008 1.15 0.93 0.03 15.4% 29.2% 9.1% 16.3% 1.71 28.37 13.84 0.10 NA 2.58 11.94 1.71 6.20 33.3% 0.04 0.07 0.03 0.22 3.44 2.81 7.4%
2007 1.17 1.01 0.04 13.3% 25.6% 8.8% 15.2% 1.52 27.02 10.68 0.09 195.42 2.29 8.94 2.53 10.44 28.2% 0.05 0.06 0.02 0.26 6.00 4.73 7.8%
2006 1.28 1.11 0.06 13.3% 26.0% 8.4% 15.9% 1.59 29.51 11.77 0.14 72.06 2.03 7.92 2.31 9.29 31.2% 0.07 0.09 0.03 0.26 4.88 3.96 6.7%
2005 1.37 1.21 0.07 11.2% 22.5% 7.3% 13.3% 1.54 31.23 11.27 0.20 53.48 1.69 6.31 2.02 8.99 25.6% 0.12 0.12 0.03 0.27 5.02 4.09 4.5%
DATAMONITOR
03/2011
Page 178
Financial Analysis
Table 21: PetroChina Company Limited: financial and operational highlights, 200509 ($m)
Currency
Unit
2009
2008
2007
2006
2005
$ $ $ $ $ $
149,435.9 (75,045.3) 74,390.6 (53,360.3) 21,030.3 15,157.6
157,254.5 (85,727.3) 71,527.2 (49,946.4) 23,394.7 16,780.0
122,617.7 (57,203.6) 65,414.2 (35,979.1) 29,435.0 21,515.0
101,011.1 (42,508.8) 58,502.2 (29,477.0) 29,025.3 20,851.5
80,962.3 (31,651.2) 49,311.1 (21,136.9) 28,174.2 19,552.2
$ $ $ $ $
43,159.5 212,626.7 56,965.8 88,415.4 124,211.4
32,979.3 175,380.0 38,947.1 59,424.7 115,955.3
34,533.8 156,532.6 29,207.9 48,304.5 108,228.1
23,783.4 127,867.8 26,372.1 41,855.1 86,012.7
25,788.0 114,072.4 22,554.2 38,511.2 75,561.2
$ $ $ $
38,407.7 (38,331.6) 7,781.6 12,744.1
25,285.1 (31,051.6) 553.7 4,860.1
30,090.7 (27,194.1) (239.0) 10,065.1
29,043.7 (23,230.5) (10,517.7) 7,119.2
29,891.6 (13,426.0) (6,250.6) 11,861.5
NA $ $ $ NA $
183,021.0 2.0 370,828.0 401,304.5 539,200.0 646.6
183,021.0 1.5 272,888.6 294,924.4 477,780.0 (6,325.5)
183,021.0 4.5 830,740.6 837,465.0 466,502.0 3,350.9
183,021.0 0 0.0 7,880.6 446,290.0 7,236.1
183,021.0 0 0.0 3,024.9 439,220.0 11,594.5
NA $ NA NA
24.5 0.1 11.6 2.7
16.3 0.1 7.9 1.9
38.6 0.1 21.3 6.8
0.0 0.1 0.2 0.1
0.0 0.1 0.1 0.0
NA NA NA
% % %
49.8% 14.1% 10.5%
45.5% 14.9% 11.8%
53.3% 24.0% 18.6%
57.9% 28.7% 21.7%
60.9% 34.8% 25.3%
NA NA NA
% % %
12.6% 13.5% 7.8%
15.0% 17.1% 10.1%
22.2% 23.1% 15.1%
25.8% 28.6% 17.2%
25.9% 30.8% 17.1%
03/2011
Page 179
Financial Analysis
Quick Ratio Interest Coverage Ratio Debt to Equity Ratio Operational Efficiency Asset Turnover Ratio Receivable Turnover Ratio Inventory Turnover Ratio Revenue per Employee Net income per Employee Other Capex to Revenues Capex Revenue by Segment Exploration and production Refining and marketing Chemicals and marketing Natural gas and pipeline Other Marketing Refining and chemicals Operating Income by Segment Exploration and production Refining and marketing Chemicals and marketing Natural gas and pipeline Other Marketing Refining and chemicals Revenues by Geography China Other
NA NA NA
0.5 27.2 0.3
0.5 52.4 0.2
0.7 55.7 0.1
0.5 61.5 0.1
0.7 69.6 0.1
NA NA NA $ $
0.8 44.7 5.0 277,143.7 28,111.2
0.9 60.6 6.5 329,135.7 35,120.7
0.9 61.8 4.7 262,845.0 46,119.9
0.8 105.0 4.2 226,335.0 46,721.8
0.7 119.3 3.4 184,332.0 44,515.7
NA $
% Million
25.3% 37,761.2
20.1% 31,610.6
21.8% 26,739.8
21.6% 21,807.7
22.6% 18,297.1
$ $ $ $ $ $ $
14,173.8 0.0 0.0 10,101.7 163.0 107,436.7 17,560.7
18,450.1 0.0 0.0 8,299.4 182.8 106,231.3 24,090.8
13,640.6 89,003.7 13,445.5 6,371.1 156.9 0.0 0.0
11,981.1 73,084.1 10,967.6 4,882.1 96.2 0.0 0.0
9,715.1 57,980.6 10,148.9 3,117.7 0.0 0.0 0.0
$ $ $ $ $ $ $
15,396.8 0.0 0.0 2,792.3 (1,641.2) 1,944.8 2,537.5
35,255.3 0.0 0.0 2,354.1 (1,628.5) 1,170.2 (13,756.4)
30,422.0 (3,031.9) 1,148.1 1,831.9 (935.1) 0.0 0.0
32,233.7 (4,275.7) 741.6 1,317.4 (991.7) 0.0 0.0
30,506.6 (2,904.3) 480.3 466.7 (375.0) 0.0 0.0
$ $
Million Million
115,931.6 33,504.3
120,909.7 36,344.8
118,418.7 4,199.1
97,534.8 3,476.3
77,926.1 3,036.1
DATAMONITOR
03/2011
Page 180
Financial Analysis
Table 22: PetroChina Company Limited: key industry-specific ratios, 200509
2009 0.76 0.46 -0.06 7.8% 12.6% 10.5% 14.1% 0.77 4.98 44.71 0.28 27.21 0.04 0.08 2.99 24.46 13.5% 0.08 0.22 0.02 0.48 19.08 11.61 25.3%
2008 0.85 0.51 -0.03 10.1% 15.0% 11.8% 14.9% 0.95 6.53 60.64 0.16 52.42 0.04 0.09 2.35 16.26 17.1% 0.04 0.14 0.03 0.46 12.61 7.91 20.1%
2007 1.18 0.74 0.03 15.1% 22.2% 18.6% 24.0% 0.86 4.74 61.83 0.10 55.71 0.05 0.12 7.68 38.61 23.1% 0.05 0.08 0.01 0.44 28.45 21.31 21.8%
2006 0.90 0.48 -0.02 17.2% 25.8% 21.7% 28.7% 0.84 4.18 105.04 0.12 61.48 0.05 0.11 0.00 0.00 28.6% 0.05 0.10 NA 0.48 0.27 0.21 21.6%
2005 1.14 0.74 0.03 17.1% 25.9% 25.3% 34.8% 0.71 3.44 119.27 0.14 69.58 0.04 0.11 0.00 0.00 30.8% 0.07 0.12 NA 0.40 0.11 0.08 22.6%
DATAMONITOR
03/2011
Page 181
Financial Analysis
ConocoPhillips
Table 23: ConocoPhillips: financial and operational highlights, 200509 ($m)
Currency
Unit
2009
2008
2007
2006
2005
$ $ $ $ $ $
149,341.0 (113,954.0) 35,387.0 (26,654.0) 12,005.0 4,858.0
240,842.0 (181,818.0) 59,024.0 (31,878.0) 32,241.0 (16,998.0)
187,437.0 (135,119.0) 52,318.0 (29,594.0) 29,440.0 11,891.0
183,650.0 (130,146.0) 53,504.0 (27,947.0) 30,265.0 15,550.0
179,442.0 (134,148.0) 45,294.0 (24,856.0) 24,360.0 13,529.0
$ $ $ $ $
23,519.0 152,588.0 23,695.0 90,121.0 62,467.0
22,816.0 142,865.0 21,780.0 87,700.0 55,165.0
26,606.0 177,757.0 26,882.0 88,774.0 88,983.0
25,066.0 164,781.0 26,431.0 82,135.0 82,646.0
19,612.0 106,999.0 21,359.0 54,268.0 52,731.0
$ $ $ $
12,479.0 (9,935.0) (2,855.0) 542.0
22,658.0 (17,616.0) (5,764.0) 755.0
24,550.0 (8,562.0) (15,340.0) 1,456.0
21,516.0 (29,993.0) 7,065.0 817.0
17,628.0 (11,016.0) (5,684.0) 2,214.0
NA $ $ $ NA $
1,525.0 51.1 77,881.7 106,582.7 30,000.0 1,618.0
1,520.9 51.8 78,783.6 106,583.6 33,800.0 3,559.0
1,613.8 88.3 142,502.2 163,906.2 32,600.0 12,759.0
1,690.4 72.0 121,627.2 149,146.2 38,400.0 5,920.0
1,377.8 58.2 80,163.3 91,674.3 35,600.0 6,008.0
NA $ NA NA
16.0 3.2 5.0 0.7
(4.6) (11.2) 2.6 0.4
12.0 7.4 4.3 0.9
7.8 9.2 4.0 0.8
5.9 9.8 3.2 0.5
NA NA NA
% % %
23.7% 8.0% 3.3%
24.5% 13.4% -7.0%
27.9% 15.7% 6.4%
29.1% 16.5% 8.5%
25.2% 13.6% 7.6%
NA NA NA
% % %
8.3% 9.3% 3.3%
-23.6% 26.6% -10.6%
13.9% 19.5% 6.9%
23.0% 21.9% 11.4%
25.7% 28.4% 12.6%
03/2011
Page 182
Financial Analysis
Quick Ratio Interest Coverage Ratio Debt to Equity Ratio Operational Efficiency Asset Turnover Ratio Receivable Turnover Ratio Inventory Turnover Ratio Revenue per Employee Net income per Employee Other Capex to Revenues Capex Revenue by Segment Exploration and Production Midstream Refining and Marketing LUKOIL Investment Chemicals Emerging Businesses Corporate and Other Revenues by Geography US Australia Canada Norway UK Other foreign countries
NA NA NA
0.8 9.3 0.5
0.8 34.5 0.5
0.8 23.5 0.2
0.8 27.8 0.3
0.7 49.0 0.2
NA NA NA $ $
1.0 11.8 22.7
1.5 17.0 39.0
1.1 12.3 28.8 5,749,601.2 364,754.6
1.4 14.1 29.3 4,782,552.1 404,947.9
1.7 15.0 36.0 5,040,505.6 380,028.1
4,978,033.3 7,125,503.0 161,933.3 (502,899.4)
NA $
% Million
7.3% 10,861.0
7.9% 19,099.0
6.3% 11,791.0
8.5% 15,596.0
6.5% 11,620.0
$ $ $ $ $ $ $
37,097.0 4,892.0 107,233.0 11.0 86.0 22.0
69,818.0 6,564.0 164,230.0 11.0 199.0 20.0
48,154.0 4,861.0 134,201.0 10.0 198.0 13.0
50,166.0 3,424.0 129,877.0 13.0 160.0 10.0
48,525.0 3,086.0 127,280.0 14.0 192.0 13.0
$ $ $ $ $ $
97,674.0 2,229.0 3,617.0 1,749.0 20,671.0 23,401.0
166,496.0 2,735.0 5,226.0 3,036.0 29,699.0 33,650.0
131,433.0 1,633.0 4,727.0 2,479.0 20,680.0 26,485.0
127,869.0 5,554.0 2,480.0 19,510.0 28,237.0
130,874.0 5,676.0 3,280.0 19,043.0 20,569.0
DATAMONITOR
03/2011
Page 183
Financial Analysis
Table 24: ConocoPhillips: key industry-specific ratios, 200509
2009 0.99 0.78 0.00 3.3% 8.3% 3.3% 8.0% 1.01 22.71 11.85 0.46 9.31 1.86 3.19 1.25 16.03 9.3% 0.21 0.22 0.04 0.58 8.88 5.00 7.3%
2008 1.05 0.81 0.01 -10.6% -23.6% -7.0% 13.4% 1.50 39.03 16.99 0.50 34.48 1.88 -11.18 1.43 -4.63 26.6% 0.22 0.23 0.04 -0.17 3.31 2.58 7.9%
2007 0.99 0.83 0.00 6.9% 13.9% 6.4% 15.7% 1.09 28.82 12.31 0.24 23.50 1.65 7.37 1.60 11.98 19.5% 0.13 0.14 0.02 0.22 5.57 4.34 6.3%
2006 0.95 0.75 -0.01 11.4% 23.0% 8.5% 16.5% 1.35 29.32 14.10 0.33 27.84 1.35 9.20 1.47 7.82 21.9% 0.17 0.20 0.02 0.15 4.93 3.97 8.5%
2005 0.92 0.74 -0.02 12.6% 25.7% 7.6% 13.6% 1.68 36.02 15.03 0.24 49.01 1.19 9.82 1.52 5.93 28.4% 0.13 0.15 0.02 0.12 3.76 3.20 6.5%
DATAMONITOR
03/2011
Page 184
Financial Analysis
Eni SpA
Table 25: Eni: financial and operational highlights, 200509 ($m)
Currency
Unit
2009
2008
2007
2006
2005
$ $ $ $ $ $
140,927.4 (81,378.1) 59,549.3 (44,372.9) 16,812.3 6,090.3
178,208.6 (106,480.0) 71,728.6 (46,919.5) 25,824.4 12,307.6
148,359.3 (81,074.0) 67,285.3 (42,313.1) 26,134.0 13,961.6
147,247.8 (80,177.3) 67,070.5 (41,208.5) 26,954.0 12,854.3
129,867.9 (67,733.0) 62,135.0 (39,780.4) 23,467.4 12,256.0
$ $ $ $ $
43,413.4 163,909.5 42,519.5 99,654.7 64,254.8
51,111.8 162,715.7 48,665.6 100,743.9 61,971.8
47,692.2 141,499.2 42,313.1 85,117.1 56,382.1
41,868.2 123,162.6 33,121.1 68,731.6 54,431.0
35,189.3 116,939.7 31,355.5 65,522.5 51,417.2
$ $ $ $
15,530.6 (14,300.5) (1,649.8) 2,242.6
30,404.3 (23,650.1) (7,008.0) 2,704.2
21,640.5 (28,027.9) 4,057.0 2,948.2
23,710.1 (9,833.5) (9,897.7) 5,557.6
20,830.2 (9,504.4) (10,911.6) 1,859.0
NA $ $ $ NA $
4,005.4 24.8 99,430.7 137,322.8 78,417.0 (3,568.9)
4,005.4 23.3 93,509.5 125,547.0 78,880.0 10,095.7
4,005.4 34.9 139,929.1 167,010.1 75,862.0 6,867.2
4,005.4 35.5 142,331.1 154,874.4 73,572.0 12,786.0
4,005.4 32.7 130,879.8 149,401.9 72,258.0 10,490.4
NA $ NA NA
16.3 1.5 4.7 1.0
7.6 3.1 3.3 0.7
10.0 3.5 4.6 1.1
11.1 3.2 4.4 1.1
10.7 3.1 4.8 1.2
NA NA NA
% % %
42.3% 11.9% 5.3%
40.2% 14.5% 7.5%
45.4% 17.6% 10.2%
45.5% 18.3% 9.3%
47.8% 18.1% 9.9%
NA NA NA
% % %
9.6% 13.8% 3.7%
20.8% 22.6% 8.1%
25.2% 26.3% 10.6%
24.3% 29.9% 10.7%
23.8% 27.4% 10.5%
03/2011
Page 185
Financial Analysis
Quick Ratio Interest Coverage Ratio Debt to Equity Ratio Operational Efficiency Asset Turnover Ratio Receivable Turnover Ratio Inventory Turnover Ratio Revenue per Employee Net income per Employee Other Capex to Revenues Capex Revenue by Segment Exploration and Production Gas and Power Refining and Marketing Petrochemicals Engineering and Construction Other activities Corporate and financial companies Operating Income by Segment Exploration and Production Gas and Power Refining and Marketing Petrochemicals Engineering and Construction Other activities Corporate and financial companies Revenues by Geography Italy Other European Union Rest of Europe Americas Asia Africa Other areas
NA NA NA
0.8 1.9 0.5
0.9 2.3 0.5
0.9 4.1 0.5
1.1 4.9 0.3
1.0 4.8 0.3
NA NA NA $ $
0.9 4.7 10.1
1.2 6.8 13.2
1.1 6.9 11.3 1,955,647.7 184,040.0
1.2 7.2 13.8 2,001,411.2 174,717.3
1.1 6.6 13.6 1,797,281.2 169,614.6
1,797,153.2 2,259,237.0 77,666.2 156,029.5
NA $
% Million
13.6% 19,099.5
11.4% 20,308.6
10.0% 14,773.3
7.4% 10,924.1
8.0% 10,339.8
$ $ $ $ $ $ $
14,184.8 41,576.7 42,960.2 5,529.7 11,643.8 89.3 178.5
19,699.1 50,470.3 60,695.7 8,235.3 11,097.1 217.6 214.8
14,838.9 37,705.2 48,913.9 9,164.1 10,454.1 242.7 298.5
12,172.3 38,515.5 51,475.8 8,585.3 8,657.9 422.6 255.2
10,836.3 31,235.5 45,520.7 7,770.9 6,705.4 442.1 312.4
$ $ $ $ $ $ $
12,719.0 5,142.0 (142.3) (941.4) 1,228.7 (532.7) (661.1)
22,647.4 5,620.4 (1,377.9) (1,178.5) 1,457.4 (482.5) (1,036.2)
18,734.1 6,227.0 956.7 139.5 1,167.3 (619.2) (435.1)
21,728.3 5,302.4 444.9 239.9 704.3 (867.5) (412.8)
17,561.2 4,631.6 2,589.8 281.7 428.2 (1,302.6) (525.8)
$ $ $ $ $ $ $
38,979.9 33,932.7 7,270.2 9,874.0 11,447.1 14,189.0 377.9
59,750.1 40,919.8 9,936.7 10,066.4 12,434.5 17,197.2 429.5
52,011.3 32,179.7 7,680.2 8,991.2 8,144.6 11,171.0 1,439.3
50,685.0 33,400.0 9,727.5 8,716.4 7,803.0 8,296.7 1,456.0
45,808.0 27,336.1 7,144.7 8,511.4 6,135.0 7,334.4 553.7
DATAMONITOR
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Financial Analysis
Table 26: Eni: key industry-specific ratios, 200509
2009 1.02 0.84 0.01 3.7% 9.6% 5.3% 11.9% 0.86 10.08 4.75 0.54 1.86 1.45 1.52 1.55 16.33 13.8% 0.21 0.28 0.06 0.95 8.17 4.73 13.6%
2008 1.05 0.88 0.02 8.1% 20.8% 7.5% 14.5% 1.17 13.19 6.76 0.47 2.26 1.71 3.07 1.51 7.60 22.6% 0.17 0.25 0.07 0.56 4.86 3.34 11.4%
2007 1.13 0.95 0.04 10.6% 25.2% 10.2% 17.6% 1.12 11.34 6.90 0.47 4.11 1.60 3.49 2.48 10.02 26.3% 0.16 0.27 0.05 0.46 6.39 4.65 10.0%
2006 1.26 1.06 0.07 10.7% 24.3% 9.3% 18.3% 1.23 13.83 7.20 0.28 4.87 1.61 3.21 2.61 11.07 29.9% 0.11 0.17 0.05 0.50 5.75 4.36 7.4%
2005 1.12 0.96 0.03 10.5% 23.8% 9.9% 18.1% 1.11 13.63 6.60 0.33 4.81 1.77 3.06 2.55 10.68 27.4% 0.12 0.20 0.05 0.58 6.37 4.80 8.0%
DATAMONITOR
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Financial Analysis
OAO Gazprom
Table 27: OAO Gazprom: financial and operational highlights, 200509 ($m)
Currency
Unit
2009
2008
2007
2006
2005
$ $ $ $ $ $
94,933.4 (39,325.0) 55,608.4 (28,673.3) 27,198.4 24,744.0
104,281.3 (36,295.8) 67,985.5 (28,117.4) 40,002.1 23,580.5
76,913.8 (16,924.3) 59,989.5 (37,715.1) 22,274.4 20,886.1
68,308.0 (13,105.9) 55,202.1 (30,185.1) 25,017.1 19,467.6
43,913.7 (5,905.0) 38,008.7 (23,599.3) 14,409.5 9,875.1
$ $ $ $ $
53,581.4 265,448.4 33,232.3 96,384.9 169,063.6
49,897.7 227,530.3 30,624.2 81,364.0 146,166.4
49,718.1 215,595.7 34,423.7 90,197.7 125,398.0
47,048.4 168,537.0 27,298.6 67,335.4 101,201.7
31,786.1 137,722.8 16,710.1 55,947.4 81,775.5
$ $ $ $
28,475.7 (31,521.3) (91.0) 7,927.4
32,265.3 (28,426.3) (2,186.7) 10,913.3
18,996.6 (28,319.7) 9,830.1 8,858.9
17,269.4 (16,258.8) 2,996.7 8,545.2
8,652.9 (20,739.2) 13,416.7 4,661.5
NA $ $ $ NA $
22,900.0 5.8 133,165.5 186,456.4 386,000.0 53,729.3
23,600.0 3.4 80,621.8 122,519.2 456,000.0 54,950.4
23,600.0 10.9 256,839.1 306,628.9 445,000.0 36,244.8
22,900.0 9.6 219,914.5 246,931.2 440,000.0 31,266.7
22,900.0 6.2 141,371.5 170,517.1 402,000.0 17,361.6
NA $ NA NA
5.4 1.1 5.4 2.0
3.4 1.0 2.7 1.2
12.3 0.9 10.9 4.0
11.3 0.9 8.1 3.6
14.3 0.4 9.3 3.9
NA NA NA
% % %
58.6% 28.6% 26.5%
65.2% 38.4% 23.5%
78.0% 29.0% 28.7%
80.8% 36.6% 29.6%
86.6% 32.8% 22.8%
NA NA NA
% % %
15.7% 11.7% 10.0%
17.4% 20.3% 10.6%
18.4% 12.3% 10.9%
21.3% 17.7% 12.7%
12.1% 11.9% 7.2%
03/2011
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Financial Analysis
Quick Ratio Interest Coverage Ratio Debt to Equity Ratio Operational Efficiency Asset Turnover Ratio Receivable Turnover Ratio Inventory Turnover Ratio Revenue per Employee Net income per Employee Other Capex to Revenues Capex Revenue by Segment Production of gas Transport Distribution Production of crude oil and gas condensate Refining Gas storage Electric and heat energy generation Operating Income by Segment Production of gas Transport Distribution Production of crude oil and gas condensate Refining Other Unallocated operating expenses Revenues by Geography Russian Federation
NA NA NA
1.3 1.9 0.3
1.3 3.7 0.3
1.2 9.1 0.4
1.5 18.0 0.3
1.6 12.5 0.4
NA NA NA $ $
0.4 5.5 4.4 245,941.5 64,103.7
0.5 6.1 4.4 228,687.1 51,711.7
0.4 4.3 2.4 172,840.0 46,935.1
0.4 5.0 2.2 155,245.5 44,244.5
0.3 4.4 1.1 109,238.1 24,564.9
NA $
% Million
26.6% 25,253.6
21.8% 22,685.0
22.4% 17,248.2
20.5% 13,997.4
19.8% 8,708.7
$ $ $ $ $ $ $
433.7 2,081.0 62,324.8 5,599.0 17,155.6 26.6 6,314.8
370.7 2,243.5 66,173.7 6,822.7 20,724.8 12.0 4,390.8
178.5 1,324.8 48,310.8 5,324.6 16,670.4 -
134.6 1,095.0 44,670.1 5,450.0 13,806.4 -
111.2 795.1 32,818.2 1,669.2 6,439.1 -
$ $ $ $ $ $ $
1,331.2 4,657.5 27,267.9 3,249.4 4,727.6 (1,025.5) (206.0)
638.6 4,647.7 11,934.3 2,807.3 2,885.6 496.2 (1,135.3)
665.8 4,680.2 13,745.0 3,452.3 1,736.7 846.3 (109.2)
439.3 1,823.5 10,169.0 1,268.2 896.1 512.8 (699.5)
36,754.7 13,878.3 55,232.7 (10,932.3) -
37,655.9 14,730.9 66,552.7 (14,658.2) -
28,770.5 10,905.8 46,976.8 (9,739.4) -
23,466.0 9,457.2 46,124.7 (10,739.9) -
14,355.3 4,780.0 30,004.8 (8,102.3) 795.1 2,080.8
Former Soviet Union (excluding Russian $ Federation) Europe and other countries Excise tax, Customs duties Gas transportation sales Other revenues $ $ $ $
DATAMONITOR
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Financial Analysis
Table 28: OAO Gazprom: key industry-specific ratios, 200509
2009 1.61 1.34 0.08 10.0% 15.7% 26.5% 28.6% 0.39 4.40 5.51 0.30 1.94 0.01 1.08 0.79 5.38 11.7% 0.16 0.22 0.00 0.01 6.86 5.45 -26.6%
2008 1.63 1.34 0.08 10.6% 17.4% 23.5% 38.4% 0.47 4.38 6.06 0.29 3.69 0.08 1.00 0.55 3.42 20.3% 0.15 0.22 0.02 0.08 3.06 2.65 -21.8%
2007 1.44 1.22 0.07 10.9% 18.4% 28.7% 29.0% 0.40 2.35 4.31 0.38 9.12 0.08 0.89 2.05 12.30 12.3% 0.17 0.26 0.01 0.09 13.77 10.91 -22.4%
2006 1.72 1.48 0.12 12.7% 21.3% 29.6% 36.6% 0.45 2.19 4.99 0.30 18.01 0.05 0.85 2.17 11.30 17.7% 0.15 0.22 0.00 0.06 9.87 8.14 -20.5%
2005 1.90 1.58 0.11 7.2% 12.1% 22.8% 32.8% 0.32 1.10 4.39 0.36 12.54 0.03 0.43 1.73 14.32 11.9% 0.19 0.24 0.01 0.08 11.83 9.28 -19.8%
DATAMONITOR
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Page 190
APPENDIX
APPENDIX Methodology
Datamonitor Industry Profiles draw on extensive primary and secondary research, all aggregated, analyzed, cross-checked and presented in a consistent and accessible style. Review of in-house databases created using 250,000+ industry interviews and consumer surveys and supported by analysis from industry experts using highly complex modeling & forecasting tools, Datamonitors inhouse databases provide the foundation for all related industry profiles. Preparatory research Datamonitor also maintains extensive in-house databases of news, analyst commentary, company profiles and macroeconomic & demographic information, which enable our researchers to build an accurate market overview. Definitions market definitions are standardized to allow comparison from country to country. The parameters of each definition are carefully reviewed at the start of the research process to ensure they match the requirements of both the market and our clients. Extensive secondary research activities ensure we are always fully up-to-date with the latest industry events and trends. Datamonitor aggregates and analyzes a number of secondary information sources, including: national/governmental statistics; international data (official international sources); national and international trade associations; broker and analyst reports; company annual reports; business information libraries and databases.
Modeling & forecasting tools Datamonitor has developed powerful tools that allow quantitative and qualitative data to be combined with related macroeconomic and demographic drivers to create market models and forecasts, which can then be refined according to specific competitive, regulatory and demand-related factors. Continuous quality control ensures that our processes and profiles remain focused, accurate and up-to-date.
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Global Top 10 Energy Companies

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Global Top 10 Energy Companies Report: Industry, Financial and SWOT Analysis

Reference Code: DBEN0784 Publication Date: March 2011

184 185 187 188 190

EXECUTIVE SUMMARY Industry analysis

MARKET VALUE Value

Figure 1: Global energy industry value, $bn, 200509

10,000 9,000 8,000

40% 30% 20%

10% % Growth 0% -10%

-30% -40% 2008 2009

MARKET SHARE Share

Figure 2: Global energy industry share: % share, by value, 2009

Exxon Mobil 5.0%

Royal Dutch Shell 4.6% BP 3.9%

Market Segmentation Product

MARKET SEGMENTATION PRODUCT Product

Figure 3: Global energy industry segmentation: product, % share, 2009

Energy Equipment and Services 4.2%

Oil, Gas and Consumable Fuels 95.8%

Market Segmentation Geography

MARKET SEGMENTATION GEOGRAPHY Geography

Figure 4: Global energy industry segmentation: geography, % share, 2009

Rest of the World 26.8%

Five Forces Analysis

FIVE FORCES ANALYSIS Summary

Figure 5: Forces driving competition in the global energy industry

Five Forces Analysis

Five Forces Analysis

Figure 6: Drivers of buyer power in the global energy industry

Five Forces Analysis

Five Forces Analysis

Figure 7: Drivers of supplier power in the global energy industry

Five Forces Analysis

Five Forces Analysis

Five Forces Analysis

Five Forces Analysis

Five Forces Analysis

Figure 10: Drivers of degree of rivalry in the global energy industry

Five Forces Analysis

Top 10 Companies Landscape

TOP 10 COMPANIES LANDSCAPE Companies Landscape

Top 10 Companies Landscape

Figure 11: Turnover of global top 10 energy companies, $m, FY2009

Top 10 Companies Landscape

Exxon Mobil Corporation

Royal Dutch Shell Plc

China Petroleum & Chemical Corporation (Sinopec)

Top 10 Companies Landscape

PetroChina Company Limited

Top 10 Companies Landscape

Table 6: Revenue growth of global top 10 energy companies, 200709

221,400.3 214,091.0 122,617.7 187,437.0 148,359.3 76,913.8

250,999.9 264,958.0 157,254.5 240,842.0 178,208.6 104,281.3

183,152.6 167,402.0 149,435.9 149,341.0 140,927.4 94,933.4

(9) (12) 10 (11) (3) 11

Top 10 Companies Landscape

Figure 12: Revenue growth of global top 10 energy companies, 200709

Financial performance analysis

Table 7: Key financials of global top 10 energy companies, FY2009

Top 10 Companies Landscape

Operating profit analysis

Figure 13: Operating profit analysis, FY2009

40 35 30 25 20 15 10 5 0 operating profit margin (%)