British Petroleum

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Contents
1.0 Introduction2
2.0 BP the company2
2.1 Political Factors Affecting BP Oil Production2
2.1.1Libya2
2.1.2 Egypt3
3.0 Economic Factors Affecting BP Oil Production4
3.1 UK VAT Increases4
3.2 Increasing Oil Prices4
3.3 Reduction in World Oil Consumption5
3.0 Environmental Factors Affecting BP Oil Production5
4.0 Conclusion6
5.0 Bibliography6

Brian Vanhinsbergh-Perez

Business andthe Environment

The External Environment

3 Most Significant PESTEL Factors Affecting BP

1.0 Introduction

This report will investigate the three most prominent external PESTEL factors which face BP (Beyond Petroleum). The report will provide a detailed look at how these factors affect the business, and explore the reasons behind them. Finally this report will make conclusions based on these findings.

2.0 BP the company

BP is one of the world's leading oil companies on the basis of market capitalisation and proven reserves. Its main businesses are Exploration and Production, Refining and Marketing, and Chemicals. Exploration and Production's activities include oil and natural gas exploration and field development and production, together with pipeline transportation, natural gas processing and gas and power marketing. The activities of Refining and Marketing include oil supply and trading as well as refining and marketing. Chemicals activities include petrochemicals manufacturing and marketing. In addition, the Company has a solar energy business which is one of the world's largest manufacturers of photovoltaic modules and systems. ‘Multinationals such as Shell and BP experience great complexity, operating across diverse political, legal and cultural systems’ Boddy (2008)

2.1 Political Factors Affecting BP Oil Production

2.1.1Libya

Political unrest in countries such as Libya and Egypt in addition to the unstable environment within the Middle East, have had significant influence on the price of oil. In 2007 BP invested over $900 in an agreement with Libya to drill over 21,000 square miles of land. Libya produces about 1.8 million barrels of oil a day, and exports more than 85% of its production. However due to recent events and the political unrest, the company has had to withdraw its employees from the region, who had been working on exploring and drilling new oil fields, bringing operations to a complete standstill.

On Feb. 21, oil rocketed to a two-year high of more than $105 a barrel in what has been described as a domino effect of protests and civil unrest seemingly swept from Tunisia, to Egypt and onto Libya. This is not the first time that protests have reflected on oil pricing, but it is likely the most significant to date. Approximately 58 per cent of Libya’s GDP stems from petroleum revenues.These countries are also subject to threats of terrorism and suicide bombers on a daily basis causing yet more instability and sensitivity in these regions.

2.1.2 Egypt

Since its peak in 1996 of 922,000 barrels/day, Egypt’s oil output has been in continuous decline by an alarming 26%. Further concern for the country is this decline is amplified each year as the rate of depletion in existing wells accelerates.

Egypt’s economy is like many middle-eastern economies dependent on oil exportation. This is because it relies on the revenue produced by oil exportation to import sufficient food supplies to feed its starving nation. But as Egypt's post-peak oil production plummets, so do food subsidies and food prices surge. Egypt are unable to find buyers for the currency it prints and double-digit inflation is the norm. As food prices increase worldwide, this increase in price is multiplied in food importing countries like Egypt with a weak currency..

BP has invested in Egypt for over 44 years and has contributed to almost half of the country’s Oil and Gas production, and is the country’s largest foreign investor. The unrest in Egypt in early 2011 is a significant concern to BP...
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