The report is prepared for demonstrating the responsibilities and roles of downward division of company. For this purpose, the company that has been selected is Chevron which is the leading integrated energy companies in the world. Chevron is actively engaged in selling and manufacturing of additives and petrochemicals, transporting and producing crude and natural gas and oil, deployment and development of technologies that helps in enhancing the value of business in every aspect of operations of company. The success of organization is driven by a diverse, dedicated and highly skilled global workforce that is united values, vision and strategies. Company carries out its operations in a responsible manner by capturing new high turn opportunities, application of advanced technologies and producing returns in a manner that is environmentally and socially responsible (Chevron.com 2018). The success of Chevron is evaluated by the application of PESTLE framework that gives a detailed review of three factors impacting the operations of company. The later of report presents the discussion of project that is chosen or run by its management that makes contribution to the local community.
Explaining the roles and responsibilities within the downstream division of Chevron:
The downstream division of Chevron is highly competitive that helps in contributing to growth of earnings by making targeted investment across the value chain and leading the industry in returns. Such downstream and chemical business of company comprise of global portfolio that is strategically placed to focus on leveraging areas of strength. Results in the downstream division are enhanced by the technical, commercial and operational expertise by the midstream division. The largest cost components of refined products in downstream business are crude oil which has the responsibility of delivering value to shareholders and competitive results in any business environment (Chevron.com 2018). Operations in downstream division consist primarily of marketing of crude oil and refined products, refining of crude oil into petroleum products, refined products by pipeline, crude oil transportation, rail car, marine vessel, motor equipment, marketing and manufacturing of petrochemicals commodity for industrial uses, lubricant additives and fuel. Some other roles of the downstream division includes debt financing activities, worldwide cash management, insurance operations, corporate administrative functions, technology companies and real estate activities (Pred 2017).
Exposure of downstream division is shifted to higher return segments such as additives, lubricants and petrochemicals along with strengthening the value chain fuels in marketing and refining business. The downstream is well focused to remain on value rather than remaining on volume that makes the division to grow margins across the value chains and improving their operations. Moreover, downstream division of Chevron collaborates with its pipeline and power organization that helps in reducing the cost of energy, achieving efficiency gains, test new technologies, improving power reliability and managing emissions (Chevron.com 2018). .
The profitability of operations of downstream is affected by the efficiency and reliability of marketing, refining and petrochemical assets of company, volatility of rates of tanker charter for the shipping operations of company and effectiveness of supply functions of crude oil and products. In addition to this, there are some another factors impacting the downstream performance that is beyond the control of company (Ahmad et al. 2016) This includes cost of energy and general level of inflation.
For company, the regional headquarter in the Asia pacific region is Singapore that comprise of lubricants, manufacturing and marketing business. The downstream business of Chevron intends to maintain focus on margins by efficiently planning and scheduling the supply chain. The division has the responsibility of continuously scrutinizing and driving savings by way of improved scheduling and forecasting along with dealing with the short planning horizons. In order to ensure that the demands of customer are met with the changing composition and quality of crude oil, this particular division has the responsibility of integrating and sophisticating the blending plans and methods into the planning efforts. Therefore, Chevron reacts to the situation for remaining competitive and protecting their margins. It is certainly possible that the supply chain in the downstream might face issues associated with scheduling, planning and executing movements of oil. The energy market is receiving constant pressure resulting from volatility in price, growing demand, global competition, weather related disruptions, geopolitical unrest, refined and constraint capacity and geopolitical disruptions that have resulted in extended increasingly complex downstream supply chain (Ikenberry 2018). Such downstream market has the role of implementing solutions through integrated demand plans with marketing and leading refining global company and thereby reducing the planning cycle. It is required by the downstream business of company at the current margin levels to make investment in an integrated value chain that would help in driving higher profitability and adapt to changing market conditions.
Identification of three PESTLE factors impacting the success of chosen company:
The oil and gas sector is influenced by a number of social, economic and geopolitical factors at the global level. In addition to this, there are some logistical and technological challenges that are faced by sector in extracting oil and gas from these reserves.
Economic factors- Some of the areas of economy are volatile that has considerable impact on oil and gas sector. The direction of chain of petroleum production which is impacted by multiplicity of factors is huge. This makes a challenging task in terms of preparation of action plans and formulation of strategies. Development of financial and credit markets are closely monitored by company and they take into account the implications of movement in price of natural gas and crude oil. The global economic conditions are regarded as bone of the external factor impacting the demand of product produced by company and natural gas and oil prices. The economic limits of gas and oil properties are positively impacted by increase in price of commodities. Furthermore, the economic viability of natural oil and gas projects is threatened by the falling price of natural gas. With improvement in economic output and standard of living, there would be a rise in level of demand of energy and this would ultimate impact the energy supplies by creating pressure. The industry price levels of natural gas and crude oil price is followed by the earnings generated from upstream segments. Prices of crude and natural gas is influenced by factors on which there is no control of industry and the supply and demand connected by inventory levels of industry and global economic conditions. Results of operations of company, production outlook, and exploration and capital investment program have been impacted by downturn in price of crude oil. It is anticipated by company y that global market would be back into balance with increase in price of crude oil in future, slowdown in growth of supply and continued growth in demand (Montgomery 2017).
Geopolitical factors- Political instability and geopolitical conflicts of the region or countries in which company is operating are the threats for the business of oil and gas companies such as Chevron. It also incorporates factors such as regulatory, legislative and legal risks which need to be appropriately reviewed and assessed. Companies operating in energy industries such as Chevron might be facing an increased domestic and international regulation of emissions of green house in year ahead (Baffes et al. 2015). Such imposition of regulations would incur additional costs and therefore reducing the overall profit generated by company. In order to have an understanding of the potential impact of such policy on different parts of business such as pricing, demand and supply, Chevron engages in ongoing efforts that assist them in evaluating how such regulations would unfold. The factors of change in anticipated supply demand and pricing is taken into account that helps in redirecting the portfolios and revising the allocation of capital. In addition to this, the current operations of Chevron are significantly impacted by decision of public policy. In addition to this, the long term trend of earnings generated from upstream segments is also functions of other economic factors such as changes in rate of taxation, fiscal terms of contract and cost of services and goods (Badiru and Osisanya 2015). Earnings generated from downstream segments are impacted by economic factors such as tying of margin on marketing and refining of products.
Environmental factors- Operations of company are significantly impacted by the environmental factors. The challenging global environment requires company to make the application of innovation and technology. Economic planning and corporate strategy of company is impacted by the environment in which company is carrying out its operations. The whole global natural gas and oil industry can shape up by the recent global environmental trend such as uneconomic feasibility of expensive gas and oil projects, decreasing emission of carbon dioxide, increasing use of renewable sources of energy and reduction of use of fossils fuels in global energy mix (Tietenberg and Lewis 2016).
Project run by company making contribution to local community:
Chevron conducts business in an ethical and socially responsible manner along with protecting the environment and people by supporting universal human rights and thereby benefitting the communities where operations are carried out or business is conducted. Organization makes contribution to prosperity of community by making social investment and forming strategic partnership. Chevron has made social investment of more than $ 1.1 billion over the past five years that has helped company in placing in the top quartile of hundred companies in such investment (George et al. 2016).
The upstream operations of Chevron manage the efficiency of energy by evaluation, identification and implementation of projects that would help in conservation of energy. It can be explained with the help of an example that depicts success of organization in reducing the consumption of energy within the operations of downstream business unit of San Joaquin Valley. The energy management project of business unit since year 2014 has resulted in mitigation of usage of energy by approximately 22000 and 180000 metric tons of green house gas emission. Gulf of Mexico is another example that has resulted in optimization of power generation by using of predictive tools of analytics (Luciani 2015).
Similarly, in between year 2014 and 2016 in the business unit of Indo Asia, intensity of energy has been reduced by 27%. Such improvement was achieved in part by the establishment of decision support center that is integrated optimized. This center helps in providing recommendations for optimization of energy efficiency and monitoring day to day performances of surface facilities. Furthermore, the green building projects strives to reduce the footprint of facilities on environment by the framework such as leadership in environmental and energy designs certification process that helps in certification of environmental sustainability of building (Liu et al. 2014).
The integration of risk management is deepened by recent updating of operational excellence. A broad range of risks is considered by business unit under the application of this process and such risks include environmental issues, health and safety issues, security of personnel and assets, facility and integrity, political and community issues. Implementation of operational excellence management system helps in managing and assessing the significant community health risks and related environmental by addressing cumulative and potential impacts of operations (Warner and Sullivan 2017). Chevron has also undertaken the development of a public private partnership community empowerment program that helps in addressing the communities need in area of operations and resolving conflicts with the help of process of participatory development.
Conclusion:
The report is prepared for illustrating the responsibilities of roles of downstream division of Chevron Corporation. It has been ascertained from the analysis that the downstream division of chevron is highly competitive and a strong performance has been reflected by this segment in the current fiscal year. Furthermore, the operations of company is significantly impacted by economic, environmental and geo political factors as analyzed from the framework of PESTLE. Chevron also takes effort to make contribution to community by running several projects of corporate social responsibility.
References list:
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Badiru, A.B. and Osisanya, S.O., 2016. Project management for the oil and gas industry: a world system approach. CRC Press.
Baffes, J., Kose, M.A., Ohnsorge, F. and Stocker, M., 2015. The great plunge in oil prices: Causes, consequences, and policy responses.
Chevron Policy, G. (2018). Corporate Responsibility. [online] chevron.com. Available at: https://www.chevron.com/corporate-responsibility [Accessed 9 Jul. 2018].
Chevron.com. (2018). [online] Available at: https://www.chevron.com/-/media/shared-media/documents/2017-corporate-responsibility-report.pdf [Accessed 9 Jul. 2018].
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