Sapura Energy Berhad Operational Strength

This assignment provides an analysis of Sapura Energy Berhad's operational strength and financial stability. It discusses the company's ability to manage its operational activities effectively, leading to growth in productivity of oil and gas products. The report also touches on various economic factors such as inflation, recession, price elasticity, demand, and supply that affect the oil and gas industry. References from books, journals, and online sources are provided to support the analysis.

FINANCE AND
ECEONOMICS

TABLE OF CONTENTS
INTRODUCTION...........................................................................................................................1
A. Ascertaining the alternative scenario on the basis of cost of production..........................1
B. Type of product, price and income elasticity.....................................................................4
C. Analysing the market structure..........................................................................................4
D. Determining the market segmentation and pricing strategies...........................................5
E. developing demand in market............................................................................................5
F. Determining various scenarios for developments in currency markets and impacts on price
competitiveness......................................................................................................................6
CONCLUISON................................................................................................................................7
REFERENCES................................................................................................................................8

INTRODUCTION
Recession is the phase where the number of job opportunities in an environment has been
reduced due to rise in the currency market as well as inflation. As per analysing the economic
market of Malaysia on which can be said that, there has been rapid growth in the information
technology and oil gas industries in the recent years. Thus, the impacts of various internal as well
as external impacts on such firm which affects their operational motives and functioning at the
global level. In the present study, there will be discussion based on operational activities of
Sapura Energy Berhad on the basis of its products, services and various operational activities
performed in global market.
Sapura Energy Berhad
This Malaysian organisation is one of the leading oil and gas company in the world. It
operates in more than 20 countries such as Australia, China, USA, Africa, Middle east etc. Along
with this, frim also engaged in constructs Offshore platforms and Marine Pipelines for oil
exploration. This firm is capable of maintaining the 50% of the global market share as an owner
of Tender Rigs. Prices of crude oil and gases in Malaysian has been analysed by government
with respect to strengthening the economy of the favourable state. Industries has been shaped by
the global megatrends like resource scarcity and impacts of emerging market (Sapura Energy,
2018). The falling productivity and cost pressures which impacts on challenges and competition
on global level.
Moreover, there are various competitors and rivalries are stated in the world which in
turn have negative as well as positive influences in various operations. Thus, Sapura Energy
Berhad will have influences in the operations due to competitors such as Trans Anatolian Gas
Pipeline in Turkey and Petrolian Nasional Berhad (PETRONAS). Moreover, these are the big
challengers to this industry in both oil and gas operations.
A. Ascertaining the alternative scenario on the basis of cost of production
In manufacturing and construction industries there are comparatively higher production
costs than operational expenses. Thus, it ascertains that, there are chances of having higher
production expenditures such as labour, material and overhead charges. Thus, these are the
expenses which are comparatively higher and the higher portion of profit has been utilised in
such operations.
1

Fixed cost: These are the costs which remains constant for longer period which will be
increased of reduces as per fluctuations in demand and supply of products (Pui and Othman,
2017). Thus, here and organisation has to make comparatively same amount of payments in each
year. It includes, rent, interest expenses, salaries etc.
Variable cost: These expenses varies from the past records of operations. Thus, an
organisation has to make payments of the expenses which do not have any consistency in
charges (Mohamed Haris and et.al., 2018). It basically, includes transportation charges, selling
and administration expenses that has negative and positive impacts in governing operations.
Average cost: This cost has been measured through ascertaining average costs and units of
a product which determines it total cost. In addition, it will be divided by number of goods
produced in industry. To analyse average cost, Sapura Energy has to be conscious about costs,
quantity and total units of product in a certain period.
Figure 1 Average Cost
(Source: Average cost, 2015)
Marginal cost: This method determines the changes in the opportunity costs which rises as
per increasing production by one unit of goods. It is comprised of all costs which were being
used in production such as labour, material and overheads for production.
2

Figure 2 Marginal cost
(Source: Marginal cost, 2018)
Macroeconomic expectations for second half of 2017 as per macroeconomic development
and recession
In consideration with the governmental plan and policies for making effective development
and rise in the global economy which consists influences of various nations. Thus, due to the
impacts of Global financial crisis which determines poor outcomes that it has been reduction in
global GDP level. Moreover, it was projected to be 3% in 2016. Global trade growth remains
subdued as per various emerging market in economies which has have lost momentum due to
drastic reduction in economy (Tyson and et.al., 2017). Development in global level of economy
is not up to the expectations which reflects poor outcomes such as improper demands of
products, reduction in supply as well as imbalanced trade practices.
Therefore, expectation of economists that global economy will have rise in 2017 as at
least half of increment can be achieved. The main reason behind poor economy is due to
improper employment opportunities applied to professionals (Balasubramaniam, 2017). Thus, in
consideration with such variations in the global economy recession and inflation are main factors
which affect economies stability as well as provokes improper management of operations.
3

B. Type of product, price and income elasticity
Price elasticity: As per considering operational activities in an oil and gas explorational
unit which determines the percentage changes in quantity demands and prices of products.
Therefore, in oil industries there are various rivalries are stated in the market which impacts on
reducing demands and costs of the products. Moreover, changes in demand for oil products
which will reversely affect the prices (Raja Ariffin and et.al., 2017). Thus, rise in demand will
also affect rise in prices of products. Similarly, if there is any reduction in demands the prices of
product will also fall down. It is due to rise in competition of market. Sapura Energy will have
required effective strategies which will be beneficial in leading firm for attaining beneficiary
gains.
Income elasticity: Income elasticity of demands determines the responsiveness which in
turn affect in measuring quantity demanded for a good or service for a change in revenue
generation of citizens. However, there are three factors which affects the demand such as
Negative income elasticity which ascertains the demands are being associated with the inferior
quality of goods (Shahbaz and et.al., 2017). Positive elasticity is associated with normal quality
of products which approaches towards rising demands of goods. In Zero income elasticity of
demand occurs when a rise in income. Therefore, will not be any influences with the prices and
quality of a product.
Cross Price elasticity with respect to complementary and substitute products
It ascertains relationship between two products and services. Therefore, it determines
quantity demanded of one product which have influences in prices of other. It brings the positive
as well as negative outcomes based on the products which were being analysed such as
Complementary and substitutes (Morgan and et.al., 2017). In oil and gas industries there are
chances of having higher challenges relevant with the products. Thus, substitutes to oil and gas
and industries will affect sales in an organisation. Moreover, number or rivalries listed in market
will have higher influences in changes prices and demand of such goods.
C. Analysing the market structure
In analysing market environment in Malaysia with respect to oil and gas sectors which
determines execution and strategies building by government (Pui and Othman, 2017). Thus,
Prime minister departments is responsible for analysing market demand and drafting prices on
products.
4

Possible strategies of competitors
In analysing the operational activities and financial health of Petroliam Nasional Berhad
on which it can be said that the world is Cautiously Optimistic. This is one of the oil industries
which has effective strategies and planning the which had helped them in having higher holding
in the current oil crisis (Mohamed Haris and et.al., 2018). Moreover, this frim has been suffered
from various internal or external challenges such as corruption and clarity of its long-term
investments. However, currently Petronas’s has planned to managed current climate for oil and
gas industries which approaches towards bringing efficiency in cost and competitiveness.
Own strategies with respected to competitors
In analysing the own efficiency and strength which will be based on effective strategic
planning. Thus, influences of various ideas and techniques will be helpful in meeting the goals at
the right time. Sapura Energy Berhad has emphasised on improving the entrepreneurial and
technical activities in the business (Tyson and et.al., 2017). Use of upgraded techniques will
help- them in becoming more competent as well as will have influences in attaining the goals.
This increment will help them in becoming more challenging with the purpose of meeting the
demand and supply in right time.
D. Determining the market segmentation and pricing strategies
Business target
Sapura Energy Berhad is listed in Forbes Asia’s Fabulous 50 has maintaining the record
from 2 years. Therefore, the commitments of the professionals with every business aspects have
lead it to this position. Moreover, as per analysing the operational activities of the firm which
determined that it deals in various aspects (Balasubramaniam, 2017). It deals in Construction,
installation and commissioning. The oil and gas exploration has also been manged by them in
this respect.
E. developing demand in market
In intention with developing the demands in different markets globally and domestic
Sapura Energy Berhad has to have proper determination and analysis over the market they are
dealing in (Raja Ariffin and et.al., 2017). Professionals of this oil and gas organisation has to pay
main emphasis on developing demands in market as well as overcoming with the recession
which will be helpful in making effective governmental policies.
Economies of scale
5

These are the cost advantages on which enterprises obtained a scale of operations on
which cost per unit or output decreasing with rise in scale. Therefore, in case of Sapura Energy
Berhad it can be said that rise in level of outputs will have influences in economy of scale.
Inflation
This is a situation on which a sudden rise in prices of commodities in an economy took place.
Thus, there are various natural resources on which a nation has to depend on another nation.
Therefore, rise in prices of such natural resources which will affect inflation in such particular
nation (Shahbaz and et.al., 2017). Moreover, impacts of this variation will bring positive and
negative outcomes to an organisation. In case of oil and gas industries there will be benefits as
rise in prices will bring them higher returns.
Consumption
This is the situation where an industry produces units and which have been consumed by
the consumers on a required time. Thus, this can be influenced through managing various
operations (Morgan and et.al., 2017). On the other side, in producing the oil and gas products by
Sapura Energy Berhad on which it can be said that, they can use such resources in operating
various activities and managing production activities.
Consumer confidence and investment
This is a state where economists analyse capacity of consumers to spend and make
payments of such commodities. Thus, it can be said that with influences of the rise in prices of
commodities such as inflation or various economic factors has impacts in reduction in
confidence level (Pui and Othman, 2017). On the other side, if there will be rise in the
employment rate as well as increase in per capital income which will bring positive outcomes to
business in attaining the targeted aims at the right time.
F. Determining various scenarios for developments in currency markets and impacts on price
competitiveness
There can be various elements and factors which has direct influences in affecting the
currency market as well as brings competition in circulation. Moreover, cash flow of an
organisation will have influences die to such micro and macro factors which in turn affects in
rising the operational costs and that will affect in profitability (Mohamed Haris and et.al., 2018).
Sapura Energy Berhad will have growth in productivity of oil and gas products as financial
governance and execution of operational activities will be well managed by them. It suggested to
6

the professionals that the prices f products are needed to be set which will bring profitable
competition to them and that will lead them in attaining the fruitful gains.
CONCLUISON
On the basis of above report, it can be concluded that, Sapura Energy Berhad will have
strong operational strength as well as financial stability as reflected in the current outcomes and
reviews from market. Moreover, there had been discussion based on various economic factors
such as inflation, recession, price elasticity as well as demand and supply of products which
affects oil and gas industries in environment.
7

REFERENCES
Books and Journals
Balasubramaniam, A., 2017. Oil Price Shocks and Sectoral Outputs: Empirical Evidence from
Malaysia. Economics Bulletin. 37(1). pp.38-47.
Mohamed Haris, N. B. and et.al., 2018, April. The Decision to Adopt Organic Practices in
Malaysia; a Mix-method Approach. In 92nd Annual Conference, April 16-18, 2018,
Warwick University, Coventry, UK (No. 273485). Agricultural Economics Society.
Morgan, M. and et.al., 2017. Socio‐cultural dynamics shaping the potential of aquaculture to
deliver development outcomes. Reviews in Aquaculture. 9(4). pp.317-325.
Pui, K. L. and Othman, J., 2017. Economics and environmental implications of fuel efficiency
improvement in Malaysia: A computable general equilibrium approach. Journal of
cleaner production. 156. pp.459-469.
Raja Ariffin, R. N. and et.al., 2017. Muslim Women’s Marriage, Pregnancy, Abortion and
Spacing of Children: Evidence from the United States, Iran and Malaysia. Journal of
Health Management. 19(4). pp.625-633.
Shahbaz, M. and et.al., 2017. The nexus between tourism demand and output per capita with the
relative importance of trade openness and financial development: A study of
Malaysia. Tourism Economics. 23(1). pp.168-186.
Tyson, A. D. and et.al., 2017. Ethnicity, education and the economics of brain drain in Malaysia:
Youth perspectives. Malaysian Journal of Economic Studies. 48(2). pp.175-184.
Online
Sapura Energy. 2018. [Online]. Available through :< http://www.sapuraenergy.com/>.
Marginal cost. 2018. [Online]. Available through :<
http://www.economicsonline.co.uk/Definitions/Marginal_cost.html>.
Average cost. 2015. [Online]. Available through :<
http://www.economicsconcepts.com/average_cost.htm >.
8