Introduction to Oil and Gas Environment

This report discusses the roles and responsibilities of the downstream division of Chevron and the impact of PESTLE factors on the success of the company. It also explores the projects run by Chevron for contributing to the local community. The report highlights the economic, environmental, and geopolitical factors that impact the oil and gas sector. The report is prepared for demonstrating the responsibilities and roles of downward division of company.

Running head: INTRODUCTION TO OIL AND GAS ENVIRONMENT
Introduction to oil and gas environment
Name of the Student
Name of the University
Author Note

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Table of Contents
Introduction:...............................................................................................................................2
Discussion:.................................................................................................................................2
Explaining the roles and responsibilities within the downstream division of Chevron:............2
Identification of three PESTLE factors impacting the success of chosen company:.................4
Project run by company making contribution to local community:...........................................4
References list:...........................................................................................................................6
Conclusion:................................................................................................................................6
Introduction:
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

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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.
Discussion:
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

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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

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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

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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

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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

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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.

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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.

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References list:
Ahmad, W.N.K.W., Rezaei, J., Tavasszy, L.A. and de Brito, M.P., 2016. Commitment to and
preparedness for sustainable supply chain management in the oil and gas industry. Journal of
environmental management, 180, pp.202-213.
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].
Clarke, C.E., Hart, P.S., Schuldt, J.P., Evensen, D.T., Boudet, H.S., Jacquet, J.B. and
Stedman, R.C., 2015. Public opinion on energy development: The interplay of issue framing,
top-of-mind associations, and political ideology. Energy Policy, 81, pp.131-140.
George, R.A., Siti-Nabiha, A.K., Jalaludin, D. and Abdalla, Y.A., 2016. Barriers to and
enablers of sustainability integration in the performance management systems of an oil and
gas company. Journal of cleaner production, 136, pp.197-212.
Griffin, J.M. and Teece, D.J., 2016. OPEC behaviour and world oil prices. Routledge.
Ikenberry, G.J., 2018. Reasons of state: Oil politics and the capacities of American
government. Cornell University Press.

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Liu, Q.Y., Mao, L.J. and Zhou, S.W., 2014. Effects of chloride content on CO2 corrosion of
carbon steel in simulated oil and gas well environments. Corrosion Science, 84, pp.165-171.
Luciani, F.G., 2015. Allocation vs. production states: A theoretical framework. In The rentier
state (pp. 77-96). Routledge.
Montgomery, H.B., 2017. Energy price shocks and macroeconomic performance. Routledge.
Pred, A., 2017. City-systems in advanced economies: past growth, present processes and
future development options. Routledge.
Tietenberg, T.H. and Lewis, L., 2016. Environmental and natural resource economics.
Routledge.
Warner, M. and Sullivan, R. eds., 2017. Putting partnerships to work: Strategic alliances for
development between government, the private sector and civil society. Routledge.

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