Pestel Case

BP is one of the world's largest oil and gas companies. It operates right across exploration, production, refining, distribution and marketing. It has about 21,000 service stations worldwide, half in the United States, 40 per cent in Europe. The largest sources of its oil production are Russia (about 45 per cent) and the USA (20 per cent); the USA accounts for about a quarter of its natural gas production and Russia about 10 per cent. Since 2005, BP has had a small alternative energy business, active in biofuels and windpower. In 2010, BP's Deepwater Horizon oil rig exploded, causing 11 deaths and an oil slick in the Gulf of Mexico covering 180,000 km. In 2012, the US government fined BP more than $4 bn. (about 2.5 bn; 3 bn) for the disaster, and many court cases are still pending.

Some headline features of BP's environment include:

Political: More than 80 per cent of the world's oil reserves are owned by state-controlled enterprises,

the largest being Saudi Aramco and the Iranian National Oil Company. In 2013, BP's oil business in Russia was transferred from a controversial alliance with a group of leading Russian businessmen to a partnership with Rosneft, the state-controlled Russian oil company, in which BP would hold 18 percent of the shares.

Economic: Forbes magazine reports predictions of economic growth between 2012 and 2020 of 7 per cent per annum for China, about 2 per cent for the United States and 1 per cent for Europe. Oil prices peaked at about $120 a barrel in 2008, before dropping to around $30 as recession took hold in 2009, and recovering to around $100 in 2012. New extractive technologies led natural gas prices in the USA to fall 30 per cent between 2011 and 2013.

Social: Car usage is falling in many European economies. After having doubled in the preceding 30 years, miles travelled in the United Kingdom by motor vehicles have fallen by about 1 per cent between 2008 and 2012; miles travelled by train reached a record in 2012, having increased by 50 per cent since the mid-1990s. From 2008 to 2012, the number of driving tests taken in the United Kingdom fell by about 17 per cent.

Technology: New technologies include the exploitation of 'fire ice' (gas hydrates under the sea) and 'fracking', the extraction of gas by fracturing underground rock to produce 'shale gas'. Fire ice might eventually equal 4,000 times all the natural gas consumed in the US in 2010; fracking offers the prospect of doubling the world's available natural gas supply by 2020.

Ecological: Fracking is liable to pollute local water supplies and even trigger small earthquakes. According to Cornell University, about 8 per cent of the gas extracted by fracking is released direct into the atmosphere, potentially a major contribution to global warming. In the USA, natural gas costs about $50 per megawatt hour to produce; wave $500; tidal $450; biomass $130; on-shore wind $80.

Legal: The Deepwater Horizon disaster has led to new safety regulations for Deepwater drilling. The European Union, where 90 per cent of oil extraction is from the sea, has imposed stricter exploration licensing procedures, risk assessment and financial guarantees against the costs of accidents. New regulations in the USA are estimated to increase costs by $1.5 m per oil well. In 2012, the

USA banned BP from tendering for all government contracts.

Questions

1.Which of the above PESTEL factors offer the most important opportunities to BP, and which the most important threats?

2.Which of the above factors spill over from one PESTEL category to another?