PETRONAS OIL COMPANY ENTER EGYPT

BM023-3-2 Individual Assignment

Individual assignment

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Contents1.0 Company Background:..........................................4

2.0 Country background:..........................................62.1 Geography:.....................................................6

2.2 History:.......................................................62.3 Government:....................................................7

3.0 PESTLE Analysis:...............................................73.1 Political:.....................................................7

Main political parties.............................................8Opportunities and threats:.........................................8

3.2 Economic:....................................................83.3 Social:......................................................9

3.4 Technological:..............................................103.5 Environment:................................................10

The Principal Functions of the Agency Include:....................104.0 Benefit, Cost and Risks:....................................11

4.1 benefit.......................................................114.2 Cost:.........................................................11

4.3 Risk:.......................................................125.0 Market Analysis:............................................12

5.1 Market Size:................................................125.2 Market Trend:...............................................12

Growth:...........................................................12Mature:...........................................................12

Decline...........................................................13Competitors:......................................................13

Proposed Mode of Entry:.........................................13RECOMMENDATION....................................................14

CONCLUSION........................................................14

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References:.......................................................14

Figure 1: Show PETRONAS Company.(Source : www.petronas.com.my)

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http://www.petronas.com.my/about-us/pages/corporate-profile.aspx


Figure 2: Show PETRONAS logo.(Source : www.petronas.com.my)

1.0 Company Background: PETRONAS was incorporated on 17 August 1974 as the national

oil company of Malaysia, vested with the entire ownership and

control of the petroleum resources in the country. It has

since grown from merely being the manager and regulator of

Malaysia’s upstream sector into a fully integrated oil and gas

corporation, ranked among the FORTUNE Global 500 largest

corporations in the world.

PETRONAS is the national oil and gas company of Malaysia and

is wholly-owned by the Government of Malaysia. Together with

its subsidiaries and associated companies, PETRONAS, has fully

integrated oil and gas operations in a broad spectrum of the

oil and gas value-chain. Its business activities include

first, the exploration, development and production of crude

oil and natural gas in Malaysia and overseas; second, the[Type text] Page 5

http://www.petronas.com.my/about-us/pages/corporate-profile.aspx


liquefaction, sale and transportation of LNG; third, the

processing and transmission of natural gas and the sale of

natural gas products; fourth, the refining and marketing of

petroleum products; fifth, the manufacture and sale of

petrochemical products; sixth, the trading of crude oil,

petroleum products and petrochemical products; and last one ,

shipping and logistics relating to LNG, crude oil and

petroleum products. Committed to ensuring business

sustainability, PETRONAS also strives to responsibly manage

natural resources in a way that contributes holistically to

the well-being of the people and nations where operate.

1.1 Gas & Power:

PETRONAS’ Gas & Power Business aspires to be a leadingintegrated gas, liquefied natural gas (LNG) and power player.To create greater focus in these core areas of growth, thebusiness has been structured and streamlined into two majorportfolios; Global LNG business and Infrastructure, Utilities& Power business.

1.2 Global LNG:

PETRONAS’ global LNG business comprises the production and

sale of LNG through its domestic operations in Bintulu,

Sarawak (PETRONAS LNG Complex) and, overseas operations, and

sales in Egypt (Egyptian LNG). PETRONAS operates one of the

world’s largest LNG facilities in Bintulu, Sarawak, which

consists of three plants, MLNG, LNG Dua and MLNG Tiga, with a

combined capacity of 24 million tonnes per annum.

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PETRONAS is also involved in LNG and energy trading activities

through its marketing arms in Malaysia and Europe (PETRONAS

LNG Ltd and PETRONAS Energy Trading Ltd).

At present, PETRONAS commands a sizeable LNG market share in

the Far East. Over the years, PETRONAS has sustained its

market position and preserved its reputation as a reliable

supplier of LNG, having sold more than 7,000 cargoes since the

establishment of its first LNG plant in 1983.

2.0 Country background:

2.1 Geography:Egypt, at the northeast corner of Africa on the Mediterranean

Sea, is bordered on the west by Libya, on the south by the

Sudan, and on the east by the Red Sea and Israel. It is nearly

one and one-half times the size of Texas. Egypt is divided

into two unequal, extremely arid regions by the landscape's

dominant feature, the northward-flowing Nile River. The Nile

starts 100 mi (161 km) south of the Mediterranean and fans out

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to a sea front of 155 mi between the cities of Alexandria and

Port Said.

Figure 3: show Egypt map and flag.

(Source: http://www.infoplease.com/country/egypt.html )

2.2 History:Egyptian history dates back to about 4000 B.C. when the

kingdoms of upper and lower Egypt, already highly

sophisticated, were united. Egypt's golden age coincided with

the 18th and 19th dynasties (16th to 13th century B.C), during

which the empire was established. Persia conquered Egypt in

525 B.C. , Alexander the Great subdued it in 332 B.C. , and

then the dynasty of the Ptolemies ruled the land until 30 B.C.

, when Cleopatra, last of the line, committed suicide and

Egypt became a Roman, then Byzantine, province. Arab caliphs

ruled Egypt from 641 until 1517, when the Turks took it for

their Ottoman Empire.

Napoléon's armies occupied the country from 1798 to 1801. In

1805, Mohammed Ali, leader of a band of Albanian soldiers,

became pasha of Egypt. After completion of the Suez Canal in

1869, the French and British took increasing interest in

Egypt. British troops occupied Egypt in 1882, and British

resident agents became its actual administrators, though it

remained under nominal Turkish sovereignty. In 1914, this

fiction was ended, and Egypt became a protectorate of Britain.

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http://www.infoplease.com/country/egypt.html


Egyptian nationalism, led by Zaghlul Pasha and the Wafd Party,

forced Britain to relinquish its claims on the country. Egypt

became an independent sovereign state on Feb. 28, 1922, with

Fu'ad I as its king. In 1936, by an Anglo-Egyptian treaty of

alliance, all British troops and officials were to be

withdrawn, except from the Suez Canal Zone. When World War II

started, Egypt remained neutral.

2.3 Government:

Republic.

3.0 PESTLE Analysis:

3.1 Political:The Egyptian Constitution provides for a strong

executive. Authority is vested in an elected president who can

appoint one or more vice presidents, a prime minister, and a

cabinet. The president's term runs for 6 years. Egypt's

legislative body, the People's Assembly, has 454 members--444

popularly elected and 10 appointed by the president. The

constitution reserves 50% of the assembly seats for "workers

and peasants." The assembly sits for a 5-year term but can be

dissolved earlier by the President. There also is a 264-member

Shura (consultative) Council, in which 88 members are

appointed and 174 elected for 6-year terms. Below the national

level, authority is exercised by and through governors and

mayors appointed by the central government and by popularly

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elected local councils. In March 2007, Mubarak introduced

several constitutional amendments that would increase

presidential powers and, more significantly, ban any political

parties based on religion, race, or ethnicity. The amendments

were put to a popular referendum and, despite low voter

turnout and boycotts by opposition groups, passed with 75.9%

approval.

Main political partiesThe multi-party system was restored in 1976 by the then

president Sadate. However, in practice it is the ruling

National Democratic Party (NDP) which completely dominates the

political arena. The Muslim brothers, a brotherhood created in

1928 by Hassan El Banna is the main opposition party of the

country. They were banned but in spite of it, they were able

to win 88 seats in the People's Assembly in the 2005

elections. The other opposition parties like Wafd, El-Ghad or

the Nasserian Party are minority parties and were nearly wiped

out in the 2005 elections.

Opportunities and threats:PETRONAS’ presence in Egypt began in 2001 through their

involvement in the North East Mediterranean Deepwater Block

awarded by the Egyptian government. Egypt’s gas industry is a

major contributor to the nation’s economy.

In line with their objective to contribute to the well-being

of the local communities where they operate, they have

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contributed to a wide range of programmes that focus on human

capital development and training to help raise the level of

professional skills of Egyptians working in the industry.

Under their ’Living Skills Programme’, they have raised and

contributed funds to refurbish additional facilities at the

Idku Vocational School which teaches trade skills in

electrical work, welding, carpentry and sewing to the local

community around Idku (located 50 km from Alexandria).

However, PETRONAS they make good deals with Egypt to sale

their GAS and PETROL as well, and this is a really good

business for them to reach all around the world and make

opportunities to sale their PETROL and GAS globally.

3.2 Economic:In the past year, the cabinet economic team has

simplified and reduced tariffs and taxes, improved the

transparency of the national budget, revived stalled

privatizations of public enterprises and implemented economic

legislation designed to foster private sector-driven economic

growth and improve Egypt's competitiveness. Despite these

achievements, the economy is still hampered by government

intervention, substantial subsidies for food, housing, and

energy, and bloated public sector payrolls. Moreover, the

public sector still controls most heavy industry.

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The international economic downturn slowed Egypt's GDP

growth to 4.5% in 2009, predominately affecting export-

oriented sectors, including manufacturing and tourism.

Unemployment is rising. In 2009 the government implemented a

$2.7 billion stimulus package favoring infrastructure projects

and export subsidies, and is considering up to $3.3 billion in

additional stimulus spending in 2010 to mitigate the slowdown

in economic growth.

In September 2009 - Egypt was ranked among the world’s 10 most

active reformers for the fourth time. The country moved up to

106 from 116 among 183 economies worldwide in the overall ease

of doing business ranking.

3.3 Social:Egypt’s total population stood at 80.3 million. Out of this

approximately 90% are Muslims while the remaining are

Christians. Most of the population inhabits the area near the

Nile River and almost half of Egypt’s population is urban,

living in the densely populated cities such as Cairo and

Alexandria.

One of Egypt’s biggest socio-economic problems is the high

unemployment rate which has been growing over the years. The

unemployment rate, which has averaged more than 10% over a

decade, increased to over 12% in 2005–06. With the population

growing at 1.8% per annum, the economic growth of 4.4% is not

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in employed population during the last five-year period stood

at 2.3%, the rise in unemployed population has been much

higher during the same period averaging around 8%

The education indicators of Egypt project a poor image of the

education system. Only about 58% of the population is literate

and there is a big difference in the literacy rates for males

and females. Male literacy rate is around 68%, while female

literacy rate is just about 47%, indicative of gender

disparity. The National Council for Women, a nodal government

agency that works for the welfare of women in Egypt, aims to

completely eradicate illiteracy among females.

The healthcare system in Egypt is underdeveloped with only

around 29% of the population covered by governmental health

insurance.

3.4 Technological:Egypt's IT spending is expected to increase from US$1.3bn in

2010 to US$2.1bn by 2014 and the Egyptian IT market growth is

forecasted to remain below pre-economic crisis levels in 2010,

but economic recovery, tenders delayed from 2009 and higher

incomes boosted by pay raises for civil servants and other

groups should help to keep sales on an upwards trajectory.

In 2008, Egypt continued liberalization of the telecoms

market, with the award of a second national fixed license.

This development, which followed the award of 3G licenses to

three mobile telecoms service providers in 2007, is likely to

drive new opportunities for IT vendors. As well as generating

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additional spending on IT products and services from the

telecoms sector, the spread of internet should provide a boost

to the PC market over the next few years.

. . .

The Egyptian IT services market is dominated by demand from

government, finance and telecoms sectors, which account for

more than 25% of Egypt's total spending

3.5 Environment: According to the Law 4/1994 for the Protection of the

Environment, the Egyptian Environmental Affairs Agency (EEAA)

was restructured with the new mandate to substitute the

institution initially established in 1982. At the central

level, EEAA represents the executive arm of the Ministry.

The Principal Functions of the Agency Include: .Formulating environmental policies.

.Preparing the necessary plans for Environmental protection

and Environmental development projects, following up their

implementation, and undertaking Pilot Projects.

.The Agency is the National Authority in charge of promoting

environmental relations between Egypt and other States, as

well as Regional and International Organizations.

4.0 Benefit, Cost and Risks:4.1 benefit :

PETRONAS’ involvement had a success story in Egypt’s

Liquefied Natural Gas (LNG) sector, and how this partnership

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of mutual benefit for Egypt and PETRONAS has been an

enriching experience? PETRONAS get many benefits from sealing

their Liquefied Natural Gas (LNG) to Egypt first, get

enriching experience for their workers, and make many

opportunities for those who need a good performance. Second ,

PETRONAS company made a good or better economic and

investment from thier Natural Gas and Petrol thought sealing

to Egypt, and Among the most obvious potential benefits are

the expected sales and profits from the market .

However, other benefit is Education, and new technology is

also an important part of their social development activities

in Egypt. PETRONAS and Egypt’s Ministry of Petroleum have

jointly awarded over 40 full scholarships to young Egyptians,

allowing them to study at University Teknologi PETRONAS.

Beyond formal education and training programmes, PETRONAS now

can actively involved in various school outreach programmes

to nurture and develop the potential of the leaders of

tomorrow.

4.2 Cost:Nowadays, PETRONAS focuses on oil and gas productions of

direct cost that can enter a new foreign market and include

costs associated with setting up a business operation, so the

cost increase year by year. PETRONAS adds value to the crude

oil produced by their exploration and production operations

through their integrated oil business that encompasses

refining, marketing, trading and retail operations. PETRONAS’

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In enriching experience, “PETRONAS has learnt project

execution strategies that can be replicated in new projects

to ensure shorter project schedule and minimisation of cost,

for instance.

Subsequently, in July 2005, PETRONAS inked a cooperation

agreement with Tharwa Petroleum Company of Egypt to create

and add value to the oil and gas resources in and outside

Egypt, and to help develop the human resource capability of

its Egyptian partner.

PETRONAS also has a 35.5 per cent stake in Egyptian LNG,

which increased the corporation’s LNG production capacity by

1.8 million tonnes for financial year ended 31 March

2007.This is part of its endeavour to retain its status as

the world’s second largest equity owner of LNG production

capacity.

4.3 Risk: The main risk that can face PETRONAS company its supply chain

risk, such as weather condition, delayed delivery, and loss

of goods .this is important because of globalization. Also,

that can affect profit of the company. However, PETRONA can

face in exchange rate as well that can affect their entrance

of a new market.

5.0 Market Analysis:

5.1 Market Size:

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In this part everything is related to population so The

population of Egypt was estimated at 69,359,979 in July of

2000, an increase of 17,115,079 from the 1990 population of

52,244,000. In 2000, Egypt's birth rate stood at 25.38 per

1,000, while the death rate was reported at 7.83 per 1,000.

With a projected annual growth rate of 1.5 percent between

2000 and 2015, the population is expected to reach 92 million

by the year 2030.

Egypt's population is the largest in the Arab world, and is

generally young, with 35 percent below age 14 and just 4

percent older than 65. Almost 50 percent of the population is

below 20 years of age and 39 percent under 15, presenting a

real challenge to government in creating job opportunities.

The vast majority of the population—94 percent—is Sunni

Muslim. Coptic Christians, and other smaller religious groups

represent 6 percent of the population, while smaller

minorities—primarily Nubians, Armenians, and other Europeans—

make up approximately 1 percent of the population.

5.2 Market Trend:

Growth:Petronas company has a good growth year by year, by doing a

good investment with other countries such as Egypt. The

national oil company, whose new financial year starts from

Jan 1 this year from April 1 before, posted a 10.8% rise in

net profit to RM55.6bil on higher margins for the nine-month

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period compared with the previous corresponding period while

revenue jumped 26.9% to RM222.8bil due to higher realised

prices and improved liquefied natural gas sales volume.

Mature: PETRONAS, potential oil provinces having already been

explored and major new discoveries becoming increasingly

rare, mature fields are slated to play an ever more prominent

role in natural oil supply to Egypt or other countries.

PETRONAS company should meet rising world demand –and thus

ensure their own business growth will therefore depend on

their ability to get the most out of existing resources.

Decline Although there is no universal definition of a “mature

field,” the industry consensus is to consider a field mature

once its production be gins to decline, a phase accompanied

by the aggravation of a number of phenomena affecting the

spatial and temporal characteristics of the field. PETRONAS

experienced a 14% decline in 2012 net profits due to halted

production in South Sudan for most of last year caused by

government disputes over transmission tariffs and an

impairment charge related to the company’s natural gas assets

in Egypt.

Competitors:PETRONAS has a number of competitors in the oil and gas

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market, such as, SHELL, PROJET, BP, and ESSO. Generally, all

these companies have similar products and services. What sets

them apart are the variety of products, services, promotional

strategy, product branding and image, company identity and

marketing strategies. Currently, PETRONAS is a major player

in the industrial market for oil and gas, within Malaysia,

hopefully expanding its branches towards even more

prospective neighbouring countries. With the support from the

government, as a national oil and gas producer, PETRONAS has

set its identity at a level of equal with its major

competitors, mainly SHELL.

Proposed Mode of Entry:The best proposed mode of entry it’s advertising, because

PETRONAS uses a great deal of advertising to promote its

product and services. The advertising media PETRONAS applies

are newspapers, television advertisements, posters, banners,

and magazines. However, the most noticed and effective

advertising media used by PETRONAS is television

advertisements. PETRONAS’ television ads have always been

unique and catchy. So, these make many advantages first, the

ability to build sale volume and, switching cost. Second, it

helps to gain more companies or student to study in PERTRONAS

university. Also there are locations Advantages,

desirability of host country production relative to home

country production. Disadvantage, Possibility that

regulations may change, OTHER ENTRY MODE :

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– Exporting

– Turnkey Projects

– Licensing

– Franchising

– Joint Ventures

– Wholly Owned Subsidiaries

RECOMMENDATION

– PETRONAS could deliver more for their products,

through interactive games. These activities can be

brought forth to the public, through service stations.

– Through their website, PETRONAS could have an

interactive menu to educate the public about their

products. This is visible through their PETROSAINS

Museum, in Kuala Lumpur, which educates the public,

mainly children, on oil and gas history, with games and

activities. PETRONAS could target the public even more

through their website.

– PETRONAS could segment their products to different

target market. In accordance to that, PETRONAS could

create a specific product line, targeted to racing

enthusiasts, mainly the drivers themselves. This creates

in them a sense of belonging and connecting to PETRONAS

on a personal level.

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– In terms, of maintenance, PETRONAS should have regular

maintenance of their services and products. Examples:

oil pumps handles, tire pumps and their products at

‘MyMesra’ outlets.

CONCLUSION

Overall, PETRONAS has ventured into the oil and gas industry

for quite some time (32 years) (PETRONAS 2005). With an

aggressive market in Egypt, PETRONAS has adapted to that

environment by delivering products and services at their best

ability.

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[Accessed: 11 Aug 2013].

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Available at:

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Petronaschemicals.com. 1985. PETRONAS Chemicals Group Berhad.

[online] Available at:

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Aug 2013].

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opportunities.aspx [Accessed: 12Aug 2013].


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releases/Pages/article/EGYPT-EVACUATION---PETRONAS-CHIPS-

IN.aspx [Accessed: 13 Aug 2013].


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Thestar.com.my. n.d.. Moody's: Petronas has headroom for more

acquisitions - Business News | The Star Online. [online] Available

at:

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18/Moodys-Petronas-has-headroom-for-more-

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Petronas, BG Group - Business News | The Star Online. [online]

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Books :-

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Shaw, T. 2009. Petronas. North Shore, N.Z.: Pearson.

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.

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Documents

PETRONAS OIL COMPANY ENTER EGYPT