Page 26 - Cost_Competitiveness
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The Institute of Cost Accountants of India
and natural gas liquids constitute the project control are considered key in
principal feedstock. Because of the building a competitive advantage within
advantages of logistical proximity, the industry, and these can be enhanced
refneries and petrochemicals plants are by scale-related R&D investment and
often situated close to each other and broad operatorship experience.
often have pipeline linkages between
them. The most common proftability 4.2 Vertical Integration
measures in petrochemicals are cash
margins per ton, usually reported for the Vertical integration is another prominent
two main - upstream products ethylene feature of the petroleum industry, although
and propylene. the details of integration have changed
over time. It can take two principal forms:
4. Value Creation Through fnancial vertical integration occurs when
Integration subsequent stages of the value chain are
owned by one holding company, which
The possible benefts of integration – controls their cash fows; operational
horizontally and vertically – have long vertical integration occurs when there
been the topic of petroleum value chain is a physical exchange between those
analyses. Having reviewed the individual different stages of the value chain, i.e.
stages of the petroleum value chain, crude and products move in between
the question arises as to the potential for them.
incremental value generation through
such integration. 5. ExxonMobil
4.1 Horizontal Integration ExxonMobil, the world’s largest public
company in market capitalization, is the
Regarding horizontal concentration, the benchmark for companies operating
benefts from economies of scale in most in the Oil & Gas Industry. The actions of
activities of the value chain are widely industry leaders like ExxonMobil are closely
acknowledged. Petroleum projects are watched by the entire global Oil & Gas
highly capital intensive, have long lead Industry ecosystem. ExxonMobil (XOM)
times, and are inherently risky. In E&P is a major integrated Oil & Gas (O&G)
particularly, scale helps to access better company with operations in oil and gas
funding, to diversify investment and exploration & production, refning, and
development risk, and to serve as long- marketing oil and chemicals.
term insurance to partners such as host
governments. Due to the high fnancial ExxonMobil recently announced that,
and operational risks involved, oil and gas “the vast majority of its new production
companies are usually partnering each over the next fve years will be oil,” and
other in E&P projects, while still competing that it will “increase capital spending on
at corporate level. Despite these frequent fnding and refning energy to $34 billion
partnerships, technical expertise and this year.”2 This announcement came
www.icmai.
The Institute of Cost Accountants of India
and natural gas liquids constitute the project control are considered key in
principal feedstock. Because of the building a competitive advantage within
advantages of logistical proximity, the industry, and these can be enhanced
refneries and petrochemicals plants are by scale-related R&D investment and
often situated close to each other and broad operatorship experience.
often have pipeline linkages between
them. The most common proftability 4.2 Vertical Integration
measures in petrochemicals are cash
margins per ton, usually reported for the Vertical integration is another prominent
two main - upstream products ethylene feature of the petroleum industry, although
and propylene. the details of integration have changed
over time. It can take two principal forms:
4. Value Creation Through fnancial vertical integration occurs when
Integration subsequent stages of the value chain are
owned by one holding company, which
The possible benefts of integration – controls their cash fows; operational
horizontally and vertically – have long vertical integration occurs when there
been the topic of petroleum value chain is a physical exchange between those
analyses. Having reviewed the individual different stages of the value chain, i.e.
stages of the petroleum value chain, crude and products move in between
the question arises as to the potential for them.
incremental value generation through
such integration. 5. ExxonMobil
4.1 Horizontal Integration ExxonMobil, the world’s largest public
company in market capitalization, is the
Regarding horizontal concentration, the benchmark for companies operating
benefts from economies of scale in most in the Oil & Gas Industry. The actions of
activities of the value chain are widely industry leaders like ExxonMobil are closely
acknowledged. Petroleum projects are watched by the entire global Oil & Gas
highly capital intensive, have long lead Industry ecosystem. ExxonMobil (XOM)
times, and are inherently risky. In E&P is a major integrated Oil & Gas (O&G)
particularly, scale helps to access better company with operations in oil and gas
funding, to diversify investment and exploration & production, refning, and
development risk, and to serve as long- marketing oil and chemicals.
term insurance to partners such as host
governments. Due to the high fnancial ExxonMobil recently announced that,
and operational risks involved, oil and gas “the vast majority of its new production
companies are usually partnering each over the next fve years will be oil,” and
other in E&P projects, while still competing that it will “increase capital spending on
at corporate level. Despite these frequent fnding and refning energy to $34 billion
partnerships, technical expertise and this year.”2 This announcement came
www.icmai.
