Report On Kuwait Petroleum Corporation (KPC) And Role Of Refining

As a government advisor to one of the NOC's listed below, produce a Report which covers the following areas:

KPC, Kuwait Petroleum Corporation,

Your Report should address the following topics and issues:

1.Discuss the role refining plays within your chosen company.

2.Provide a detailed review of at least 3 PESTLE factors and their impact on refining within your chosen company.

3.Assess how refining activities undertaken by your chosen company have impacted the lives of the indigenous people and local community.

In the current era, the game-changing competition in the refining industry is drastically increasing. The national oil companies are increasingly flexing their commercial muscles in the refined oil products markets. In the coming few years, it is expected that there will be new capacity start-ups in Kuwait, Oman, Saudi Arabia and in other areas of Middle Eastern and Asian countries. This has been found that NOC gets affected due to the macroeconomic influences the operations and success of the refining that involves in the NOCs. Thus, it is essential for the government to plan so that they can reduce the adverse impact of the factors.

The report is based on the KPC (Kuwait Petroleum Corporation) which is one of the NOC that perform the operations related to the refining. Being the government advisor of the Kuwait Petroleum Corporation it is essential to talk about the role of refining within the organisation. Along with this, detailed information of at least 3 factors that affect the refining of the country is discussed. These factors are examined with the help of the PESTLE analysis framework which includes the external factors impact on the company. In addition, the report includes the impact on the lives of the indigenous people and the local community because of the refining activities are undertaken by the company.

Kuwait Petroleum Company is well-known Kuwait’s national oil company with the head office in the city of Kuwait. The major activities which are performed by the KPC include petroleum, production, marketing, exploration, refining, petrochemicals and transportation of the products (Kuwait Petroleum Corporation, 2018). The company is able to produce approx. 7% of the world’s entire crude oil (Kuwait Petroleum Corporation, 2018). KPC came into existence in the year 1980 on 27^th January as an umbrella corporation participating KOC, KNPC, KOTC and PIC successfully placing this company under the regulator of the government. In the market, KPC is considered as one of the worlds most respected, reliable and trusted suppliers of the energy with a long and proud history (Kuwait Petroleum Corporation, 2018).

Refining plays a vital role in the company who perform the operations of the refinery. The refining process is majorly used by the company who produces oil from their factories. The oil refining is one of the essential industrial plants that improve crude oil into petroleum products like gasoline, diesel and heating oils (Kuwait Petroleum Corporation, 2010). The process of refining is majorly served as the second stage in the process of a product in KPC. In the industry, the course of refining process is normally known as the downstream second though on the other hand raw crude oil manufacture is known as an upstream sector.

KPC make use of the both downstream and upstream for the local as well as for the international sector also. The tenure downstream is lined with the notion that the oil is sent down the product value chain to an oil refinery that is essential to be processed into petroleum. The stage of the downstream also comprises the actual sale of the products related to the petroleum majorly to the businesses, governmental and to the other private individuals.

Role of refining in KPC (Kuwait Petroleum Company)

KPC domestic downstream cultivate refining volume is up to 1.4 MM bpd in the average term. This is considered as the maximum conversion capacity difficulty of KPC domestic factories while accomplishing the local energy demand. The refining process plays a vital role for the KPC with the help of which they can offer the petroleum products that can accomplish the needs of domestic energy requirement and international market requirements in terms of quantity and quality (Kuwait Petroleum Corporation, 2018).

KPC domestic upstream include the capacity of the Kuwait 4.0 MM Bpd by 2020 for achieving the sustainable crude oil production and maintain the same by the year 2030 (Kuwait Petroleum Corporation, 2018). KPC pay for the created hydrocarbons by accumulation the proven reserve through the enhancement of the retrieval of the hydrocarbons from the present tanks and pursue a destructive onshore and offshore exploration program.

KPC Company also performs the operations related to the international upstream which include the achievement related to the crude oil and gas production outside Kuwait of 200 MBOEPD by the year 2020 which is essential to maintain throughout the year 2030 and reserves of 650 MMBOE by the year 2020 (Kuwait Petroleum Corporation, 2018). The international upstream operation of company helps in maintaining the capability and technology of the business. KPC become the operations of international upstream assets by reaching more than 20% operatorship by 2030.  

KPC make use of the refining in their operations which helps them to produce the oil and transport it to the different areas which reflect the role performed by refining in KPC. The process of refining contributes in managing and operating the integration of the activities in the most well-organized and specialized manner. In addition, the refining contributes in increasing the shareholder value whilst confirming the best exploitation of the hydrocarbon funds of Kuwait. Majorly, the KPC include the extraction of petroleum and its supply in the market. The petroleum is able to be transported and distributed in the market once it gets refined properly. The petroleum includes the mixture of the hydrocarbon compounds which include all gaseous, liquid and solid states. In addition to this, the petroleum gets deposited into the sedimentary rocks throughout the world. The role of refining in the KPC is to separate the petroleum into the small parts and after this, it is essential to treat these parts industrially, valuable and into the usable products that are produced. This is the fact that when the company distribute the petroleum in the form of the crude then it offers the less value to the company as well as to the customers.

Thus, this shows that the role of refining which is essential for the corporation to offer the quality petroleum to the other companies in the market. In addition, it is essential to maintain their operations in the international and domestic market.

PESTLE analysis is the framework which is a tool which is used by the marketers to analyse and monitor the macro-environmental factors that affect the organisation. The review of external factors is essential to understand the impact on KPC.

KPC domestic refining

The political factors include the changes in the rules and regulations by the government that affects the working of KPC in Kuwait. The major threats that affect the business of the oil and gas company are the political factor because this can make changes in the decision taken by the KPC (Baker, 2014).

Geopolitical conflict is one of the leading issues which affect the KPC operations. In the foreign market, there are some countries that are not willing to form an effective relationship with Kuwait. In addition, there are many reasons in the politics due to which the KPC doesn't form the relationship and leads to conflicts (Doronin, 2013). The rise in the conflict affects the company to supply the oil in the regions where the political conflicts have taken place. Moreover, sometimes the member of NOC also faces numerous types of geopolitical factors which directly create an impact on the decision making of the KPC. For example; Venezuela and Nigeria keep the high prices for the different economic conditions which include their dependency on oil exports revenues. On the other hand, Kuwait, Iran, UAE, Saudi Arabia and Qatar keep the low prices of the products because they want to protect their market share in the oil market (Doronin, 2013).

In addition, this has been found that government of Kuwait control more than 90% of the proven oil reverses with the help of the NOC (National Oil companies) and 75% of the global oil and gas production. This control of the government might affect the working of the KPC in Kuwait.

In addition, the pressure of an appropriate amount of oil and gas reserves in the country can leads to the civil wars with the rise in the corruption. This creates major side effects on the world as a resource curse.

The economic factor is one of the major elements that affect the working of the KPC as these factors include GDP, inflation rate, economic growth, purchasing power and many other (Chernev, 2018). This has been found that there is a deep connection between the petroleum industry and the economy of the country. Kuwait has small, wealthy and moderately open economy which is approximately continuous since the growth of the gulf war. The major basis of the salary in Kuwait is the crude oil that is approx. 95% of the country export and salary of government. The importers of the country are becoming China, South Korea and India who are contributing to growth and rise in purchasing power of the country. This has been found that approx. half of the GDP of Kuwait is composed of oil sector that is 55% and remaining is composed of the non-oil sector. Thus, the analysis reflects that this is favourable for the decisions of the KPC. This shows the leading issue related to the less diversification of the economy of the country. In addition, another issue is that the economy of the country is totally depended on the international trade instead of the local population. These will affect the decision of the KPC as they have to conduct their operations in a manner to effectively utilize the resources (Grant, 2016). In addition, Kuwait might face a reduction in the sources which affects their supply of the oil in the market. This also affects the profitability of the KPC.

KPC Domestic upstream

The environmental factors include the impact of the operations on natural resources. The government of Kuwait has the legal right to bring the changes in the national taxes for the oil and gas industry (David, 2011). The current environmental trends reflect the decrease in CO2 emissions, a decrease in the usage of fossil fuels across the energy mix and rise in the renewable sources of energy. KPC operations are affecting the atmosphere for the proper management the effective Air emission has been done with the help of the Gas Flaring reduction (Kuwait Oil Company, 2015). This reflects that KPC meets their obligations by following the regulations related to the environment and also to reduce the gas flaring environment. In addition to this, the KPC consume the water and energy resources which lead to the rise in the stringent environmental standards. The government make the constraint to the use at some extent which makes the KPC rethink about the extraction, production and distribution method to get the license for operating the huge operations (Schopp, 2018).

KPC affects the life of indigenous people and the local community in several ways which include the use of the land. Seberuang sub-district area includes the permit for oil and gas extraction can affect the survival of indigenous people. The refining of the oil leads to the exploration of the land and the atmosphere (IPIECA, 2018). This reflects that exploration of the forestry takes place and forest area is considered as their source for the clean water, food, firewood, medicine and many others. This is the reason due to which bati village rejected the expansion of the 1139 plans in the area (Outlooks On Biodiversity, 2011). This reflects that KPC refining is affecting the livelihood of the local community and indigenous people by opening new plants in the area of forestry. Along with this, KPC is contributing in not offering the respect to the human rights.

It is the high time due to which the KPC continue to defend the lands and forest to engage the stakeholders at all levels to safeguard the private sector and the government to preserve the habitats and protect their rights.

Conclusion 

In the end, it can be concluded that Kuwait Petroleum Corporation is one of the NOC who is performing the operations related to the refining. The analysis reflects that refining plays a vital role for KPC in the market of Kuwait. It includes the downstream and upstream for the international and domestic purpose. In addition, the discussion related to the different external factors has been done that can affect the working of the KPC. The major 3 factors that impact include a political factor, economic factor and environmental factor. In addition, the discussion related to the refining impact on the lives of local and indigenous people has been assessed which reflects that KPC should think for the projects on which they are performing their operations.

References 

Baker, M. J. (2014) Marketing strategy and management. London: Palgrave Macmillan.

Chernev, A. (2018) Strategic marketing management. Chicago:Cerebellum Press.

David, F.R. (2011) Strategic management: Concepts and cases. India: Pearson/Prentice Hall.

Doronin, D. (2013) Macro-level Market Analysis of Kuwait [Online]. Available from: https://www.theseus.fi/bitstream/handle/10024/55142/Kuwait.pdf [Accessed on 6^th November 2018]

Grant, R.M. (2016) Contemporary strategy analysis: Text and cases edition. New Jersey: John Wiley & Sons.

IPIECA (2018) Community engagement and Indigenous Peoples [Online]. Available from: https://www.ipieca.org/our-work/social/indigenous-peoples/ [Accessed on 6^th November 2018]

Kuwait Oil Company (2015) Air Emissions Management in Kuwait Oil Company [Online]. Available from: https://www.epa.gov/sites/production/files/2016-04/documents/tue4emissionmanagementinkoc.pdf [Accessed on 6^th November 2018]

Kuwait Petroleum Corporation (2010) Kuwait Petroleum Corporation [Online]. Available from: https://www.kpc.com.kw/press/KPCPublications/CorporateBrochure/KPCCorporteBroshure2010.pdf [Accessed on 6^th November 2018]

Kuwait Petroleum Corporation (2018) History [Online]. Available from: https://www.kpc.com.kw/about/history [Accessed on 6^th November 2018]

Kuwait Petroleum Corporation (2018) Kuwait refineries [Online]. Available from: https://www.kpc.com.kw/InformationCenter/Pages/Oil-Refineries.aspx [Accessed on 6^th November 2018]

Kuwait Petroleum Corporation (2018) Strategy [Online]. Available from: https://www.kpc.com.kw/about/strategy [Accessed on 6^th November 2018]

Outlooks On Biodiversity (2011) Indigenous Peoples’ and Local Communities’ Contributions to the Implementation of the Strategic Plan for Biodiversity 2011-2020 [Online]. Available from: https://www.cbd.int/gbo/gbo4/outlooks-review-en.pdf [Accessed on 6^th November 2018]

Pitatzis, A. (2016) PEST Analysis for Global Oil and Gas Companies Operations [Online]. Available from: https://energyroutes.eu/2016/05/08/pest-analysis-for-global-oil-and-gas-companies-operations/ [Accessed on 6^th November 2018]

Schopp, A. A. (2018) Three major challenges for the oil and gas industry [Online]. Available from: https://www.veolia.com/en/market/industry/oil-gas-industries-environmental-impact [Accessed on 6^th November 2018]