Santos Ltd: Environmental Analysis Assignment Paper (Essay Sample)

SANTOS LTD: ENVIRONMENTAL ANALYSIS
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SANTOS LIMITED: ENVIRONMENTAL ANALYSIS
Introduction
Santos Limited is one of the major players in the Australian oil and gas production industry. The Adelaide based company was formed in 1954 and has since grown from a struggling exploration company to being recognized as one of the largest oil exploration and production companies in the larger Asia pacific region (IBIS World, 2016). As of December 2015, the copany average an annual production of 57.7 million barrels, annual sale revenues of 3.25 billion A$ and assets valued at 21.9 Billion A$ (Santos Ltd, 2015). Apart from the Asial pacific region, the company also has ongoing operatios in Krygistan and Egypt. Santos’ estimated domestic marketshare is 9.3% with its major competitors (by market share) being Woodside petroleum (17.1%), BHP Billiton (13.1%), Shell (9.6%), Chevron (8.6%) and ExxonMobil (8.6%) (IBIS World, 2016). This document aims to investigate the macro-environment within which Santos operates in with the view to offer market insight which might be usd as the foundation for decision making and strategy formulation proceses within the company.
Pestle Analysis
The PESTLE analysis framework will be used to invstigate Santos Ltd’s macro environment. The framework analyses 6 constituent components of the macro environment (Ho, 2014): Political, Economic, Social, Technological, Legal and Environmental environmental factors and how they impact the company under review.
Political
Santos Ltd benefits immensely from operating within Australia’s stable political system. The Australian political environment not only promotes transparency but also ranks highly in terms of creating a business friendly environment. Table 1 below shows Australia’s percentile rankings according to the Six indicators of good governance according to World Bank data (World Bank, 2016)
IndicatorGlobal percentile rankingsControl of corruption95.2Government Effectiveness91.8Political Stability and Absence of Violence87.4Regulator Quality98.1Rule of Law96.2Voice and Accountability93.6Table  SEQ Table \* ARABIC 1: Australia's governance indicators (Source: World Bank)
As the data shows, Australia consistently ranks highly in all governance indicators, showing that the country has a stable and conducive political environment for business.
In addition to good governance, Australia also has strong political ties to all the major global financial markets which provide Australian companies with valuable access for their exports.
Economic
Australia has a robust economy that is ranked 12th globally in terms of GDP size (Garcia, 2015). The country’s economic environment encourages open market principles and has a strong and stable financial system. Internationally, the country is affiliated with numerous regional and global economic organizations including APEC (Asia Pacific Economic Cooperation), the G20, OECD (Organization for Economic Cooperation and Development) and the WTO (World Trade Organization) (Sakharov et al., 2015).
World Bank data also shows that the country’s energy consumption, especially in the fossil fuel demand, is rapidly increasing which guarantees Santos Ltd of having a ready market with high demand for its products. Australia also ranks 13th globally in the ease of doing business index (Peng, 2015), with top 5 performance in terms of ease of obtaining construction permits, credit accessibility and the enforcing of contracts, all of which are vital for Santos Ltd’s operations.
The only negative economic aspect has been the dropping international Oil and Gas prices (Husai et al., 2015) which have seen Santos Ltd make overall losses in 2014 and 2015 despite recording impressive production growth and seeing a reduction in its operational expenses (IBIS World, 2016).
Social
Australia has a very multicultural and ethically diverse population. Multiple social development measurement indices corroborate the fact the Australia’s social cultural environment is well developed. In terms of education and literacy, the country has a 99% adult literacy rate with 58% of the population between 25 and 60 having achieved vocational or tertiary post secondary qualification (Tompkins et al., 2014). This educational excellence creates a qualified talent pool from which Santos Ltd, and other Australian Business entities, can source employees.
In terms of poverty levels, and standard of living, the 2014 Human Development Index carried out by the UNDP place Australia at second position globally (only exceeded by Norway) in terms of having low poverty levels, good accessibility to social amenities and overall impressive standard of living (Bravo, 2015). Low poverty creates a population that has the purchasing power to create demand for Santos Ltd products.
Technological
The Australian Oil and Gas exploration industry is among the most technologically advanced globally. Australia is projected to be the first country to fully implement a floating LNG (liquefied Natural Gas) extraction plant in the world and there have been big developments in terms of developing floating oil production platforms as well as the development of large scale geosequestration (the safe underground storage of greenhouse gasses) (Kerbers and Kartnell, 2008).
However, most of the technology used is often imported with World Bank data showing that Australia has a large gap in its high technology exportation and importation in favour of importation.
Legal
Australia has a very clearly defined and effective legislative and regulatory framework for the oil and gas production industry. State governments are in charge of all onshore exploration/production as well as offshore activities within their state controlled continental shelves (within 3 nautical miles of the shore) (Zakkour and Haines, 2007). Offshore exploration/production beyond state territorial waters is governed on a commonwealth level. Both on a state and commonwealth level, there are numerous laws and regulatory bodies that govern oil production in terms of enforcing safety laws, monitoring fees and levies as well as enforcing environmental conservation and taxation.
Environmental
Australia has one of the most biological diverse environments both terrestrially and in terms of marine flora and fauna. The country is responsible for 1.3% of global CO2 emissions, but has performed impressively in terms of outperforming its Kyoto protocol targets and is predicted to meet its 2020 greenhouse emission reduction targets (Curran, 2009). Santos has been on the forefront in environmental conservation efforts by being a founding partner of AMOSC (Australia Marine Oi...