ST FRANCIS METHODIST SCHOOL

BUSINESS MANAGEMENT ENTERPRISE

TASK 1
RESEARCH PROJECT – GLOBALISATION
ENVIRONMENTS PEST

NAME: LOURDES KUSUMADI

CLASS: PU2A
Introduction

Globalisation has been defined as the process by which different societies, cultures,
and regional economies unite through a worldwide network of political ideas through
transportation, communication, and trade. Globalisation has affected many nations;
economically, politically, and socially. It is a term that refers to the rapid unification
and interdependence of various nations, which shapes the world affairs on a global
example, which includes Australia. In the recent years, globalization has accelerated
in an incredible speed that has contribute to an increase in free-trade activities,
development of new technology, and the worldwide acceptance of markets.

PEST analysis stands for Political, Economic, Social, and Technological analysis.
It is a useful strategic instrument for understanding market growth and decline,
business position, potential, and direction for operations. By using PEST analysis,
we will conduct Woodside’s standings and potential for future growth. Political factors
looks at political threats such as geopolitical conflicts, and government regulatory
risks to Woodside. Next is economic factor that examines into how oil and gas
industries affect Australia’s economy such as the unemployment rate, and the
significance of Woodside to help Australian economy. Social and ethical factors
looks at how Woodside contributing to the community and how Woodside is adapting
to trend in oil and gas industry. Lastly, technological factor takes into consideration
how technology has change throughout the few decades and how this has change
the industry. Woodside is an Australian oil and gas company with a long track record
of oil and gas discoveries. Woodside is a leader in exploration globally, they are on
track to build a balanced global portfolio, generating value, and long-term growth.

Company Profile

Woodside is one of the most experienced and qualified liquefied natural gas (LNG)
operator, they produce a world-class standard product. Woodside is Australia’s
largest independent oil and gas company that has a global presence. Their
producing assets in Australia include North West Shelf (NWS) Project, that has been
going on since 1984. In 2012, they commenced production from Pluto LNG, they are
the largest producer of LNG in Australia. Additionally, they are adding additional
volume from their non-operated Wheatstone LNG, they will be targeting LNG and
condesate will be exported and domestic gas will be transported via pipeline, this
project will officially start in mid-2017.

They also operate a fleet of floating production storage and offloading (FPSO)
facilities. They are planning to add additional oil production from the Greater Enfield
Project from mid-2019. Their global exploration portfolio includes expanding to
frontier provinces in Australia and the Asia-Pacific region, the Atlantic, Sub-Saharan
Africa and Latin America. Woodside has planned to grab in high-quality development
opportunities in Australia (Browse), Canada (Kitimat), and Myanmar. Woodside are
also pursuing new concepts, technology and planning strategies to enable the
earliest commercialization of these resources.

Additionally, Woodside has developed two joint venture that has significantly benefit
the business. Firstly, Woodside operated North West Shelf (NWS) Project facility, it
accounts for more than one third of Australia’s oil and gas production. NWS Project
is a joint venture between six major international companies. Lastly, the Browse Joint
Venture (BJV) that is a still under development. The BJV participants are now
preparing a new work program and select phase activities.

PEST impacts of globalization

Due to the advancement of politics globalisation, the world is becoming increasingly
interconnected, and as the nation increasingly trade and invest in one another.
Political factors include areas such as environmental law, trade restrictions, political
stability, and health and safety law in a business. Furthermore, globalization has
influenced majorly on economic factors including inflation rate, economic growth,
interest rates, and exchange rates. These factors have a huge impact on how
businesses operate and make decisions. Not only on how business operate, but how
consumer are changing their lifestyle according to how the economy is doing. Other
socio-cultural factors knowledge, such as the use of variety of language, culture,
body language or gestures, could greatly benefit a business by being able to expand
domestically or even internationally. Technological factors includes the rate of
technological change, automation, and innovation. Technology gives companies the
ability to innovate in so many different ways. Lastly, ethical factors includes the
responsibility of a business on an ongoing environmental problems, dumping on
waste products, reducing carbon footprint, and pollution control. Being environmental
friendly and ethical will increase a business public image and support from citizens in
any country.

Political Factors
Woodside has a long track record of oil and gas discoveries. They are proactively
finding new oil and gas volumes that has helped Australian economy to shape.
Woodside has owned one of the world’s most premier LNG facilities in the North
West Shelf and Pluto LNG. Oil and gas are used widely in modern life. Oil fuels
transportation vehicles that underpins economies and lifestyles. Meanwhile, gas
provides electricity and is also used for cooking, heating water, etc. The world relies
on oil more than any other energy sources, oil accounts for almost a third of the
world’s primary energy demand. By 2017, the total export capacity of LNG from
Australia will be 85 million tonnes. This could make Australia the world’s largest LNG
producer (currently 4th largest). However, with the significant benefit that Woodside
has resulted in oil and gas industry, there are many risks and threats that Woodside
needs to not overlook while they continue to grow.
A few example of the threats are geopolitical conflicts, and government and
regulatory risks.

Geopolitical conflicts are disagreements and rivalries that focuses on factors such
as; economics, geography, demography of policy, and foreign policy of a state. A
good example of a geopolitical conflict is the Brexit referendum, whereby British
voted to leave the European Union. The referendum created a chaos in global
markets, including currencies, and resulting in pounds fall to its lowest level in
decades. The immediate impact from UK’s Referendum result was not pleasing for
the Australian economy. Australian Dollar lost 3% to the US Dollar, which effects a
wide variety of market, specifically to Woodside oil and gas business that has gone
on global scale to Asia-Pacific, United States, and Latin America. With around $50
billion in shares was gone from the local market, resulting from the Australian Dollar
dropped in value massively. With unexpected event that could take place any time,
such as the Brexit could effect significantly in Australia import and exporting of goods
and supply.

Government and regulatory risks are unavoidable to Woodside operations and

development as they are involved with both domestic and international governments
and regulators. Woodside’s business activities are subjected to strict and extensive
regulations. Unforeseen change introduced by governments may impact the
company financial standing. Government regulations may negatively effect
Woodside’s ability for future development or maximize value from existing assets.
For example, Woodside’s proposed developments, financial performance, and the
ability to deliver value from existing assets are exposed to changes in governmental
approach in carbon pricing.

Economy Factors
Australia’s oil and gas industry plays a significant role for the prosperity of Australia’s
economy through employment, tax contribution, scale of technology, and its value-
add. Oil is not only for transport fuel; it’s by-products are essential for producing
plastics, chemicals, pesticides, lubricants, and asphalts. Furthermore, by converting
natural gas into liquefied natural gas (LNG) exports to build Australia’s economy.
Australia will become the world’s largest LNG exporter by 2020. However, because
of the downturn, demand has gone down for oil and gas and has affected Australia
economy. But LNG is Australia’s latest success story, and will become the world’s
largest LNG exporter by 2020. This will help Woodside to maximize their LNG
project.

PwC has done an analysis that shows for every dollar of production from oil and gas
sector adds 70 cents of value-add compared other industries that only has value-add
average of 49 cents. Australian Petroleum Production & Exploration Association
(APPEA) Chief Executive David Byers has stated that “The analysis demonstrates
that growth in the oil and gas industry will be higher than the rest of the Australian
economy over the next decade providing a substantial boost to national income and
to taxation revenue,” Oil and gas industry contributes $6.2 billion to Australia Gross
Domestic Product (GDP). The economic benefits of the oil and gas industry currently
accounts for one third of Australian business investment. 200 billion AUD in project
investment between 2012 and 2017 has been committed, and this could rise by 342
billion AUD by 2035. In 2020, oil and gas production is expected to contribute 65
billion AUD, which will increase 3.5% of Australia GDP.

Woodside has contributed to 2 out of 7 of existing LNG project (NWS and Pluto
LNG), and 1 development LNG project (Wheatstone). This signifies how significant is
Woodside influence to Australian economy. Additionally, they own FPSO fleet that
delivers Australia Oil. NWS has reached LNG reliability of 97.4%, and sales revenue
was US$2,986 million in 2014. Pluto LNG reach a top-quartile LNG reliability of
97.1%, and the share of Woodside operating revenue was US$3,440 million. Lastly,
FPSO sales revenue in 2014 was US$825 million.

Oil and gas industry are notably found to decrease unemployment rate. A report by
the Australian Trade Commission found that new and existing development already
created thousands of jobs and this would likely to continue on for a few decades.
APPEA has estimated that over the investment period, there will be around 103,000
jobs created for Australians. Lastly, a 2013 resources skills study by the Australian
Workforce and Productivity Agency have calculated the most significant employment
gains, with an expected 57% increase from 38,943 workers in 2013 to 61,212 in
2018 under the current situation in oil and gas industry.

Social and Ethical Factors

These factors express the trend around the globe such as lifestyles, current needs,
attitude towards saving and investing, attitude towards renewable energy, attitude
towards ecological-friendly business, and population growth. These factors will affect
on how Woodside will make decision on how they will operate, invest, and create or
join a new joint venture. Woodside should be able to offer their services which aim to
benefit people’s lifestyle. Not reacting to changes in society can be an unwise
decision.

First of all, even though oil and gas industry have experienced a long-term impacts
of the downturn since June 2014. According to Deloitte, that 2017 will be “the slow
road back”. Supply and demand are increasing by early 2017, while global and US
oil demand continues to show moderate but slowly increase. Hence, oil companies
have learnt to adapt in a lower price environment, by cutting their cost and focusing
on capital. Demand is down because of the economic slump, and people are saving
oil by using less. However, the need for oil and gas will never be changing, The
International Energy Agency forecasts that oil will still be the world’s most used fuel
in 2040. Oil supplies around 34% of the world’s energy needs, and natural gas
accounts around 21% of energy consumption worldwide. World demand for energy
has increased as population growth increases, emerging and expanding economic
continue to spring forth. Oil and gas have allowed to world to move around the
communities with ease (transportation vehicle), improve health systems, heat/cool
school, homes. Additionally, it also has helps in industrialisation and to increase the
production of food and manufacture products that make our life easier. Lastly, to able
to travel around the world.

Globalisation has caused the world to change their lifestyle where now people do not
send letter to communicate but they use social media, and instead of walking or a
great voyage, we now use vehicle transportation such as car, motorbike, and
airplane. This lifestyle changes are contributing to how everyone makes decisions.
The advantage of this lifestyle change is now we are working and doing activities in a
much faster rate, without the help of oil and gas modern way of life won’t be
maintained without it. There are practically no products or services that could
function with energy – cars, packaging, medicines, etc.

However, the increasing awareness of what is the modern lifestyle has affected our
environmental sustainability. Australia uses 400 million barrels – 63.6 billion litres of
oil each year, and Australia consumes about three times as much oil as it produces.
The burning of oil contributes to 50% of International CO2, which leads to the
catastrophic global warming that has been continuously a worldwide issue. The
Earth’s temperature has consistently increasing and has threaten many flora &
fauna, climate change, and pollution. Additionally, the production phase cause huge
impacts to the ecological resources such as fragmentation of habitat, interfere with
migratory and other behaviour of some wildlife, disturbance to the ecosystem, and
increased potential for fire. Furthermore, hazardous materials and waste
management of oil and gas industry. Industrial wastes are generated during
production operations, when these wastes are managed poorly and released to the
environment, such as accidental spills to marine ecosystem will affect the organisms
and even us humans who consume and drink the water, biological accumulation may
happen and threaten our life in long-term. Lastly, possible health impacts to health
and safety to workers could result from hazardous air emission, water contamination,
etc. These impacts are unavoidable but it could be reduced and managed.

Woodside has been awarded the inaugural Western Australian Department of

Fisheries Excellence in Marine Biosecurity Award. This is the outcome from the
excellent Health, Safety and Environment Policy and the mandatory environmental
regulations that apply to all their facilities and operations. Woodside conduct
research to understand the migratory patterns of certain species in the areas which
they operate, includes the satellite tracking of humpback through their permit areas
of north west Australia. Woodside was the first to use this technology in Australia,
this shows how committed Woodside is to the environment. Furthermore, they have
conducted research for a better understanding of impacts of their activities on the
ecosystem, and they also monitor their environmental footprint. Woodside has
successfully achieved a 29% reduction in flared gas intensity. The best example of
Woodside’s commitment is that they have dedicated oil spill response team to
minimise the when the spill and conducting a regular the team response capabilities
because oil spill created a significant impact to the marine ecosystem, causes many
deaths of marine organisms.

The last trend that has been going on in the community is the act of being ethical to
the community. Businesses that does these actions are considered to have a
positive public image that would benefit Woodside to have a positive public image,
and gain the community support. Woodside has embedded at every level of their
company to build mutually beneficial relationships with the community through social
contribution. In fact, Woodside employees have contributed 35,400 hours of
volunteering programs between 2009 and 2015. Furthermore, in February 2014,
Woodside launched the Woodside Development Fund, $20 million commitment over
10 years to support reducing childhood vulnerability and improving children future
aged 0 to 8 years old. Next, their first international investment is the Myanmar
Education Consortium (MEC). Myanmar has left the poorest country in South-East
Asia because of the political isolation causing children and youth to live below
poverty line. The result from this fund is that parenting groups and home-based
playgroups will be opening in ten villages across Myanmar.

Currently the country that has been rapidly growing and even recognised by
Woodside is Indonesia. Indonesia is a rapidly growing market for gas, and has
suffered from a neglect from Australia and just now gained recognition. The
challenge for Woodside is that Indonesia has a large number of islands over a great
distance. This will challenge Australian workers to better understand different
aspects, for example is to understand the shipping. Woodside is interested in doing a
joint venture, but not yet succeed. However, Woodside has sign agreement to supply
Indonesia’s Pertamina for the supply of estimated 0.5 to 1 million tons of LNG per
annum. Indonesia would be a beneficial country to have a joint venture with because
they are in the midst of improving their infrastructure, and the opportunity for
Woodside to take the chance.

Technological Factors

Technological advances affect all sectors of the energy market and all other regions
in the world. Previously in the energy field, big data gathered from many points of the
exploration and it was extremely challenging. Some of the challenges are precise
computation, exploration speed and focus, etc. However, in today’s world, handling
big data has become much easier. The energy industry has evolved dramatically
from undeveloped geology to supercomputer that has accurate calculations and 3D
views of the subsurface. The technology has altered the manner in which how oil
and gas are reserved, identify, and produced. The 21 st century oil and gas industry is
charged by technology and innovation, and have also improved conservation of
natural resources and environmental protection. For example, the trend “cheap and
clean” continues to increase at today’s rapid pace, clean-coal technology is within
reach already. Additionally, the cost of renewable energy such as solar power are
coming down rapidly, which could make technology commercially useable in many
ends at a large scale in the next century. The future of the energy industry is
beautiful and cheap.

Woodside is a leader in exploration, and this success is driven by their early and
advance adoption in leading exploration technology. The ongoing technical
innovation that Woodside has been committed to is the key of their continued
success. They are one of the first user of 3D seismic data in the 1980s, led deep
water drilling in the 1990ws and were at the first in line of amplitude-supported
drilling in Australia in the 2000s. Recently, Woodside is the first users of 4D and
multi-azimuth seismic data in Australia. Woodside have safely drilled more than 50
wells in water depths greater than 1000 metres, their drilling campaigns around the
world including East Africa, West Africa, Gulf of Mexico, Mediterranean, Myanmar,
and Korea. Woodside aim is to maintain the best performance and cost while
maintaining their technical integrity with the highest standards.

Woodside has benefited from federal government support in the form of Enhanced
Product By-Law Scheme, while at the same time also providing a large scale of work
to local Australian suppliers. The scheme requires Woodside to use Australian
sources for supplies, parts, equipment’s, and components whenever possible.
However, in exchange, whenever these items are not available through Australian
supplies, the scheme provides import of these items duty-free, resulting in significant
saving. This is the example of government support for Woodside technology.
Woodside acknowledges that the federal government scheme create a strategic
advantage for both Woodside and Australian suppliers.
Even though with the increase of demand for the energy sector, the Technology and
Industry Advisory Council has highlighted the problem of shortages in man power.
The most acute shortages are in the trade areas, such as heavy vehicles and
electrical instrumentation. Shortages are also being experienced in technical levels
for technicians, technical document specialists, etc. As well for professional level
such as for engineers, senior project engineers, etc. This is a report from
investigations into the causes and future projections of skilled labours shortages in
Western Australia. The key issues that have been highlighted to be the cause of
problem are the ageing labour workforce, off-shoring of jobs, higher wages have
caused to increase in school leavers and to not complete a higher education and
start working immediately, this resulted in decrease in high skilled occupations, and
lastly the need to further adapt and develop the current training system. The council
has estimated that the demand for the labour will grow faster than the State’s ability
to supply the workers. The council have concluded that Australia will need to depend
on long-term immigration and a need to develop domestic workforce. As a result, it is
suggested of increasing immigration with a particular goal to increase the intake of
overseas students.

Future Outlook
Woodside is a proud Australian company with the vision of becoming the global
leader in oil and gas industry. They have been operating the North West Shelf, since
1984, and with the successful start up of Pluto LNG in 2012. Woodside have remain
committed on strengthening their relationship with customers, co-ventures,
government and communities. Woodside’s joint venture has create a huge
advantage for them to adapt with the globalisation, their joint ventures has gone to
Cameron, Canada, Gabon, Morocco, Myanmar, New Zealand, Peru, Republic of
Korea, Spain, and Tanzania. Woodside has planned to drill

Between 84 million and 90 million barrels of oil equivalent will be the output for 2017,
down from 94.9 million in 2016. While LNG production should increase from 2016
due to the high demand, as the start-up of the Wheatstone LNG project will
contribute to extra volume in 2017, it will be the key pillar of growth in Western
Australia, sets to contribute more than 13 million boe of output a year. Drilling in
Myanmar will cost $US100 million, and wells are also planned in Woodside’s new
Senegal venture in Gabon, and as well at the Swell gas in Australia’s north-west
coast. Woodside has also stated that they are still keen to develop Browse gas
project.

Furthermore, a surprising event that happened early this year was United States
leaving the Trans-Pacific Partnership (TPP). TPP representing roughly 40% of the
world’s economic output, it consists of ties between United States, Japan, Malaysia,
Vietnam, Singapore, Brunei, Australia, New Zealand, Canada, Mexico, Chile and
Peru. First of all, the TPP was intended to increase American influence in Asia and
balance China’s rising power, as United States leave TPP this may create a huge
advantage for China to open a transparent regional economic arrangement. Beijing
has created their own trade deal know as the Regional Comprehensive Economy
Partnership (RCEP), which includes Australia as well, if RCEP succeeds, China
would be in a stronger position to lead a bigger free trade area in the future.
However, the leaving of US hasn’t impacted on Australia’s economy at all, such as
Australian currency. Australia may even have a wider chance without US, but with
China because China is their biggest trading partner. The advantage or impact are
still unknown for Australia economy, but this factor will be need to look out for as
Woodside has arranged 25-year deal for LNG shipments with China National
Offshore Oil Corporation.

Conclusion
In conclusion, PEST analysis is a crucial business tool that analyses four different
groups of external factors which can affect businesses, on how they operate,
develop, make decisions, etc. From political to technology, each of these category
represents a wide range of variable that may impact a business.

Overall, PEST analysis for Woodside has highlighted four important factors that are
affecting its external macro environment. The success of Woodside has come from
their careful analysis towards these four factors, from following strict government
regulations, contributing to Australia economy, following the trend, being eco-friendly
and managing a good and safe environment for workers, to a great innovative
technology that are available for their projects. All have affected the profitability and
viability of Woodside significantly.

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