Chevron Petroleum is a multinational energy company headquartered in California, USA. Chevron ranks among the six top most oil companies in the world. The corporation is actively operating in about 180 countries. The company is engaged in the various aspects of energy production; these aspects include geothermal, oil, and gas. The company undertakes power generation, exploration, refining, production, chemicals manufacture, transport and marketing.
Chevron is considered the third-largest oil producer in Nigeria and it is one of the largest private investors in Nigeria. The corporation operates as a joint venture with the Nigerian National Petroleum Corporation. This venture operates in the Niger Delta both in the onshore and the offshore regions. Chevron possesses an estimated 40% interest in over 13 concessions found spread in over 2.2 million acres in the Niger Delta. Additionally, Chevron also operated projects that include Escravos Gas-To-Liquids and Escravos Gas Plant projects.
Aside from the onshore and near-offshore operations, Chevron also has widespread interest in deep waters of Nigeria. These interests range between 20 to 100 percent in the 10 deepwater blocks. Chevron’s interest in the deepwater blocks is well exemplified by the Agbami development, one of Nigeria’s largest deepwater ventures. In the year 2010, the oil explorer conjured a multi million dollar Niger Delta Partnership Initiative Foundation that sought to address the socioeconomic hurdles facing the Niger Delta (OET, 2012).
The explosion that occurred on the 16th of January 2012 resulted in the death of two contractors. The oils spills also conferred some long term effects to the residents of Koluama village. The water used by the villagers was highly polluted by the oil spills from the gas explosion. The gas explosion saw the contamination of food and water. The gas burn also occasioned the migration of over 100 people from the towns and villages close to the fire.
2.0 Analysis of the External Environment
PESTEL analysis is an acronym that stands for Political, Economic, Social, Technological, Environmental and Legal analysis. This kind of analysis is considered an extensive way of conducting an analysis of the external environment.
2.1 PESTEL Analysis
PESTEL framework is vital in the identification and analysis of the possible risks that affect Chevron’s gas exploration in the Niger Delta. According to Henry (2008:52), the PESTEL analysis captures the six main types of that look at the Political, Economic, Social, Technological, Environmental and Legal aspects.
Risk analysis is best used to analyze the problems associated with oil exploration activities. According to Henry (2008: 23), the process of risk analysis encompasses different aspects of risk that include risk assessment, risk management, and total risk analysis. Quantitative risk assessment (QRA) is an important method of analysing the effect that the occurrence of a risk would have on the various aspects of the project under consideration. The risks inherent in an oil exploration exercise can thus be categorized on the basis of their characteristics into social, technological and natural aspects.
2.1.1 Social Aspects
A social disaster is thought to be a hazard that affects the lives, properties, activities and livelihoods of a human system. These hazards arise from events that include crowd crushes, civil unrests, bombings, gun fires and riots from rowdy and marauding workers. Riots and civil unrests are notorious for paralysing the operations of a business enterprise. These unrests often emanate from the employees’ displeasure of the manner in which their affairs are being handled by the management. The occurrence of these events could paralyse the operations at the Chevron Nigeria Ltd.
2.1.2 Technological Aspects
A technological disaster occurs when there is a malfunction, misuse and breakage in a modern piece of equipment, which is habitually accompanied by severe impacts on the lives and livelihoods of the employees of the workers using the piece of equipment. Technological disasters are often associated or accompanied with a release of toxic substances of some sort to the biosphere, atmosphere or hydrosphere (Keil, 2012: 17). The gas burn at the Chevron Nigeria Ltd plant led to oil spills that polluted the waters, killing marine life forms and disturbing the balance of life in the marine environment. The gas explosion might have resulted from a structural failure in its drills.
2.1.3 Natural Aspects
The natural aspects present themselves in the form of natural disasters, which are hazards that occur naturally without the participation or influence of man. Tsunamis and flooding are exemplars of natural calamities that might affect the operations of an oil exploration firm, both in their onshore and near-offshore operations. In the case of gas fire at Chevron Nigeria Ltd’s plant, there is a possibility of the operations being affected by these natural disasters. Additionally, the location of the oil drills offshore exposes them the more to the rigors of weather and natural calamities.
3.0 Uncertainty/Impact Analysis
The gathering of the various influencing factors is considered to be an important step in scenario development. The initial listing of all the probable factors that might affect the outcome of the scenario development process serves as the initial step in this brainstorming process. After establishing the numerous factors then the uncertainty/impact analysis is then employed to narrow down the listing of influential factors into a manageable set of factors (OET, 2012). The uncertainty/impact analysis is also instrumental in zeroing in on the crucial influential factors that can be used as a basis for fashioning compact scenarios. Following are tables showing how the various risks can be qualified and quantified:
3.1 Risk Qualification
3.2 Risk Quantification
Risk quantification denotes the process involved in evaluating the identified risk and formulating data that will be used to determine the action that will be taken towards the data gathered. The aim of this process is to order the identified risks according to their significance (Fadeyibi, 2011: 15). Most projects are often exposed to the triple constraint of time, money and resources and as thus it is therefore important to order the risks according to their importance so that the most pressing or threatening risk can be attended to first. Risk quantification uses the severity of risk to quantify the various risks. The risks under consideration are often ranked as high, low and medium.
3.3 Risk Management Strategy
Risk management is an ongoing process that most corporations embark on so as to ensure that protection is afforded to itself, its workers and clients. A sound risk management strategy is one that is well structured to identify, evaluate and manage risks. This strategy can be implemented by an organization of any size (Fadeyibi 2011; 32). A risk management strategy for Chevron Nigeria Ltd can be designed as shown hereunder:
4.0 Scenario Analysis
- The scenario analysis process denotes the various strategic planning methods applied by corporations following some hypothetical series of events of some sort. This process seeks to draw a close relation between the hypothetical events and the results of the observations gathered through analysis and attempts to investigate the aftermath of such events (Lindgren, & Bandhold, 2003: 13). The scenario plan presented hereunder is a representation of hypothetical events that are tailored to depict the various scenarios decision making for the Chevron Nigeria Ltd.
4.1 Decision making in the context of each Scenario
4.1.1 Scenario A: Worst case Scenario
This scenario arises from massive oil spills and gas leaks. This scenario is most likely to be fatal and may lead to massive loss of the sea’s biodiversity. This scenario is also likely to lead to fluctuations of gas and crude oil prices, air pollution and emergence of waterborne diseases. The severity of this scenario necessitates the development of an emergency plan that is presented in the next section.
4.1.2 Scenario B: Bad Case Scenario
This scenario arises from moderate oil spills and gas spills. This scenario is equally disastrous; however, the quick response by the engineering team to shut down the pipelines reduced the severity of this scenario. This scenario’s occurrence can be blamed on the negligence of the plant operator. The occurrence of this scenario will be accompanied by loss of human life and destruction of property. This scenario might necessitate the formulation of an emergency plan.
4.1.3 Scenario C: Fairly Bad Case Scenario
This scenario results from a gas leak and massive oil spill. This scenario may be blamed on an explosion at the valve station and a subsequent breakdown of communication between the two centres. The gas leak is quickly contained because of its detection by the fault system. The oil spill from this scenario might lead to the death of aquatic organism. The plant may be shut down to allow for the cleaning up of the oil spill and repair of the communication system so as to prevent the recurrence of such events in the future.
4.1.4 Scenario D: Fairly Mild Scenario
This scenario results from moderate spills and gas leaks .In this scenario the oil and gas leaks are detected much earlier by the fault system. The early detection of the oil spills prevents massive losses in aquatic life. Similarly, the early detection of the gas leaks also prevents the subsequent occurrence of explosions. The containment of these leaks and spills prevents the disruption in drilling, and as a matter of consequence, the supply of gas and oil from the plant continues unabated. This scenario needs no development of an emergency plan.
5.0 Emergency plan for Worst Case Scenario
The oil industry is ranked as the most hazardous line of business. Despite this ranking, corporations often try to manoeuvre their way around the dangers primarily because of the industries profitability. The oil industry is also considered to be a major support industry for other sectors of the economy. This is so because of its product, oil, which literally drives or fuels the other sectors of the economy. Scenario thinking allows us to pre-empt the likelihood of occurrence of the worst case scenario and by so doing allow us come up with counter measures that will insulate the corporation against the adverse effects that accompany this scenario. The formulation of an emergency plan for the worst case scenario is inspired by the fact that it is at the occurrence of this scenario that most injurious effects are conferred. Following is an emergency plan that can be adopted by Chevron Nigeria Ltd.
6.0 Disaster Recovery plan
This plan is important as it charts out a road map that will guide the recovery process that follows the occurrence of the worst case scenario. This disaster recovery plan is tailored to respond to the occurrence of the worst case scenario described in the section above. The disaster recovery plan will provide a road map for the restoration of basic services after the occurrence of a disaster. After restoring the basic services, the plan will then move on to direct the short term and long term activities aimed at restoring the various aspects of the site back to its original form.
Fadeyibi, I.O. et al., (2011). Burns and fire disasters from leaking petroleum pipes in Lagos, Nigeria: an 8-year experience. Burns journal of the International Society for Burn Injuries, 37(1), p.145-152.
Henry, A. (2008). Understanding strategic management. Oxford, Oxford University Press.
Keil, I (2012). Environmental Auditing. Munich: GRIN Verlag Publishers
Lindgren, M., & Bandhold, H. (2003). Scenario planning: the link between future and strategy. Basingstoke [u.a.], Palgrave.
Lobel, M. (2012). Chevron Nigeria gas well fire ‘may burn for months’ [online]. Available at . [Accessed on 17th Dec 2012].
OET (2012). Nigeria: Chevron Getting Ready to Kill Burning Well. [online]. Available at . [Accessed on 17th Dec, 2012]