SOCAR Company is an established international company dealing in the marketing and production of oil and gas. It has a fleet of ship that it uses to transport its goods and products of oil. Being a world class leader in the refining and management of this oil and gas business, it has employed certain measures known as refining and shipping strategies (ARDNŞ, 2011).
It also employs reverse transportation of oil via the Baku-Novorossiysk pipeline and does its refining of the extra additional oil volume at the oil refineries in Baku. As SOCAR’s oil production goes down, the company is challenged to ensure the that the various company’s oil refineries are filled well with oil to maintain the companies economic state (YUSIFZADE, 2007). The company should therefore consider investing in other countries, not just as dissemination centers, but as places where the company can exploit and mine oil to fit the rising demand for its resources. This could be done in countries like Romania and Turkey, where the company enjoys good relations with those governments. The oil the company extracts from the Azeri-Chirag-Guneshli oil fields and the condensate from the Shah Deniz field form a major chunk of SOCAR’s exportation.
The company has been constructing small refineries which the Investments, Department of SOCAR tells Turan that such unwarranted constructions are not very important to the general welfare of the organization (ARDNŞ, 2011). SOCAR claims that as far as bigger refineries are concerned, there are no plans to of incorporating such plans into its annual budget any time soon (YUSIFZADE, 2007).
The company tries to manage its risks by establishing more oil refineries of a capacity rising up to ten million tons of oil a year in Turkey. This forms the strategic refining project for the company over the many years it is supposed to remain a world leading oil and gas company. Its prospects show that not even Azerbaijan is going to buy new oil refining activities in the economy (YUSIFZADE, 2007).
The country has been able to ship 762582 tons of oil from Novvrossiski port down to 42.6% against the same. During this new era, it has also planned to ship up to 1.75 million tons. As a big company SOCAR generally should focus on innovation and expansion in order to maintain a competitive advantage over other capable companies.
SOCAR moreover, should utilize these countries where the potential of growth is so high by developing expansion programs in them such as creating oil refineries or applying for mining licenses to exploit the oil rich reserves (YUSIFZADE, 2007). Such countries include Russia, which presently has only 68 refineries and with a potential capacity of growing up to 299 million tons a year in the near future. In Kuban also the volume of oil and oil products will increase by 13% up to 15 million tons compared to that in 2012. Presently the Kraodar region runs five oil refineries with the biggest one known as Tuapse oil refinery reaching a capacity of 15 million tons a year. This is according to the ministry of Krasnodar hence the company is advised to develop expansion schemes in such areas full of potential.
The company has had a lot of successful endeavors in a bid to grow itself through expansion by investing its cash in several areas and ensuring In order to ensure this the company has signed many business treaties and agreements to support its expansion and growth. The company at one time was able to use the funds from the Eurobond placement such that in the amount of $500 million to pay for assets in Switzerland that were purchased from EXXOn Mobil. SOCAR was simply acquiring the Swiss branch as an asset (YUSIFZADE, 2007). Through having many varied assets involved in businesses the companies can be able to sustain itself in case of a major financial crisis. This acts as a way of risk management and appreciation.
It is nevertheless clear that better strategies be laid in order to overcome risks. Through such investments SOCAR has to focus on oil refineries and the exploitation of other countries where this resource is abundant (YUSIFZADE, 2007). For instance, they should be building their petrol stations in many other countries and not advocating only for economic growth. In order to maintain a better risk management plan, the number of refineries built should not exceed by a very large number the oil exploration plants close by in that area (ARDNŞ, 2011). This way there can be no shortage of oil supply, especially to the refineries and a smooth operation is guaranteed.
Furthermore, it would be prudent enough to buy assets, especially those that appreciate with time such as land to keep the company making profit. Care should however be taken not to over indulge in unrelated business which might end up absorbing the oil business.
With the wealth invested in this company, it should open up tit market in increase its existing niche in the international market. The other recommendation for this company to remain competitive is the aspect of building up new and modern distribution channels which should be integrated with technological applications. The company should also consider restructuring its supply system management to ensure that, it competes effectively with other players in the market.
YUSIFZADE, K. (1997). The oil & gas industry of Azerbaijan. Baku, SOCAR.
ARDNŞ. (2011). SOCAR plus.