...Metallgesellschaft AG: A Case Study Page 1 of 7 Metallgesellschaft AG: A Case Study By John Digenan, Dan Felson, Robert Kelly and Ann Wiemert In December, 1993, Metallgescellschaft AG revealed publicly that its "Energy Group" was responsible for losses of approximately $1.5 billion, due mainly to cash-flow problems resulting from large oil forward contracts it had written. In a lucid discussion of this infamous derivatives debacle, Digenan, Felson, Kelly and Wiemart explore the trading strategies employed by the conglomerate, how proper supervision could have averted disaster and how similar financial crises may be avoided in the future. Background Metallgesellschaft AG, or MG, is a German conglomerate, owned largely by Deutsche Bank AG, the Dresdner Bank AG, Daimler-Benz, Allianz, and the Kuwait Investment Authority. MG, a traditional metal company, has evolved in the last four years into a provider of risk management services. They have several subsidiaries in its "Energy Group", with MG Refining and Marketing Inc. (MGRW) in charge of refining and marketing petroleum products in the U.S.[1] In December, 1993, it was revealed publicly that the "Energy Group" was responsible for losses of approximately $1.5 billion. MGRM's expanded venture into the derivatives world began in 1991 with the hiring of Mr. Arthur Benson from Louis Dreyfus Energy. It was Benson's strategy that eventually contributed to the massive cash flow crisis that MG experienced. The Deals: MGRM committed...
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...A CRITICAL ANALYSIS OF THE BP OIL SPILL RESPONSE AND PREPAREDNESS PLAN FOR THE DEEP HORIZON – WHY DID IT FAIL? Toni Josina Elfrieda Beukes* May 2012† ABSTRACT: Based on events that unfolded in the U.S. in the weeks and subsequently months of the Macondo well blow-out, it is clear that neither industry nor government was equipped to deal with a spill the scale and complexity of the Deepwater Horizon disaster. As one of its key recommendations to President Obama for addressing the causes and consequences of the spill, the National Commission on the BP Deepwater Horizon Oil Spill in its final report, stated the need for “strengthening oil spill response, planning and capacity”. Industry best practice dictates that quickness and accuracy are key requirements for effective oil spill response and preparedness planning (OSRPP); yet it took nearly three months to seal the Macondo well. This paper is accordingly concerned with the reasons for the apparent failure of the BP oil spill response plan. This failure will be considered in light of current international environmental regulations on OSRPP and applicable United States legislation, whilst assessing the BP oil spill response plan’s compliance therewith. The study will also consider some theory in the development of OSRPP by looking specifically at risk assessment tools and applying key criteria to the BP oil spill response plan to determine its adequacy and appropriateness for its operations in the GOM. What...
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...1. Executive Summary 3 2. Overview of the UK Oil and Gas Industry 4 2.1 Discussion on the current state of the industry 4 3. UK Oil and Gas Industry Leadership Outlook 5 3.1 Current Leadership Issues and Practices 5 4. Current Global and National Crises Issues 8 4.1 Issues and Impact on the Industry and Practices 8 5. Future Leadership Outlook 10 5.1 Leadership Aims for the Future 10 5.2 Leadership practice: Challenges, Impacts and Recommendations 10 Works Cited 13 1. Executive Summary This report is focused on the current leadership and development in the United Kingdom’s (UK) Oil and Gas industry. The first section highlights and describes the current external and internal environment, along with the challenges posed to the industry. The second section describes the issues faced by the industry in the short-term and long-term process and the measures taken by leaders to curb these issues and minimize the potential of risks and high costs to the industry. The third section gives an analysis of the global issues and problems posed to the UK oil and gas industry, their effects and practices undertaken to resolves these issues. The last section gives an analysis of the future outlook of the industry and its leadership capabilities. It also focuses on recommendations for the leaders to face the challenges that will shape its future protocol and practices within the industry. 2. Overview of the UK Oil and Gas Industry 2.1 Discussion on the current...
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...such as raw materials, like engine components for a car manufacturer. They may also be service-based, such as specialist engineering consultancy when trailing new technology or distribution services for a high street retailer. It is vital that inputs not only meet the required and reliability standards, but also those they are competitively priced. Supply chain management is a set of approaches utilized to efficiently integrate suppliers, manufactures, warehouses and stores, so that merchandise is produced and distributed at the right quantities, to the right locations and at the right time, in order to minimize system wide costs while satisfying service level requirements. For the oil and gas industry with its high levels of risk, the Chartered Institute of Purchasing & Supply (CIPS) is providing training to improve the efficiency and effectiveness of purchasing and supply. OPITO, the focal point for skills, learning and development in the oil and gas industry, undertook a labour market survey of the industry which identified a sector wide skills shortage. Oil & Gas UK then undertook a supply chain specialist for the oil and gas industry. The responsibility of an organization, the impact of its decisions and activities on society and the environment, resulting in transparent and ethical behavior which: Contributes to sustainable development, health and well-being of society. Takes into account the expectations of stakeholders; Upholds the law in force and is in line with the...
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...Chapter 21 Structured Financing Techniques in Oil and Gas Project Fina.nce Future-Flow Securitizations, Prepaids, Volumetric Production Payments, and Project Finance Collateralized Debt Obligations Christopher L. Culp and J. Paul Forrester* I. INTRODUCTION Project finance is the extension of credit to finance an economic unit where the future cash flows of that unit serve as collateral for the loan. By facilitating the separation of project assets from the sponsor and enabling the financing of those assets on the basis of the cash flows they are expected to generate, project finance can allow a sponsor to undertake a project with more risk than the sponsor is otherwise willing to underwrite independently. Project finance can also help sponsors avoid incurring leverage beyond tolerable levels, thereby helping them preserve their debt capacity, credit ratings, and cash flows for alternative capital investment activities. Large-scale oil and gas projects have been popular subjects for project financing since the inception of the market. Indeed, modem project finance is thought to have begun in the 1930s when a Dallas bank extended a nonrecourse loan to finance an oil and gas project. I Project finance "came of age" in the 1970s and 1980s with the Please address correspondence to christopher.culp@chicagobooth.edu or jforrester@ mayerbrown.com. The usual disclaimer applies, and the opinions expressed herein do not necessarily reflect those of any...
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...Role of Risk Management in Managing Price volatility in the Global oil and gas market 1.Introduction “Oil is the life blood of civilization. It fuels the vast majority of the world’s mechanized transportation equipment – automobiles, trucks, trains ships, farm equipment, the military, etc. oil is also the primary feedstock for many of the chemicals that are essential to modern life”(Hirsch et al. 2005:2). It can be said that; there cannot be economic growth without oil, therefore oil is crucial to the world economy, and change in prices would definitely have a knock on effect on the world economy, the oil market is complex, very volatile and it’s capital intensive (Sharma 1998:2). “Oil Prices have exhibited unprecedented volatility in recent months , prices rose from 2004 to historic highs in mid -2008 and only to fall in the last four months of 2008” (kojima 2009:9). Economic growth in the United States of America (USA) and the emerging new markets between 2004 and 2008 gave rise to demand for oil and high-rise in the price of oil. This high volatility of prices has led governments and institutions to intervene in the oil market. This coursework aims at showing the impact of oil price volatility in the global market; it also examines the various roles played by governments, financial institutions and The Organisation of Petroleum Exporting Countries (OPEC) in stabilizing and managing the risk, and the remote causes of price volatility. Government intervention...
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...Turn risks and opportunities into results Exploring the top 10 risks and opportunities for global organizations Oil and gas sector Contents Introduction Executive summary Part 1: Risks Ernst & Young sector risk radar The top 10 risks 1. Access to reserves: political constraints and competition for proven reserves 2. Uncertain energy policy 3. Cost containment 4. Worsening fiscal terms 5. Health, safety and environmental risks 6. Human capital deficit 7. New operational challenges, including unfamiliar environments 8. Climate change concerns 9. Price volatility 10. Competition from new technologies 1 3 6 7 8 8 10 12 14 16 18 20 21 22 23 24 25 26 26 28 29 30 32 34 36 38 39 40 42 Part 2: Opportunities Ernst & Young opportunity ladder The top 10 opportunities 1. Frontier acreage 2. Unconventional sources 3. Conventional reserves in challenging areas 4. Rising emerging market demand 5. NOC-IOC partnerships 6. Investing in innovation and R&D 7. Alternative fuels, including second generation biofuels 8. Cross-sector strategic partnerships 9. Building regulatory confidence 10. Acquisitions or alliances to gain new capabilities Methodology Introduction While risk continues to dominate the business agenda, competition is also becoming just as dominant a feature. Market volatility, pricing pressure, variations in market performance, demanding stakeholders — all have contributed to a global economy that encourages competitive drive. And with that drive comes...
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...British Petroleum Individual Project Phillip Zaphiropoulos Friday, November 16, 2012 ADM1300 B Jean-François Aubert “In partial fulfillment of the requirement of ADM1300.” ADM1300 Fall 2012 Individual Project – British Petroleum 1. Executive Summary To: CEO Robert Dudley From: Phillip Zaphiropoulos Date: November 16, 2012 British Petroleum is a public limited company. They suffered a huge downfall from their 2010 Mexican Gulf oil spill, although have rebounded very positively since then with major improvements in the company, both ethically and environmentally. This company markets its products in over 100 countries and, as of December 2011, employs over 83,000 employees. British Petroleum has worked hard to honour their commitments to the people and communities of the Gulf Coast. This company produces the natural resources that the world depends on daily, and produces them in some of the most operative, proficient, and resourceful ways which are possible today. (BP, n.d.). This company proves to be constantly evolving in the world. They are always innovating and coming up with new ways to operate their business as to cause the most minimal effect or damage on the environment. BP has become one of the most environmentally aware companies of the modern age, especially from what they have gone through in the Gulf of Mexico, and the revolutionary technologies they have integrated in their business operations. The vertically integrated company uses three...
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...very nascent stage of growth. It taps only .4% of the markets. Hence shows huge scope of growth in future. This projects aims to throw light upon into this potential market. To brief about the evolution of commodity markets there is a look into the past giving the overview of the commodity market in India. Various commodities exchanges MCX AND NCDEX work for developing commodity market in India. Major reforms have been initiated in commodity futures markets in India in the last few years along with the analysis about the present scenario of commodity market in India. These efficient risk management tools insulate buyers and sellers from unexpected changes in future price movements. Understanding role the participants of future markets - hedgers, speculators and arbitragers. The second phase of the project deals with the Energy sector of the commodity exchange viz. Crude oil and its determinants in particular for in depth analysis. It includes fundamental analysis for crude oil. How the behavior of crude oil price has significant impacts on different parts of the economy, affecting government, enterprisers and investors, etc. It includes the Study of the reasons behind the volatility of crude oil. Understanding why the fluctuations in the price of crude oil are always a subject of debate. Interrelationships of these factors is identified and quantified to understand and track risk exposure levels. This project is focused on...
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...discover more about what is really sustainability. I have often | | | |heard this word and have probably already used it without really fully understanding the concept. | | | |I am eager to learn more about the role that corporations could play in our future world and how we could possibly reverse the trends toward | | | |over-consumption and over-population. | | | |As a business student, I have often been told that corporations should aim before all at creating financial wealth for its shareholders. I would| | | |however want to believe that a corporation can contribute to the well-being of a wider range of stakeholders. As a future business executive, I | | | |would much rather concentrate my efforts in order to attain such an objective. | | |Article 1: |The evidences presented in this report are clear. Global warming is a...
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...Hedging Jordanian Oil Purchases' Risk and Costs Using Oil Futures Contracts During 1998-2007 Dr. Asa'ad Hameed O. AL-ali ; Mohammed Murdi Al Rawad Abstract This study aims to investigate whether using futures contracts will reduce the Jordanian imported petroleum price risk and decrease the Jordanian petroleum purchases invoice. To achieve the objectives of this study, ten years-hedge simulation conducted on the real imported quantities to generate assumed comparable cases for the unhedged and hedged costs of the Jordanian monthly purchases. The study sample consisted of Jordanian monthly imported quantities of crude oil during the 1998-2007 period. Weekly spot prices of Saudi Arabian Light Crude and the daily futures prices of NYMEX Cushing Crude Oil Futures Contracts 1 (one month) and 4 (4 months) were also used. Constant cross hedge strategy conducted for hedging the Jordanian imported petroleum needs. The NYMEX Cushing Crude Oil Futures Contracts 1 and 4 employed to hedge the Saudi Arabian light crude oil over the study period as a proxy for the Jordanian petroleum purchases. The results demonstrate that the constant cross hedge strategy with the NYMEX oil futures contract 4 proved to be successful in hedging the price risk of the Jordanian imported petroleum and decreases the purchases invoice. While that of NYMEX oil futures contract 1 increases the price risk of the Jordanian imported petroleum, but at the same time decreased the purchases...
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...Corporate Social Responsibility in the Oil and Gas Industry Corporate social responsibility is the concept that has been increasingly used in present day business rhetoric. Although the concept itself is relatively new, it has become widely present and today there are no major companies that do not have some kind of CSR agenda. The role of CSR in the oil and gas industry has been at the forefront of promoting the idea of CSR. The oil companies today devote attention to sensible issues related to the society and environment in which they operate. The main reason why the companies today try to behave, or at least try be seen as behaving more responsible, is that such behavior is favorable to their financial success. Hence, although they behave more responsible to some extent, it would be wrong to claim that they are more ethical and moral. This is evident from often present manipulation of CSR actions and the fact that a lot of CSR rhetoric is geared towards advertisement purposes. As some companies devote more resources to the external communication of CSR practices, this creates an image that they are more responsible. In order to get the insight into the real role of CSR in the industry, a critical analysis of the CSR strategy of Exxon is presented below. Exxon is a major global oil multinationals that have significant influence on the oil industry and is a trend and standard setter. The concept of CSR itself is divided into two main spheres – macro and micro. Former...
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...the occurrence of repeated natural disasters and studies showing the ill effects on human health. It has been established that the misuse of natural resources can threaten the existence of future generations. The role of businesses, civil society and governments has been discussed in the context of environmental sustainability in this report with focus on climate change. The oil and gas sector is an important sector in terms of sustainability related to the environment. The sector has been scrutinized widely for occurrences like leakages and oil spills. The companies in this sector have a huge impact on the environment. The importance of oil companies in the path to sustainable development has been discussed. The multinational giants British Petroleum and ExxonMobil have been used as case studies to understand the kind of initiatives being taken in this sector for a sustainable environment. Lastly, the challenges related to the sector in implementing these initiatives have been discussed. Table of Contents Introduction 4 Development and sustainability issues 5 Climate change 6 Role of business, government and civil society 6 Role of government and regulation 8 Civil society 9 Oil and gas Sector 9 Initiatives in oil and gas sector for sustainability 10 British Petroleum (BP)...
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...Malaysia start joining the derivative market trading community in October of 1980’s with the launched of crude palm oil futures at Kuala Lumpur Commodity Exchange (KLCE). KLCE was known as the first futures exchange in Malaysia and all of Southeast Asia, established in 1980. In December of 1995, Kuala Lumpur Options and Financial Future Exchange (KLOFFE) were officially licensed as a futures and options exchange, and trading on in its flagship stock index futures. In December 1998, KLCE and Malaysia Monetary Exchange (MME) were merged to establish Commodity and Monetary Exchange of Malaysian (COMMEX). Shortly after, in January 1999, KLOFFE became subsidiary of Kuala Lumpur Stock Exchange (KLSE). In June 2001, KLOFFE merged with COMMEX and form Malaysian Derivative Exchange (MDEX). Later Bursa Malaysia Derivative Berhad has listed in 2005. 2.2 China In 1980’s the relevant department study abroad to prepare and actively preparing for China's futures market .The China Zhengzhou Grain Wholesale Market, was the first commodities futures market opened at China in 1990 October. Due to the reason lack of unified management and understanding in future market and issues like illegal trading, market manipulation, China's futures market is in disarray. In 1993 China state council started to regulation it’s future market by standardize the market operations to clean up the futures brokerage firm, strengthen supervision and improve...
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...Sustainability Review 2011 bp.com/sustainability Building a stronger, safer BP What’s inside 2011 was a year of recovery, consolidation and change for BP. Our employees worked hard to make BP a stronger, safer company. We recognize there is more to do, but we believe important progress was achieved during the year, and we are clear on our priorities and responsibilities as we move forward. In this Sustainability Review, we look at how we are working to enhance safety and risk management, earn back trust and grow value, following the Gulf of Mexico accident. Stakeholder voices External and internal stakeholders have been essential in shaping this report. Many of their insights and opinions are highlighted here and online. We also include observations and a summary statement from our external assurance provider, Ernst & Young. During our work we interviewed staff responsible for engaging with external stakeholders and reviewed evidence of how information from these dialogues is captured. We have also attended a selection of briefings to investors and two of the roundtable discussions held in 2011 to understand the perspectives of various thought leaders on how BP should evolve its reporting and communications. We noted that stakeholders welcome this dialogue but there remains a desire for more comprehensive reporting on how BP is changing. Ernst & Young Observation Find out more online This Sustainability Review is a summary...
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