With wildly fluctuating prices of crude walloping the manufacturing sector in general, driving margins to their slimmest pickings, consolidation is a trend that’s set to continue.
This is also particularly true in the oil&gas industry as the majors seek to maximize their revenue potential, larger integrated oil&gas companies press for more efficient distribution networks, while Downstream companies are pummeled by the high$ cost per barrel, as the price swings from the $100 mark to close on $150 and back again.
Refinery margins were thought to be quite safe and robust right up until the beginning of last year, but late 2007 and early 2008 results completely debunk this as myth.
Add to this…
- the debate on whether we’ve already hit peak oil
- political instability in the world’s top producing areas
- massive increasing demand from Asian economies in particular
- the pressure on oil producers to source and extract the precious commodity through non-conventional means
- tighter compliance regulations
- and last, but not least – environmental concerns and green issues
…and you’ve got yourself quite a volatile marketplace.
These swings and roundabouts are the kind of adventures or misadventures (depending on your perspective in the market) that can make or break entire economies, let alone individual enterprises.
Before I digress absolutely, I’ll meander back to my original point, where mergers and acquisitions are an increasing trend in the oil&gas industry. Mergers and Acquisitions in the Chemical Industry in a recent blog. Of course, there are overlaps, since petrochemicals are primary products in the oil&gas industry.
Anyway, in the midst of this age of consolidation in industry, we’ve now got an enormous set of REACH – A Central BPX Information Repository. The point here is that financial experts now see REACH due dilligence as a primary consideration when organizations evaluate target companies during M&A appraisals.
In a recent article, REACh due diligence – Extended scope of M&A services in the framework of REACh, from the Journal of Business Chemistry, Dr. Bernd Schneider and Dr. Matthias Kuschel of PWC assert the following:
“Considering the stipulation of REACh as the new EU chemicals regulation with dramatic impacts on many chemicals businesses, REACh Due Diligence has to be seen as a new Due Diligence discipline. During the M&A process it will be critical to know how the target is positioned and prepared for the REACh regulation.”
This has direct impact for Downstream oil&gas companies also and highlights the importance of REACH Compliance within this sector during these turbulent times.