Porter's Five Forces: Essar Oil
Michael Porter five force analysis for Essar Oil Limited
Threat of new entrant
Oil and Gas is a highly capital intensive sector. Huge investments and long gestation periods characterize every component of the value chain right from exploration and production to refining to retailing. The investment required runs into billions of dollars. The oil prices are also quite volatile and the industry also faces high geo-political risk. Taking these factors into consideration the entry barriers are quite high. In India the administered price mechanism (APM) and licensing policies makes doing business all the more difficult. The refinery of Essar has a complexity of 12.5 making it a very complex refinery capable of refining all varieties of crude and producing Euro 5 grade fuels. This is also among the largest single location refinery in the world, thus leveraging on economies of scale.
Therefore Essar oil faces minimal threat from new entrants.
Bargaining power of suppliers
Essar currently has a 10.5 mtpa capacity refinery at Vadinar, Gujarat and is expanding the capacity to 34 mtpa. In its E&P business it has interests in Ratna and R-Series blocks in Bombay high India, Mehsana in Gujarat and also at many places in Madagascar, Africa, Nigeria and Vietnam. As a result the company is vertically integrated. Though there is no substitution of raw material (Oil) the question of bargaining power of supplier is considerably hedged. The location of the refinery is also of strategic importance because it is located Vadinar is a natural all-weather, deep-draft port that can accommodate very large crude carriers and is quite close to the gulf region which is the largest supplier of crude to India. Because of this the demand supply gap if exists can be catered to by a variety of suppliers giving little or no bargaining power to the suppliers.
The bargaining power of suppliers is minimal.
Bargaining power of Buyers
Essar Oil serves retail customers through a modern, countrywide
Threat of new entrant
Oil and Gas is a highly capital intensive sector. Huge investments and long gestation periods characterize every component of the value chain right from exploration and production to refining to retailing. The investment required runs into billions of dollars. The oil prices are also quite volatile and the industry also faces high geo-political risk. Taking these factors into consideration the entry barriers are quite high. In India the administered price mechanism (APM) and licensing policies makes doing business all the more difficult. The refinery of Essar has a complexity of 12.5 making it a very complex refinery capable of refining all varieties of crude and producing Euro 5 grade fuels. This is also among the largest single location refinery in the world, thus leveraging on economies of scale.
Therefore Essar oil faces minimal threat from new entrants.
Bargaining power of suppliers
Essar currently has a 10.5 mtpa capacity refinery at Vadinar, Gujarat and is expanding the capacity to 34 mtpa. In its E&P business it has interests in Ratna and R-Series blocks in Bombay high India, Mehsana in Gujarat and also at many places in Madagascar, Africa, Nigeria and Vietnam. As a result the company is vertically integrated. Though there is no substitution of raw material (Oil) the question of bargaining power of supplier is considerably hedged. The location of the refinery is also of strategic importance because it is located Vadinar is a natural all-weather, deep-draft port that can accommodate very large crude carriers and is quite close to the gulf region which is the largest supplier of crude to India. Because of this the demand supply gap if exists can be catered to by a variety of suppliers giving little or no bargaining power to the suppliers.
The bargaining power of suppliers is minimal.
Bargaining power of Buyers
Essar Oil serves retail customers through a modern, countrywide