Companies within the Energy Value Chain

We refer to the Energy Value Chain as the collective of the organisations from producers and refiners of hydrocarbons in the upstream to heavy consumers of carbon-based inputs downstream. This covers fossil fuel producers, mainly in oil and gas, from exploration to retailing, and coal mining; and energy intensive firms such as carbon-based power generators and intrinsically high energy consumers such as metal smelters and cement manufacturers.

Companies in the Energy Value Chain are often referred to as heavy industries since they are capital-intensive, involve movement or processing of massive tonnages of raw material, and have high barriers to entry. The value chain starts with the supply chain of production and distribution and completes with the consumer.

We categorise companies by business sector segmentation using the Global Industry Classification Standard (GICS) 3 . This classification system is particularly well aligned with market reporting and analysis at the individual company level as well as broad categories of sectors. The GICS structure consists of 11 sectors, 24 industry groups, 69 industries, and 158 sub-industries and applies to companies globally. Energy value chain companies are dispersed throughout the energy, materials, industrials, and utilities GICS sectors. Alternative classification standards for future consideration include the Standard Industrial Codes (SIC), and North America Industrial Coding System (NAICS).

Within the oil and gas industry, the value chain can be broadly described as the following 4: • Upstream sector: all activities associated with exploration & production • Midstream sector: Transportation of crude oil to refineries and storage and marketing of wholesale products • Downstream sectors: Refining, delivery to retail hubs, sales & marketing of products

Main participants in the international oil markets can be categorised as the following: • Super Major Companies (SMCs) • National Oil Company (NOCs) • International Oil Companies (IOCs)

Beyond the focus of this report, there is a growing number of companies within the renewable energy, utilities, and technology sectors that are involved in the production,

3 (S&P Global & MSCI 2018) 4 (Saleh 2018) distribution, and support of clean energy. In particular, solar, wind, battery, and other technologies are making significant and growing contributions as viable energy sources. The future holds much optimism for renewables as their installed capacity is burgeoning worldwide. The European Environment Agency estimates around 17% of EU energy consumed came from renewable sources in 2017 with 11 EU member countries already meeting their 2020 targets. 5

This case study is part of the “Cambridge Case Study Series”, a collection of analyses of risk management practices of global corporations. There is more publicly available data on companies in the US and Europe than other regions and literature and media coverage of business activities and reporting in these regions tend to follow suit. Likewise, the data and analysis in this case study has greater focus on sectors and companies located in the US and Europe. Additionally, this case study covers topics relevant to publicly listed companies with traditional business models in the energy value chain rather than those in the renewable energy markets.