Table 22. Business Context – Oil & Gas Company

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& Gas Company in environmental practices such as ISO 14001 and self-reporting initiatives (e.g., DJSI). For example, Oil & Gas Company was listed in the Dow Jones Sustainability Index (DJSI) in 2010, after its main competitor in Latin America was listed in 2006. Additionally, Oil & Gas Company was certified under ISO 14001 in 2008 after its main competitor in Latin America was certified in 1997.

In addition to coercive, normative and mimetic pressures, Oil & Gas Company is subject to the variation of the international price of oil and has faced an extent fall of barrel prices since 2015. Specifically, oil prices underwent a considerable drop because of strong growth in OPEC production in previous years. The average barrel prices were $43.55 USD in 2016, compared to $52.39 USD per barrel in 2015 and $98.95 USD per barrel in 2104 (BP, 2016). In response to the oil price crisis, the company developed an austerity plan to reduce investments and reduce costs and expenses, through an operational efficiency focus and the renegotiation of contracts in order to continue with the development of the activity of the firm, thus minimizing the possibility of economic risk.

Finally, in 2017 and 2018, the oil prices recovered almost by 70% of the value lost since 2014. In 2018, the company finds itself going through a good moment of financial strength due to the fact that it has managed its assets to reach equilibrium and has stabilized its profits after the fall in oil prices (the CEO, 2017).

Table 22 presents a summary of the influencing factors and environmental practices found in the Business Context.

Table 22. Business Context - Oil & Gas Company

esa factor categories main features

Business context

Coercive * Requirements from regulators to operate. * Social license from communities located near to the facilities of the company. Mimetic * Main competitor’s practices in ecosystem protection and CO2 compensation. * Main competitor’s self-reporting initiatives such as DJSI and GRI. Normative Industry standards and voluntary programs such as ISO 14001 and ISO 26000 standards and UN Global Compact principles, the CEO water mandate and human rights principles.

122 | Carlos Fúquene Retamoso

b) Business model

Oil & Gas Company runs a stable business model to keep its position in the market by being the only oil refiner and fuel producer in Colombia relying on market opportunities, management of risks and establishing a permanent dialogue with regulators.

In recent years, the company has optimized production, transportation and refining capacity in order to increase the life of crude oil reserves, which means improving the indicator of production vs. existing reserves in the Country (Sustainability Report Oil & Gas, 2016;2017;2018). Because of those capabilities, Colombia reached a peak in oil production (2.4 trillion barrels) and reserve levels (6.3 years) in 2015 (BP, 2016; PWC, 2014). The company controls 95% of the pipelines of the country and the transportation facilities including the shipping of crude oil.

The business model is deployed through financial capabilities, operational efficiencies and stakeholder management.

Financial capabilities supported the Company to perform investments for the development of technological solutions for process optimization. The company has been involved in the optimization of expenses and investments, simplification of business processes and business efficiency.

The organizational capabilities of the firm have been associated to managerial ability and organizational processes to face changing markets. Even, in the case of the oil price crisis, the firm was able to maintain its competitive advantage and deal with external demands from stakeholders. Company´s capabilities have supported the Company to secure the market through the optimization of oil refining efficiency and the increase in processes productivity, company branding through a renewed image to reflect its commitment with sustainability and cleaner barrels, management of relations with stakeholders (especially communities and authorities) and the execution of alliances with business partners in alternative energy projects.

Technical know-how supported process improvement for the development of oil production in mature fields, the management of heavy oils and the improvement of oil recovery practices. The company counts with more than 60 patents registered in Colombia, the United States of America, Korea and Indonesia. Those patents are related with process improvement, oil leak detection and monitoring, heavy crude oil extraction and use of by-products. Technical know-how has improved the amount of oil recovered from wells by using different extraction techniques.