Page 74 - Azerbaijan State University of Economics

N.V. Abdullayeva: Value creation through mergers and acquisitions in energy sector

less integrated along the value chain that is specialized in one part of the value

chain. For example, there are independent refiners that purchase crude oil and

process it into finished products, independent marketers that purchase refined

products or even independent pipeline companies specialized in the transportation of

oil and gas. In the latter case, larger companies present in the industry can also own

them. For example, Colonial Pipeline Company is a major interstate pipeline that

moves from refined products from the Gulf Coast to the East Coast. owned by BP

(17.96%), CITGO Petroleum (15.79%), Conoco (8.53%), Equilon (16.12%), Koch

Industries (7.30%), Marathon Oil Company (2.82%), Phillips Petroleum (8.02%)

and Union Oil Company of California (23.44%).

Finally there are key players that are external to the production and distribution

of the energy source. These are, for example, Trade and professional organizations

that support the industry and its employees as well as government agencies that

regulate industry operations to ensure compliance with national laws.

Beyond multinational global oil conglomerates, there are also important national

oil suppliers that are also considered important in defining the industry. These are

mainly found in major oil producing nations such as Saudi Arabia, Iran and Venezuela

that supply much of the world with their oil. Indeed national oil companies hold the

majority of petroleum reserves and produce the majority of the world‘s supply of

crude oil, and have exclusive rights over exploration and distribution of oil. Compared

to private based organizations, national oil companies typically do not operate strictly

on the basis of market principles. In many cases their objectives might include wealth

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