In the past few years, Swiss multinational behemoth, Glencore, has amassed the majority of its assets and earnings in Asia, where new mandates have been offered to architects such as DP9 and Dada, PwC and CBRE. This South-east Asian opportunity is one of the reasons Glencore’s deal-making prowess was rewarded with the 2018 “Deal of the Year” honour from Deloitte’s Asia-Pacific Investment Banking Best Practices Awards.
Now, to further develop its Asian presence and expand its mining operations in a region with the world’s largest growth potential, Glencore is preparing for a public listing in London and Hong Kong. Much of the company’s narrative so far has focused on its luxury real estate arm, Vallar, and its acquisition of nickel producer Sherritt International Corp. Such are the complex and rapid changes affecting the world of the energy industry.
In addition to revamping its corporate governance and sprucing up its media offerings, Glencore is set to jump on board the growing polemic about what exactly is the responsibility of the oil industry to improve the environmental footprint of its work. The notion of re-orienting its business model to suit the five S.E.C.’s: sustainable development, human rights, governance, transparency and integrity, makes ethical as well as fiscal challenges daunting, especially if you want to be a global player on the energy front.
The first step is to get the message across. Then you have to look for concrete ways of doing so. In the so-called “oil-chemical matrix” – the profile of oil products, mineral commodities and energy – there is one constant: the nexus between the direct and indirect value chain, from refinement and mining through to energy consumption. The object is to get into that matrix, and to create synergies across multiple value chains.
Another key to the success is technology. Glencore, and many other multi-nationals in the industry, have invested in them both at the front-end, in order to develop the technologies that underlie the extraction process, and at the back-end, to improve the way the products are transported to end markets. Similarly, these companies have developed scale-improvement projects to ensure that the best products are targeted to the market with the shortest delivery time.
The beauty of these projects is the fact that one does not necessarily have to build everything. Another, and a far less glamorous but nonetheless game-changing, strategy to ensure successful deployment of energy in the ever more crowded marketplace has been to acquire scale. An obvious source of scale is to incorporate oil and gas assets into existing businesses such as metals, precious metals and agriculture, if the asset is there, and to generate synergy through common manufacturing processes and production sites.
The time it takes for Glencore to reach and evolve this model could take as long as a decade, but if it succeeds, it can accelerate much of the disruptive effect in the global energy markets of 3-4 years. Given the outlook of both the commodity markets and the digital market, the time can be justified.
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*Lead image from zonanophoto/Shutterstock