Brand value increases across categories

Part 3 | The Categories
Ecopetrol appears in the BrandZ ranking
for the first time this year.
Similarly, government gas price controls
impacted the results of China’s Sinopec,
which experienced a decline in net profit.
Pressed by rising domestic demand,
PetroChina, China’s largest oil and gas
company, continued its international
exploration efforts, especially for natural
gas, because of the government’s
commitment to improving air quality.
IOCs face challenges
Economic duress in Europe and Japan,
along with slower growth in China,
impacted the financial results of the
major international oil and gas brands
last year. The IOCs also faced these
two key challenges: too few major new
oil exploration projects; and too much
natural gas, which depressed prices.
ExxonMobil and Chevron, the two
largest US producers, reported strong
profits, however, based on their refining
businesses. Major long-term exploration
Insight
Brand plays a key role
Reputation is internal as well as
external. It is a driver of recruitment,
motivation, retention. It includes brand
equity and stakeholder relations,
particularly governments and potential
partners. And it can serve as insurance
against calamity. In the oil and gas
category, brand is one important part
of reputation. It’s more about building
and supporting reputation than it is
about differentiation.
Adrian Zambardino
Planning Partner
Ogilvy
adrian.zambardino@ogilvy.com
96 BrandZ Top 100 Most Valuable Global Brands 2013
investments hurt Shell’s profit. Along with
the suspension of drilling off of Alaska,
Shell’s business was also negatively
impacted by political instability in
Nigeria. ExxonMobil encountered
production problems in Kazakhstan and
the North Sea. It acquired a Canadian
exploration business to access gas deposits
in the shale rock of Western Canada.
Chevron, among the brands most
engaged in fracking to extract shale gas
in Europe, acquired a major stake in a
private Lithuanian oil and gas company.
Environmental concerns limited fracking in
France and other parts of Western Europe.
Ventures with Russian brands
The need to combine technical expertise
and potential reserves produced several
collaborations between IOCs and Russian
brands. In joint ventures formed with
Rosneft, ExxonMobil will explore several
Arctic off shore locations and Siberian
fields, and Rosneft will gain access to
several ExxonMobil fields in Texas.
In a deal with BP, Rosneft purchased the
British-owned oil and gas brand’s Russian
holdings, TNK-BP, and BP increased its
stake in Rosneft to about 20 percent. The
companies expected the new relationship
to increase exploration capability and
produce operating synergies.
Russia’s Gazprom worked on a long-term
deal to meet China’s growing gas needs.
Gazprom supplies a significant amount
of Europe’s natural gas. The European
Union targeted the company for anticompetitive
practices. Gazprom’s stock
price declined.
Higher prices drove a 6.2 percent
increase in net income to $11 billion
for Lukoil. Russia’s second largest oil
producer appeared for the first time in the
BrandZ ranking of oil and gas brands.
Expansion depends on
brand and reputation
Reputation was the critical currency
that the international companies relied
on when negotiating with governments
for exploration rights. Brand remained
the consumer-facing expression of the
company in its retail gas station locations.
Shell operated 44,000 retail locations
worldwide, for example, roughly 10,000
Insight
Cultivate reputation
Exploration is increasingly difficult and
happening in environmentally sensitive
places like the Arctic. Given the
tension between wanting to protect
the environment and the desire for
the energy to keep the lights on, it’s
likely that any problems will generate
significant attention. Reputation can
help moderate public opinion.
Rob Alexander
Global Planning Director
JWT
rob.alexander@jwt.com
more than McDonald’s. Sinopec controlled
about 29,000 gas stations, mostly
in South and Eastern China.
While the financial impact of these downstream
operations may be less critical
than the benefit derived from upstream
exploration and refining, brand presence
is significant. Generally, oil and gas companies
viewed their petrol station businesses
as cash generators for supporting
the huge expense of exploration.
Brand becomes especially important
as oil and gas companies establish
themselves in countries and attempt to
be understood as good local citizens.
Typically companies aim advertising at
influencers and engaged audiences.
Shell, which has operated in Iraq for
about five years, but has a long-term
commitment in the country, introduced
a marketing campaign aimed at the
Iraqi public. Launched late in 2012,
the campaign positioned Shell as a
contributor to the country’s wellbeing, not
simply an extractor of its resources.
Insights
BrandZ BigData
Brands draw investor
praise, consumer scorn
The oil and gas category has a polarizing
effect. Business people and investors
surveyed in the BrandZ research rate
the top brands as an excellent
investment, while acknowledging the
less than attractive public image of
the industry.
Consumers, hugely influenced by the
increasing price of gas at the pump,
and concerned about the environment,
are generally quite negative about the
oil and gas category brands, saying
they are “arrogant,” “uncaring” and
even “dishonest.”
The multinationals attract most
opprobrium and achieve very low
levels of “trust,” while the national oil
corporations score well above average.
Source: BrandZ BigData, over 2 million consumer
interviews regarding over 10,000 brands in 30-plus countries
Action Points
1. Innovate
Innovation implies technological
competence. That means not
just doing something on time, but
also doing something no other
organization can do; something that’s
never been done before. That kind of
innovation attracts the best workers
and helps win major contracts.
2. Develop partnership skills
The cost and complication of oil
and gas exploration means that one
company alone seldom completes
a major project. Success requires
effective partnership. It’s important
to be known for reliably delivering on
promised work on time, on budget
and with a high degree of excellence.
3. Support local businesses
It’s a good thing to do. And it’s
smart. When working internationally,
supporting local businesses
improves good will and reduces
costs. And it’s much cheaper than
flying everything in from the other
side of the world.
4. Help local communities
It’s another cost of doing business.
To be successful, a long-term
business engagement requires a
complementary commitment to
improving local living conditions with
investments in health care, education
and other underfunded needs.
Commodities | Oil & Gas
Spotlight
BRIC consumers will
compromise to help
environment
A majority of consumers in Brazil,
India and China say they are willing
to consider the environmental impact
of their lifestyle choices and make
compromises if necessary. A lower
proportion of European consumers
say they are willing to compromise.
The contrast may reflect the greater
environmental challenge in fast
growing markets as well as the
remediation and regulation already
in place in Europe.
Willing to compromise
65%
India
Any who agree:
“ I am prepared to make
lifestyle compromises to
benefit the environment”
60%
Brazil
Source: Global TGI 2012
(Europe: UK, France, Germany
and Spain)
58%
China
42%
Europe
97