Marathon Oil's Crude Oil Operations and Marketing Strategy

Introduction: America's Oil Import Dependence

America produces merely 37 percent of its oil demands, requiring approximately 60 percent of its oil to be imported from other countries, including Nigeria, Kuwait, Russia, Norway, and Canada (Marathon, 2010). With such high demand for oil, America maintains ports through which imported oil is delivered by vessels capable of carrying up to three million barrels on a very large crude carrier (VLCC). Once these crude oils have been brought to America's coast, they are loaded into a storage facility and then transported to a refinery to be processed into different types of products (Marathon, 2010). At Marathon, this is accomplished through the Louisiana Offshore Oil Port, or LOOP. This entire process can take approximately one month to complete (Marathon, 2010).

Marathon is in need of creating a new operational plan and designing more time-efficient approaches to the crude oil process. While developing this plan, Marathon should also devise a new marketing strategy to outperform its competitors. With the potential banning of offshore drilling on America's coast looming, it is vital that Marathon immediately revisit its business model.

LOOP Operations and Supply Chain Timeline

Marathon currently takes roughly 34 days to deliver oil to many of its facilities across the East Coast and the Midwest. This process begins when a supertanker or other import vessel transports crude oil to LOOP, which is located between Louisiana and the Gulf of Mexico. When the product arrives at LOOP, it is evaluated and directed through a pipeline into a storage facility. The evaluation and storage process can take up to two days to complete. Once in storage, a set of four pipelines distributes the crude oil to over 50 percent of America's refineries. From there, the oil is shipped to retailers in its various refined forms (Marathon, 2010).

LOOP transports one million barrels of crude oil on a daily basis. It is "strategically positioned" (Marathon, 2010) as the only United States port capable of handling crude oil imports via supertankers. Those supertankers can hold up to three million barrels, and it can take up to three days to process just one supertanker.

Risks of Single-Port Dependency and Proposed Solutions

Because Marathon owns 50 percent of LOOP (Marathon, 2010), it has a direct stake in LOOP's operations. Louisiana is well known for natural disasters, and LOOP could become inoperable during such events. If this occurs, other ports in the United States would not be able to handle supertankers, causing significant delays in the imported crude oil delivery process. This could create financial risk for the company in possession of the supertanker, the oil company responsible for the supply being delivered, and could trigger a broader fluctuation in United States oil prices.

The best solution to this potential dilemma would be for Marathon, along with other crude oil companies, to collaborate and invest in a second oil port with the same capabilities as LOOP. Not only would this provide an alternative when natural disasters or other disruptions occur at LOOP, but it would also create new business opportunities for all parties involved. With a second large oil port operational, supertankers would have the opportunity to move more quickly through the unloading process.

If the crude oil companies selected a location further north on the East Coast, that port could focus on distributing oil to the upper East Coast and upper Midwest, while LOOP continues to serve the lower East Coast and lower Midwest. This geographic division would improve efficiency throughout the unloading, processing, and transportation stages. The Louisiana Offshore Oil Port currently bears the full burden of supertanker imports, and a complementary northern facility would substantially reduce that vulnerability.

Conclusion and Strategic Recommendations

The change in regulations surrounding deep water drilling could significantly harm the crude oil economy, and Marathon along with other oil companies should pursue new marketing plans in response. In doing so, companies should place greater focus on the customer, rethink their marketing approach to reach their ideal audience, and reinforce their value to existing customers. When rebuilding its marketing strategy, Marathon should evaluate its brand, the broader market, and its competitors, then generate a media presence to communicate company changes to the public.

Following a review of its marketing plan, Marathon should investigate investing in a second supertanker port located further north on the East Coast. A northern port would provide redundancy and security in the event of natural disasters or technical difficulties at LOOP, while also improving delivery efficiency to northern regions of the United States. Additionally, a second facility has the potential to double the volume of oil that can be imported. According to the U.S. Energy Information Administration, petroleum supply infrastructure plays a critical role in national energy security, further underscoring the strategic value of port diversification. Most importantly, Marathon must develop a plan that differentiates it from the competition in order to survive and thrive in today's energy market.