Statement of problem
The global oil and gas industry involves numerous participants and action players to facilitate the production of these essential resources. The participants of the industry are influential in the overall global economy as they can influence the lives of everyone’s lives through transportation, asphalt, propane, heating and electricity fuels, lubricants, and many more petrochemical products. This industry is the most fundamental source of energy in the world hence the reason for its impact across all the aspects of the economic industry. However, with the high demand and value for this product, the industry is facing a lot of challenges; most countries are demanding to exert a greater control over their oil resources. The advancement of technology has made the price of oil seeing record high prices also. Most countries are fighting over of oil resources two of these countries are Sudan and Nigeria. The upstream sector of the oil and gas industry involves processes including the searching for and the recovery of crude oil as well as its production. In the upstream sector, discovery or exploration of crude oil takes place. This involves intensive and extensive efforts towards ascertaining the actual places where crude oil is located. Exploration is a very difficult process and therefore requires the service of experts in the field. More so, information technology plays active roles in the exploration or searching of crude oil in order to easily discover new grounds where oil is located and therefore take advantage of them.The upstream sector includes different operations such as the searching for prospective underwater oil and gas fields, drilling of exploratory wells and also making requisite operations on the well so as to bring the crude oil or natural gas to the ground surface. The continued effects of exploring oil effects global warming compared to non-hydrocarbon sources of energy. The downstream sector of the oil and gas industry involves the refining of the crude oil and/or raw natural gases obtained in the upstream sector as well as selling or distributing the products obtained. Many products are derived from the refining of crude oil and these may include diesel oil, liquefied petroleum gas (LPG), asphalt, petroleum coke, gasoline, fertilizers, antifreeze, plastics, rubbers, pesticides, synthetic rubber, jet fuel and many more. The downstream sector of the industry is the sector that relates with the consumers. Facilities involved in this sector include petrochemical plants, oil refineries, natural gas distribution companies, retail outlets and so forth. High fluctuations of crude oil prices have led to an unpredictable market. The experts in the industry predict continued increase in global demand for oil energy by 2040 which will create another major issue in the global oil and gas industry.
Summary of the situation/analysis of issues
The oil and gas producing industry can be analyzed using PEST analysis tool, which analyses its political, economic, social and technological environments of the industry. The political environment has majorly affected the industry; the ability of integrated oil companies to win licenses from different governments is majorly political. The legal procedures set by politicians in taxing the oil industry as a result of its high profits also affect the industry. Risk of civil unrest in places like Sudan and Nigeria which are close major oil places also affects the industry. Laws on safety aspect also for the oil and gas industry, major laws like carbon emissions laws have affected the industry greatly. The introduction of OPEC has continued to regulate the different government taxes on the global oil industry, and thus continued to regulate oil prices in local government oil production. For example Mexico doesn’t allow foreigners to invest in oil and gas industry, due to this the country’s industry is straining without major investment in technology thus the industry may fall. Global forces such as geopolitical pressures are troubling the industry. We therefore need the knowledge, contacts and skills to effectively adapt to these troubles and geopolitical insecurity in the industry. It is also very important that we make appropriate efforts towards anticipating and reacting to the radical changes on the global sphere. The economic environment has also majorly affected the improving profitability and lowering operating costs through the use of new technology, the Increasing demand for oil and gas putting pressure on prices. OPEC operates in the mission to coordinate and unify the petroleum policies of Member Countries and ensure the stabilization of oil prices in order to secure an efficient, economic, and regular supply of petroleum to consumers thus it regulates member countries’ taxes on crude products stabilizing prices of oil. Oil and gas perform a special role in the global economy in that energy demands increase by an average of 1.5% every year and is expected to go high to the year 2030. Some challenges in the upstream oil and gas industry can be effectively resolved if we lay emphasis on the new interdependencies between senior management information, operational effectiveness and decision making. We also need to appraise and understand their impact on our overall profit margins. This can go a long way in solving our problem.
Delegate your assignment to our experts and they will do the rest.
Strategic alternatives and recommendations for strategy
Discovering new oil and gas reserves is what helps keep the industry alive. As a result sustainability and environmental concerns by lobbyists, risks of accidents and damage to the ecology, especially following the problems of environmental pollution and global warming is major social effect of crude industry. Due to the major concerns of global climate technology should be use to help develop other new sources of energy that are environmental friendly. Thus it is expected that there will be a possible future reduction of demand for oil when alternative fuels (electric cars or bio-fuels) are developed and accepted on a wider basis than currently used. Improving the use of technology will help also in reducing problems with the case industry. Finding new sources of oil will get harder and require the new technologies in the crude industry. Improvements have been made in the transportation of oil and gas to increase efficiency and safety, such as LNG technology. The global oil and gas industry should have collaborative operations to use the economies of scale which includes advanced technology. These will reduce the industry production costs. OPEC, IOCs and NOCs should be allowed to oversee most of the activities of crude production to enable them stabilize prices of crude oil. Most countries should advocate for other sources of energy that are more environmental friendly to support crude oil in meeting the energy demand in the market. There should be efficient reservoir management to enable the industry to keep on surviving without experiencing the paradox of resource curse. The political legalities put in place should always enable the industry to develop to avoid scenario like that of Mexico. Oil and Gas has facing a real challenge of shortage of liquid fuel in this era. There is great need to increase the production of liquid fuel in the upstream sector. The output from Canada’s oil sand can be increased by threefold by 2035 which is equivalent to 4.5 billion barrels per day has the capacity to extract more oil and made effective. Not only that, but also there should be efficient avenues in place to bring the extracted products to the market. The American Petroleum Institute pointed out that oil sand production can be limited in 2014 because of shortage or inadequacy of pipelines leading from refineries to the market. To make the Canada’s oil sand to become more beneficial and efficient, there is need to put the right upgraders and pipelines in place. Shell has achieved substantial success by increasing capacity at the Athabasca Oil Sands Project in Alberta by 100000 barrels per day. It has also opened a second mine in which it expanded the upgrader which converts bitumen to crude.
