Oil And Gas Sectors: Emerging Themes And Areas Of Focus

Introduction to the Upstream, Midstream, and Downstream Segments

The oil and gas sectors consist of three segments, which are upstream, downstream, and midstream. The upstream segments comprise of the exploration and the production of oil and gas. Midstream segments comprise of the storage and transportation activity whereas the downstream consist of the players that are engaged in the process of refining, processing, and marketing of the oil and gas products. Economic growth of the country depends on the demand and supply of the natural resources.

With the rise in demand and supply in the market, the oil and gas sector increased their production and exploration from nature. Oil and gas sector is facing some problem in regulating the market and producing the oil and gas due to some of the emerging themes. This emerging theme includes operational excellence, cost management, managing the assets portfolios and others. These themes are not only affecting the individual sector or industry but also affect the overall performance of the country (Iofina, 2011). 

From the graph, it can be analyzed that the need for the energy companies will rise in the market. These companies will provide the alternative ways to run the vehicle and other things. In near future, the prices for the oil and gas prices will increase in the market due to scarcity and high demand for the oil and gas in the market. Due to the high price charged by the companies, demand will move downwards and the consumers start using the alternative for oil and gas (Okoro and Chikuni, 2017). The decision-making in the oil and gas industry makes difficult due to the rules and policies are made by the single authority, which is OPEC and other regulatory bodies. OPEC is concerned about sustaining the use of natural resources for the long span of time in the market so that the future generation can also use oil and gas. OPEC has made the recent strategy in which the promotion of using the low carbon in the economy is used. This will help to save the economy and its resources for long span (World Economic Forum, 2017).

Emerging Themes

Many trends have been finding in the oil and gas industry. Recent trends that have been identified from the case is related to the problem of allocation of resources, proper use of technology in the extracting the oil and gas from nature. Other issues, which are taken into consideration by oil and gas sector, are to remain cost-effective in extracting the resources and manage their use (Reinaud, 2004). From the case study, it can be analyzed that there are certain areas, which affect the current business strategies of the oil and gas sector, which includes:

Emerging Themes

Resource abundance

The oil and gas sector needs to save the resources for the future course of action. This will make the sustainability of the natural resources for the longer period. This need to be prepared to achieve low cost and are focused on the cost, speed, and efficiency. Exploration of more natural resources from the environment does not make the market to grow for longer. The market opportunities will find only be beneficial when it is gained by the first mover in the market (Gagnon, Hall and Brinker, 2009).

Profound technological advances

Using the ways in which the use of natural resources can be made effectively and efficiently is crucial for the extraction of natural resources. Companies are using the new and updated technology in the business to improve the productivity.

Low carbon economy

Low carbon economy emphases on producing and extracting the goods while maintaining the natural peace. The sustainability in nature can be increased by making use of alternative ways to protect the nature. By following the use of low carbon in the economy, the fossils fuels can be saved for the future use (Stout, 2014).

Managing the cost

Asian Market tries to control the cost and giving much importance in extracting the natural resources with full efficiency without wasting any penny or resources of the environment. The major focus is given to the uncontrollable cost and engineers and many experts try to control that cost to achieve sustainability in the market. National Oil companies try to manage cost by properly allocating and apportioning them. This management in saving the resources is must (Haggerty et al., 2014).

Managing for value and energy

Energy and value chain should be managed on the idea that the employees and experts ion the oil and gas industry will create more value for them. Use of automation and digital tools for disposing of the resources leads to the increase in the investment returns. The personalized development of the individual expert will rise in the company, as they are the top performers to get the resources protected while extracted.   

Low carbon economy

Use of low carbon economy focuses on the sustainability factor in the energy system. To attain the sustainability in the production and use of natural resources, a combination of solutions has been used. Renewable sources of energy play and crucial role in sustaining the global energy for long. Strategies are used by companies to have sustainability in energy system is that use of the portfolio approach in managing the clean energy in their research and development investment (Orem et al., 2014).

Resource Abundance

Operating the use of natural resources with excellence

Global company’s tries to manage the dealing in the oil and gas are looking forward to maintaining the balance between their working model and proposed model. This balance is made due match the demands and supply of the market effectively all around the globe. This will be done to have choices for many companies. For designing this operating model, the different option will be considered and a combination of the available model will be selected to get the excellence and integrity in the working (IBEF, 2018).

Managing the portfolio

The management of portfolio also plays a crucial role in assigning the funds to every department in the company. In oil and gas industry, allocations of the funds are done according to the needs and requirement of the department. In oil and gas companies, the majority of the funds are utilized in exploring the natural resources from the earth and doing the research in developing the way to sustain the natural resources for the long period. There is a need for flexibility in arranging and managing the assets and funds in oil and gas industry (Bamberger and Oswald, 2014).

Allocation and management

The capital allocation and management is another theme in the oil and gas industry, which deals with the infrastructure of the oil and gas industry. The matters related to the quality, knowledge resources, risk, procurements, communicators, and all the cost must be managed in order to get the optimum resources while using the appropriate governance model. In this, they try to develop the superior capability in managing the multiple complex capital projects, which will develop the business value in future to these energy companies (Technavio, 2018).

Areas of focus include:

Political Environment

The majority of the government of oil-producing countries through their national oil companies control more than 90% of the proven oil and reserves and over 75% of the global oil and gas production. The oil prices are managed by the OPEC (). This organization tries to coordinate and unify the petroleum prices and policies of the member countries. From this, the oil and gas industry will have the stability in the economic environment all over the world, there will be regular, and continuous supply of the natural resources in the market. OPEC political decisions can affect dramatically the oil and gas companies. 

Technological Environment

Countries like Paris and the US have started the research in developing and exploring the resources by using the technology so that the use of scarce resources should be done optimally. Most of the countries extract the rock and other sources of conventional resources as they can be utilized by is of proper technology (Brittingham et al., 2014).

Profound Technological Advances

Demographic Changes

Demographic changes that the employees are demanding the changes in the working environment. This expresses concern about the oil and gas companies in society. Millennial started the majority of them will work in the developed market and started their management and executives roles in the market. They are introducing the new technological advancements and accountability in their work. Globally there is competitive talent competing to sustain the natural resources for the long span of time in the market so that the future generation can use the natural resources (Resilence, 2015).

Social trends and shifts

The social trends and shifts, which are an analyzed from the oil and gas industry point of view, is that there is an increasing awareness and focus towards the friendly habits in using the natural resources in the environment.

Industry Globalization

Recently the concept of sustainability was used in Brazil in oil and gas companies. The company tries to make the globalization in the oil and gas sector. Brazil is offering the variety of alternative strategies in producing the substitutes for the natural gas. The introduction of liquid hydrocarbons will grow in the market due to the high demand for the natural resources (LUKOIL, 2018). The oil and natural gas industry are providing the sufficient incentives and motivation to their employees to their market employees (Sadorsky, 2001).

The recent example can be taken is of the cartel decision in the Redline agreement. The cartel is the form of agreements between the sellers in the market in which they decide the price and output be sold in the market at the predetermined price and output. The formation of the cartel will make the coordination and integration across the countries and oil producing companies. Iraq Petroleum Company (IPC) has made the cartel in which 99.5% of the territories explored by them in Iraq. This agreement was found a secret arrangement made in the Achnacarry Castle, Scotland (Filly and Fernandez, 2014). 

In the year 2013, Gallop Poll ranks the oil and gas industry as the least trusted industry. This sector has lost the trust and faith among the peoples due to the recent scandals happens in the market. Loss of trust and faith is because of the debated lobbying and suits against the changes in the climate conditions and other environmental and safety regulations. The rules and regulations in the oil and gas industry are made according to the laws and policies while considering the economic conditions and climatic change (Estrada and Bhamidimarri, 2016).

Low Carbon Economy

Global Economic Issues

The connection between the petroleum industry and the global economy is found significantly important. This will affect the market performance and economic growth of the countries. This drives the consumption of oil and gas rise due to the economic crisis globally in recent times. This leads to the increase in the price of oil and gas in the market affect the countries capacity to purchase bad sell the commodities (Strategy&, 2017).

Oil and gas sector in next 5 years

The oil and gas sector is growing in the market due to high demand. The consumption of oil and gas products is increasing day by day, which is moving towards to deplete the natural resources. In the next five years, the demand and supply of oil and gas will change. This will not only hamper the environment sustainability but also affects the consumption habits of the consumers.

Due to the high demand at present in the market, there will be a depletion of natural resources. There will be less or no resources in the market. There are different alternatives are started to avail in the market which is working as like oil and gas uses. The use of hydrocarbon is found common in the market. Many cars are starts producing, which will be run on hydrocarbon liquids. This will able to reduce the pollution in the environment. Another advantage is that the consumer habits will be changes and they will switch to the non-natural resources. This will save the environment resources for the future use (EIA, 2016).

 Themes affecting the decision making

4D Seismic Technology

This technology is used by the research and development department to evaluate the potential hydrocarbons reserves in the regions. By using this technology by the research and development department, mapping then resources and the time when the reservoirs will change over time will be predicted. This research is on the peak in the market and collaborating with the various universities and scientist around the globe to boost the research (Omeje, 2017).

Reviewing the portfolio

The oil and gas companies need to review their portfolio and evaluate the sources where the funds are allocated. Companies try to diversify their funds and invest in those areas where they can get the maximum return. This restructuring in the assets of the company is done to ensure the business competencies in the market.

Cloud computing

Managing the Cost

There is a high need to access the demand and supply of the natural resources in the market. This is analyzed to access the real-time information from oil fields and drilling platforms. From this way, workers can collaborate and analyze the data remain informed about the production decisions by the country. This will give the accurate information about the exploration, production, and development of oil and gas in the country and which is considered the security reason. Cloud computing is efficient in nature and scalable too. The power of computing the demand and supply in the market is done by using the information, which is provided, by the cloud computing (Mahieu et al., 2016). 

Managing the cost

The cost management should be done by the oil and gas sector so that the prices will not increase in the market. The cost can be controlled by detail analysis, tracking the records, and forecasting the demand from the market.

Recommendations

Using unconventional fuels/alternatives sources of gas

The focus is given on shifting the consumption of natural gases to its alternatives available in the market. Use of natural resources should be decreased and the promotion of the hydrogen to run the automotive and other vehicles should be there. The Ministry of Petroleum and Natural gas give a fund of US$ 18.8 million with the contribution from major oil companies to conduct the research and development in producing the hydrogen-based fuels. Another alternative is also found in the research and development is coal bed methane due to the large-scale availability (CDP, 2018).

Developing the midstream infrastructure

Oil and gas industry offers significant opportunities and benefits to develop the infrastructure of the country. The distribution of gas network is not spread to the large portion of the country. These benefits in the vehicular segment as an alternative fuel, which offers a20% cost benefit over diesel (Warner and Sullivan, 2017). 

Forming joint ventures or partnership with foreign players

Companies in oil and industry can form the joint venture in their business so that the resource allocation and distribution can be done appropriately without any loss. The joint venture will benefit the countries, as they are free to use their technology and monetary resources for ultra-deepwater exploration, which can yield the significant results. Currently, Indian companies are made use of this joint venture and sharing the technology that helps them to explore and expand on land or in shallow basins (Delloite, 2018).

Managing for Value and Energy

Development of strategic storage facilities

The industry of oil and gas makes the storage facility for the natural resources so that they can be remain preserved for than a long period of times and future generation can able to use them. Storing facility provides the resources to be used in the future with the aim to protect them. This resource will be used as an emergency mechanism in the case of short-term disruption in fuel supply (Franco et al., 2014).

Promotion of low carbon economy

Oil and gas sector tries to enhance the use of the non-fossil fuels in the economy so that the fossil fuel remains unused. This will protect and preserve them for large.  Not only the oil and gas sector should promote the use of low carbon economy but the society should also make use of natural resources with due care.

Conclusion

From the above discussion, it can be concluded that the current fuel use trends put the world on the path towards a dramatic rise in the global temperature. The oil and gas sector has found different ways to flourish and sustain in the market for the long period. Different ways are identified by the companies’ research and development department to protect and preserve the natural resources. Protecting the resources will benefit the next generation and they can make use of them. The sector has many opportunities to explore in the market by assessing the feasibility of using the non-conventional sources of energy.

These sources include coal bed methane, hydrogen, and biodiesel. Oil and gas sector is contributing much in developing the midstream infrastructure with a particular attention given on many cities to increase the use of non-conventional sources. There are a few themes, which are affecting the oil and gas sector in the economy. These themes are related to the allocation of resources, managing the cost and rebalancing the portfolio of the assets. This entire theme affects the economic structure by makes changes in the demographic factors, changes in the social trends etc. These themes are affecting decision making in the oil and gas sector of the country. This problem can be solved by using the high technology in the business, which includes cloud computing and 4D seismic technology in the oil and gas sector.  

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Operating the Use of Natural Resources with Excellence

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