Development In Oil And Gas Management PoG 350

Present business scenario and issue identification

Discuss about the Development in oil and gas management PoG 350.

The study provides a brief view about the risk management process along with the importance of innovative strategies in an organization. Before initiating the risk management process, it is important to go through the risk assessment process in order to determine the risk presents in the present scenario (Glickman and Gough 2013). Risk assessment is a systematic method and sensible measurement process of identifying the risk that helps the organization to control the risk (Haimes 2015). The risk management process is method of prioritization that helps in general analyzing to build security goals and guidelines in order to reduce the uncertainty (Pritchard and PMP 2014). The organizations include innovative strategies to lead the business towards growth.

In the present business market, some companies engage in strategic innovation to take their business in the next level. Apple, Dyson, Samsung, Barclay S, IKEA, BP are the well known companies that deliver new innovative products in the world market. On the other way, some companies such as Nokia, Blockbuster, BlackBerry, Mark and Spencer failed to make innovation in their production. The companies that pursue several innovative strategies are able to make more revenue and acquire sustainable growth. Due to improper management and lack of strategic innovation, other companies are lagging behind. Here, the researcher has chosen a company that incorporates several innovative strategies but somewhere it has more opportunities to make growth in their business.

Here, the study discusses the above mentioned business activities by considering the company Oil & Gas UK. The respective organization is the leading trade association for oil and gas industry of United Kingdom (Oilandgasuk.co.uk. 2016). In this particular study, the risk management procedure of the respective organization is demonstrated along with the innovative strategies they pursue and they need to pursue as well.

The present business scenario of Oil & Gas UK would help to analyze the market position of the organization. In the year of 2014, the respective organization has provided 68% of the total primary energy of United Kingdom (Oilandgasuk.co.uk. 2016). According to DECC (Department of Energy & Climate Change), the percentage will increase by 70 in the year of 2030 (Prpich, Coulon and Anthony 2015). In 2014, the average price of Brent oil is measured was $99 per barrel. This is lower than the amount measured in the past three years. It was $109, $112, $111 in the years 2013, 2012, 2011 respectively (Oilandgasuk.co.uk. 2016). The average price has been declined further in the year of 2015. It was $58 in 2015 (Oilandgasuk.co.uk. 2016). In the period 2014-2015, the organization has paid £2.2 billion on the corporate taxes of production. It is found as the lowest amount in the past 20 years due to the decreasing oil price (Oilandgasuk.co.uk. 2016).  

The prime goal of the organization is to reduce the expenditure as a whole and improve the efficiency. In 2014, the capital investment of Oil & Cost UK was £14.8 billion which was the highest amount in the past four years (Oilandgasuk.co.uk. 2016). In the year of 2015, they have expected that the amount will be reduced up to £10-11 billion. As per their investment assumption, they have expected the amount of capital investment would fall by £2-4 billion every year (Bennear 2015).

The operating cost of the organization was increased by 9% in the year 2014; it was £9.7 billion. In that year, Oil & Gas UK expected to reduce their operating cost by 22% at the year of 2016. In addition, they expected to reduce it up to £9.3 billion and £8.6 billion in 2015 and 2016 respectively (Oilandgasuk.co.uk. 2016). Besides, the total pre-tax expenditure was raised by 3% in 2014. As a result, they have experienced rising expenditure as well as decreasing revenue in the last year. It led the organization to confront £4.2 billion cash flow deficit in 2015, which was the largest amount in its history (Oilandgasuk.co.uk. 2016).

As per the statement of Ward, Stuart and Bloomfield (2015), the environmental issues become the central point of risk assessment in the oil industry from the last decade. Oil & Gas UK maintain a systematic procedure to identify the hazards. However, they fail to identify the scope of risk identification. Somehow, the traditional procedure fails to deal with the current challenges of world oil and gas market. Environmental Impact Assessment (EIA) is one of the major risk assessment process that the organization pays heed on (Tan, Ortiz-Gallardo and Perrons 2016). The organization has formalized the EIA process over time to make the process more effective. Apart from this, preliminary screening and scoping process is pursued in order to indentify the depth requirements of the organization.

Akhurst et al. (2015) stated that certain risk evaluation and management process is followed by Oil and Gas UK in order to resolve the complexities and hitches found during the risk assessment process. Certain stages are included in the process of risk management such as hazard identification, identification of consequences, magnitude of consequences, probability of consequences, and risk reduction or elimination. It has been found that the company is facing cash flow deficit due to lower oil price in UK. Besides, the capital investment declines and at the same time the operating cost increases. In this context, the major hazard is the company is confronting problems regarding competition in the global market. Technological progress failed to reach the company in that position where it can acquire more revenue as well as profit.

They failed to identify the consequences before and that is the reason they are facing this uncertainty in the present situation. In terms of these consequences, they need to address the root cause of this risk which they fail to do. Asgari et al. (2015) added that the organization might resolve the problems they have for short term period only which will cause long term issues. The long term issues might reach at a unsolvable stage if they are not uprooted. In this case, Oil & Gas UK has taken the short term issue solving strategy that led them in today’s complexity. Besides, it is important to determine the magnitude of consequences to predict the future risk that they might face in upcoming years. The magnitude of consequences helps in assuming the probability of the further consequences (Torres, Yadav and Khan 2016). Through predicting the future risk, an organization can make certain strategies to deal with the uncertainty.

Oil & Gas UK has skipped the stage of consequence identification and thus they failed to determine the magnitude as well as probability of consequences. The risk management process is pursued without implementing the previous major stages that made the company to face certain issues. The risk management process was not followed effectively which is one of the prime reasons behind the cash flow deficit that occurred recently in their business.

Trutnevyte et al. (2016) sated that strategic innovation is an approach and creative process that bring breakthrough ideas to drive the business towards growth and development. Strategic innovation is needed to acquire comparative advantages over the competitors and deliver strong competition to the rival companies as well. The prime mission of considering strategic innovation in the business process is to take the business in a new growth level and create a sustainable position in the market. It helps the organizations to look beyond their boundaries that help them to focus on both short term as well as long term outcomes. However, through pursuing innovative process, the organizations are able to expand their business, reduce cost in the long run, and reduce dependency on the workforce. On the other way, the employees lose their jobs due to this process. In Addition, company has to bare high expenses in the short run for incorporating new ideas and techniques.

The above sections have discussed about the business scenario of Oil & Gas UK in the present business market. Along with that, the study has brought out some of the major challenges that the company has been confronting since last 2-3 years. It has been found that technology progress has taken place in order to eliminate the complexities but could not meet the objectives. Innovation is required in the technology, business operations and activities to uproot the issues in the short run (Radnejad and Vredenburg 2015). Though, it is not possible to resolve all the problems exist in their business in the short period of time, thus long term planning as well as strategy is needed. Primarily, they need to reduce their operation cost and improve their efficiency to achieve their ultimate goal. Innovative management system and technology would help them to create more opportunities in order to grow their business.

As per the statement of Webb (2015), asset integrity defines that the entire assets, that the organizations have, can perform effectively as well as safely as per the required actions. The Oil & Gas UK require making sure that the assets it has are working correctly and fulfilling their expectations. It has been found that almost 30% of the platforms of their operating areas have been functioning foe more than 20 years and thus became ageing assets (Oilandgasuk.co.uk. 2016). These platforms are facing constant growing challenges in both the domestic as well as the world market. The major challenge that the company confronts regarding their assets can be split into two main categories. One is material related issues, and the other one is inspection and maintenance issue. Before initiating innovative business process, they need to create innovation ways in the material utilized in their production process. Apart from this, the management body should take innovative ways monitor the integrity of the materials and understand the corrosion under insulation.

 As opined by Dholakia et al. (2015), it is important for the organizations to understand as well as monitor the integrity of the materials in order to reduce the probability of uncertainty. Through adopting innovative ways, Oil & Gas UK can enhance the material performances in the changing environments. A high level of guidelines can be established to create several managing ways when the workers have to change the operational processes on the existing materials (Trutnevyte et al. 2016). The process of predictability of asset life provides the opportunity to extend the life of the existing assets. In addition, the company needs to apply Full Life Cycle Design (FLCD) principles to maximize the asset life.

In the present situation, the company is seeking new strategies and ideas in inspection and maintenance of the assets. Best engineering practices need to be implemented to increase accuracy of fatigues (Banks 2015). The process of controlling obsolescence would help to manage the component obsolescence in an effective way. The upgraded obsolete subsea control system would help to control the obsolescence (Hansen and Steen 2015).

According to Upham, et al.(2015), the strategy innovation process is the systematic ways of creation of certain growth strategies and implementation in the business models. Along with seven dimensions, the strategy innovation framework of the respective organization can be framed.

Seven Dimensions	strategy innovation process	Time frame
1. A managed innovation Process	Along with the traditional approaches, Oil & Gas UK should implement some non-traditional approaches in their business. Through identifying the internal capabilities, they would able to facilitate the interplay between internal practices and the external opportunities (Littleford  et al. 2016).	2 months
2. Strategic Alignment	It is the process of building internal support for the business activities (Costa-Campi, García-Quevedo and Trujillo-Baute 2015). This would help the stakeholders of the company to pursue common goal, vision, and actions.	6 months
3. Industry Foresight	Storbacka and Nenonen (2015) stated that it is the understanding of emerging and converging trends. Besides adopting new technology, the company should look over the alternative ways of innovation in order to deal with the challenges.	1 month
4. Consumer/Customer Insight	It defines the ways of understanding both the articulated and unarticulated requirements of the existing as well as potential consumers (Song and Oh 2015). Through prioritizing the customers, they can achieve their goal of improving efficiency.	6 months
5. Core Technologies and Competencies	The core technology and competencies of Oil & Gas UK is the set of their internal capabilities, assets of the company, and organizational competencies. Through increasing the core technology, the organization would able to value their customers more.	8 months
6. Organizational Readiness	It determines the ability of the organization to implement new ideas and techniques. It has been found that technological progress was occurred but failed to eliminate the problems it has. Innovation is needed to manage all the operational, financial, and political factors (Haugh 2015).	6 months
7. Disciplined Implementation	After planning the strategies, the company needs to implement them in a different way. The management body of the organization could keep track records of their operational progress. All the activities need to be framed in order to help all the stakeholders to perform efficiently.	12 months

Table 1: Seven dimensions of strategic innovation framework

(Source: Foss and Saebi 2015)

Figure 1: Seven dimensions of strategic innovation framework

(Source: Foss and Saebi 2015)

Conclusion

The study concludes that the average price of oil and gas has been decreasing in United Kingdom, thus the organization Oil & Gas UK are confronting certain challenges. The operating cost of the company increases and this make them to face cash flow deficit. In the risk assessment process, they failed to address the scope of the risk identification. This results low comparative advantages in the world market. Further, it has been found that technological progress could not help the company to increase their revenue. Therefore, the study asserts that the company needs to adopt innovative strategies and techniques in order to deal with the difficulties present in the current business scenario. The seven dimensions of strategic innovation have manifested the fields that the company should look over.

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