Emerging themes in oil and gas industries slide share

Emerging Themes in Oil and Gas Industries 1
Emerging Themes in Oil and Gas Industries
By
Gudyne Wafubwa

Table of Contents
1 Introduction........................................................................................................................................3
2 Themes in Gas and Oil Firms...............................................................................................................3
2.1 The 3D Effects .............................................................................................................................4
2.2 Government Pressure .................................................................................................................4
2.3 Attracting Investment .................................................................................................................5
2.4 Risk Management .......................................................................................................................5
2.5 Adapting Changes .......................................................................................................................6
3 How the themes identified can affect the decision-making process. .................................................6
4 Recommendations for handling the identified themes....................................................................11
5 Conclusion ........................................................................................................................................12
6 References........................................................................................................................................14

1 Introduction
Oil and gas companies are among the major firms in the world. In the
emerging market, the rising demands of oil and gas have put stress on the available
market. Additionally, with a daily increase of population, one wonders if the fuel
supply at the current state will be in a position to handle the rising demand. On the
other hand, major National Oil Companies are in a rush to compete for the
dominance of the market in the world. These are among the current themes that are
emerging in these firms. Finding ways to cope with them will be of high importance to
the market and the world at large. Every part has its themes that are emerging in this
field. For instance, it is not common to find that those themes from Russia are the
same as those in North and South America.
Consequently, they will be different from those happening in the same
continent but different countries. In this report, therefore, the major themes that have
been identified to affect oil and gas firms across the world be the focal point of
discussion. The impact of these themes on the current operation of the firms will
also be looked at. Furthermore, the report will be examining how these themes will
affect the current political environments and technological advancements. However,
the report will not wind there; it will seek the significant impact these themes may
influence the decision making in the field and lastly, the report wraps up by the
recommendation that will be offered to handle the situations.
2 Themes in Gas and Oil Firms
According to Primeast (2014), five major themes have the potential to cut
across the world. The Primeast acknowledge that even though various factors might

affects the operation of Oil and Gas firms all over the world, the themes cannot be
uniform. Thus, their informed research came up with the most issues that have the
potential to cut across the globe. In their report, Primeast has identified the following
factors that are undermining the smooth operation of Oil and Gas firms.
2.1 The 3D Effects
The 3D effect. In this, they have noted with great concern that oil wells are
drying up. Thus, to find oil needs advanced technology and skilled laborers who
come at a cost. Given that the demand for the oil supply has increased when this is
happening, it is putting much pressure on the business. Even though some firms are
finding new ways to handle the situation like joining hands with their rival, there is a
problem to co-exist due to different beliefs. In a case where it becomes hard to
resolve conflicts between partners, the business fails. As such, it is advisable that
firms should look for a long-term solution to meet their goals, mission, and vision
alongside target.
2.2 Government Pressure
The second theme identified is how to handle the pressure coming from the
government. Most governments across the world are finding new ways to control
pollution coming from carbon. With these regards, it is putting much pressure on
companies to find a new way to handle such. It has been documented that most of
greenhouse gas effects are coming from firm mining oil. Thus, it is their responsibility
to find new ways of minimizing emission while keeping the profit. All this calls for
more advanced technology that now needs more investment. Also, it requires that
firms should find engineers who will be controlling the machines to avoid massive

emission of oil in the environment, lest they be ban from operating. This theme is
also putting pressure on the working of the firms as they have to increase the price
of their products to meet their market target, and still, they have to maintain their
customers.
2.3 Attracting Investment
Thirdly, the article has also stressed on the issue of attracting investment.
With the daily fluctuation of oil prices all over the world, most investors are finding it
hard to pour their money in the oil firms. For example, investors have attracted a fear
to invest in UK-Oil based companies since the economic slump in 2011 that has not
yet recovered. Best to note is that this is not the issue affecting the UK alone, but all
over the world. The hardest problem at hand that most firms are facing is to maintain
the high-performance level that can lure investors. Apart from the economic
downturn, other factors as aforementioned are exerting much pressure to investors
who are not willing to invest in oil firms anymore.
2.4 Risk Management
Risk management in oil factories is always at the bar when it comes to the
health of human being, marine animals and environment at large. Oil spillage is a
common risk factor that is experienced all over. For these reasons, the European
government has speculated rules that business people need to have to handle all the
risks that might occur. Thus, it calls for the firms to maintain a high level of operation
to avoid the occurrence. Also, it will need that companies be providing insurance
covers to their employees to cover for the risks that might occur while in the firm.
This is a major financial demanding project that when a firm is not well organized, it

might face a challenge in its commercial operations. With such problems at hand, it
becomes hard for the firm to maintain their profits at the same time, reputation.
2.5 Adapting Changes
Changes are inevitable; currently, several changes are going on and need
that oil and gas firms should be in a position to handle if they want to maintain that
picture of world dominance. Adapting to changes might seem to be an easy task, but
implementing the changes needs more than financial support. For this case, it is
posing a problem to the smooth operation of the firms that are operating oil and gas.
Some of the changes that need to be addressed are from a government perspective
to technological advancement. Unless one is prepared to welcome them, s/he may
fail to compete in this era of machines.
3 How the themes identified can affect the decision-making process.
On the issue of dealing with the 3D effect, the company has to make a
decision that will see a profit in the span of five years before planning other
measures. Here is how the decision process can be affected. Given that the land is
drying up, oil resources are sedimented and need a civil engineer to prepare the cite
for all facilities that will be required to facilitate drilling. Coming to the estimated cost
of running the operation for five years; the company will need a financial model that
will direct the decision-making process. The process can be as follows, the
management pre-assume that the production will decrease by 12.5 progressively
each year. Then they will set some money that will be spent throughout the
production process, say to cater for landowners, government, accounts, and lawyers.
Following this model, one will realize that the profit from this project will be

recognized as from the third year which can run up to the fourth year. During the fifth
year, general maintenance of the machines and more equipment to facilitate the
further dried oil will cost another considerable sum of money. Having this in mind, the
investors might opt to leave the project, or still proceed with the plan to its
completion. Looking at all factors that accompany oil drilling, one realizes that all
monetary requiring elements are skewed to the start of operation, in a situation like
this, these factors are more pronounced and need massive investment. Using this
methodology to determine the viability of the process will lead to a sounder decision.
Additionally, following that real profit can be seen after the seventh year, puts
another pressure on the investors (Offshore Technology, 2011).
(Carmalt, 2017)
After handling the pressure coming from the 3D effect, there is also another
hurdle waiting for investors to look into; the government policies that need to be
adhered to. Apart from the decision of the government that needs those company
running oil drilling to control their emission of effluent, there is also another pressure
of tax to be included. When summed up, the total cost for running the project is

costly. One will observe the trend of oil supply and project it to see when the profit
will be realized from the project at hand. Given that installing chimney that will
facilitate this policy is high and requires a specialist to check it time to time to see its
efficiency, the material that will be needed for its constructions and then adding the
tax that one will have to pay, s/he may decide to leave the project. However, all the
decision will be under one's jurisdiction. At such projection, it is assumed that the
company will start making its profit in three to fours to come. The period is taken to
earn if not correlating to the advantage projected, then the decision to carry out the
project might be impacted negatively (Investopedia, 2018). Another significant risk to
look at is the political risk. The sitting government might come up with new rules that
aim at controlling the firm operations.
Furthermore, the weight of the trucks that will be allowed on the road need to
adhere to government rules. Then there comes another risk of government change,
more so in countries that do not have a history of first sitting government and lastly,
world armed conflict. All the above risks as associated with the government need to
be addressed when the decision to invest in oil drilling firms. It might pose a
significant challenge as such. It requires a more informed mind to carry out the
operation (Cristina & Bernardo, 2017).
Factors that are affecting decision making in attracting investors may vary
from the economic perspective to government influence. For instance, there is this
issue of fluctuating crude prices. This can be viewed in terms of political stability
which may comprise of the time taken to approve new projects and fluctuation in fuel
prices. Countries that face-face these issues find it hard to attract investors. Their

decision to invest will depend on the stability of fuel price in those states. There is
also a challenge in terms of uncertainties in economics. Even though some people
do not just accept that it is an issue that needs to handled as such, in sharp look, it is
a challenge and needs to served with keen interest. The problem is just that an
investor does not know the loss and gain of the project. Therefore, one cannot
project the benefits of the project. In such a situation, the decision to carry out a
business in the oil firms becomes hard. It will need a financial advisor to help the
investor in such a condition. This further calls for additional costs. Lastly, before
investing, one need to identify the skilled labourers who will carry out the process
(Global Energy, 2013). In a state where the availability of skilled workers is a
problem, it needs that the same personnel be imported. Going with that idea, it will
attract more money which might be non-profitable to the investor. This consequently
has a significant impact when it comes to the decision-making process.
Risk management is the prime factors that all firms need to consider.
Investors are advised to know the risks that are underlying their project before they
can move ahead with the decision to invest in oil firms. The oil spill is among the
significant risks that are witnessed in oil drilling firms. This calls for an informed mind
to come up with ways to handle such an occurrence from happening. Here, several
factors will need to be considered before making such a decision. Thus, the investor
will need to know how much it will cost to implement some measures given that, risk
management correlates directly to the profit earned. Imagine a situation where there
is a fire outbreak in the firm consuming all the machine and infrastructures. In such a
case, the loss that will be witnessed will be higher than the investment that could
have been put in to see that everything is okay. To ensure that everything is

protected, several procedures will be required to be undertaken. Most notably
includes; analysis of hazard, tools maintenance, the certification from the third party,
and change management (Leveson, 2011). Looking from a financial point of view, all
the mention step needs the input of capital. This plus other expenses might attract
losses in the company. But now, the decision will be based on, are the procedures
essential? If the answer to the above question certify investors need, then s/he will
be moved to decide on its implementation.
Lastly, investors are trapped between the decision to adapt to changes. The
world is experiencing technological changes in the field of gas and oil. For instance,
there were unexpected US shale producers who shocked the global markets. The
market disruption caused by them was unwelcoming for many producers even from
those in Russia and the Middle East. The period experienced financial losses, many
jobs were lost, and the fuel price felt. As an investor, one needs to anticipate such
times. It is therefore imperative for one to have decided he or she will take in case
such a circumstance happens. Basing on that scenario where market prices reduced
and many jobs were lost, if one is not keen and well prepared, then commercial
break down can lead him to leave the business (Blasi, 2017). When that process
happened, many companies almost closed down due to the financial blow. However,
some firms moved ahead to target deep offshores. This was done so that they could
recover their losses in a shorter time. These with more changes need to be
anticipated. As such, the decision to invest in the oil and gas industries should cut
across from a legal perspective to technological changes that generally happen
unexpectedly.

4 Recommendations for handling the identified themes
As the issue of "3d effect" serves more drawback in oil and gas drilling
operation due to technological advancement needed, the firm are advised to join
hands. However, it is recommended that managers be aware of their diversity all the
way from religion to personal beliefs. Additionally, there will be no cooperation in a
situation that communication is poor. Thus, several factors, in addition to this need to
be adhered to when coming together. Even though it is recommended that business
should come together to reduce the cost of running, it should also be in their mind
that how to share the profit gained will be another hurdle to face. For this reason,
managers need to agree on how to share the cost of running the firm and how to
dived the profit earned.
Handling the pressure from the government of the day might be another battle
awaiting investor. In nations that need a certification showing how one is handling
pollution issues, it is advisable to find them to avoid falling on the other side of the
law. Also, a human being requires to be responsible for their environment. Therefore,
the issues related to the environment should not be a subject that attracts the arm of
the government. Citizens are also advised to pay their taxes to be self-sustaining.
Thus, an investor willing to invest should abide by the law to pay the taxes that need
to be used for the development of the nation at large.

Risks are inevitable, handling and finding a long-lasting solution can serve
well for proper operation of the firm. Several recommendations are given on how to
handle issues related to risk management. For instance, the firm needs to ensure
that its workers have undergone training about how to manage risks when they occur
in their firm. Maintaining machines in the industry is also another recommendation
given as a way of handling the menace of threats that might happen in the factory.
However, when managing risk, one needs to know that different types of risk are
involved in the firm. Recommendation for various risk will differ from one to another.
A most important aspect to keep in mind is to be informed of the dangers that have
the potential to happen. With this, one will know how to handle in case it occurs.
As technology keeps on changing, adapting to new technology in oil and gas
industries should be a primary concern of an investor. It has been shown that wells
are drying and one will need to go deep offshore to find the fuel. In such a case, the
technology that will be required is more advanced and changing to it is the only
solution for the firm to remain in the field. For example, when the shale of the US
came into existence, many industries were shaken as there was a financial
breakdown. Also, jobs reduced as the fuel had fallen in price. Finding the solution on
how to handle the situation was only hope for the companies that wanted to compete
well in the field. Some changes might have a broader impact on the economy, in
case one does not face it, then it will be a drawback to him or her. Recovering from it
might take some time.
5 Conclusion

There are various emerging themes in the field of oil and gas. For example,
the changing in technology and drying of wells. All these factors, plus those above
have a significant financial impact. Finding a long-lasting solution to them will be
ideal for dealing with problems associated with them. The report has identified the
risks that await the gas and oil industries, it has further discussed how these factors
might have a significant impact on the decision making and lastly, has given the
recommendation that can be undertaken to mitigate the problems.

6 References
Blasi, A., 2017. Commentary: Witnessing the ongoing transformation of the oil and
gas industry. [Online]
Available at: https://www.iea.org/newsroom/news/2017/july/commentary-
witnessing-the-ongoing-transformation-of-the-oil-and-gas-industry.html
[Accessed 18 December 2018].
Carmalt, S., 2017. Chapter 2: Oil Company Finances. In: The Economics of Oil: A
Primer Including Geology, Energy, Economics, Politics. S .l.:s.n., pp. 1-23.
Cristina, R. M. & Bernardo, H., 2017. Influence of Emotions on the Acceptance of an
Oil Drilling Project. Sage Journals, 50(3), pp. 324-349.
Global Energy, 2013. Challenges and Solutions in an Upstream and Downstream Oil
and Gas Operation. [Online]
Available at: https://globalenergy.pr.co/65678-challenges-and-solutions-in-an-
upstream-and-downstream-oil-and-gas-operation
Investopedia, 2018. How do government regulations impact the oil and gas drilling
sector?. [Online]
Available at: https://www.investopedia.com/ask/answers/012715/how-does-
government-regulation-impact-oil-gas-drilling-sector.asp

LEVESON, N., 2011. Risk Management in the Oil and Gas Industry. [Online]
Available at: http://energy.mit.edu/news/risk-management-in-the-oil-and-gas-
industry/
Offshore Technology, 2011. Coming Up Empty: The Risks of Drilling Dry Wells.
[Online]
Available at: https://www.offshore-technology.com/features/feature115909/
Primeast, 2014. Top 5 challenges are facing oil and gas companies. [Online]
Available at: https://www.primeast.com/top-5-challenges-facing-oil-and-gas-
companies/

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