Newfield Exploration

NEW FIELD EXPLORATION LIMITED

STM ASSIGNMENT

INDEPENDENT OIL & GAS INDUSTRY

ABHINAB MITRA

02-Apr-14

ACKNOWLEDGEMENT

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Roll No- U113062 Section - B

This project is a humble effort from my side as an example of electronic store study. However, it would not have been possible without the kind support and help of many individuals. I would like to extend my sincere thanks and appreciation to all of them.

I would like to convey my deepest gratitude to my course instructor Mr. Anshuman Tripathi for her guidance and constant supervision as well as for providing necessary information regarding the project. He was instrumental in creating an urge and insight necessary to work on this project.

I sincerely hope that the project report will be appreciated by all. I shall be glad to receive any constructive suggestions for the further improvements in the content of the report. I hope this report will be helpful to those who go through it giving their valuable time.

Abhinab MitraRoll-No: U113062Section: B

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Table of ContentsAnswer 1..............................................................................................................................................4

Business Model of New Field Exploration Limited:....................................................................4

Business Model of a Domestic Organisation: EOG Resources Inc.........................................5

Business Model of a Government Organisation: ONGC Limited.............................................6

Business Model of an International Organisation: MOL Group:...............................................8

Answer 2..............................................................................................................................................9

Activity Diagram of New Field Exploration Limited:....................................................................9

Activity Diagram of EOG Resources Inc.:.................................................................................10

Answer 3............................................................................................................................................10

Low Cost Providers:.....................................................................................................................10

1. Total – Western Europe..................................................................................................11

2. MOL Energy – Eastern Europe:.....................................................................................11

3. Petrixo Group – Middle East :.........................................................................................12

4. PEMEX – North America................................................................................................13

5. Petrobras – Latin America:..............................................................................................14

Exploration and Production.....................................................................................................14

Refining, Transportation, Commercialization and Petrochemical.......................................14

Distribution.................................................................................................................................14

Gas, Power and Gas-chemical...............................................................................................14

Biofuels.......................................................................................................................................14

International...............................................................................................................................14

6. PTTEP - Asia.....................................................................................................................15

7. Petro SA - Africa................................................................................................................15

Answer 4:...........................................................................................................................................16

PESTEL ANALYSIS.....................................................................................................................16

Political Factor:..........................................................................................................................16

Economical Factors..................................................................................................................17

Social Factors:...........................................................................................................................17

Technological Factor:...............................................................................................................18

Environmental Factor:..............................................................................................................18

Legal Factor:..............................................................................................................................19

Porters 5(Five) Forces for the Independent Oil & Gas Industry:............................................19

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Threat of entry by new competitors:.......................................................................................19

Rivalry among existing competitors:.......................................................................................20

Pressure from substitute products..........................................................................................20

Bargaining power of buyers:....................................................................................................20

Bargaining power of suppliers:................................................................................................21

Strategy of the closest Competitor.............................................................................................21

Complementors:............................................................................................................................21

Answer 5............................................................................................................................................22

i> History & Evolution:..............................................................................................................22

Growth Rate and Profitability Rate:........................................................................................22

Future:........................................................................................................................................23

ii> Size of the Industry across the world:............................................................................23

Size of the Industry in US:.......................................................................................................24

Key success factors of Oil & Gas Industry:...............................................................................25

Operational Excellence -..................................................................................................................25

The Beginnings of Integrated Asset Management...............................................................25

Challenges to Success.............................................................................................................25

A Comprehensive Solution......................................................................................................25

Significant contribution of research:.......................................................................................26

Strategy management..............................................................................................................26

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Answer 1.

Business Model of New Field Exploration Limited:

We are guided by our FOUNDING BUSINESS PRINCIPLES. These Principles are the foundation for our success and are practiced everyday in running our current business and creating our future strategy.

Talented Employees

Talented Employees are the base on which Newfield Exploration was founded in 1988. "Team Newfield" comprises the best and brightest talent our industry has to offer. Their creativity and commitment are key to our success.

Focus

We are focused on distinct geographic regions where our people have a competitive advantage. Our assets are more alike than different, allowing us to effectively shift people and capital to our highest return areas.

Balance of Exploration and Acquisitions

Our growth has come through the proven expertise of finding and developing hydrocarbon resources through the drill bit. Additionally, select acquisitions have accelerated entry into new geographic areas.

Emphasis on Technology and Teamwork

Since our beginning, we have coupled major-company technology with the mindset of an independent. By investing in the latest technologies, we give our people the tools they need for success.

Mindset of an Independent

As an independent, we are singularly focused on the discovery and development of hydrocarbon resources. With this focus, we have flexibility and can make decisions quickly to capture attractive opportunities.

Control of Operations:

We prefer to operate our activities and control our operations. We typically have a high working interest and operate the majority of our production.

Employee Ownership:

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Owners make the best employees. We reward and encourage employees through equity ownership and incentive compensation based on both company and individual performance.

Business Model of a Domestic Organisation: EOG Resources Inc

EOG Resources Inc. (NYSE: EOG) is one of the largest independent natural gas producers in the United States. EOG’s reserves are primarily located in major basins within the United States, but the firm also has international operations in Canada, Trinidad, the United Kingdom, and the North Sea. 

Business Model:

The Company Prefers to Avoid Acquisitions- Historically, EOG's business model has shunned acquisitions and preferred to find and develop resource basins on its own. By avoiding pricey acquisitions EOG has kept its operating expenses and capital costs in check. EOG's low-cost mentality has allowed the company to invest in existing operations in unconventional deposits such as the Barnett Shale which, as of late, has developed into one of the most prolific natural gas producing basins in North America.

High Natural Gas and Oil Prices Have Doubled EOG's Profits- Coupled with the company's low operation costs, the dramatic increase in gas and oil prices have more than doubled EOG's revenue since 2004. With approximately 88% of the company's proved reserves natural gas, only 12% account for crude oil. Unfortunately, the price of natural gas has not erupted as significantly as oil prices. So although the company has benefited from price increases, it hasn't had the same acceleration of revenue and operating profit as more oil-focused competitors.

OPEC's Role- OPEC plays an important role in regulating the high market prices that

have benefited EOG. Artificially high oil and gas prices are important to the

company's profitability because these resources are commodity goods, making their

markets subject to volatile price cycles and harsh price competition.

Expensive Deepwater Exploration Conflicts with EOG's Low-Cost Business Strategy- High operation costs have kept EOG from expanding deepwater drilling activities. However, despite EOG's apprehensions the prospect of oil exploration and production of all types of sources is more economically feasible than ever due to substantial returns most companies are enjoying. EOG's limited involvement in the offshore drilling market may keep the company from growing at the same rate with competing companies that are pursuing deepwater oil exploration, since this is currently the oil industry's hottest sector.

Emerging Markets in Hybrid and Alternative Energy Technology Might Compete with EOG in the Long Term - Rising oil prices have led both consumers and companies to seek out alternative sources of energy and invest in renewable energy such as nuclear, solar, wind, biofuels, and ethanol. As the global consumer demand shifts

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toward renewable energy sources due to recent environmental concerns over climate change, this change in consumer consciousness may adversely affect the oil and gas industry. With the advent of hybrid and fuel cell vehicles and the cost of gasoline becoming dangerously close to $4 per gallon, consumers have become less inclined to purchase gas guzzling SUV’s opposed to more fuel-efficient cars. As a result oil and gas companies stand to lose if the industry encounters a sudden decrease in demand.

Business Model of a Government Organisation: ONGC Limited

India is looking at liberalizing the natural gas sector following deregulation of liquid petroleum sector in 2002 for promoting competitiveness and efficiency. As a result of deregulation process, ONGC would have new opportunities in Natural Gas Business and also shall face the task of formulating different strategies for pricing its natural gas in future as the current pricing mechanism and marketing arrangements are controlled by GoI to a great extent. This study is based on the assumption that GoI would allow a level playing field to all players including ONGC in the emerging scenario.

For assessing the future scenario, structural changes that occurred and pricing practices that were followed in developed gas markets of U.S, U.K & Europe and emerging economies like China were studied and are summarized as below: • Structural changes like price decontrol, third party access (TPA) unbundling lead to Emergence of new markets, new players and new relationships.

• Gas pricing approaches depends on the market models

• Discriminatory netback basis* and/or regulated pricing (cost plus or rate of return) in monopolistic markets

• Inter-fuel / gas-to-gas competition based pricing in developed competitive markets.

• In developed gas markets, spot, futures and market centre (hubs) were in place where

gas prices are determined by interplay of supply and demand

• Shift in gas price indexation techniques from traditional oil / oil products basis towards spot pricing.

• Shift towards flexible contractual practices.

* Netback price = Delivered price of cheapest alternative fuel to the customer (including any taxes) adjusted for any differences in efficiency or in the cost of meeting environmental standards/limits

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– Minus cost of transporting gas from the beach or border to the customer;

– Minus cost of storing gas to meeting the customer’s seasonal or daily demand fluctuations;

– Minus any gas taxes.

Implications for ONGC:

In this changing scenario ONGC as a producer would have the following mixed bag of opportunities in Gas marketing

• Marketing model and contractual arrangement

• Direct sale of gas to bulk consumers like power plants, fertilizer plants etc.

• Direct sale to small, medium and large industrial consumers.

• Sell gas to Local Distribution Companies for further supply to small / residential consumers.

• Competitive pricing or the market value principle shall prevail as a fair pricing system for producers including ONGC.

• Inter-fuel competition and gas-to-gas competition will become tougher and gas pricing will become more complex.

• Deregulation shall bring in competition but will not be a guarantee for high prices, however will lead to higher volatility.

• Synchrony of oil and gas prices may still continue to exist with lesser correlation as seen in markets like U.K, U.S where spot prices have moved away from crude oil prices.

• Use of gas pipelines and infrastructural facilities

• ONGC will be free to lay transmission pipeline but such pipeline shall be designated as open access by Government and at the same time will also be allowed access to other’s pipeline.

• ONGC shall have emerging business opportunities in

• Alternate sourcing options - LNG imports, Imports through pipelines etc.

• Pipeline markets – Construction, Transmission, Operation services etc.

• Financial gas markets - Spot, Futures, and Options etc.

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Business Model of an International Organisation: MOL Group:

The MOL group intends to become a major regional energy company. The achievement of this strategic objective requires MOL to streamline the Group`s operations and organisation. The newly created model should reflect closely the underlying business processes and enable the firm to respond with flexibility to new challenges. This assumes an organisational model which highlights the enhanced role of the sales and marketing processes, which have the closest relationship with customers. At the same time MOL´s aim is to streamline its central functions and services, turning operations leaner and more efficient.

With this aim, on the 19th of July, 1999 the Board of Directors approved the proposal of the Executive Committee to introduce a new business and organisation model. The Chief Executive Officer of MOL, at the same time, appointed the respective heads of the newly created business units and mandated them to outline the detailed operational processes for their business areas. In line with the Board decision, the Executive Committee will directly control major business units, without the need for a divisional management and co-ordination level. This also means that, except for the role of the Chief Administrative Officer and the Chief Financial Officer (members of the Executive Committee) other senior vice president positions will be eliminated. The final shape of functional control, service processes and organisation will be developed upon the appointment of the CFO, based on the division of responsibilities within members of the Executive Committee.

Business processes and decisions in the new model will be brought closer to the CEO. The Board expects, as a result, a simpler and more cost efficient organisation, with better headcount efficiency and capex efficiency translating into higher returns on capital employed. The major business units which will be established, eliminating the existing two divisions, will reflect closely the core business processes according to their position in the value chain, enabling the company to measure their contribution to value creation. One of the first key tasks for the newly appointed business unit heads will be to outline the business processes within their units and to quantify the potential for efficiency improvement by such streamlining. The Company will incorporate these measures in targets to be presented in its strategy discussion in the fall.

Most activities presently performed by the Upstream Division will be re-structured into two new units: Exploration and Production will be responsible for the exploration and production of

crude oil and natural gas in Hungary and internationally, the operation of underground gas storage facilities as well as certain service operations related to production, whereas

Gas Marketing and Power will be responsible for the wholesale and retail marketing of natural gas as well as for the implementation of the group´s strategies in the field of energy. This unit will also direct (but not operate) gas storage and transmission operations, and will bear the cost of such operations through internal transfer of prices and will also absorb the capital employed in such activities (underground gas storage facilities and transmission pipelines). This unit will also be responsible for the marketing of capacities in MOL´s gas storage and transmission system (i.e. gas transit and contract storage), within the limitations of the group´s strategic interests.

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Activities carried out in the current Downstream Division will be performed in three major units: Supply, Refining and Logistics will be responsible for the supply, transportation and

processing of crude oil and oil products, as well as the operation of the group´s entire logistics system (including crude oil pipelines, natural gas transmission systems, crude oil product pipelines, crude oil and oil product storage tanks as well as distribution terminals), at the highest possible efficiency;

Marketing will be responsible for the wholesale distribution and trading of oil products, including motor fuels, lubricants, bitumen as well as LPG (the latter is currently within the responsibility of the Upstream Division), and the production of bitumen and lubricants. The unit will develop joint marketing, customer service and sales support (back-office) functions;

Retail Marketing will be responsible for the sale of a wide range of products and services within the filling station network to end users.

A new Chemicals business unit will be set up to manage the relatively sizeable existing chemical product portfolio including the sales of chemical feedstock and secondary products, to manage chemical investments in the group´s portfolio and to develop future, value-generating business opportunities in the chemical sector.

Answer 2.

Activity Diagram of New Field Exploration Limited:

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Activity Diagram of EOG Resources Inc.:

Answer 3.

Low Cost Providers:Since it is an independent Oil & Gas Industry, there are no real low cost providers. The industry segment here does not sell oil or petroleum products but is more concerned with exploration. Since the conditions differ in different countries and regions, hence the cost of exploration is mainly dependant on conditions and not technique. Moreover the geographical constraints and the government policies like licensing, environment policies, taxes, tax free losses, etc play a major role. It also takes into account the chances of success and failure and takes further decisions.

So there would be no such low cost provider in this industry.

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The other Diversified Product/ Service Providers of Independent Oil & Gas across continents are:

Western Europe - Total Eastern Europe - MOL Energy Middle East - Petrixo Group North America - Petróleos Mexicanos (PEMEX) Latin America - Petrobras Asia - PTT Public Company Limited Africa – PetroSA

1. Total – Western Europe Vision - In collaboration with ADNOC and VEDC, develop UAE human capital competencies for the oil, gas and energy industry.

Mission –

To recruit and train outstanding UAE Nationals as apprentices in the oil, gas and energy technologies industries by leveraging Totals ’ twenty years of experience in the oil and gas industry.

To provide the skills, knowledge and confidence that will enable UAE Nationals to work successfully in the oil, gas and industry.

To facilitate career opportunities for UAE National apprentices at Total Abu Al Bukhoosh as well as other companies that are part of the ADNOC group.

Objectives – To achieve our ultimate target of zero serious accidents, our policies focus on two areas: workplace safety and technological risk management.

Key attributes :

Developing the exchange of best practices, reporting of abnormal situations and "near

miss", using feedback in a more formal way, so that it can become more firmly rooted in

the Group’s safety culture.

2. MOL Energy – Eastern Europe:

Vision: MOL Group keeps people moving ahead by discovering new ways of serving their energy needs better and creating value for generations to come.

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Mission: Operating across and from Central Europe, MOL Group will systematically overcome all frontiers, inspired by its management and relying on the expertise of its people.

Objectives: To transform energy sources into essential conveniences and enjoyment for people in their everyday lives on the road and in their homes.

Key Attributes:

Drive for value-creating growth: the drive for value-creating growth is of key importance to our shareholders, and provides new opportunities for our employees and other stakeholders.

Pace setter and improvement agent: as companies, teams and individuals, we strive to be a determining factor in the development and improvement of our businesses and our region

Hard work and continuous self-improvement: as the foundation of our competitiveness, we value performance and commitment to continuous self-improvement

Team player and partner: as individuals, teams and companies, we all work together for the success of the Group. Cooperation is essential to maximize the value of our integrated business

Quality and company of choice: we provide outstanding quality at competitive prices. Striving for quality in our products and services and professionalism in our daily work, we want to be the company of choice for our stakeholders

Health, safety, environmental and social commitment: we want to fulfil our responsibilities towards our employees, hosting communities and societies, and thus aspire to go beyond the legally required standards.

3. Petrixo Group – Middle East :

Vision: Petrixo is committed to building a strong and credible network of cooperation with distinguished oil companies around the globe, in order to add a value to the energy markets and environment protection. 

Our operating vision revolves around recognizing our client and society needs and developing economical products and services, as well as, quality, safety, health, and environmental protection systems to satisfy these needs. 

Petrixo is serious enough in developing new ideas to enhance our operation. We also develop the form of transportation when it comes to transferring refined oil products and activities, occurring under our pipe lines for the flow of oil and gas. 

Our strategies are all unique and effective that is not only for the sake of people but also on focus on health and proper safety approach. We are able to meet the goals by investing on other beneficial projects with high return but low cost establishment. 

Petrixo is also giving worth to our major investors and stakeholders by exercising their timely

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ideas and suggestions for the development of our company like expanding, developing and

consolidating more production & trading assets. 

Mission: At Petrixo, we are committed to establish long lasting relationships with the consumers by gaining their trust and exceeding their expectations, as well as, establishing highest levels of integrity, professionalism, fairness and honesty with our professional associates, subcontractors and suppliers. 

Our core objective is the provision of professional and quality products to our patrons that perfectly satisfy their needs; timely delivery within the budget, and represent value for money and exceeding expectation through exceptional services. Petrixo has achieved this feat with a structural continous development program, aimed at provision of quality products and services that helps to develop personnel skills and reduce costs. The use and applicability of quality program is ensured with constant review and audit of the system, throughout the organization in order to achieve the financial goal with highest standards of operations.

Objectives:

Key Attributes:

To hire highly qualified people and maximize their ability through specialized training and skill developments.

To prioritize interest in operations in order to protect the environment and control the pollution.

To honor the local and national culture and comply with all applicable laws and regulations.

4. PEMEX – North America

Vision: To be the best option for the supply of imported goods and services for the PEMEX Group.

Mission: To contribute to generate value to the PEMEX Group by providing comprehensive management solutions for the supply chain of imported goods and services with innovation, quality, efficiency, and competitiveness.

Objectives: Since our creation, we have developed over 200 Long-Term Partnership Agreements and we have had contractual relationships with more than 1,700 suppliers in the oil equipment manufacturing and services, and other related industries.

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Key Attributes: We are committed to the satisfaction of our customers by continually improving our services through innovation, quality, efficiency, and competitiveness.

5. Petrobras – Latin America: Vision: Be one of the world’s top five companiesand the company of choice for our stakeholders.

Mission: Work ethically , safely and profitably in the oil and natural gas industry with social and environmental responsibility, providing the right products for customer needs and contributing for the development of Brazil and the countries in which we operate.

Objectives: We are committed to the satisfaction of our customers by continually improving our services through innovation, quality, efficiency, and competitiveness.

Key attributes:

Exploration and Production

Produce an average of 4.0 million bpd between 2020 and 2030, considering Petrobras stake in fields in Brazil and abroad and acquiring exploratory rights to support this goal;

Refining, Transportation, Commercialization and Petrochemical

Supply the Brazilian oil products market, reaching a refining capacity of 3.9 million bpd, in line with market requirements;

Distribution

Maintain leadership in the Brazilian fuel market, increasing the value added and the preference for Petrobras brand;

Gas, Power and Gas-chemical

Add value to the businesses of the natural gas chain, monetizing the natural gas from the pre-salt and from the interior basins of Brazil;

Biofuels

Keep growing in biofuels, ethanol and biodiesel aligned with Brazilian diesel and gasoline markets;

International

Perform E&P activities, with focus in oil and gas exploration in Latin America, Africa and the US.

6. PTTEP - Asia Leading Asian E&P company driven by technology and green practices.

Vision: Leading Asian E&P company driven by technology and green practices.

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Mission:  Operates globally to provide reliable energy supply and sustainable value to all stakeholders.

Objectives: To define Project SSHE Policy for all activities taking place throughout the project, i.e. Detailed engineering, construction, start up and production operations; in line with PTTEP Corporate procedures and Zawtika project Objectives.

Key Attributes: PTTEP is a national petroleum exploration and production company dedicating to provide a sustainable petroleum supply to Thailand and the countries we operate as well to bring in foreign exchange earnings to our country. 

7. Petro SA - Africa :

Vision: To be the leading African energy company.

Mission: PetroSA will be the leading provider of hydrocarbons and related quality products by leveraging its proven technologies and harnessing its human capital for the benefit of its stakeholders.

Objectives: The core strategic functions of PetroSA are to make it possible for the Government of the Republic of South Africa to:

Improve the supply of fuel, oil and gas to the country Mitigate the impact of oil price variations and foreign currency fluctuations Drive transformation initiatives in the South African oil, gas, fuels and petrochemicals

value chain Champion, support and entrench the growth of Black Economic Empowerment (BEE)

in the sector Manage the contingency crude oil reserves and the strategic petroleum assets of the

Government of the Republic of South Africa Access upstream petroleum assets for the benefit of the citizens of Republic of South

Africa Competitively operate PetroSA in a sustainable commercial manner.

Key Attributes: The exploration and production of oil and natural gas The participation in, and acquisition of, local as well as international upstream petroleum ventures The production of synthetic fuels from offshore gas at one of the world’s largest Gas-to-Liquid (GTL) refineries in Mossel Bay, South Africa The development of domestic refining and liquid fuels logistical infrastructure The marketing and trading of oil and petrochemicals.

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Answer 4:The global oil and gas market was worth just over $2,640 billion in 2010, representing almost a 74 billion barrel oil equivalent of consumption. The oil and gas industry is predicted to grow at a 7% compound annual growth rate, hitting almost $3,700 billion by the close of 2015, according to research from MarketLine.

The oil and gas industry covers the locating, extracting (drilling), refining, delivering and marketing of oil and gas products. Oil meets much of the oil and gas industry is predicted to grow at a 7% compound annual world’s demand for energy, around a third in the EU and Asia and over half in the Middle East.

PESTEL ANALYSISIn order to understand factors that affect the industry, the PEST analysis could offer some help. PEST analysis helps is the analysis of external factors which are beyond the control of the companies and these factors sometimes could be a potential threat. Moreover these factors can lead to new opportunities being created for companies to explore.

Political Factor:Political decisions made by the government will definitely affect the oil and gas industry in one shape or another (more (directly or indirectly)). One of the main political talking points is the effect the industry has on climate change. According to Chapman (2009), companies do not really recognize the effect the industry and company has on climate change. Steps have and are been taking to ensure that companies recognize changes in climate. Many countries not too long ago updated the Petroleum Act, tightening the law on decommissioning, making it adamant and compulsory that companies take into account the impact of climate change. The government realizes that actions and policies are needed for the industry to continuing providing energy for the economy while the industry reduces the amount of emission they produce and also providing new powerful energy option. In 2000, it was proposed that countries would need to reduce it emission of CO2 by 2050 and if possible to reduce it by 80% by 2100. This was an international agreement proposed in other to prevent concentration of carbon dioxide from rising above 550 parts per million in volume. At present, it would be safe to assume that it has risen significantly.The political factor takes into consideration political stability, pricing regulations, industrial safety regulations, tax rates and incentives and many more.

An effective way in which government believe would encourage the industry to limit the amount of pollution they create is the carbon tax charge. The purpose of this is to lower greenhouse gas emission produced by the industry. Similar to this charge is the climate change levy (referred to as tax on energy. The importance of the tax is to encourage change in the industry. This has persuaded the industry to start looking new renewable energy source or risk having to pay additional cost of the levy on their energy bill. The levy applies to electricity, oil and gas industry, if a company produces the energy the use from renewable

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energy source they will be exempted from this levy. Furthermore companies that agree to the governments' emission target will be given an 80% discount.

Economical FactorsThe economical factor takes in consideration of such issues as exchange rates, economic growth rate, unemployment rate, inflation rate and price in oil and gas. The Oil and Gas industry is one that holds a stronghold in the world. The economy receives a massive boost when there are increase of activity drill in respect to Oil and Gas. As stated, Oil and gas production contributes massively to the government through tax. Unfortunately high price for oil in the modern day is major problem for economies around the world (both rich and poor). The reality is that in many countries, oil is becoming unaffordable for more and more people. In the fiscal last year a huge amount was contributed by the industry in terms of tax revenue, this was likely due to high oil and gas prices. If oil and gas price continue to increase this could change the balance of trade between countries and exchange rate. This increase would cause a decline in the balance payment of net oil-importing countries thereby putting downward pressure on exchange rate therefore import become more expensive and export less valuable which leads to a drop in national income.

Social Factors:There different social factor affect the industry such as customer buying patterns, ethical issues and the environment. Due to very nature of the industry, the environment is in real danger from drilling and transportation process. The chemical used in drilling can be harmful to the environment. The burning of oil as fuel creates destruction, whereby it contributes to such problems as global warming and acid rain. In addition, forest are now at major risk as there are increase pressure applied by the oil and gas industry leaders pushing for new drilling in sensitive and regions which were once protectedTwo main factors affect the industry are major event and consumer attitudes and opinion. Consumer attitude and opinion are changing in the modern day environment. More and more people are moving to solar energies instead of using fuel or gas, this is called the "GREEN CULTURE". There are more concern for the environment now than ever, prompting the search for alternatives. The government intend to have in place coal and gas fired and nuclear power in place by mid 2020 as alternatives.Furthermore, employees' health and safety is another political talking point. Due to the volatile conditions in which employees have to work in and also sub standard physical asset could potential have a negative impact on the health and safety of the employees which would therefore compromise the employer and public liability insurance cover.

Technological Factor:

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Technologies are essential to oil and gas industry, due to the harsh and demanding environment we currently live in; the industry leads in technological innovation in order to overcome challenges of recovering oil and gas from difficult reservoirs and deeper waters. For the industry, the need of need technology is need in order to discover new ways of reducing production cost, improving performance and making marginal fields economic to develop. The effort put in by the industry to develop new technologies for locating and producing oil and gas has led to various inventions and technical advances that have been used elsewhere.An area in which the government and the industry highlight as potential growth area is in the field of Carbon Capture and Storage. European Union alongside with other countries has recognised this potential and legislation have been put in place and funding made available in order to finance demonstration plant in Britain and other countries. The industry's knowledge of undersea geology, reservoir management and pipeline transport will undoubtedly play an important role in making this fledgling technology work effectively.

Environmental Factor:

It focuses on the analytical issues inherent in any environmental monitoring or cleanup program as they apply to today's petroleum industry, not only during the refining process, but also during recovery operations, transport, storage, and utilization. Designed to help today's industry professionals identify test methods for monitoring and cleanup of petroleum-based pollutants, the book provides examples of the application of environmental regulations to petroleum refining and petroleum products, as well as current and proposed methods for the mitigation of environmental effects and waste management. Petroleum technology, refining, and products, and reviews the nomenclature used by refiners, environmental scientists, and engineers. Environmental technology and analysis, and provides information on environmental regulation and the impact of refining. It includes: In-depth descriptions of analyses related to gaseous emissions, liquid effluents and solid waste* A checklist of relevant environmental regulations* Numerous real-world examples of the application of environmental regulations to petroleum refining and petroleum products* An analysis of current and proposed methods of environmental protection and waste Efficient reliable and competitively priced energy supplies are prerequisite for accelerating economic growth. Realization of high economic growth aspirations by the country in the coming decades, calls for rapid development of energy market. The Hydrocarbon Vision-2025 report, which encapsulates Government’s long-term policy for this sector enunciate therein the long-term policy covering exploration, refining, marketing infrastructure, gas and all other related matters in the hydrocarbon sector. The national endeavour is to bridge the ever-increasing gap between demand and supply of petroleum products in India by intensifying exploratory efforts for oil and gas in the Indian sedimentary basins and abroad supported by other alternative sources of energy like Coal Bed Methane (CBM), Gas Hydrates, Coal Liquefaction, Ethanol and Bio-diesel etc.

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Legal Factor: New Exploration Licensing Policy (NELP), over the last 6 years there has been a significant growth in E&P activities. There have been several successes. These finds will require state of the art technologies to extract the hydrocarbons as well as highly skilled and competent professionals to manage the industry. The E&P industry today is using cutting-edge technologies to locate hydrocarbons and optimize efficiency in production. These technologies include the use of complex reservoir modelling and simulation, nuclear magnetism, sonic & ultra-sonic technologies, magnetic resonance, advanced chemical engineering, fluid mechanics, telecommunication, process engineering etc. As “easy oil” has become a thing of the past, the industry is moving towards frontier areas to increase production. The high value of the end product has led to significant technological developments to tap resources in offshore environs of deep and ultra deep water (from 300-3500 meter water depth).Heavy oil consists of over 40% of the hydrocarbon resources in the world. This oil does not flow at surface conditions. Optimizing the recovery of hydrocarbons from existing producing fields (called “brown fields”) remains an existing challenge. Current recovery rates in India need considerable enhancement. These are just some examples of the E&P challenges that are found in India and an opportunity for the use of state of the art technologies and developing manpower for meeting these challenges.

Porters 5(Five) Forces for the Independent Oil & Gas Industry:

Threat of entry by new competitors:Entry barriers to the petroleum industry include: i) political and governmental pressures, ii) the need for highly trained and specialized workers, iii) the need for large capital investments, iv) asset specificity, and v) physical hazard and risk. Global political forces shape the industry and in the U.S. The the production of oil is extensively regulated by federal, state and local authorities. Environment evaluations and laws regulating processes require an extensive compliance plan.Highly trained and specialized workers are needed to operate equipment and determine key drilling decisions. Significant capital is required to enter the market, to replace reserves, and to sustain production. The firm must pay for development prospects and productive oil properties. A substantial reserve is needed to cover operations during periods of unproductive drilling and shortages of oil field equipment, services and qualified personnel. Mineral rights to the real property acquired for drilling are expensive and asset specific. Land is not easily converted to other uses at the same price. The value of the aggregates, or farming produce, may be less than the mineral interests. Companies seem to aggressively protect their competitive position, and new entrants may be reluctant to invest the capital necessary. Economies of scale realized by the majors act as an entry barrier. Minimum

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efficient level of production for the oil and gas industry is high due to up-front costs, requiring a larger market share for an entrant to be competitive. Oil drilling also can be hazardous; exposing the entrant to financial, regulatory and civil liability for personal injury; damage or destruction of property, natural resources and equipment; and environmental damage clean up responsibilities that suspend, limit or prohibit operations.

Rivalry among existing competitors: In 1999, the top five producers held a 41 percent market share. The next largest five held 13 percent, and the following 50+ companies held 46 percent. The high concentration indicates a less competition. The market appears disciplined; lesser intensity is expected with increasing market growth; high exit barriers; and historically slow but steady industry growth. However, the market is more volatile than it appears, possibly due to global rivalry. Rapid global growth, high real property and storage costs, low switching costs and low levels of product differentiation foster more intense rivalry.

Pressure from substitute products: Substitute products refer to products in other industries. At the present time, the search for alternative sources of fuel is prevalent; however, very few substitutes are yet commercially feasible. Coal, nuclear energy, renewable like hydro electric power, solar power; and wind power are just a few. Pressure from substitute products is low in the short run.

Bargaining power of buyers: Oil is a commodity, and is traded as such (low bargaining power). Also, the OECD represents substantial bargaining power by buyers. The majors, while dominating the U.S. market (high bargaining power), must compete with much larger global interests as buyers (low bargaining power). Majors are both buyers and producers (high bargaining power). Producers have the ability to sell to many buyers, eg. the emerging markets in China and India (low bargaining power), but the members of the OPEC establish prices, affecting supply and price levels (high bargaining power.) The buyers have a positive relationship to the industry: when “greener” alternatives are found, both the producer and the refiner (eg.) will find a reduction in demand, rather than a shift in power between the producer and the supplier.

Bargaining power of suppliers:Acquiring realty is a dominant cost. In the Chaparral Form S-4 , it constitutes 86 percent of the total assets of the company. Suppliers of 86 percent of the assets of the firm should have high bargaining power, but realty is widely held. If one property is not attractive, the buyer buys the next. In addition, sellers may not transact business with the buyer more than once, limiting bargaining power. The labour pool for experienced managers in the industry is aging; the median age is between 48 and 52. Few new graduates enter the field due to poor to fair job opportunities historically. There are two labour unions, the APEU and the OCAWU. Some majors employ over 100,000 people, but 53 percent of producers have fewer than five employees. The number of potential employees is small; those available for employment have relatively great bargaining power. Wages in the industry rank above average, also indicating an above average bargaining power.

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Strategy of the closest Competitor: It’s main competitor in that segment and range is EOG Resources.

1. Crude Oil Advantage2. Crude by Rail System - Transportation of crude oil and natural gas quickly to

efficiently sell at a premium price.3. Highest price continuously because of the earliest movement in crude oil, which

gives a lot of flexibility4. Having own infrastructure.5. Decentralized business model6. Grow by drilling low-cost, internally generated prospects rather than through

acquisitions7. Capture an early-mover advantage in key resource plays8. Maintain a strong balance sheet with a moderate net debt-to-total capitalization ratio9. Continue to increase the percentage of crude oil and natural gas liquids in our

portfolio, emphasizing North American production

Complementors:1. Transport - Midcontinent Express Pipeline LLC, Kinder Morgan Energy Partners,

Laclede Energy Resources, Inc.

2. Basins -  the Anadarko Basin, Uinta Basin

3. Rig – The Company does not share the vendor details. But since it is an exploration company, it procures rigs from various countries, regions and companies.

Answer 5. i> History & Evolution: Oil Exploration and Production is a complex

process, and each step of the oil supply chain involves specialized technology. Oil reservoirs are identified through geological field work, geological modelling, seismic imaging and exploratory drilling. Oil is then extracted with production equipment and transported in tankers and pipelines. Oil refineries refine crude oil into various marketable end products including gasoline, diesel fuel, jet fuel, marine fuel, petrochemical feedstock and other chemicals. Most oil companies, even vertically integrated giants, don't build the equipment needed to complete all of these difficult and costly tasks. Instead, oil companies turn to engineering and industrial firms that build and operate the oil rigs, tankers, and pipelines that are the backbone of the industry. These oilfield services companies provide the infrastructure, equipment, intellectual property and services needed by the

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international oil and gas industry to explore for, extract, and transport crude oil and natural gas from the earth to the refinery, and eventually to the consumer. The threat of 'oil running out' - for years regarded as the second big turning point facing the industry - is no longer an imminent prospect, with 'peak oil' increasingly looking like a misleading notion. On the contrary, it is demand that is nearing a plateau, at least in developed countries. And with reserves of oil and gas having more than doubled since 1980, the problem is not finite resources, but rather the rate at which these very large resources can be converted into reserves.

The oil industry can no longer rely on its monopoly of the transport market, a sector which constitutes half the global oil market. Use of oil in transport is being drastically reduced by competition from other industries, driven both by the increase in oil prices since 2005, and by government policies limiting carbon emissions. Business as usual is no longer a credible future: an epic, rather than incremental response is needed if the industry is to continue to evolve and prosper. The choice is to change or be changed.'

Advances in technology are also playing a crucial role in reshaping the industry, opening up new reserves of 'unconventional' oil, as they already have for gas, and creating new and previously unforeseen opportunities for private sector companies. But these companies cannot afford to be complacent. For investors who look for growth in value or volume, many private sector oil companies seem configured for the last era and not the next; their strategies look recycled, not renewed. Fundamental changes taking place in the geopolitics of oil are also examined.

Growth Rate and Profitability Rate: The global oil and gas market was worth just over $2,640 billion in 2010, representing almost a 74 billion barrel oil equivalent of consumption. The oil and gas industry is predicted to grow at a 7% compound annual growth rate, hitting almost $3,700 billion by the close of 2015, according to research from MarketLine.The oil and gas industry covers the locating, extracting (drilling), refining, delivering and marketing of oil and gas products. Oil meets much of the oil and gas industry is predicted to grow at a 7% compound annual world’s demand for energy and around a third in the EU and Asia and over half in the Middle East.

Total worldwide capital expenditures for the companies were US$541.0b in 2013. The strong growth in exploration spending and development spending was somewhat offset by declines in property acquisition costs. Combined exploration and development spending increased 20% in 2013 and grew 48% from 2009 to 2013. 

All regions showed increases in total spending in 2013, but the level of reinvestment in oil and gas operations has varied widely by region over the five-year study period. The companies’ worldwide plowback percentage was 54% during 2009-13 while the US recorded the highest level at 123% and Europe the lowest at 31%. The plowback percentage represents total capital expenditures as a percentage of revenues less production costs. Worldwide after-tax profits for the study companies were US$268.4b in 2013, representing a 16% decline from 2012. Combined oil and gas production increased 2% in 2013 and revenues saw a slight 1% increase. Production costs rose 6% in 2013 primarily due to higher

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costs for labor, services and other lease operating expenses. Depreciation, depletion and amortization charges increased significantly in 2013 as many natural gas producers in Canada and the US recorded property impairments due to low natural gas prices. 

Future: Exploration trends will follow the industry’s perception of the “next best resource base” to explore and develop, which incorporates both the scale and quality of resource and the cost of its development.

Exploration is already some 40 years into the deepwater era. And although it is perhaps half way through it in finding terms, deepwater exploration is a trend that will be with there for some time yet.

Deepwater will likely be followed by two very different trends, both of which are beginning to emerge. Firstly, a move to the unexplored arctic frontier of ice bound continental shelves; and secondly to a re-exploration of the onshore and shallow waters of the world with new images, new technology and occasionally new ideas.

ii> Size of the Industry across the world: The global oil & gas market grew by 30.4% in 2010 to reach a value of $2,642.5 billion. In 2015, the global oil & gas market is forecast to have a value of $3,699.4 billion, an increase of 40% since 2010. The global oil & gas market grew by 16.3% in 2010 to reach a volume of 73.8 billion BOE. In 2015, the global oil & gas market is forecast to have a volume of 91.8 billion BOE, an increase of 24.4% since 2010.

Crude oil is the largest segment of the global oil & gas market, accounting for 79.7% of the market's total value. Americas accounts for 34.9% of the global oil & gas market value. Oil and gas companies are typically large, integrated players that benefit from their scales of operations. The presence of such incumbents intensifies rivalry in the market.

Size of the Industry in US: For many decades the benefits of oil and gas

development in the US have been overshadowed by the amount of money

companies in the sector have made, the environmental impacts of use or

development and occasional accidents and the degree to which imports impact

US foreign policy and economic health.

The extent, to which the US oil and gas business drives job growth, contributes to

local and the national economies and has renewed potential to shift economic

and political power back to the US.

Some of the striking statistics include:

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$1.1 Trillion: The total value added by the US oil industry to the national economy

$109.5 Billion: The projected amount US households will save between 2009 and

2020 due to lower household natural gas prices

$545 Billion: Amount directly provided by the oil and natural gas industry to the US

economy in 2011 (according to a PriceWaterhouseCoopers report).

One million plus: The number of hydraulic fracturing wells API claims have been

drilled without a case of groundwater contamination (API cites its own blog, quoting

in turn outgoing EPA chief Lisa Jackson on proven cases of groundwater

contamination).

9.2 million: The number of US jobs supported by American oil and gas

$94,500: The average salary for refinery workers

$29 billion: Cash dividends paid to shareholders of oil and natural gas companies

In 2011, the oil and gas industry contributed more than $1.1 trillion towards US

GDP of about $15 trillion in that year, according to the PwC report.  That represents

7.3% of the total economic output of the U.S. economy in 2011, and comes from

$481 billion in direct impact(jobs, income and value added within the industry),

$494 billion in indirect impact (jobs, income and value added throughout the supply

chain of the oil and gas industry) and $126 billion in induced impact (jobs, income

and value added from household spending of the income earned directly or

indirectly from the industry’s spending).

America’s oil and gas industry is enormous, as is its impact on the US economy.

And the positive impact of the oil and gas industry gets stronger all the time, as

domestic energy output increases – North Dakota is producing record amounts of

oil, Texas oil output has doubled in just the last three years to the highest level since

1987 (Eagle Ford Shale in Texas now ranks as the largest single oil and gas

development in the world based on capital expenditures) and the US has probably

just surpassed 7 million barrels per day in domestic oil production for the first time in

more than 20 years. Domestic natural gas production reached a record high last

year, bringing prices down to record low levels and rolling the carbon clock back by

several decades.  With all of the increased domestic production of oil and gas, the

US was more energy self-sufficient in 2012 than in 20 years – we produced more

than 83% of the total energy consumed last year (based on data for the first nine

months) for the first time since 1991.

Key success factors of Oil & Gas Industry:

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Operational Excellence - In today’s increasingly commoditized and globalized business environment, companies in all industries are finding it necessary to increase their competitive advantage. Indeed, companies in the oil and gas industry are looking to increase their bottom line by boosting their operating efficiency and reducing fixed cost. Achieving this, however, is challenging, especially within the context of the increasing complexity of remote and extreme operational environments. One strategy oil and gas companies are employing is the full integration of all assets and processes into a single management system. In doing so, oil and gas companies have great potential to increase their operational efficiency and realize significant reductions in fixed cost.

The Beginnings of Integrated Asset ManagementThe move toward integrated asset management initially started with companies focusing on Process Safety Management (PSM) within the context of a health, safety and environment (HSE) system. Oil and gas companies often operate in extreme environments utilizing highly hazardous processes. These processes must be managed with extreme precision to avoid significant process-related incidents. To accomplish this, companies would develop PSM procedures and programs that were typically housed within the HSE function.

Challenges to SuccessAs oil and gas companies look to increase the efficiency and integration of their assets, many of them have implemented initiatives geared towards different aspects of the business. There would be an HSE-based initiative coupled with a PSM-focused initiative, for example, which were then tied to a production initiative and so on. The problem with this model is that, ultimately, an initiative-based approach to integrated asset management leads to overload. Businesses find themselves with too many disparate initiatives and an inability to allocate resources. The challenge to corporations is to figure out how to manage various initiatives in a holistic way. The goal is to manage all of the priorities – safety, production efficiency, cost effectiveness – together and across the organization, from the corporate headquarters, to the various plant sites.

A Comprehensive SolutionThis process of standardizing business processes can be particularly difficult for oil and gas companies, which often view the corporation as an entity similar to a holding company.  Each business area – exploration, upstream and downstream production, refining – is distinctly different, and it may seem as though standardization is impossible or illogical. With a greater understanding of what is required to be successful, which may differ from one worksite or business unit to the next, it is possible to develop common and standardized core competencies across the business as a whole. To successfully accomplish this, experts from each of the core areas – operations experts, safety executives, maintenance and reliability directors, and management – must come together and participate in designing a model that is broad enough to be applicable to all of the assets. Creating standardized approaches to various business functions allows for centralized knowledge and oversight, while giving flexibility in implementation, allowing business units in different operating environments to apply common knowledge and standards.

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Significant contribution of research:

This piece of research is useful for deepwater oil and gas project management practitioners in the petroleum industry who will encounter issues of cost and schedule overrun, strategy and resource allocation and therefore, can make use of the recommendations in this researchstudy. The research would enable the exchange ofknowledge in tackling current and future challenges and create pathways for deepwater oil and gas project management and enhance further success in locating, extracting, and transporting oil and gas to meet global demand. Project management is indispensable for business results, the research will be able to create strategic dialogue on issues of project success, that reflect the realities of capital project management in the oil gas, and petrochemical sectors, to improve efficiency and further ensure a framework of good practices is consistently applied. It will also bridge existing knowledge gap and further aid in reducing project failures of major and complex national projects.

Strategy management   Strategies are broad action plan statements that guide and direct the use of organisation’s resources to accomplish the mission and goals (White and Patton,2002). Strategic management is geared towards achieving corporate objectives. It provides a guiding force that integrates the efforts of all levels of staff in an organisation. Rachman and Mescom (1978) identified strategic management as one approach to the ‘big picture’ problem; they believed, it stresses the importance of focusing on overall company goals, rather than on individual products or division within the company. Jauchand Gleuck (1988) defined it as “a stream of decisions and actions which leads to the development of an effective strategy or strategies to help achieve corporate objectives”. According to Hill et al. (2007), the strategy management process is a combination of not only strategy formulation, strategy analysis, and strategy implementation, but also evaluation and control(monitoring performance using actual results learning and adjustments) and environment scanning by identifying what is important and addressing the strategic issues by gathering information and analysing both the external(opportunities and threats), and internal (strengths and weaknesses).

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