Strategic Management

Case Analysis 2: The Global Oil & Gas Industry

Group 2

 Anmol Guleria (500080303)

 Vishesh Anand (500088165)
 Anant Singh (500080299)
 Himanshu Singh (500081770)
 Harsh Nirwal (500084910)
1) Characteristics of Oil and Gas Industry:
As already known that the Oil and Gas industry is the one which is having one of
the longest value chain as compared to other industries and it plays a major role
in enhancing the growth of the GDP of any country. The whole Oil and Gas value
chain is operated through three sectors i.e. Upstream, Midstream, Downstream.
The value chain of Oil and Gas Industry value chain starts Exploration and
Production in upstream, Transmission and storage in midstream and ends with
Refining and marketing in downstream. After that the end product is reached to
the customers.
The Oil and Gas industry also relies on some of the impacts Like- War Events,
geopolitical issues and Elections, Land Acquisitions etc. Oil and Gas industry is a
volatile industry and some changes or some activities have an adverse impact on
the Oil and Gas value chain.
Cost Effectiveness:
 Oil and Gas industry should have a cost effective business as we are
investing more on the field in the initial stage and after that waiting for cost
effective return on it. It all starts with the canalization of the field with the
help of the acquired data and see whether this field has adequate amount
mineral in it or not and how much investment can be done on this field and
how many well can be drilled in the field all this is done with the help of
acquired data.
 Now, acc. to the analysis the company’s investor and stakeholders will go
for initiating production. In case if the analysis and data has gone wrong
then the company may suffer the loss of crores of rupees.
Efficiency Enhancement
 Followed by the cost effectiveness Oil and Gas industry is highly focused
upon improving efficiency particularly the integrated companies like
Conoco Philips, Saudi Aramco prefer to increase their yield from their
downstream process.
 Investing in Upstream business is like probability but as compared to
downstream the investment in downstream is like a calculation. We can

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 except higher efficiency from Refinery and Petrochemical business it we can
invest more in these to increase their optimization.
 Many developed nations are struggling to improve their efficiency and are
finding new developments and technologies. Like in 2003 most of the
European and North American countries were in a situation to adopt Shale
oil for their refineries.

Volatility:
 As already mentioned that Oil and Gas market is highly volatile market and
it mainly depend upon the demand and supply side and with other energy
resources. If more focus is shifted towards renewables for some time then
the prices of Oil may fall due to high supply and less demand.
 If in other time there is a situation like Shale Revolution and Oil embargo it
may affect the entire value chain of oil and gas industry globally. It is one of
the important and beneficial character as it helps in trading the mineral
conveniently.
 In good times the Oil and Gas companies will earn profit and will prosper
but in bad times these companies suffer a huge loss especially the
upstream companies.
Degree of Threat is Low:
 Because of the investment criteria and capital expenditure in the oil and
gas industry we can say that there won’t be huge entrants and already the
entire industry is dominant by IOC’s and NOC’s so there are less chances for
other private entries.
 It is mandatory to initiate new search for the assets so that we can bring
our investments back.
 Rivalry between top companies is normal in this field for finding projects
and getting new fields is not an easy solution. So, this is why they are
mainly focusing upon the integration of the entire sectors like Upstream to
downstream, Refinery and Petrochemical complex to reduce their capital

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 investment and reduce the losses and can have good amount of resources
in terms of storage, transport and utilities.
2) Competitive advantage:
It refers to a state in where a company achieves a favorable position in its
business. Some of the examples of the competitive advantages as mentioned in
the case are
1. Kids on mobiles distinctive competitive advantages its financial
management.
2. Royal Dutch shell group coordinates with the decentralized network by
operating 200 + companies.
3. BP is famous for its elephant hunting. One of the best term which refers to
the act of practicing to target large companies and customers for
acquisition.

Relative position of any industry defines the profitability of the industry. The two
types of competitive advantages that are for the low-cost strategy or the
differentiation strategy. Porter explains this using three main points cost
leadership differentiation and focus. This focus strategy is further categorized into
cost focus and differentiation focus.
Strategy of cost leadership- The Company gives out its products in the Industry for
low cost. They may incorporate preferred access to raw materials, technologies
and various other factors determined.

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 Differentiation strategy- In this strategy industry finds a way in which it can be
unique and provide an efficient market for its valued customers. It can be
explained as premium price combined with uniqueness.
The focus strategy can be explained as a strategy which is very narrow but
competitive. In this strategy a group of segments are selected by the focuser and
it tailors itself to serve them by excluding others.

3) Factors that affect structure and cutthroat elements

This can be clarified obviously through doorman's five powers model,

Competition:
Production lull
Joint
adventures
Superior
innovation

Substitute: Force of
>Biofuels purchaser:
>Gas >Outsourcing
>Electric >Investment
rights
vehicles
Oil & Gas
Industry

Force of provider:
Obstructions to
>Cartels
section:
>Government >Global legislative
guidelines issues
>Monopolised
>Huge Upfronnt
market for
venture
administrations

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4) Reason for vertical combination of biggest contenders

The abbreviation many oil organizations allude to working from mining to

assembling, circulation and deal in numerous areas of the business. In the start of
the business, the industrial facility refined the greater part of its stock, and
afterward refined items were appropriated through its organization claimed retail
locations, in an upward joining. The IOCs work in numerous enterprises, however
they have an authentic vertical combination.

Coordinated organizations:

 There are numerous rivals in the oil and gas industry which in an upward
direction incorporated to the worth chain interaction of market
capitalization in worldwide blend. Like Exxon versatile, regal Dutch shell,
Gulf oil and so forth,

 Diversification of income streams on the oil and gas industry which offers
the board administration range.

 The powerful expense control and client assistance in the oil and gas
industry to proceed with the capital consumption and Technology venture
to work on the Economics of abilities and effectiveness in the biggest
contender of in an upward direction coordinated in oil and gas industry.

 In the inventory network lessen the functional expense dependent on

applying the development ways to deal with cut down the way status.
Drives to guarantee consistent inventory network device for preparing and
advancement father responsibilities to partake in the whole hydrocarbon
esteem anchor as per the organization controls in ONGC.

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 International organizations the significant pattern of not many years has
been developed very significance of NOCs.

 Although BP Exxon portable and sell or among the biggest exposure

attributes organization on the planet they are the main 10 world's biggest
Oil and Gas outlines estimated by oil and gas administrations

 It has a 90% of overall oil and gas sources and most new oil enacted to be
found in the regions.

 In expansion to IOCs, NOCs and auxiliaries, there are countless different

firms in the oil and gas industry that perform significant jobs. All through
investigation, advancement and creation, the oil-field administration firms-
three of which enroll in excess of 100 million-Halliburton (65,000) and
Baker Hughes (46,000) assume a key part. As indicated by the Baker Hughes
site, both these organizations offer items and administrations that help the
oil and gas makers in "looking for, making, producing and taking care of oil
and gas saves."

 The separation further serves to focus light on the capability of vertical

monetary incorporation. As firms at first created vertical monetary joining
basically to empower vertical working, will a developing business sector use
refute their continuation? How is monetary vertical mix going to be
improved or decreased? Do we move to an existence where significant
global petrol organizations don't have to possess more than seismic
treatment facilities?

 The inconsistencies in monetary and vertical hierarchical advancement can

add to these issues and that's just the beginning. The separation is more
than just a sophistry in scholastics.

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5) Eventual fate of oil and gas industry
It is likewise expected that the climate will rely upon this, and the utilization of
gas and diesel fuel are the fundamental elements of a dangerous atmospheric
deviation. What could be compared to worldwide impact is in question - the
destiny of opponents like Russia and Russia. Iran has joined an article.
Immense fortunes can be made or lost because of any development in a
powerful economy presently kept down by the biggest public and private
establishments in the world.

In 5 Years

 Demand for oil and gas will keep on becoming paying little mind to the
limitations forced. In the following not many years. New advances, for
example, pressure driven breaking and brilliant wells, progressed boring
advances, increment oil and gas creation and decrease working
expenses, expanding refining edges and by and large productivity.

 The blast in shale oil and shale gas in the United States will keep on
fulfilling worldwide need for fuel and cutting edge items.

 Oil and petrochemical organizations will profit from the distinction

among oil and flammable gas costs.

In 10 Years

 Oversupply of oil available lessens costs and edges for organizations,

value issues among OPEC and OPEC + nations will unequivocally
influence the market, and as interest for cleaner and less expensive fuel,
the oil and gas industry will encounter repeating value decreases and
request

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 This powers organizations to likewise zero in on choices that are
moderate, reasonable to clients, and promptly accessible.

 Increasing interest for cleaner fills builds interest for LNG, and as
interest for electric vehicles develops over the course of the following 8-
10 years, the worldwide market will change profoundly. expanded
rivalry from worldwide oil and gas organizations

 Alternatives, sustainable fills, and different options will experience in the

oil and gas industry because of lower costs.

 How the public authority urges nations to utilize cleaner powers by

opening retail outlets and presenting new advancements, for example,
shipping LNG and changing CNG over to engine fuel to save the climate.

 Very couple of nations like China, the USA, Germany, and others have
utilized CNG and LNG as a vehicle fuel and the interest for gas and HSD
has declined.

 Companies will focus to reduce carbon emissions by incorporating

Carbon Capture & Storage technologies or else they might be
forced to pay an increased carbon tax.