Introduction to the Oil and Gas Industry

The oil and gas industry is regarded as the leading sector of the world in the terms of dollar value. It is the global powerhouse that employs thousands of workers all across the world and at the same time, it generates billions of dollars each year, globally. In the regions that house the major NOCs, the oil and gas companies are considered to be immensely important and vital for their contribution of a significant amount to the national Gross Domestic Product (Kelland 2014). The oil and gas industry is broken into three major areas, that is; Upstream, midstream and downstream. Upstream component refers to the exploration, which involves the search for underground and underwater natural gas fields. The report discusses about the history and structure of this industry, different roles of international, national and government sponsored enterprises, the supply chains and the demand as well as seasonality of the chosen products (Yusuf et al. 2014).

International Oil Companies

There has been a wild ride for the investors in world’s biggest publicly traded companies of oil and natural gas, for the past two years. As compared with the high water marks in the middle 2014, the shares of Big Oil went down to around twenty five percent and the earnings collapsed. The big irony was that even the oil prices reduced, Big Oil is growing and getting bigger. According to the Energy Information Administration, in the mid 2014, the production of oil was 8.75 million barrels per day, in the United States. Later on, it has grown to around 9.69 million bpd, which became its highest level in the forty five years (Warneke et al. 2014).

However, the production of oil, in the United States has declined to more than half a billion, but the global production still continues to increase. The global production of the oil industry has increased to 94.8 million bpd from 92.4 million bpd. In addition to this, a unique aspect of recent surge is that majority of the gains did not come from the oil companies of OPEC’s. However, Saudi Arabia has one of the major national oil companies; Saudi Aramco remains the world’s most undisputed production leader and the Western as well as Russian companies have made their contributions towards the production level since the past few decades (Olaguer 2012).

National Oil Companies

A national oil company, often abbreviated as NOC, is the oil and gas company that is fully or the majority is owned by the national government. As per the World Bank, the national oil and gas company accounts for around seventy percent of the global oil production as well as controlled by ninety percent of the proven oil reserves in the year 2010. Due to the ever increasing dominance on the global reserves, the overall importance of the NOCs in comparison to the international oil companies like Royal Dutch Shell, British Petroleum, Exxon Mobil and more, has increased dramatically in the recent times (Papavinasam 2013).

The Three Major Areas of the Oil and Gas Industry

In reference to this, the national oil companies are also increasing their investments outside the national borders. The government controlled companies have managed to dominate the ranks of world’s biggest energy producers. On the basis of the combined oil as well as gas productions for the year 2014, fifteen out of twenty world’s biggest energy production companies are the state owned organizations controlled by the national governments. Moreover, out of six, four biggest oil companies owned by the state government, operate in Middle East region with the state controlled energy resources (Logan and McNeish 2012). In addition to this, other state owned companies of oil and gas are located in China and Russia, Africa and Latin America. 

Government Sponsored Enterprises

The government sponsored enterprises comprises privately held oil corporations along with the public purposes as created by the United States’ congressmen in order to reduce the costs of oil and gas. Moreover, in Mexico, there are two major government sponsored enterprises and both of them are in the energy sector. The government sponsored enterprises are the ones where the state has control over the companies, either by full, significant minority or majority ownership. In most of the OPEC countries, government officials own several oil and gas companies that operate on their areas (Kumar and Rabinovitch 2013). In addition to this, the government sponsored enterprises prove to be beneficial as they reduce the influence of the politicians over the services.

A noteworthy example of this is Saudi national oil and gas company and Saudi Aramco that the government of the Saudi bought in the year 1988. It changed its name to Saudi Arabian Oil Company from the Arabian American Oil Company. Moreover, the government officials of Saudi Arabia also operate and own Saudi Arabian Airlines. In addition to this, it owns around seventy percent of the Saudi Basic Industries Corporation and other companies as well (Bergh et al. 2014). In the year 2012, according to the IMF reports, around eighty percent of the world’s petroleum reservoirs were controlled by the government owned companies and out of twenty, fifteen oil companies were state owned (Paik 2012).

Journey of a petroleum product and natural gas product

Gasoline is a petroleum product, which is transparent in nature and used primarily as the fuel in the spark ignited internal combustion engines. It comprises of the organic compounds and is obtained by fractional distillation of the petroleum that is enhanced with various additives. However, bio gas is a natural gas product, which is typically a mixture of various gases that is produced by breakdown of the organic matters due to the absence of oxygen. The differences between gasoline and bio gas is that gasoline is a non renewable resource and bio gas is a renewable resource (Skogdalen and Vinnem 2012).

National Oil Companies (NOCs)

Gasoline is made from the crude oil that was formed millions of years ago from the remains of the tiny aquatic animals and plants. The bio gas is a bio fuel that is produced from anaerobic fermentation of the carbohydrates in waste materials of bacteria or plant materials. The comparison between both the products is that they are both from natural sources and human beings highly depend on them. Both the products produce huge amount of energy and grow on earth (Mohanty et al. 2013). In addition to this, people must use both the products wisely as they may impact the environment, at large.

Supply chain (Upstream, Midstream and Downstream)

The petroleum industry plays a major role in the overall development of the country in terms of economy. The overall performance of the supply chain is becoming very crucial as well. However, the various stages of the supply chain management of gasoline involve exploration, production, refining, marketing and consumer.

(Figure: Gasoline Supply Chain

Source: Zarinabadi and Samimi 2012)

The upstream supply chain includes acquisition of the crude oil, operations that is, exploration, production and forecasting and the logistics management that is delivering the crude oil from various remotely located areas to the refineries. The downstream supply chain includes refinery and the processes related to forecasting, production as well as logistics management.

 

(Figure: Bio gas Supply Chain

Source: Skogdalen and Vinnem 2012)

The bio gas supply chain however, covers the overall integration of the sources along with reloading destinations and stations. From areas like, households, restaurant and hotel industries, food industries, slaughterhouses and meat industries, huge quantity of the bio-genous raw material results (Kelland 2014). Therefore, depending on the overall condition of the distance and bio mass, the production centers direct their transportation reloading stations.

Demand and seasonality of the products

In the year 2007, the gasoline demand reached a higher level in the United States of around 9.286 million barrels per day. However, it declined during the period of Great Recession. Later on, it expanded again and the consumption increased around 90,000 bpd to 8.774 million bpd. It has been the largest year over year growth since the 2006. The retail prices of the gasoline are however, affected by the crude oil prices and the overall gasoline level supply has become relative to the demand. Historically, the retail prices of gasoline tend to rise during the spring or peak summer. The prices are generally low during the winter season (Papavinasam 2013). The environmental regulations generally require that the gasoline sold during the summer be less prone to evaporation during the warmer weather.

Government Sponsored Enterprises in the Oil and Gas Industry

The environmentally friendly product, biogas is a renewable source of energy that is being generated from the anaerobic digestion of the trio mass wastes like animal dung, food wastes, residues of plant, solid wastes and more. The gas comprises of around fifty percent of methane and fifty percent of carbon dioxide. However, with the natural gas becoming cheaper these days, the demand for bio gas is also increasing and it can be a challenging option. The increasing demand among the farmers, industrial processors, municipalities have led to widening of the opportunities of renewable gases for treatment technologies (Olaguer 2012).

Conclusion

To conclude, the oil and gas industry is still regarded as one of the extraordinarily successful industries, which still experiences massive growth in their segment. The large volume of the products of oil and gas industry is gasoline, fuel oil, bio gas and more. The petroleum is considered to be the primary material for the magnitude of certain chemical products like pharmaceuticals, plastics, solvents, fertilizers and more. It is integral to various industries and is considered to be of critical importance for various nations as the core foundation of the several industries. The industry is considered to be one of the major industries which contribute a huge chunk to the country’s overall economy. 

References

Bergh, L.I.V., Hinna, S., Leka, S. and Jain, A., 2014. Developing a performance indicator for psychosocial risk in the oil and gas industry. Safety science, 62, pp.98-106.

Kelland, M.A., 2014. Production chemicals for the oil and gas industry. CRC press.

Kumar, P. and Rabinovitch, R., 2013. CEO entrenchment and corporate hedging: Evidence from the oil and gas industry. Journal of financial and quantitative analysis, 48(3), pp.887-917.

Logan, O. and McNeish, J.A., 2012. Flammable societies: Studies on the socio-economics of oil and gas. Pluto Press.

Mohanty, S.K., Akhigbe, A., Al-Khyal, T.A. and Bugshan, T., 2013. Oil and stock market activity when prices go up and down: the case of the oil and gas industry. Review of Quantitative Finance and Accounting, 41(2), pp.253-272.

Olaguer, E.P., 2012. The potential near-source ozone impacts of upstream oil and gas industry emissions. Journal of the Air & Waste Management Association, 62(8), pp.966-977.

Paik, K.W., 2012. Sino-Russian Oil and Gas Cooperation: the reality and implications. OUP Catalogue.

Papavinasam, S., 2013. Corrosion control in the oil and gas industry. Elsevier.

Skogdalen, J.E. and Vinnem, J.E., 2012. Combining precursor incidents investigations and QRA in oil and gas industry. Reliability Engineering & System Safety, 101, pp.48-58.

Zarinabadi, S. and Samimi, A., 2012. Problems of hydrate formation in oil and gas pipes deals. Journal of American Science, 8(8).