PESTEL Analysis of Oil and Gas Industry in Nigeria

The natural resources which are possessed by Nigeria are able to affect the oil and gas based industry in a huge manner. The country has acquired the position of 10^th biggest producer of oil in the entire world. Nigeria is the third biggest manufacturer of oil in Africa as well. More than 90% of the total foreign exchange based activities are based on the oil based revenues. The daily levels of production of Oil are thereby limited with the help of the OPEC quota based reductions. The production of oil in Nigeria is thereby based on the response which is provided to the oil supply in the entire world (Ablo 2015).

The report will be based on the analysis of the external environment based on the Oil and gas industry of Nigeria. The Oil and gas business based industry of the country will be analysed with the help of Porter’s five forces framework. The marketing analysis will be made with respect to the business model of the organizations operating in the industry.

The exploration of the Oil and gas based industry in Nigeria is based on different factors and aspects. The major factors which thereby need to be analysed in order to understand the industry include, the political factors, economic factors, social factors, technological changes, legal condition and environmental factors. The industry can thereby be analysed in an effective manner by studying these aspects in a detailed manner (Badiru and Osisanya 2016).

Political factors – Political issues have always been able to affect the rich oil based states in Nigeria. The instability which has been experienced in the political condition of the country is also considered to be a major factor which is able to affect the industry. The corrupt nature of government officials is also considered to be a factor which has a major effect on the organizations which operate in the industry (Ablo 2015). The youth in Nigeria has also been accused for kidnapping and gaining illegal arms as well. The unrest which has been taken place in political condition needs to be addressed in order to progress the operations of the organization (Berkowitz, Bucheli and Dumez 2017).   

Economic factors – The economic breakdown which has thereby occurred in the world had major levels of effects on the industries in every part of the world. The banks which operate in Nigeria have undergone reforms in the recent times. The central bank of the country had been listed for the different un-serviced debts and loans. This further led to the lack of loans which are provided to the different individuals and organizations, even the oil based marketers (Dibia and Onwuchekwa 2015). The import based activities of different products in Nigeria have not been funded by the banks in Nigeria. The reduction of loans provided to the organizations and different individuals has affected the economy of the country. The business organizations in the industry have been affected by the economic condition of the country (De Vita, Lagoke and Adesola 2016).

Porter’s Five Forces Analysis of Oil and Gas Industry in Nigeria

Social factors – Nigeria has experienced huge growth in the 21^st century with the help of different infrastructure based projects based on solid infrastructure. The growth in the economy has an impact on Nigerian people as well. The social status of Nigerians has improved and they have increased their standard of living as well. The Nigerians have started moving towards the clean sources of energy required for cooking. The demand for energy has also increased in the recent times in comparison to the demands which were present in the last decade. The improvement in social status has been affected the demands for oil, natural gas and different related products as well (Dibia and Onwuchekwa 2015).

Technological factors – The technological condition of Nigeria is an important issue which has influenced industry related to oil and gas. The refineries which have been developed in the country are also affected by the lack of proper technologies. The improvement in technology based aspect is considered to be an important factor which is able to affect the operations of different organizations. The growth has been quite high in the technologies used in oil and gas based industry. The improvement in technological aspect is considered to be an important factor which has been helpful for the technological revolution (Donwa, Mgbame and Julius 2015). Technological changes have been a major factor which influenced the lives of Nigerian people and maximised their efficiency as well. The economic growth of the country has been mainly based on the oil and gas based industry. High levels of competitiveness of the industry is considered quite important for the organizations which operate in the country (Elenwo and Akankali 2014).

Legal factors – The legal condition of the country is based on the political condition and instability as well. The regulations and laws which have been developed in the country have been able to affect the operations of the organizations which are a part of the industry. The players in the oil and gas based industry operate built on the regulations which have been set by the government. The efficiency and profit based levels of the organizations are thereby maximised with the help of proper levels of policies and regulations as well (Gabriel, Asawo and IDRIS 2016).

Environmental factors – The environmental conditions are considered to be highly important for the operations of organizations in the oil and gas based industry. The industry is considered to emit the carbon dioxide in a huge manner. This has proved to be a major concern for the organizations in this industry. The Nigerian market needs to be become a low carbon based economy in order to become competitive on a global basis. The transformation of natural gas has also played a key part in the growth of the economy in an effective manner (Monday 2015).

The external factors have been able to affect the oil and gas based industry in a huge manner due to the economic and political condition. The government of Nigeria is thereby able to play a key role in the effective and profitable operations of the organization in the industry (Obara and Nangih 2017).

Rivalry based on competition – The levels of competitiveness in the oil and gas based industry is quite high. The upstream based division of the industry is mainly affected by the levels of competition. The large oil and gas based organizations which are known as the Integrated Oil and Gas Companies or IOCs are mainly affected by the levels of competition. The size of the upstream based organizations can be analysed with the measure of the revenues and market capitalization. The private organizations operate in the upstream sector of the industry and affect the oil and gas sector. More than 90% of the oil based reserves are controlled by the different National Oil companies in Nigeria (Onoh 2017).

Threats related to the new entrants – The entry of new organizations in the oil and gas based sector is affected by different factors. The requirement of huge amounts of capital is an important factor which restricts the operations of these organizations in the upstream sector. The levels of internal competition are also considered to be highly important for the operations of the new entries in the industry. The location of oil and gas based reserves in different war zones is a major factor which is able to affect the operations of the organizations. The new entrants in Nigeria are thereby affected by the laws and regulations which have been developed and implemented by the government (Oyewunmi and Olujobi 2016).

Threats related to substitutes – The alternative sources which are available as compared to the oil and gas based industry mainly include, coal, nuclear energy, biofuels and hydrogen. The different energy sources are able to replace the high levels of hydrocarbons which are used in global energy based mix. The requirement of investment in this case is quite high (Oyewunmi and Oyewunmi 2016).

Bargaining power of the buyers – The buyers in this industry are not powerful in nature. Different types of buyers who are a part of the industry mainly include, national oil based companies, refineries, international oil and gas based companies, countries and traders. The main interest of buyers is based on the quality and price of the products. The buyers are thereby not able to affect the prices of oil and different oil based products which have been decided by the government. The bargaining based power of consumers in oil based sector in Nigeria is low until they start using any alternative sources (Sumbal et al. 2017).

Bargaining power of the suppliers – The suppliers in the oil and gas based sector of Nigeria are highly active in the supply chain. The abilities which are possessed by the suppliers are able to affect the prices of oil. The bargaining based power which is depicted by the suppliers is higher as compared to the buyers. The expenses which are incurred by the organizations in production are affected by the suppliers. The oil based organizations are thereby affected in a huge manner by the suppliers and their prices as well (Werner, Inkpen and Moffett 2016).

Strengths  The Organization of Petroleum Exporting Countries (OPEC) which has been helpful in the raise of prices of oil.  The joint ventures made by the organizations are also major strengths of oil and gas industry.	Weaknesses  The economic problems faced by the country is a major level of weakness.  The economic condition has affected the revenues.
Opportunities  The oil based wealth of Nigeria has chances of improvement.  The natural resources are considered to be effective opportunity for the country (Williams, Kilanski and Muller 2014).	Threats  The dependence of Nigeria on the oil and gas industry is a huge threat.  The rise in prices of raw materials is also a major threat (Sumbal et al. 2017).

The marketing strategies which are used by the oil and gas based organizations are mainly based on the enhancement of their performance in the industry. The complex structure of the industry is thereby a major factor which can affect the operations of different oil and gas based organizations. The upstream based organizations thereby need to focus on the accomplishment of the goals which have been set. The organizations can develop strategies based on the problem areas which the products are able to fix (Obara and Nangih 2017).

The business model of an oil and gas based business is based on the partners which are include, the subsidiaries which are provided with dealerships. The government of Nigeria is also considered to be a major partner of the organization. Major activities are based on transportation of pipelines, marketing of the products and refining. The important resources which are a part of the operations include, reserves based on oil and the partnerships (Donwa, Mgbame and Julius 2015). The relationships which have been developed with the customers are considered to be important parts of the business based relationships. The organizations are based on different customer based segments which provide effective levels of revenues and profitability as well. The cost based structure plays a major part in the operations of the oil and gas operations. The prices of the products are able to affect the revenues of organizations in the competitive industry (Werner, Inkpen and Moffett 2016).

The major advantages which are provided by the business model are based on the various aspects of the business that need to be considered in order to continue the operations in the competitive industry of oil and gas in Nigeria. The disadvantages of the model are related to the lack of proper details related to the business operations in the industry. The business model of the oil and gas business needs to provide effective information related to different aspects (Badiru and Osisanya 2016).

Key performance indicators based on future success of the organization are as follows,

• The growth of Nigerian Oil and gas industry will be able to facilitate the growth of an organization.
• The increase in demands will act as a major factor which will affect the processes of the oil and gas business in Nigeria.

Conclusion 

The report can be concluded by stating that the oil and gas based industry of Nigeria has shown immense levels of growth in the recent times. The organization which operates in the industry can thereby gain a lot from the growth and increase in demands of the products. The organization will be able to take advantage of the abundant natural resources which are provided by the country.

References 

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Badiru, A.B. and Osisanya, S.O., 2016. Project management for the oil and gas industry: a world system approach. CRC Press.

Berkowitz, H., Bucheli, M. and Dumez, H., 2017. Collectively designing CSR through meta-organizations: A case study of the oil and gas industry. Journal of Business Ethics, 143(4), pp.753-769.

De Vita, G., Lagoke, O. and Adesola, S., 2016. Nigerian oil and gas industry local content development: A stakeholder analysis. Public Policy and Administration, 31(1), pp.51-79.

Dibia, N.O. and Onwuchekwa, J.C., 2015. Determinants of environmental disclosures in Nigeria: A case study of oil and gas companies. International Journal of Finance and Accounting, 4(3), pp.145-152.

Donwa, P.A., Mgbame, C.O. and Julius, O.M., 2015. Corruption in the oil and gas industry: Implication for economic growth. European Scientific Journal, ESJ, 11(22).

Elenwo, E.I. and Akankali, J.A., 2014. Environmental policies and strategies in Nigeria oil and gas industry: gains, challenges and prospects. Natural Resources, 5(14), p.884.

Gabriel, J.M.O., Asawo, S.P. and IDRIS, A.A., 2016. Workers satisfaction through vertical job loading among casual employees of oil and gas companies in Nigeria. Nigerian Journal of Oil and Gas Technology, 2(1), pp.66-77.

Monday, J.U., 2015. Local content policy, human capital development and sustainable business performance in the Nigerian oil and gas industry. J. Mgmt. & Sustainability, 5, p.75.

Obara, L.C. and Nangih, E., 2017. Accounting practices and performance of oil and gas industry (upstream sector) in Nigeria: An empirical analysis. International Journal of Academic Research in Accounting, Finance and Management Sciences, 7(2), pp.215-222.

Onoh, J.K., 2017. The Nigerian oil economy: From prosperity to glut. Routledge.

Oyewunmi, O.A. and Olujobi, O.J., 2016. Transparency in Nigeria’s oil and gas industry: Is policy re-engineering the way out?. International Journal of Energy Economics and Policy, 6(3), pp.630-636.

Oyewunmi, O.A. and Oyewunmi, A.E., 2016. Managing gas flaring and allied issues in the oil and gas industry: Reflections on Nigeria. Mediterranean Journal of Social Sciences, 7(4), p.643.

Sumbal, M.S., Tsui, E., See-to, E. and Barendrecht, A., 2017. Knowledge retention and aging workforce in the oil and gas industry: a multi perspective study. Journal of Knowledge Management, 21(4), pp.907-924.

Werner, S., Inkpen, A. and Moffett, M.H., 2016. Managing Human Resources in the Oil & Gas Industry. PennWell Books.

Williams, C.L., Kilanski, K. and Muller, C., 2014. Corporate diversity programs and gender inequality in the oil and gas industry. Work and Occupations, 41(4), pp.440-476.