Internal and External Environments for the Oil and Gas Management - Essay Example

Oil and Gas Management Introduction: It is believed physical decline of oil reserves can pave way for substantial economic dislodgment with alternative energy powers being unable gulf the gap within a decade or so. However, some analysts argue that liquid fuels production is going to be sufficient enough to meet global demands for the 21st century. Oil prices will keep soaring which will ultimately stimulate discovery of oil reserves. Both viewpoints are important and debatable but the most important concern is how organizations should be given the incentives to incorporate strategies to develop technology and inculcate alternative sources of energy for the global consumers. The theory of peak oil is largely based on Hubbert’s work. He foresaw peak oil production in 48 countries of the U.S. The theory is represented in a bell curve showing the sudden rise in discovery of oil reserves declining gradually as the rate of reservoir discovery slows down. Significant inferences have been made about the peak oil theory. Increase in oil prices will be intensely felt with respect to transportation of energy fuels. Air transport is likely to face a sad demise as it is heavily dependent on oil. Ultimately, the unfortunate picture demonstrates that the tourist-dependent areas will largely suffer because of the fall in the peak. Higher transportation costs signal higher food costs; we are not self-sufficient societies anymore hence, industrial agriculture will suffer. This on the contrary means that the organic foods department will thrive on its own because it is not dependent on oil as much. Peak oil theorists predict the aforementioned possibilities . Expert analysts delve into the evaluation and usefulness of alternative energy sources in the long-run. The alternative sources need to be cost effective; these can be divided into liquid biofuels and other category which involves hydrogen and electricity. Biofuels can easily enter into the transportation market in the next decade. Biofuels have their environmental advantages as well which gives them an edge over petroleum. Experts are still discovering the potential uses of carbon cars, sticks and carrots, hydropower, solar energy etc. The need of the hour is to subsidize agencies and organizations to make efficacious use of these resources (Kopp, 2006). The research analysts studying oil and gas management also focus on the extent to which U.S and other oil producing countries are dependent on OPEC, a prestigious corporation. OPEC plays a major role in determining the prices of oil and its supply. When the global prices of oil increase, the American economy is likely to slow down production, as the Wall Street analysts show. The most eminent sectors of the US economy that are affected by OPEC are crude oil and motor gasoline. OPEC impacts the economies of the oil producing countries by pressurizing the tax system, production controls and quotas and nationalization of allowances (Ahdoot, Morsey & Vela, 2001). Analysis: Hubbert’s predictions about the peak and downfall of oil reserves have been seen as being absolutely accurate. As he forecasted, the oil reserves in the world are finite however they can vary depending on the economy and technology. Before the dreadful peak in oil reserves is reached, people on the globe have to commence a shift to alternative energy powers. The work of Wood et al. and Cavallo reveal some catastrophic results and predictions. The peak in non-OPEC countries will be reached by 2015 to 2020 as experts foresee. Replications using the USGS-based resources estimates indicate that the peak for conventional oil will be reached after 2015 till 2040 (Transportation Research Record). Colin Campbell, the founder of London-based Oil Depletion Centre considering the peak theory predicted oil shortages and declines in reserves sooner or later. He suggests that the consumers gradually transform their lifestyles; his conclusions are based on a historical Meta analysis of the oil i ndustry. According to him, global oil production in the 21st century declines 2 to 3 % every year. Campbell is one of those experts who question the accuracy of the statistics provided by USGS and IEA. He believes that majority of the facts about oil consumption and reserves come from Oil and Gas journal which are funded by the government. He critically analyses the facts presented by OPEC and continues to argue that these industries revise the facts upwards just to give an optimistic picture. To sum up the urgency of the situation, a report published by the U.S. office of petroleum reserves highlights that world oil reserves are being depleted three times as quickly as it is being explored. The decline in reserves might get irreversible and for this purpose many geologists are now turning to Hubbert’s groundbreaking work peak oil, especially to save the U.S. oil and gas management. Over and above, experts in the HIS energy evaluate that 90% of the oil reserves are in production (Vidal, 2005). A progressive analysis of peak oil quotes is presented by the OADC to conclude how alarming the decline of oil reserves got from 2009 to 2012. In February 2009, the CEO of Total was quite hopeless regarding the economic crisis and oil depletion. According to him, global oil production could not be increased from 89m barrels a day. Moving on, the chief economist of IEA said in August 2009 that the era of cheap and easily accessible conventional oil had passed and he predicted that the globe now had to face utter difficulties in the form of oil depletion. In 2010 September, the same chief economist namely Faith Birol declared in an interview on BBC One planet that the sad demise of oil industry was extremely depressing. The demand of oil consumption grew in India, Middle East and China. The production of oil on the other hand could not be increased as in the OECD oil production had drastically fallen. Lastly, the former president of Shell Oil said in an interview on CNBC in February 2012 that OPEC has functioned optimally for years; complication of oil depletions cannot be handled by OPEC as it has played its role already (The Oil Depletion Analysis Centre). Alternatives: Geologists and analysts have been delving into alternate renewable and non-renewable energy resources to discover survival opportunities after peak oil. The two alternatives highlighted in this paper are solar power and hydropower. Solar power comes from the sun’s rays and hydropower comes from water as alternative energy resources. The former requires solar energy farms whereas the latter requires dams and reservoirs. Building from the research of Energy Research Institute, a few deductions about the usefulness of solar energy can be made. Saudi Arabia has been into detailed solar energy research since the late 70’s. The sun is a major resource in the Arab countries and it can be utilized for the benefit of the country. In the field of solar energy conversion, Saudia Arabia can take the lead due to its geographical location. Multiple projects in Saudi Arabia have various implications globally (Alawaji, 2000). A paper titled ‘A wake-up call’ outlines the importance of solar energy development with relation to the peak oil theory. This research paper demonstrates that peak oil is inevitable and has to be encountered. The four reactions to peak oil mentioned in this paper are conservation, deprivation, conflict and substitution. Solar energy is described by its proponents as radiant energy which is neither liquid nor solid. The fossil fuels reserves also have a limit and solar power has to be an immediate alternative. Experts from the peak oil group also criticize the organizations in being more focused on predicting when and how will the peak be reached rather than investing their resources to preparation (Winter & Swenson, 2006). In the past, solar energy had been evaluated as uneconomic and within a decade with the actualization of peak oil, its economic appeal has increased over time. Experts say that by 2020, global installed solar capacity could be 20 to 40 times its current level. Goffman argues with the cost and intermittency of solar cells. He focuses on the aspect of net metering in which in buildings connected to the electrical grid solar energy might get back into the grid, causing the meter to work backwards. Solar energy cannot supply baseline power which is a consistent energy need. Hydropower is a renewable energy resource that gets it essential energy from the sun which in turn pushes the hydrological cycle providing a supply of water. Global organizations like International Hyrdopower Association, Canadian Hyrdrpower Association, and the International Commission Large Dams that promote and use solar energy as a shield against peak oil. By the year 2050, half of the 21century, world population will increase 50 percent. Generally, world energy consumption is set to increase in the coming decades with environmental aisde effects on the rise. Hydropower in these situations is a clean, renewable energy resource. Work has already started; countries are incorporating hydropower like China, India, Turkey and Iraq. In other 80 countries various hydropower projects are under construction. The benefits of hydropower outnumber fossil-based energy. Use of hydropower can minimize environmental detriments whereby increasing the standard of living in rural areas. A plethora of merits can be attained within the process of development plans such as in the building of dams, irrigation sources, secure water supplies, flood control and recreational opportunities can be devised. No other source of alternative energy comes with such wide ranging advantages. Hydropower has the lowest operating costs and perpetual plant life. Water is renewable and cannot be a victim of market systems. Fossil-fuel generation has dangerous emissions which pollute the environment. For instance, in China 23 million of SO2 are released into the atmosphere each year by thermal power plants. Hydropower development schemes have construction and operational stages in which social and environmental aspects can be addressed. The issue facing the relocation of the labor forces and recruitment can be handled in the construction stage which can last for many years. The side effects of hydropower include sedimentation, problems with fish due to water quality etc. Hydroelectric power has a key role to play in the future. The main problem that comes with all alternative sources is the storage issue. These sources cannot be efficaciously stored and managed. For instance, the critics say that solar energy will take a large part of free land. As demonstrated above, the application alternative energy resources are quite dependent on the location both geographically and strategically. In a nutshell, the initial investments of solar energy are extremely high but within a decade, a well-developed system can be devised to suit the needs of post-oil crisis. Germany has set the paradigm for utilizing solar energy, leading many countries in the world. Strategies to Face Oil and Gas Crisis: The global energy crisis encounter requires a lump sum of investment with in-depth research and analysis. The analysts who have been studying peak oil have to prioritize developmental schemes that prepare the future generations in dealing with oil and gas depletion. To begin with, many experts have been doing this by suggesting that the solution lies in solar energy but they have long ignored the economics of solar power. The fossil fuels which release carbon dioxide in the atmosphere are adversely killing the environment. Global warming and peak oil are two connected concerns for the entire population of the world. By 2050: One-third of energy needs to come from alternative sources practically not only in theoretical frameworks Solar, wind, water and other renewable resources like biomass and geothermal have to be utilized in industrialization, agriculture and food. The IEA predicts that world’s energy crisis needs around $1 trillion annually. The confusion lies in the ways to investment; the following recommendations are given: Exploring new supply origins Aligning with the demand patterns Transforming the role of NOCs and IOCs i.e. these companies are made partners in financial and technological arenas for downstream and mainstream alternative energy research and practical ventures. Successful mainstream amalgamations will result in the development and discovery of energy reserves and ensure affordable oil prices as competition will increase with a well defined IOC-NOC relationship. For example, Shell has developed terms with Gazprom in Russia and negotiated with China National Offshore in the past. In the developmental plans, the feasibility of the schemes has to be evaluated and measured. Usually the rural areas of developing countries suffer. For example, with regard to hydropower developments taking place in India China and Middle East, the grand projects suppress the fresh spring water ecosystems. Hence, there is a dire need of decentralization in alternative energy projects which can ultimately address global warming and reduce poverty . Tax incentives are another way to facilitate the alternative energy change. These incentives are created by government organizations to enhance the installation, purchase and process of renewable energy systems. These incentives and subsidies help make the alternative changes more cost effective. In finding out strategies, the experts should remind themselves that, “You cannot solve this world’s problems with the same thinking that created them” – Einstein Critics debate that it is ineffective to be prepared well before time. There are some countries around the world which have been suffering due to the peak oil crisis. The scenario is worsening with global warming and increased population density. The flipside represents some countries that are going to stay immune to the world energy crisis taking advantage of their location and position. Those societies which have been self sufficient will bravely survive this oil crisis no matter what. Hence on the solutions also lies in self-motivating the countries to become individualized in their operations instead of being largely dependent on oil producing countries. ‎ ‎ Read More