Promoting South Atlantic Petroleum company towards strategic and sustainable oil and gas Management| Literature Review
Chapter Two: Literature Review
This chapter deals with the literature review of the operations of oil and gas industry. The first part of this review will briefly look at the industry from the global perspective. The researcher will bring together literature including the management, exploration, crisis and the new strategies and technology that are deployed to manage oil risks, spillage and leakages. The last part of this literature will focus on the position of Nigeria in the industry. The researcher will be mostly focused on the role played by Nigeria in the oil industry. The researcher will address the main issues that are faced by oil industry in Nigeria. Finally, the researcher will link the two parts to come up with a comprehensive conclusion on the global state of the oil and gas industry and the state in Nigeria.
- Global perspectives of Oil and Gas Industry
Globally, the oil and gas industry is one of the most influential industries Schmitt (2014). Most other industries rely on the oil and gas industry to obtain the energy that they use for production and other activities. A research done by Ukpongson and Onu (2015) unveiled that more that 70 percent of industries in the world rely on oil and gas power to carry out their operations. One of the global functions of oil and gas products is to propel production machinery. This means that without this form of energy, production in most of the companies will be impaired. Due to this, the state of oil and gas industry determines the state of other industries. The example given by Hatakenaka, Westnes, Gjelsvik and Lester (2011) is that when oil and gas prices go up, other product prices are also likely to go up. This is because production cost for most of these products will go up. All these costs are at the end absorbed by the final consumer. The other major use of oil and gas globally is transportation. A research done by Osman (2014) established that more than 97 percent of transport in the world is done using oil and gas as the main method of propulsion. In any industry, transport is responsible for possession utility as well as place utility. This shows how important the oil and gas industry is.
- Issues in the industry
Oil and gas industry faces a number of issues. As pointed out by Hatakenaka, Westnes, Gjelsvik and Lester (2011), the state of oil and gas industry is a main focus for industrialists. It determines major economic indexes like currency value (inflation), employment rates and product prices. Product prices are the main determinants of demand and supply as well as consumption patterns. It can therefore be argued in the words of Ajibade and Awomuti (2010) that oil and gas industry is the backbone of world economy.
There are several global issues that have been directly linked to oil and gas industry. To begin with, the current trend in the world is “going green”. This according to the environmentalists is the only option that has been left to the world population in order to maintain a habitable environment. Many environment experts have viewed oil and gas products as the main causes of the existing carbon imbalance. The argument according to Pei (2011) has been that level of carbon dioxide produced globally is more than the allowable amounts. The conversion cycle of carbon dioxide to oxygen has also been affected by reduction of natural vegetation. This has led to a situation where oil and gas products have been greatly condemned. These environmental experts have in turn recommended the use of what they refer to as clean energy. This includes energy derived from sources like solar, wind, biogas and geothermal power.
This trend has impacted many industries where more focus is being given to the transition from use of oil and gas to application of cleaner energy sources. Motor vehicle industries for example are coming up with vehicles that produce less carbon to the environment. This according to Hatakenaka, Westnes, Gjelsvik and Lester (2011) can be done by either reducing the intake of oil/gas in order to reduce wastes or increasing efficiency of oil/gas usage to ensure minimal waste. In either case, the demand for oil and gas products is being highly impacted.
Another major trend in the global oil and gas industry is relationship between oil extraction and radioactive wastes. According to Pichon and Lynch (2012), oil extraction has increased exposition of radionuclides. These radionuclides are the ones that cause radioactive reactions. Comparative research done by Osman (2014) unveiled that oil rich regions are very rich in radionuclides. This research also exposed the risks faced by people living in these regions as compared to those in non-oil producing regions. As a vitiating measure, the researcher recommended use of more sophisticated oil and gas extraction methodologies that will minimize spillages. The researcher also recommended creation of policies that will define the methods to be used in extraction of oil and gas products. Another research done by Pei (2011) to compare concentration of radionuclides from Niger delta and Northern England established that Niger delta has more risks. Though the northern England is an oil producing area, the researcher argued that there are better policies and more sophisticated technology to control risks.
- Strategies in place for managing issues
In order tom manage the issues raised in part 1.2 above, several strategies have been adopted. According to Omorede (2010), the issues raised concerning oil and gas industry are genuine and need proper strategy formulation in order to counter them. To begin with, he argued that there should be a clear strategy of environmental conservation that should be adopted by all industries including oil and gas companies. This strategy should include preservation of natural environment through planting trees, taking care of natural sources of water and generally taking care of the green environment. By doing this, industries will be providing a solution to the carbon cycle that is getting out of hand. As argued by Ukpongson and Onu (2015), the level of oxygen in the environment is being overridden by carbon dioxide. This mostly arises from production of more carbon dioxide with lesser purifying agents. The most commonly unknown purifying agents for carbon dioxide include green vegetation. By taking care of this part of the environment, it will be possible to purify the carbon produced by oil and gas products.
Another strategy that can be formulated to solve issues in in the oil and gas industry is creation of clear policy. According to Pei (2011), there had been no clear policy on the extraction of oil and gas in many regions. This had caused the process of oil and gas extraction to be more destructive to the people living in those regions. Destruction of natural environment and exposition of radioactive wastes are some of the shortcomings of oil and gas extraction in many places. In order to control this, respective governments have been forced to come up with control policies. These policies are mostly focused on the extraction process as well as extraction technology. Only companies with the outlined capacity are allowed to perform extraction activities.
Finally, engagement of all stakeholders has been adopted as a policy to solve the issues associated to oil and gas industry. According to Ukpongson and Onu (2015), all stakeholders should be involved to ensure that all interests are well represented. These include oil companies, customers, government agencies and the general public. Oil and gas companies are mostly interested in making profits. Customers are mostly concerned with obtaining the products at the most affordable prices. The government is concerned with the welfare of the people. All these interests should be well guarded.
1.4. Nigeria’s perspectives of Oil and Gas Industry
Niger Delta has been the focus of many oil and Gas experts in the recent past. According to Edjenekpo (2011), exploitation of oil and gas is the main economic activity of the region. He added that there is a foreseeable future in this exploitation since the oil wells have the potential of supplying fuel for the next 1 million years. Oil according to Ukpongson and Onu (2015) is the major foreign exchange earner for Nigeria. It serves many economic interests for the people of Nigeria. These include and are not limited to provision of income through employment and business, stabilization of currency value and economy at large.
- Issues in the Nigeria’s Oil and gas industry
Iwetan, Fuwape, Arogunjo and Obor (2015) pointed out that there are several issues that need to be addressed in order for Nigeria to achieve the goals of oil and gas industry. To begin with, he pointed out that the issue of pollution and exposition of radioactive wastes should be well addressed. All stakeholders should be involved in ensuring that the environment is well guarded. Another issue that should be addressed as far as oil and gas products are concerned is usage. According to Pollard (2010), oil and gas products account for more than 65% of the global carbon composition. This issue should be addressed by governments as well as businesses.
- Strategies adopted in Nigeria for managing issues
The government should come up with a clear policy to control exploration, extraction, processing and distribution of oil and gas products. There should also be a policy to control usage of these products to ensure that they are not destructive to the environment. As far as exposition of radioactive materials is concerned, the government and other stakeholders should formulate guidelines to protect any exposition of radioactive materials. These policies should prevent any risks related to spillages of oil and gas during the process of extraction. The policy according to Odoh, Ohaotu, Okoye and Mbaoji (2012) should also control the processing of oil and gas products.
Businesses have a role to play as far as resolution of these issues is concerned. Through corporate social responsibility, every business leader should strike a balance between profitability and taking care of the environment Ajibade and Awomuti (2010). Evolution of environmental management accounting has come as a major step towards resolution of this issue. Every business has a responsibility of accounting on the manner in which it has taken care of the environment.
1.7. Conceptual Framework
The researcher in this case is interested in bringing out the state of the oil and gas industry globally. The researcher looks at the issues that affect day to day running of the industry. These issues according to this research include environmental conservation and sustainability, exposition of radionuclides that later impact on people’s health, oil and gas prices and technology application in the oil and gas sector. The researcher also focuses on the strategies that can be applied to resolve these issues. The highlighted strategies include leadership, management techniques, training and development, policy formulation, and inclusion of stakeholders.
Just like other industries, oil industry has its own issues. As pointed out by Hatakenaka, Westnes, Gjelsvik and Lester (2011), the oil industry faces many issues most of which are environmental issues, business issues and technological issues. In order to resolve these issues, leadership of all firms in the industry should be focused at the same point. Leadership styles applied by these leaders should provide solutions to the issues. Governments too should be fully involved in formulations of policies to guide all players in the industry. Appropriate technology should be applied in the oil and gas industry to prevent any risks and to create cost effectiveness.
Ajibade, I. and Awomuti, A. (2010) Petroleum Exploitation or Human Exploitation: An Overview of Niger Delta Oil Producing Communities in Nigeria; African Research Review, 3(1)
Edjenekpo, L. (2011). The Use of Corporate Social Responsibility in Corporate Strategy in Nigeria as Oil and Gas Industry: Emerging Trends. SSRN Electronic Journal
Hatakenaka, S., Westnes, P., Gjelsvik, M. and Lester, R. (2011) The regional dynamics of innovation: a comparative study of oil and gas industry development in England and Nigeria. International Journal of Innovation and Regional Development
Iwetan, C., Fuwape, I., Arogunjo, A. and Obor, G. (2015) Assessment of Activity Concentration of Radionuclides in Sediment from Oil Producing Communities of Delta State, Nigeria; Journal of Environmental Protection
Odoh, U., Ohaotu, C., Okoye, T. and Mbaoji, F. (2012) Extraction and characterization of crude oil in Niger Delta; SSRN Electronic Journal
Omorede, C. (2010) Assessment of the Impact of Oil and Gas Resource Exploration on the Environment of Selected Communities in Delta State, Nigeria; SSRN Electronic Journal
Osman, C (2014) Optimistic outlook for oil and gas industry; Pump Industry Analyst
Pei, X. (2011) Study on the Factors of Partnership Success in Upstream Oil and Gas Industry; AMM
Pichon, C. and Lynch, J. (2012) Synchrotron Radiation and Oil Industry Research; Oil & Gas Science and Technology – Rev. IFP, 60(5), pp.735-746
Pollard, W (2010) Rise in North African oil and gas production predicted; Pump Industry Analyst
Schmitt, H. (2014) Environmental politics and the oil and gas industry; Natural Gas, 13(1), pp.13-16
Ukpongson, M. and Onu, D. (2015) Development Efforts Of Oil Companies As Perceived By Rural Households In Selected Oil Producing Communities; Journal of Agriculture and Social Research (JASR), 4(1)