Category: Petroleum

Introduction

A foreign direct investment (FDI) is a commitment made by an entity situated in one nation, to an organization or element situated in another nation. Foreign direct investments contrast significantly from indirect investments, for example, portfolio streams, wherein organizations put resources into values recorded on a country’s stock trade. Countries making direct investments commonly have a critical level of impact and control over the organization, which the investment is made.

Open economies with a talented workforce and great development prospects tend to draw in bigger measures of a foreign direct investment than managed economies (Broersen 6). Gross domestic product (GDP) is the financial estimation of completed merchandise and administrations created inside a nation’s fringe in a particular period. Even though GDP is normally ascertained on a yearly premise, it can also be figured on a quarterly premise. The gross domestic product incorporates all private and open utilization, government costs, investments, and fares, short imports that happen inside a characterized region. However, GDP is a wide estimation of a country’s general financial movement (Kitov 7).

The gross domestic product is one of the essential indicators used to gauge the wellbeing of a nation’s economy. Using the above information as the preamble, we will discuss the effect of foreign direct investment on the GDP of member nations (OPEC). Consequently, we will analyze the impact of population on gross domestic product. Finally, we will compare a foreign direct investment with trade tariffs of OPEC countries.

Impact of Foreign Direct Development

The impact of FDI on financial development is now and again considered the subject since individuals think drawing in FDI could prompt a few valuable impacts that lead to financial development. FDI is characterized as an investment, including a long haul relationship and mirroring an enduring intrigue and control of an occupant entity in an economy other than that of the foreign direct financial specialist (Broersen 9).

Previous research demonstrates that there is a positive connection between the level of FDI and monetary development in a nation. Particularly creating nations can advantage from fortifying FDI strong strategies. Nevertheless, previous literature revealed that no qualification is made between the diverse efficient attributes of OPEC nations. For instance, Iran has possessed the capacity to develop an enormous city as it is present due to the broad oil industry, yet has formed an enhanced economy.

FDI and OPEC Countries. From this exploration, we can evaluate nations of the Association of Petroleum Exporting Countries (OPEC) that bolster FDI empowering strategies. Prompting the accompanying inquiries, is there a beneficial outcome of FDI on monetary development in these nations? Is there a noteworthy contrast between the conceivable impact of FDI on financial development between exporting nations and nations that are individual from the Organization of Petroleum Exporting Countries (OPEC)?

Are there other variables that influence the conceivable impact of FDI on financial development? This exploration looks at whether the impact of FDI on development relies on the accessibility of human capital, the advancement of money related markets, and the openness of exchange in a nation. It especially concentrates on the impacts of FDI on development in OPEC nations.

Experimental examination utilizing a cross-country dataset over the period 1980-2011, demonstrates that there is no confirmation to trust that FDI positively affects monetary development. It does demonstrate a strong constructive outcome of FDI on monetary development in OPEC nations (Cincotta and Engelman 5). There is a negative collaboration between the impact of FDI on GDP in these nations and individual OPEC countries. In opposition to previous research, the outcomes do not indicate huge cooperation among FDI and human limit, the level of advancement of money related markets, and openness to the exchange (Olibe and Crumbley 12).

Finishing up, there is proof to think drawing in FDI in OPEC nations positively affects monetary development, despite the level of human limitations and the level of advancement of budgetary markets on the other hand the openness to the exchange.

As demonstrated, this paper will especially take a gander at the impact of FDI on financial development in OPEC nations. Therefore, a brief clarification of OPEC and its member nations will be condensed. OPEC is an intergovernmental association existing of 12 individuals that generally depend on incomes produced from the oil division. The establishing nations, Iran, Iraq, Kuwait, Saudi Arabia, and Venezuela, comprehended the significance of vital assets for commercial enterprises worldwide to establish the Association in 1960. FDI could be a noteworthy channel for innovative exchanges by making reverse linkages.

It could present new advances and expand the number of potential business people of new associations in a later stage. Consequently, the valuable impacts of FDI on economic development are influenced by favorable conditions. Economists accepted that there must be a sure level of learning absorptive human limit access, while OPEC nations still have a hard time to deal with the transformation of their oil fortune in human and physical capital.

Besides, money related markets must be created to execute the advantages that emerge from FDI (Broersen 13). However, OPEC nations are battling with constrained access to outside budgetary assets. Surveys revealed that weight on the significance of free-market play, rivalry, and unbiased approach for FDI influenced economic development. Because of the topographical and political contrasts, it is difficult to characterize the general fare technique. Even though OPEC nations export oil, in light of their overwhelming part in this segment, it is difficult to say they have exchanged impartial techniques.

Effect of Population on GDP

Financial analysts have frequently dismissed the effect of principal demographic procedures for monetary development. Researchers believe it is conceivable that the cooperation of monetary development with populace elements can bring about a destitution trap. Notwithstanding mortality decay, previous literature distinguished populace development, richness, age-auxiliary change, urban development, and urbanization as demographic components that influence financial development.

Given the information from the World Bank and utilizing an example of forty-three exporting economies, the paper revealed that the development rate of per capita GDP is straightly needed for populace development. Consequently, both the youthful and old reliance proportions are affected by the mortality index. The impact of populace development on per capita GDP development is straight and all over the place negative.

It is more grounded when cooperation terms are incorporated into the measurement model. Governments in OPEC nations can influence development with a specific end goal to facilitate development. Since a decrease in GDP influences the age structure of inhabitants, it is found to have no measurable effect on monetary development when both the youthful and old reliance proportions are incorporated in the model. The impact of the old reliance proportion of per capita GDP development is constantly negative and more grounded when communication terms are incorporated into the model.

Then again, connections between the youthful reliance proportion and populace development and regardless of whether the normal yearly populace development rate is under 1.2 percent apply a positive impact on financial development (OECD Benchmark Definition of Foreign Direct Investment 11). Neither the level of urbanization nor urban development has a factually noteworthy effect on per capita GDP development (Razmi and Behname 8). This outcome might be because of the way that these two measurements of the demographic move apply positive and negative consequences for financial development and these impacts are self-scratching (OECD Benchmark Definition of Foreign Direct Investment 6).

Critical Analysis of OPEC Countries

The impact of the population on the GDP of OPEC countries can be summarized with the margin of all sectors of the economy. The forecast displays the population of both sexes between 1980 – 2020. From the analysis, Algeria, Ecuador, Iran, Iraq, and Kuwait showed a high population margin compared to other OPEC countries. Consequently, the populations of Libya, Nigeria, Qatar, UAE, and Venezuela were lower than the first group.

By implication, there is a significant impact of the population on the GDP of OPEC countries (OECD Benchmark Definition of Foreign Direct Investment 10). Tariff margins among OPEC countries were analyzed to ascertain its impact on GDP and FDI (OECD Benchmark Definition of Foreign Direct Investment 13). As a result, the tariff index was measured across manufactured goods, chemical products, machinery, transport equipment, ores, and metals.

By simple average, the traffic index of Iran was higher than in other member countries. However, the ranks on manufactured goods include Iran, Angola, Qatar, and Saudi Arabia. Others include Kuwait, Libya, Nigeria, and Iraq. Consequently, the tariff on chemical products by simple average ranked Iran higher than member countries. Countries with a higher simple average include Iran, Angola, Qatar, and Saudi Arabia. However, Kuwait, Libya, Nigeria, and Iraq had a low simple average of chemical products. However, countries with a higher impact of FDI include Iraq, Nigeria, Qatar, Saudi Arabia, the UAE, and Venezuela. Angola, Ecuador, Iran, Kuwait, and Libya had an insignificant influence on FDI.

Conclusion

The measure of FDI pulled in OPEC nations has unequivocally expanded after the 1980s, covering half of all the private capital streams in 1998. In recent years, OPEC countries have advanced both monetarily and socially, for the most part, because of the benefit produced from the oil division. However, part nations will need to expand their economies. In the process toward a broadened economy, pulling in FDI is accepted to be good, since it could bring about a few advantages like progressed innovations and different overflows.

In any case, past studies have demonstrated there ought to be an ideal environment in the host nation. For example, there must be a certain level of information absorptive human limit accessible for budgetary markets and there must be openness to exchange. In summary, FDI affects the gross domestic product of OPEC countries. Consequently, population expansion affects the economy of OPEC countries. From the analysis, there is a significant influence of different economic indicators on the economy. Consequently, OPEC countries enjoy a comparative advantage compared to other nations.

Works Cited

Broersen, Doortje 2013, The Effect of Foreign Direct Investment on Economic Growth in OPEC Countries. Web.

Cincotta, Richard and Engelman, Robert 1997, Economics and Rapid Change: The Influence of Population Growth. Web.

Kitov, Ivan 2008, GDP growth rate and population. Web.

OECD Benchmark Definition of Foreign Direct Investment . 2008. Web.

Olibe, Kingsley and Crumbley, Larry 1997, Determinants of U.S. Private Foreign Direct Investments in OPEC Nations: From Public and Non-public Policy Perspectives. Web.

Razmi, Mohammad and Behname, Mehdi 2012, FDI Determinants and Oil Effects on Foreign Direct Investment: Evidence from Islamic Countries. Web.

Introduction

Qatar Petroleum is a state owned company that was nationalised in 1977 by the state’s acquisition of a 60% stake of the company. To become an effective competitor in the market, the company entered the market with an underlying oligopolistic model that characterised the overall market structure through mergers and creation of subsidiaries (Kern, Kuzemko and Mitchell 2). The key characteristics of the market environment that Qatar Petroleum operates in include long run profits and the interdependence of the company with smaller companies and other major players such as ExxonMobil. Here, the market structure is defined on a non-price option economic competition model.

Qatar Petroleum Detailed Case Study

Ritz, argues that Qatar petroleum deals in petroleum products which include oil and gas besides the production, development, and exploration of crude oil and liquefied natural gas (LNG) defined in its upstream and downstream activities (4). Here, three endogenous variables define the characteristics of the firms, which include exploration, discovery, and success. The oil market structure has changed significantly both in the internal and external markets.

Subsidiaries and joint ventures

This is typical of the state owned company, which was established by Emiri under the decree no. 10, is the third largest in the world that has established joint venture with Ras Gas Company Limited, Ras Laffan Liquefied Natural Gas Company Limited, atar Liquefied Gas Company Limited Q.S., and Qatex Limited among others. QP Ras Gas (III) Limited, Qatar Holding Intermediate Industries Company Limited, and Industries Qatar Q.S.C. constitute its subsidiary companies (Rodriguez and Scurry, 11).

Besides, the subsidiaries and its joint ventures, the company has invested in the Arab Petroleum Pipelines Company and the Arab Maritime Petroleum Transport Company among others. Because of the high stakes of the state in the company was officially nationalised in 1977 after a sequence of events such as the acquisition of 60% of its shares. Oil production by Qatar petroleum is served by a network of pipes to the export terminals and refineries from the onshore and offshore oil fields. A typical production graph is shown in figure 1.

Oligopolistic model

Qatar petroleum is characterised by an impure oligopolistic economic model that is defined by limited competition, but high initial capital investment (Growitsch, Hecking and Panke 2). The company has partnered with other oil companies such as Occidental, TOTAL and ExxonMobil for the production and export of oil to North America and European nations.

Characteristics of the oil industry

The oil industry’s operational mode is characterised by major, independent, and diversified oil firms that allow them to operate in the exploration, production, and transportation of the commodity segments of the petroleum market. However, the concentration ration is not 1 as the game theory depicts.

Major oil companies

Major oil companies usually have their own experts and equipment for the exploration, production, and transportation of oil. Companies conceptualised as diversified are characterised by a smaller share of participation in the oil industry. However, some oil firms are classified as independent because the firms operate in a market structure that is defined by smaller capital investments.

Figure 2 shows the distribution of oil production with Qatar occupying 37% of the world’s total volume (Cetorelli and Strahan, 2). Different forces in the market depict the behaviour of different companies that respond to the forces of perfect competition as failing to perfectly obey the laws of demand and supply as detailed in the game theory where the seller sets the prices and the buyer has no option but to accept the price offerings as illustrated in figure 3.

Pricing

While the trend of setting oil prices has been in the domain of oil producing and exporting countries for many years, the current trend has changed significantly, making it an important variation of the basic Hoteling model. However, the market structure of the petroleum industry is defined by the inter-temporal profits maximization in the context of an oligopolistic competition as depicted in figure 3.

The analytical results show that the industry is characterised by a few firms that dominate the market that is driven by major oil companies besides the companies that have formed mergers and subsidiaries to be competitive in the market. The Pricing mechanism P1 and P2) and the other response variables MC and MR provide evidence of the failure of the firms to collude to manipulate the price of oil. The market trend is evidently conceptualised in Saudi Arabia’s refusal to cut production quantities to raise market price of oil (Vivoda, 5).

Typically, oligopolies operate in rather unique ways because when the price of oil is decreased by one country, other countries follows suit and that is reflected in the current behavior of price changes in the oil market. The demand and supply curves and the underlying economic models and theories sometimes do not explain the behavior exhibited in the oil market. Here, the supply (output) can be defined by a continuum of market variables and the levels of agreement among the oil producing companies as depicted in figure 4.

Besides, it is evident that the external oil competitors have a strong influence on Qatar Oil Company’s oil production and exploration because even if the company intends to raise the price of oil, other oil exploring, producing, and exporting countries could optimise the resulting gap to increase their market shares, which makes Qatar oil company vulnerable to the loss of customers.

However, because of the need to increase profits and not paint the company as an oil cartel, price maximization should underpin the policies and business strategies and the economic models adopted by the company.

Competition in such markets can either be cooperative or non-cooperative. The cooperative competition model is evident in the current market oil structure where firms create mergers, subsidiaries, and sometimes cooperate at different levels of the exploration, production, transportation, and exporting oil.

Contrast the economic efficiency of the outcomes under market structure

It is possible for firms to make significant gains in terms of profits and market dominance if the level of cooperation is high resulting in an economically efficient market structure.

Economic efficiency

This is in response to the demand where a smaller number of firms in the oil market operate efficiently. In theory, one notes that because the firms are few, the economic efficiency of the outcomes are high because firms find it easy to cooperate at the same level by agreeing to make production quotas that perfectly obey the economic model of demand and supply. An oligopoly based market structure enables companies to set high oil prices. The whole mechanism is illustrated in figure 5 where an equilibrium condition is reached depending on the behavior of the market forces.

Conclusion

In conclusion, the typical points that emerged from the study are that Qatar petroleum is a national oil company that has developed mergers and subsidiaries and partnered with major companies in the exploration, production, and transportation of oil besides endeavouring to set the price of oil. The market structure is oligopolistic in nature and it is characterised by companies with the ability to set prices if the level of cooperation is high.

Works Cited

Cetorelli, Nicola, and Philip E. Strahan. “Finance as a barrier to entry: Bank competition and industry structure in local US markets.” The Journal of Finance 61.1 (2006): 437-461.Print.

Growitsch, Christian, Harald Hecking, and Timo Panke. “Supply disruptions and regional price effects in a spatial oligopoly—an application to the Global Gas Market.” Review of International Economics 22.5 (2014): 944-975. Print.

Kern, Florian, Caroline Kuzemko, and Catherine Mitchell. “Measuring and explaining policy paradigm change: the case of UK energy policy.” Policy & politics 42.4 (2014): 513-530. Print.

Ritz, Robert A. “Price discrimination and limits to arbitrage: An analysis of global LNG markets.” Energy Economics 45 (2014): 324-332. Print.

Rodriguez, Jenny K., and Tracy Scurry. “Career capital development of self-initiated expatriates in Qatar: cosmopolitan globetrotters, experts and outsiders.” The International Journal of Human Resource Management 25.7 (2014): 1046- 1067.Print.

Vivoda, Vlado. “Natural gas in Asia: Trade, Markets and regional institutions.” Energy Policy 74 (2014): 80-90.Print.

The current assets of a company are convertible in an operating cycle, mostly a year. They are of the essence as they enable to meet daily obligations (Horngree et al., 2005). Five categories of current assets include debtors, cash and cash equivalents, stock, prepaid expenses as well as short-term investments. They are shown in the balance sheet and are normally listed in liquidity order. They are therefore arranged on how quickly they are convertible to cash. If the current assets are less, the company may result in short-term lending to ease the situation (Horngree et al., 2005).

On the list of current assets, cash and cash equivalents rank first followed by short-term investments (Horngree et al., 2005). The inventory which is intended for use within a year comes below the short-term investments. Accounts receivables are next on the list with the prepaid expenses ranking last. From the financial statements of British Petroleum for the year ended 2012, the organization’s current assets are not properly listed. The table below shows how the current assets were listed.

Table 1

Cash and cash equivalents being the most liquid of the current assets should have appeared first in the list. The cash and cash equivalents are distinguished from other current assets because they mature in three months while the other current assets take 12 months or the operating cycle of an organization whichever is less. The derivative financial statements and other investments should have followed each other to represent short-term investments. Next on the list should have been the inventory. As for the account receivables category, trade, and other receivables, current tax receivables and loans should have appeared in this category. Last on the list should have been the prepayments.

In an organization, various assets held have different characteristics and are used for various future economic benefits. While classifying assets, their nature and used bits of help in categorizing them. In the balance sheet, assets are classified as either current assets, fixed assets, property, investments, deferred costs, and intangible assets (Horngree et al., 2005).

Assets for British Petroleum are classified into three categories namely; noncurrent assets, current assets, and assets held for sale. Under the noncurrent assets, the company includes property, plant, and equipment, the company’s goodwill, intangible assets, investments which are controlled jointly, associates investments, loans, trade receivables, and financial instruments, deferred taxes, and surpluses from the pension plan.

The trade receivables, financial instruments, and prepayments are categorized both in the noncurrent and current assets categories (Bp Annual Report, 2012). This is due to the duration in which each of the categories is held. If the period is less than a year, the assets are classified under the current assets while if the assets are held for more than a year, they fall under the noncurrent assets category.

The financial assets of the company are classified at initial recognition at their fair value. This includes the purchase price plus any transaction costs. For the company, these financial assets are loans and receivables, either for sale or those held for hedging purposes (Bp Annual Report, 2012).

References

Bp Annual Report, (2012). Web.

Horngree, Sundem& Elliott, (2005), Introduction to Financial Accounting, Pearson Education, New Delhi.

Introduction

British Petroleum [BP] is a private limited company that operates in the UK oil and gas industry. The firm was established in 1909 and has been in operation for over 100 years. BP has attained substantial growth since its inception.

Its growth has arisen from integration of effective growth strategies such as internationalisation and formation of mergers and acquisition. For example, on 21^st March 2013, BP acquired 5.66% of Rosneft which is the leading oil producer in Russia (BP, 2013). The firm’s success has also arisen from integration of effective marketing strategies.

The UK oil and gas industry has become very challenging over the past few decades. This has arisen from changes in the internal and the external business environment. Despite the prevailing environmental changes, firms within the industry are committed towards maximising their profitability. As a result, firms are considering expanding their marketing activities by venturing into the international market.

The objective of this paper is to provide a comprehensive definition of the marketing and to illustrate how environmental factors affect international marketing process. The analysis is achieved by comparing the macro environments of China and the US which are some of the countries that BP has ventured.

Definition of marketing

Traditionally, organisation did not pay much emphasis on the element of marketing. Their main concern was on how they would sell the products that they produced. However, the concept has undergone significant transformations over the past few decades and has gained prominence. Various experts have tried to define the term ‘marketing’. According to Phillip Kotler, marketing refers to a societal process through which consumers achieve their needs by creating and exchanging products and services that are of value.

On the other hand, Peter Drucker defines marketing as the process through which organisations try to understand consumer needs and produce products that result in delivering customer value. William J. Stanton defines marketing as the sum total of various business activities such as pricing, promotion and distribution that are aimed at satisfying consumer needs. The concept of marketing is essentially aimed at enabling organisations generate their desired level of profit.

Organisations can market their products locally or in the foreign market. The process through which organisations market their products overseas is referred to as international marketing. There are various reasons that motivate organisations to incorporate international marketing.

Some of these reasons include the need to maximise the level of profit, existence of a saturated domestic market, intense competition in the domestic market and high demand in the international market. Moreover, international marketing is also motivated by existence of product life cycle differences between the local and the foreign market.

To be effective in the international market, it is important for the parties involved to select the most appropriate market entry method. Some of the methods that an organisation can select include licensing, franchising, formation of mergers and acquisition and joint ventures.

In addition to market entry, an organisation must also incorporate the most effective international marketing mix. International marketing mix is more complex compared to domestic marketing mix. Firms entering the international market must evaluate the political, cultural and economic environments in the foreign market. To survive in international marketing, organisations are required to either standardise or adapt its domestic marketing mix to the international market.

Comparison of environmental factors between China and the US

Political and legal factors

International marketing is affected by changes within the political environment. As a result, it is paramount for multinational companies to analyse the political and legal environments in the host country. Examples of issues that should be evaluated relate to the policies adopted, the system of governance and level of political stability.

Both China and the US have experienced a relatively higher rate of political stability over the past decades. The stability in the two countries has arisen from adoption of effective system of governance. The US has adopted a democratic system of governance which has led to attainment of a high level of political stability. On the other hand, China has adopted a monarchy system of government.

Collins (2013) asserts that the political risk in China is reasonably low compared to other emerging countries. However, the degree of transparency in the country’s legal and regulatory systems is relatively low compared to the US. Corina Monaghan, a renowned political analyst opines that the low level of transparency makes it challenging for multinational companies to operate in the country.

Despite the low level of transparency, China is characterised by a predictable business environment. The countries’ level of political stability has also arisen from minimal incidences of strikes, business interruptions, political violence and riots.

China and the US have experienced significant increment in demand for oil and gas. The daily oil consumption in China amounts to 8.2 million barrels compared to that of the US which amounts to 18.69 million barrels. In an effort to satisfy the growing oil and gas demand, the Chinese government announced a plan to adopt new oil and gas exploration policies. The policies are aimed at stimulating more oil and gas exploration companies to venture the industry (US Energy Information Administration, 2013).

Similarly, the US government passed 10 bills in 2011 that were aimed at accelerating investment in oil and gas. The US government also announced plans to commence oil drilling in Alaska and offshore oil and gas exploration at the Atlantic coast (Broder, 2011). These investments are aimed at minimising the country’s overdependence on oil and gas imports (US Energy Information Administration, 2013).

Prior to joining the WTO, marketing in China was very difficult due to existence of strict government regulations. The Chinese government required firms intending to venture the market to partner with local firms in their respective industry. Such legislations limited firms’ ability to undertake international marketing in China due to loss of control. On the other hand, the US economy is liberalised which makes it easy for multinational companies to venture the market.

To improve the country’s competitiveness to foreign investors, the Chinese government has over the past three decades undertaken numerous reforms in its foreign investment policies. This is likely to promote BP’s operation in the international market. In summary, the two countries political and legal environments indicate the high market potential in the US and the Chinese oil and gas industries.

Economic factors

Firms in different sectors are affected by various economic changes such as fluctuation in the level of demand and supply. There are various factors that impact demand for a product or service such as the level of the consumers’ disposable income. Prior to entering the international market, firm’s management teams should evaluate the level of consumer disposable income. It is also important for marketers to evaluate the host country’s rate of inflation and the level of employment.

China and the US have undergone significant economic growth over the past decades. Despite the 2007/ 2008 economic recession, China managed to sustain its positive rate of economic growth. However, the US economy was adversely affected. Currently, China’s Gross Domestic Product [GDP] is estimated to be $ 5.745 trillion while that of the US is estimated to be $14.6 trillion. This shows that the two economies are relatively large (US Energy Information Administration, 2013).

Chinas economic growth has emanated from various factors such as adoption of the open-door policy in the late 1970s. Additionally, the country relaxed its policies with regard to international business which is evidenced by its entry into the World Trade Organisation. This has significantly increased the number of foreign investors in China.

China and the US have relatively low rates of unemployment which average 4.3% and 9.7% respectively (Trading Economics, 2013). The two countries have also managed to maintain low rates of inflation as illustrated by figure 1 and 2 respectively. The low rate of inflation and unemployment in the two countries has significantly enhanced the consumers’ purchasing power. Consequently, there is a high probability of BP maximising its sales revenue by adopting effective international marketing strategies.

Figure 1: Web.

Figure 2: Web.

As a result of increment in the consumers’ disposable income, the citizens’ living standards in the two countries have improved significantly. For example, a large number of citizens in China and the US own vehicles (CNPC Economic & Technology Research Institute, 2012). It is projected that China will become the largest global economy by 2030. This presents an opportunity for BP in its international marketing efforts.

Social-cultural and environmental factors

Social trends can influence the demand of a particular product or service positively or negatively. China and the US have experienced a considerable growth in the size of their population. According to the US Energy Information Administration (2011), emerging economies such as China and India are projected to experience a robust population expansion over the next two decades.

Moreover, it is also projected that China will experience increment in energy consumption as a result of the high rate of economic growth. The demand for energy in China is projected to be higher than that of the US with a 68% by 2035 (US Energy Information Administration, 2011). Figure 3 illustrates the growth in energy consumption between China, US and India from 1990 and the projected growth in demand by 2035.

Source: (US Energy Information Administration, 2013).

Findings of a study conducted by KPMG (2012) revealed that the US is likely to experience a decline in demand for oil and gas over the next 3 years. KPMG cited the slow rate of economic recovery from the 2008 economic recession and the increase in demand for alternative sources of energy as the major factors that will lead to a decline in demand for energy in the US.

Consumers in the developed and the emerging economies such as the US and China are increasingly shifting to consumption of clean forms of energy such as electricity, biogas, bio fuel and nuclear energy. Other forms of energy that consumers are integrating include wind energy and solar energy (US Energy Information Administration, 2013). This transformation has arisen from increased knowledge and level of awareness on the importance of integrating alternative forms of energy.

For example, consumers have realised that using hydrocarbons such as petroleum based fuels as a source of energy increases the rate of global warming. This arises from the fact that petroleum based fuels increase the amount of greenhouse gases such as carbon dioxide emitted into the atmosphere. Greenhouse gases increase the rate of global warming and hence the rate of climate changes.

In their consumption process, most consumers are committed towards minimising the amount of greenhouse gases they emit into the atmosphere in order to counter the high rate of climate change (Wang, n.d) Additionally, numerous environmental conscious organisations are advocating for consumption of alternative forms of energy in order to lower the rate of environmental pollution.

These social transformations are likely to affect BP’s operation in the US and Chinese markets. Consequently, the firm will be required to review its operational strategies. To survive in the long term, BP will be required to integrate the concept of Corporate Social Responsibility.

Adopting CSR will enable BP to develop a high level of customer loyalty. This arises from the fact that consumers will develop a perception that the firm is conscious of the prevailing environmental issues. This will increase the probability of BP gaining a high rate of market acceptability in the two countries.

Technological environment

The global oil and gas industry has undergone considerable growth. One of the factors that have stimulated the industry’s growth relate to the high rate of technological innovation. Firms in the industry are investing in research and development in order to design technologies that can improve their competitiveness. Development computer technology is one of the aspects that have promoted the industry’s growth.

China and the US have invested heavily in oil and gas exploration and refining. As a result, there is a high probability of BP experiencing intense competition in the process of marketing its products in the two countries. In addition to oil and gas exploration and refining, the two countries have managed to develop an elaborate pipeline network.

This has significantly increased the two governments’ competitiveness in distributing oil and gas within their boundaries. However, BP does not have an elaborate pipeline network in the two countries. Consequently, the firm is likely to experience a challenge in its marketing process.

The high rate of technological innovation in the industry has also increased the intensity of competition due to emergence of alternative forms of energy. Industry players are investing in development of renewable forms of energy such as geothermal, wind, nuclear energy and biomass amongst others.

China and the US are amongst the leading countries with regard to investment in renewable forms of energy. Consequently, the likelihood of BP experiencing intense competition in its international marketing processes in China and the US is high. To cope with the intense competition, BP should ensure that it evaluate the technological environment in order to make the necessary adjustments.

Conclusion

Marketing is one of the most important concepts that firms’ management teams should consider in their strategic management processes. This arises from the fact that the effectiveness with which a firm markets its products determines its success. Changes in the domestic market make most firms to consider venturing the international market.

However, international marketing is a complex task. This arises from the fact that the firm has deal with a wide range of factors that are different from the domestic market. In the course of its operation, BP has managed to attain global strategy. The firm has achieved this by incorporating the concept of internationalisation. Some of the countries that the firm has entered include China and the US.

The essay entails a comparative study of the US and the Chinese oil and gas industry. The report entails a comprehensive evaluation of the political, legal, social, economic, environmental and technological factors that are likely to affect BP’s international marketing activities in the two countries.

To effectively market its products in the Chinese and the US markets, BP’s management team should develop a comprehensive understanding of the two countries’ business environments. Additionally, the firm should ensure that it undertakes continuous review of changes within the host country. This will enable the firm to make the necessary adjustments.

One of the ways through which the firm can achieve this is by conducting continuous market research. The research should mainly focus on macro environmental factors such as the politics, economic changes, social and technological trends, legal and environmental changes.

By developing a comprehensive understanding of the macro environment in the US and China, BP will be able to achieve its internationalisation objective. This arises from the fact that the firm will formulate and implement effective international marketing strategies. As a result, the probability of the firm succeeding will be increased.

Reference List

BP: Company information. (2013). Web.

Broder, J. (2011). Obama shifts to speed oil and gas drilling in US. Web.

Collins, S. (2013). Political stability in China comes with little transparency. Web.

CNPC Economic and Technology Research Institute: Current status of Chinas oil industry. (2012). Web.

KPMG: US oil and gas outlook. (2012). Web.

Trading Economics: United States inflation rates. (2013). Web

Trading Economics: China inflation rates. (2013). Web.

US Energy Information Administration: International energy outlook. (2013). Web.

Wang, H. (n.d). Characteristics and trends of China’s oil demand. Web.

The significant oil leak disaster in the Gulf of Mexico is closely associated with the activities of the British Petroleum (BP) because the company could not prevent the disaster, and it could not overcome its negative consequences adequately because of the lack of the effective contingency and crisis management plans.

To provide the compensation to cope with disaster’s consequences and to overcome the issues associated with the consumers’ boycotts, BP implemented the Deepwater Horizon Oil Spill Trust and provided the necessary financial initiatives to support the ecological and environmental investigations connected with the disaster.

However, these initiatives and attempts to compensate the problem cannot be discussed as enough to change the consumers’ attitude to BP because the company had the similar problems earlier, and the absence of the necessary plan to predict or overcome the challenge supports the idea that the further disasters can be possible.

It is important to note that BP failed to recognize such ethical questions as the negative experience of the previous disasters and safety violations because the industry experts drew the company’s attention to warnings on the company’s safety.

Furthermore, the necessary conclusions were not made, the safety was not improved, and the effective crisis management plan was not developed. As a result, the company’s workers were killed, and the threatening situation for the environment was created because of BP’s rather negligent behaviour and ignorance of warnings.

Being one of the leaders within the industry, BP contributes to its further marketing success while using the company’s effective reputation. The success of such a company within the industry highly depends on the previous effectiveness and reputation because of the importance to attract consumers with references to the quality of the services and products provided.

he oil leak disaster resulted in worsening the company’s reputation significantly, and the fact led to boycotting the products because the previous reputation was questioned.

The organization’s reputation significantly depends on different ethical issues and the company’s abilities to overcome them. For instance, Kraft Foods Inc. failed to respond adequately to the ethical issues associated also with social problems during the 2000s. The company was discussed as producing and promoting unhealthy products for children.

To save profits and to meet the company’s needs, Kraft Foods Inc. chose change the advertising policies and approaches rather than to respond to the social and legal claims (Ferrell, Fraedrich, & Ferrell, 2011, p. 84). Thus, the ethical behaviour was violated as well as the response to the customers’ interests.

The other company, T-Mobile USA, identified the risks of the unethical behaviour in time and provided the possibilities for educating the employees in order to cope with the results of the unrealized merger with AT&T and its negative effects. The higher ethical standards were proposed to change the situation within the company for better, and T-Mobile USA preserved the status of one of the highly ethical companies in the United States (T-Mobile’s strong ethical culture, 2012).

Nevertheless, the question about the future challenges related to the corporate social responsibility of BP remains to be open. Thus, it is possible to answer it with references to the known facts and previous experience of the company. If BP does not change the approach to ethical standards and safety policies associated as well as the approach the corporate social responsibility, the further disasters will ruin the company’s reputation.

References

Ferrell, O., Fraedrich, J., & Ferrell, L. (2011). Business ethics: Ethical decision making and cases. USA: Cengage Learning.

T-Mobile’s strong ethical culture. (2012). Web.

Oil is one of the most valuable resources. This is because it is the principle source of energy. Therefore, effective management of revenues from oil may lead to economic prosperity of a country. United Arab Emirates is one of the countries that provide evidence of how good management of revenues from oil may lead to economic prosperity.

The country has experienced meteoric economic growth due to effective use of revenues from oil. Oil has helped in fuelling the development of other sectors of the country’s economy. These include tourism, housing, and education (Rostin 3).

However, various countries have been unable to use revenues from oil effectively. Nigeria is one of the countries that continue to have extreme levels of poverty despite having huge oil reserves (Falola and Heaton 11).

This highlights the importance of effective management of revenue from the oil. Vietnam is one of the Asian countries that have huge oil reserves. The country strives to use revenue from oil to improve the welfare of its citizens.

Vietnam’s petroleum industry has come a long way since Vietsovpetro’s initial exploration of crude oil in the Bach Ho oil field in 1986 (Alpert 51). Since then, Vietnam has exploited more than 200 million tons of oil. Vietsovpetro is the largest company in oil exploration.

Vietsovpetro is a joint venture between Russia and Vietnam. Petrovietnam, a state owned company, owns 51% of the Vietsovpetro. JSC Zarubezhneft owns the remaining 49% of the company (IBP 70). Vietsovpetro is the fifth largest company in Vietnam.

Oil exploitation by Vietsovpetro accounts for approximately 90% of the total oil exploited in Vietnam. Continued exploitation has led to the development of the petroleum industry. The industry is one of the major sectors that help in the growth of the economy of Vietnam.

Revenue from oil accounts for approximately 25% of the annual budget revenue of the country. Vietnam is the third largest country in South East Asia according to oil reserves, exploitation and exportation (IBP 70).

The discovery of new oil fields has led to significant increase in Vietsovpetro’s revenue. In 2011, the company had revenues of more than $5 billion (Anon. para 1).

This figure may seem small when compared to dominant players in the global oil industry such as ExxonMobil. However, the increase is vital in ensuring the continued development of the company into a global corporation. In 2011, Vietsovpetro produced slightly more than 6.4 million metric tons of oil (Anon. para 6).

This was more than the projected output of the company. The company projects higher revenues in the future. This is due to the price volatility of oil. Vietsovpetro is not the only company in the industry. The company faces stiff competition from Qatar Petroleum International. However, government support gives Vietsovpetro a competitive edge in the industry.

Development of Vietnam’s petroleum industry has led to the development of numerous auxiliary industries. Massive investments in technology have helped in fuelling the growth of the industry. These investments have helped in the expansion of Vietnam’s petroleum industry into the region and the world market.

If the current trend continues, the industry is likely to become one of the most competitive industries in the region. This would greatly benefit the economy of Vietnam. The development of the industry would help in improvement of the welfare of the Vietnamese citizens.

However, the industry continues to face various challenges that necessitate it to make considerable capital investments (IBP 70). Vietnam forecasts great improvements in the oil industry. The country forecasts that by 2020, the immanent capital retrieving rate (IRR) accounting would reach about 43% (Viettrade para 4).

Vietsovpetro is the major player that would help in the development in the industry. Development of the oil industry would help in the development of other energy related industries. These include nitrogenous fertiliser, chemicals and the gas industry.

However, it is vital for the Vietnam government to ensure that there is planned development of the industry. This would ensure the long-term stability of the industry.

The Vietnam government has a strategy for the development of the industry up to the year 2015. The strategy has six orientations that are vital in the development of the industry (Vietrade para 5). These orientations are outline below.

The government plans to make the petroleum and gas industry a vital branch of the economy. This industry would help in the development of the economy over the next several decades (Vietrade para 6). Technology is vital in the development of the petroleum and gas industry.

Therefore, the government plans to make the industry a major sector that would help in the technological development of the country (Metz and Turkson 231). Technological development in the oil industry would facilitate the development of other industries.

The government also intends to use oil in forming a strong economic corporation. The government is one of the major players in the industry. Therefore, growth of the industry would enable the government to become a strong economic corporation (Vietrade para 7).

Since Vietnam is a socialist government, it is vital for the government to become a strong economic corporation. This would help in better management of revenues from oil. However, this would necessitate the government to regulate the political environment in the highly volatile region.

The government should desist from activities that may make it face sanctions from the diplomatic community. Sanctions may derail the efforts of the government to become a strong economic corporation.

The Vietnam government intends to increase efforts aimed towards the discovery, exploitation and exportation of the vast oil and gas complex in the country (Vietrade para 8). Recent discoveries of new oil reserves prove that Vietnam may have huge reserves of unexploited oil.

Therefore, it is vital for the government to improve discovery efforts. In addition, the government intends to expand exploitation activities in overseas locations. Therefore, Vietsovpetro will continue to be a major organisation that would help the government to achieve its goals.

Vietsovpetro is currently contemplating venturing into other markets. The company intends to follow the example of other highly successful state owned enterprises that have ventured into the international market. These include CNPC-PetroChina and Sinopec.

Both companies are highly successful state owned Chinese companies. Vietsovpetro intends to venture into the Malaysian, Cuban, Nigerian, and Peruvian markets. Successful venture into the international market would guarantee the future development of the company.

The Vietnam government also intends to increase the development of the oil filter and natural gas industry (Vietrade para 9). Development of this industry would help in improving the economy of the country. It would facilitate the development of the Vietnamese manufacturing industry. This would help in broadening the economy of Vietnam.

The Vietnam government also intends to diversify the mode of investment and business (Vietrade para 10). These investments would help in the gradual development of the competitive oil and gas market. These investments would ensure the long-term stability of the industry (Papageorgiou and Spatafora 12).

Finally, the Vietnam government intends to enlarge the types of petroleum and gas services to ensure that they contribute towards energy security. In addition, the government strives to ensure the protection of the national sovereignty and ecological environment (Vietrade para 11).

Protection of national sovereignty necessitates the government to continue being a major player in the industry. This would ensure that Vietnam residents are the major beneficiaries of revenues from oil.

In most developing countries, multinational corporations are the major beneficiaries of revenues from oil. Various regulations would ensure that oil exploration does not have a negative effect on the environment (O’Rourke 45).

The Vietnamese petroleum industry has many companies that perform different roles that help in the development of the industry. There are companies that engage in exploiting petroleum, processing and trading, designing and constructing petroleum services, and training workers.

These companies have highly skilled managers and employees. In addition, the companies use modern technologies. The activities of petroleum companies get special attention from Vietnamese and Russian political leaders. This is because they both have interests in Vietsovpetro, the dominant player in the industry (Sumsky, Hong and Lugg 331).

The activities of other companies in the industry may have a direct or indirect effect on Vietsovpetro. Regulating the development of the oil industry would help in the industrialisation and modernisation of Vietnam’s economy.

Works Cited

Alpert, William T. The Vietnamese economy and its transformation to an open market system. Armonk, NY: M.E Sharpe, 2005. Print.

Anon. Vietsovpetro’s revenues exceed $5.6 bln. Vietnam Investment Review. 2012. Web.

Falola, Toyin and Matthew M Heaton. A history of Nigeria. Cambridge: Cambridge University Press, 2008. Print.

IBP. Vietnam investment and business guide. Washington, DC: International Business Publications, 2007. Print.

Metz, Bert and John K Turkson. Methodological and technological issues in technology transfer. Cambridge: Cambridge University Press, 2000. Print.

O’Rourke, Dara. Community-driven regulation: Balancing development and the environment in Vietnam. Cambridge, MA: The MIT Press, 2004. Print.

Papageorgiou, Chris and Nicola Spatafora. Economic diversification in LICs: stylized facts and macroeconomic implications. Washington, DC: International Monetary Fund, 2012. Print.

Rostin, Andreas. Structural change in the United Arab Emirates. Nordesterstedt: Grin Verlag, 2007. Print.

Sumsky, Victor, Mark Hong and Amy Lugg. Asean-Russi: Foundations and future prospects. Pasir Panjang: Institute of Southeast Asian Studies, 2012. Print.

Vietrade. Petroleum industry: An important motive force to push up the economic development. Vietnam Trade Promotion Agency, 2012. Web.

Written by Mathew Bishop and Michael Green, Is Corporate Social Responsibility Evil explores the issue of Corporate Social Responsibility (CSR) by observing two events: the recent oil spill in the Gulf of Mexico and the melt down of financial systems in the late 2008.

It seeks to de-link corporate social responsibility from the two incidents in response to an article whereby Chrystia Freeland, an editor with the Washington Post, positively correlated the two. In the case of the oil spill, the article seeks to show that even though British Petroleum (BP) did go to great lengths in their CSR campaign; other firms that did not do this would have suffered the same fate because of their shallow strategy of just ensuring ‘no failure and never preparing for one.’

The article agrees that, CSR did have the effect of affording the company leniency and more time than would have been the case if their CSR were not so aggressive. It also argues that, the CSR campaign by the company had waned since it declared the need to go beyond petroleum in combating factors that lead to climate change.

On the financial systems meltdown, the article admits that Goldman Sachs focused on CSR activities, which did not seem to help the firm in its advancement. The firm became unpopular due to the huge profits it made after the crisis and gave out huge bonuses to its staff not acknowledging the public for the banking industry bail out. The authors therefore argue that the approach to focus on CSR rather than its presence was wrong. In conclusion, firms need to better their CSR by engaging in better ways with the public to avoid such incidences.

As the article further roll out, the need for CSR is emphasized and its advantages highlighted in different ways. Firstly, CSR need sticks out clearly in the BP case in the way the concerned parties were able to buy more time and leniency because of being part of corporate social responsibility. Their advocacy of increased use of greener sources of energy aligned the parties for future changes and gave the impression that they care about the wellbeing of the environment and the society as a whole.

Value added to products and services is one of the advantages of a well-implemented CSR plan. The regression in profits for Goldman Sachs shows a failure in their CSR approach. The article underlines the importance of efficient communication with the public in the implementation of a CSR plan. The article covers the existing literature but no new idea comes into play. However, the link between the theories of CSR and the industry practise comes out well in the analysis of these two cases.

Despite the author’s articulation of the importance of CSR, the article fails to give sufficient support to the ideas that it presents. For instance, the claim that the decreased public perception on the Goldman Sachs investment firm hinged on its CSR policy is not substantiated by a research or other relevant means.

However, the ideas presented do rhyme with the given literature on the subject especially on the benefits a firm stands to gain from CSR. I do therefore agree with the article that, CSR is not an evil but a strategy that calls for proper implementation in order to reap maximum benefits.

Reference

Bishop, M., & Green, M. (2010). Is Corporate Social Responsibility Evil?Huffpost Business. Web.

Introduction

The company chosen for Analysis is BP (British Petroleum); a vertically integrated multinational firm, and one of the largest organizations in the globe. The company is in need of revamping the oil production process especially after the catastrophic 2010 oil spill and dwindling returns over the past five years.

Main consideration

The organization is vertically-integrated because it handles almost all aspects of oil production such as exploration, refining, marketing, electricity generation, distribution, and the sale of petrochemicals. While the company might boast about its large size and its capacity to handle all these aspects, its returns indicate that the firm might need to reinvent itself.

The notion of integration might not be the best model for the company. This is evident through minimal shareholder pay backs over the past five years. In this period, the company has recorded shareholder depreciation in its annual returns.

Shareholder pay outs do not come from capital growth; they instead emanate from dividends. As if this is not enough, the firm has not witnessed any substantial production growth over the past nine years, yet it keeps investing in its business processes.

Current situation of the company’s industry

Not all oil companies are doing as badly as BP. Firms that focus on one line of production, or those that are not as vertically integrated as BP, tend to perform well. An organization such as BG only dwells on upstream oil processes and leaves the marketing, distribution and trading to other partners.

This company has recorded high capital growth numbers. Conversely, large oil corporations that integrate production with sales are position 23 out of 24 among all other significant industries in the country.

This implies that profitability is quite low for integrated oil firms. Members of this industry must also contend with concerns about environmental protection. Many of them also have difficulties in acquisition of new resources.

In this light, the company needs to consider separating its brands and businesses. In other words, it can sell away declining brands and stick with the ones that have a long life such as shale gas or liquefied natural gas. It could rebrand upstream and downstream portfolios and thus concentrate on the aspects of production that truly yield effective returns.

Secondary data resources

An industry analysis will be necessary to start the research proposal. Cowan (2) wrote one such report concerning gasoline prices. This article highlights how refineries, marketers and distributors are performing. It will allow one to make an analysis regarding performance in the oil industry.

The second resource will be a Wall Street journal report by Power et al. (11) on the feasibility of drilling as part of the company portfolio. Lastly, the proposal will use a publication from BP concerning its performance in order to prove that it requires a restoration of the same (Tharoor 5).

Information gathering techniques

The research will mainly dwell on secondary data, and it will only use the most relevant and credible resources. This will entail a selection of reports and articles that discuss oil industry performance over the past five decades. Such papers must specifically relate to profitability within vertically integrated oil firms.

Additionally, the paper will involve an analysis of the growth numbers within BP itself so as to justify the need for a brand revamp. Thereafter, the research will give some suggestions on how the brand reinventions can occur.

Works Cited

Cowan, Trey. Crude Math: What is really impacting global gasoline demand. 2012. Web.

Power, Stephen, John Kelly and Stephen Hughes. “Lawmakers chastise oil firms over spill.” Wall Street Journal. 2010: 11. Web.

Tharoor, Ishaan. “A brief history of BP.” Time Magazine. 2010: 5. Print.

Introduction

An examination of the study presented by Parkes (2012, pp. 1636-1651) reveals that the offshore petroleum/gas extraction industry is ranked among the most dangerous industries for workers due to the rather volatile nature of the extraction process (Parkes 2012, pp. 1636-1651). As Parkes (2012, pp. 1636-1651) explains, possible hazards in relation to working on an extraction platform include:

1. possible pump failure resulting in an explosive pressure build-up
2. hazardous weather conditions creating the possibility of the platform being battered by hurricane-force winds
3. the inherent dangers of working on a raised open platform within a constantly damp environment
4. various natural disasters (i.e., earthquakes, hurricanes, tsunamis, etc.)

Current estimates on the number of deaths per year within the industry vary due to a large percentage of offshore platforms often existing in countries, such as Cameroon, Equatorial Guinea, Gabon, Mexico, and a variety of other states where the regulatory environment can best be described as “spotty” due to the relatively lax safety regulations that are implemented in favor of increased profitability (Chakhmakhchev 2010, p. 32).

Current estimates place the number of injuries that have occurred on a global scale between 2001 to 2010at 5,281 with several dozen dead (primarily, within Mexico and the U.S.; however, due to the relatively high number of reports originating from such countries, it is not truly indicative of the sheer scale of the deaths that occur within the industry on a daily basis) (Chakhmakhchev 2010, p. 32).

Fortunately, Australia has experienced relatively few deaths within its offshore petroleum extraction industry in the period of 2008 and 2012 with incidences, primarily, isolated to these of the Western Australian Coast and those within the Victorian coast. It does not mean that the potential does not exist for a significant amount of causalities to occur.

What you have to understand is that there is a significant disparity between the workplace health, safety and protection rights between workers on offshore drilling platforms and those that work on dry land (Outlook for Australian offshore remains bright 2012, p. 42).

An examination of relevant text on the issue reveals that workers on offshore platforms are exposed to a variety of adverse work stressors which impact their ability to perform and result in a higher likelihood for accidents to occur (Offshore oil & gas developments–snapshots from around the world 2012, pp. 1-16). These stressors can consist of the following:

1. problems with circadian rhythm adjustment (day and night cycle) as a direct result of shift rotations which increase the likelihood of impaired judgment and awareness;
2. cabin accommodations on platforms are often sparse, unsanitary and cramped, resulting in high incidences of claustrophobia and the transmission of pathogens which increase the likelihood of a person getting sick;
3. lack of any sufficient medical facilities/medical personnel on the platform;
4. 2-week to 3-week offshore tours of duty which significantly increase physical and mental fatigue due to the lack of sufficient outlets for rest and relaxation;
5. the general noise of the environment is not conducive towards enabling proper rest, resulting in workers having notable sleep deprivation creating considerable issues related to their ability to actually work properly;
6. work shifts often lasting for 12 hours or more resulting in the development of considerable physical and mental fatigue;
7. limited shore leave and adjustment time which creates considerable work dissatisfaction;
8. different standard of offshore workers’ training resulting in a talent pool that is relatively inexperienced and often woefully undertrained to be able to do their jobs properly.

A closer examination of the health and safety standards applied to onshore workers reveals considerable differences from their offshore counterparts wherein the presence of well-stocked medical facilities, the implementation of sufficient rest times, creating shift schedules allow adequate circadian rhythm adjustment as well as longer leave periods which create relatively healthy and happy employees.

These measures result in considerable lower level of accidents as compared to that within offshore extraction platforms. Based on this, the paper will explore the reasons behind the disparity between the application of OHS between onshore and offshore workers and determine whether OHS regulations should be harmonized in order to apply to any location within the petroleum industry. This paper assumes that harmonization of OHS laws, regulations and operational standards should be implemented between onshore and offshore operations

Current OHS Legislative Environment in Relation to Offshore Drilling Platforms

It is interesting to note that when examining the OHS legislative environment surrounding offshore drilling platforms, the regulating agency in charge of it, namely, the National Offshore Petroleum Safety and Environmental Management Authority (NOPSEMA), has actually taken a relatively “hands-off approach” in policing the various offshore platforms within Australia which would create considerable dangers for workers within such industries.

Moreover, an examination of current legislation surrounding offshore petroleum industry workers shows that they are not subject to the same standards of training, regulation or access to experts within the field as found in subsequent legislative mandates that surround onshore workers.

Also, OHS laws, in general, have not been shown to significantly encompass offshore facilities and as such create a significant degree of potential OHS abuse, which can and often does happen on these platforms. The end result can only be described as an “impotent” legislative environment for offshore workers where their safety and security have not been properly addressed by both the policies of the Australian government and the agency that is supposed to ensure their protection.

Arguments surrounding the divergent application of OHS laws have resulted in numerous debates encompassing a variety of factors. However, it is generally agreed that the local demand within Australia for petroleum-based products is one of the reasons behind the apparently cavalier attitudes towards implementing stricter regulations for safety and protection of offshore drilling operations.

For example, current estimates of the electrical use per household within Australia show that on average, a home/apartment within the city requires roughly $1,500 per year on electricity consumption with an average daily use of 17 to 31 kWhs (Kilowatt-hours) per day or 8250 kWh per annum (Australia: Market profile, 2004: 22 – 23).

Such a fact calls for the production of 8 tons of carbon pollution per household created each year due to the fact that 90% of Australia’s energy needs are met through the use of fossil fuel-burning power plants (Australia, 2005: 39 – 44).

With a population density of 4,575,532 within Sydney alone, this represents literally billions of tones of carbon gases released into the atmosphere on a yearly basis. One factor to consider when taking such figures into consideration is that cities, such as Sydney, are estimated to grow to at least 6 million by 2035, resulting in an even greater strain on the city’s resource infrastructure (Australia, 2005: 39 – 44).

This means that the use of utilities, such as electricity, will continue growing along with the amount of carbon gases released into the atmosphere, consequently reaching astronomical rates due to the increase in domestic consumption. The reason these particular facts are mentioned is the fact that they are directly responsible for the current problems in remedying the problem related to harmonizing OHS laws for onshore and offshore oil/ gas extraction.

First and foremost, it should be mentioned once again that 90% of Australian current power supply comes directly from fossil fuel resources, a great percentage of which include oil power plants (Hindmarsh & Matthews, 2008: 217 – 228).

As the population of Australia grows, and the demand for power increases, it has been shown by studies, such as those by Hindmarsh and Matthews (2008), that the predilection of the Australian government has been to create more fossil fuel burning power plants due to their relatively inexpensive cost in building and the fact that they have worked effectively for so long (Hindmarsh & Matthews, 2008: 217 – 228).

In fact, there are already even more plans to build several more fossil fuel burning power plants in order to meet the growing demand. While it may be true that governments have the responsibility in ensuring the continued safety and health of workers, the fact remains the same that in case of ever-increasing power demands in Australia, it is apparent that the needs of majority outweigh the needs of the few, and in this case, the apparent lax OHS standards within the offshore petroleum industry take less precedence over the necessity of ensuring that Australia continues to receive much-needed fossil fuel.

How else can it be explained that despite the flagrant OHS abuses by various offshore petroleum companies, their activities have continued to remain in operation? The fact is that the government can ill-afford any interruptions to Australia’s voracious appetite for power, stopping operations at offshore platforms that have exhibited that flagrant abuses of OHS would cause potential power crises within such cities as Sydney which would definitely be detrimental for government.

Based on this and despite numerous means of remediation or intervention, it is unlikely that any venture in harmonizing OHS laws between the onshore and offshore petroleum industry will truly succeed unless alternative forms of power are found immediately to replace fossil fuel usage; however, this is an outcome that is highly unlikely within the immediate future.

From this particular perspective, it can be seen that the legislative environment within Australia is far from conducive towards implementing regulations in favor of OHS law application on offshore oil extraction platforms. It must also be noted that there are also issues regarding the application of OHS laws on platforms which are at times not within the EEC (exclusive economic zone) of Australia, which encompasses a 200-mile radius from Australia’s shores.

While it is understandable to a certain extent that such platforms are not necessarily subject to Australian law given their location, some of these platforms are within the EEC, yet they are apparently generalized as belonging to the same category as those which are considered outside. There is also the fact that the workers on such platforms are Australian citizens and, as such, should be subject to the same rights as their onshore counterparts.

Harmonizing Australia’s OHS laws and regulations to be completely uniform covering any location

When examining the issue of harmonizing OHS laws and regulations involving any industry within the jurisdictions of the Commonwealth of Australia (including Commonwealth waters offshore) and its states and territories, you have first take into consideration the potential adverse impact if such laws remain as they are.

A brief look at the various comments and opinions regarding the latest deaths on an offshore platform on the Victorian coast reveals that many within the offshore petroleum industry at present are well aware of the inherent disparity between them and their onshore counterparts with some of the comments from current workers within the industry clearly indicating that the number of accidents will definitely increase within the coming years. However, nothing is done to improve the conditions on the offshore platforms.

Taking this into consideration, the necessity of implementing some form of harmonization becomes more apparent than it was. It must also be noted that it is highly unlike that the companies themselves which own and operate these platforms would actually implement more extensive OHS safety measures.

A brief examination of the offshore petroleum industry in general shows that there is a considerable degree of prolific cost-cutting and neglectful treatment of workers which often results in the sheer amount of accidents that have occurred within the past decade.

As such, it is thus the responsibility of the Australian government to implement equal methods of OHS laws and regulations between the onshore and offshore petroleum industries in order not only to create a certain degree of equality in operations between the two industries but to subsequently ensure that Australian workers are treated properly and in full accordance with the law.

Finding a Solution

The inherent problem with finding a solution to this issue is the fact that the problem goes far beyond just workers rights but encompasses the power needs of Australia. The fact remains that a large percentage of Australia’s fossil fuels are supplied by these platforms, and as such, it is necessary to continue keeping them in operation despite the inherent problems in OHS.

Another factor that should also be taken into consideration is the fact that the worker “churn” within the offshore petroleum industry is considerably high given the lackluster working conditions and the inherent dangers involved within the industry itself (Dickey, Watson & Zangelidis, A 2011, pp. 607-633).

This is one of the primary reasons as to why training and development programs, which are meant to ensure that only properly trained expert workers are on the platform are relatively few (Dickey, Watson & Zangelidis, A 2011, pp. 607-633).

Based on their experience, the companies that own such platforms have determined that investing into the training of workers who are going to leave soon is an inherently wasteful venture, and as such, it is their opinion that only the barest and the most necessary amount of training should be implemented in order to minimize cost and maximize profit.

The inherent problem with this particular way of operations is that it creates a considerable gap in knowledge and experience within the teams making the platforms result in a greater likelihood of mistakes.

Studies, such as those by Paterson (2011, pp. 369-389), have shown that one of the main reasons behind the relatively high rate of deaths and accidents within the offshore petroleum industry is directly related to the fact that in combination with questionable regulations which govern the industry, the lackluster method using which workers are trained contributes significantly to workplace accidents, and as such, proper training programs should not only be considered a necessity but a right by platform workers since it could in effect save their lives (Paterson 2011, pp. 369-389).

Conclusion

Based on the arguments presented within this paper, it can be stated that the harmonization of OHS laws, regulations and operational standards should be implemented in onshore and offshore operations.

Unfortunately, it has also been shown that extenuating factors involving the demand for oil, the general condition of the industry itself in the form of high churn rates and the fact that the current legislative environment surrounding the issue can be considered “impotent” show that it would take considerable public debate on the issue before any harmonization of laws between onshore and offshore petroleum industries can be established.

The only feasible way this paper sees this happening in the future is if a considerable loss of life due to inefficient OHS regulations on an offshore platform occurs. It is rather regrettable to take into consideration that such an event would be necessary for sufficient support for law harmonization in this particular case to actually occur.

Reference List

‘Australia: Market profile’ 2004, Energy Forecast Asia & Australasia, pp. 22-26, Business Source Premier, EBSCOhost.

‘Australia’ 2005, Energy Forecast World, pp. 39-44, Business Source Premier, EBSCOhost.

Chakhmakhchev, A. 2010, ‘Global overview of offshore oil & gas operations for 2005-2009’, Offshore, 70, 5, p. 32, MasterFILE Premier, EBSCOhost.

Dickey, H., Watson, V., & Zangelidis, A. 2011, ‘Job satisfaction and quit intentions of offshore workers in the UK North Sea oil and gas industry’, Scottish Journal Of Political Economy, 58, 5, pp. 607-633, Business Source Premier, EBSCOhost.

Hindmarsh, R., & Matthews, C. 2008, ‘Deliberative Speak at the Turbine Face: Community Engagement, Wind Farms, and Renewable Energy Transitions, in Australia’, Journal of Environmental Policy & Planning, 10, 3, pp. 217-232, GreenFILE, EBSCOhost.

‘Offshore oil & gas developments–snapshots from around the world’ 2012, ENHESA Flash, 64, pp. 1-16, GreenFILE, EBSCOhost.

‘Outlook for Australian offshore remains bright’ 2012, Offshore, 72, 2, p. 42, MasterFILE Premier, EBSCOhost.

Parkes, K. R. 2012, ‘Shift schedules on North Sea oil/gas installations: A systematic review of their impact on performance, safety and health’, Safety Science, 50, 7, pp. 1636-1651, Academic Search Premier, EBSCOhost.

Paterson, J. 2011, ‘The significance of regulatory orientation in occupational health and safety offshore’, Boston College Environmental Affairs Law Review, 38, 2, pp. 369-389, Academic Search Premier, EBSCOhost.

Introduction

Construction projects can achieve desired outcomes in a relatively short time and with relatively minimal resources. However, for this to occur, then certain criteria must be adhered to as seen in the construction projects of British Petroleum (BP) at the Andrew Field and the New British Library (NBL) project.

Comparison of the projects

British petroleum’s Andrew Field was completed not just within the scheduled time but four and a half months before the deadline. The company had decided that it would achieve first oil within 6 months from the commencement of the project (Latham, 18).

Therefore, the six weeks completion was a sign that they had exceeded expectations. BP was able to achieve this owing to their careful use of man hours. They dedicated one hour per tone towards the re-commissioning of the project which such a great achievement was given the fact that their counterparts had been using about 20 man-hours per tonne for the same.

Operating costs for the entire British petroleum project were kept under a tight lid hence explaining the success of this project. First of all, the company had intended on spending 450 million pounds on the project. However, as the project went on, this eventually reduced to 290 million pounds.

BP was able to achieve this through continuous brainstorming and re-examination of their construction processes so as to determine which processes could be made more cost effective (Latham, 24). The company continuously allowed autonomy over decision making amongst the members of the team.

This put them in a place where they had the power to challenge the status quo and think of new and creative ways of achieving their cost reduction goals. At first, the latter company did not expect to save so much since it had been expected that the probability of achieving such a target would have been ten percent.

However, this project team was able to contravene those negative expectations and thus direct the savings towards greater earnings. It was shown that the company’s profits went up by 45 million pounds and this is directly attributable to the operational savings. It should be noted that profits of such nature are not even common within the construction industry so theirs was definitely something worth noting.

On the other hand, the NBL project went over and above its budgets and was highly inefficient in resource usage. Initially, the group had set aside cost changes at a maximum of 10,000 pounds. However, this soon changed to 25,000 pounds within the course of the project. One of the reasons for this haphazard use of project funds was the fact that the budget and project scope were not well defined.

Most additional costs had not been accounted for and NBL had left important phases of the construction such as technical variations and the design development at the discretion of the project director and superintending officer’s contingency fund.

This was definitely a step in the wrong direction because instead of being proactive in budget making the NBL project team was being reactive. Budget increases would only be done after costs had already spiralled and this was not a very wise decision (Bourn, 5). Budgetary control was only achieved late in the project i.e. in 1995 after much wastage has already occurred.

It is worth noting that BP has such a strong sense of direction when carrying out the project. This was largely because the latter organisation had created very clear goals before the onset of the project. Furthermore, they had all understood their specific expectations for the Andrew Field operation and therefore were in a position to work towards those outcomes without having to waste time on clarifying them again.

Team roles were well identified and so were the results that each of the members was expected to deliver or at least work towards. Conversely, the New British Library team suffered from a lack of direction. In the 1980s, the latter team did not even have a preset project scope, timetable or committee. They had deliberately allowed things to be undefined because they had assumed that this would lead to greater flexibility.

However, it was very clear later on in the project that this had been mistaken thinking. Lack of role definition during the New British Library’s implementation process contributed to poor performance because there were certain overlaps.

The government body has a superintending officer yet the project needed a construction and project manager. These were all roles that existed in the project and they led to ineffective time usage as well as poor resource use (Bourn, 4).

The Andrew team was not afraid of borrowing new concepts from other industries and applying them in their project. This particular case was ideal for illustrating how the construction industry can benefit from waste reduction strategies as well as other initiatives during construction. This group employed the Cost reduction initiative for the new era initiative.

The BP project was able to make its mark as a landmark agent for change within the construction industry owing to this dedication towards new initiatives. In the tendering process, British petroleum did not focus on conventional ways of procurement; it laid down ten criteria that would determine the minimum conditions that such an entity was expected to achieve in order to enhance some of their outcomes.

New British library had very serious problems with these issues. The procurement process within the New British Library project was as effective as it should have been.

There were problems with supplementary agreements as well as problems with contractor’s counterclaims. If the NBL team had been very clear on their expectations during procurement then perhaps some of the challenges they went through may have been eliminated.

All BP project contributors were working with one another as members of one unit. They did this after a call to behavioural change by the project’s manager. At the onset, he asserted that he wanted the members of the team to go through a revolution and this would only be made possible if they considered behavioural change. It was eventually made possible through a rigorous change in different aspects of their behaviour.

Everyone was firmly committed to the project and they considered themselves as one group. Conversely, the New British Library did not have a sense of ownership of the project. Management had never been placed in the hands of the latter entity. In fact, out of the seventeen members selected for the project in 1992, only one came from the British Library and he had not even been allowed to contribute towards the design of the project.

The New British Library project was managed by the Office of Arts and Libraries at first and then transferred to the National Heritage Department. This continual transference of managerial powers came in the way of establishing a firm commitment to the project by the said team (Bourn, 3).

As if the latter was not enough, the NBL project continued to be implemented by an inefficient team until it was eventually realised that some managerial changes needed to be instated.

A project review revealed that the steering committee was superfluous. Team work was not very common and most of the project members were not working together. There was a need to ensure that this changed hence explaining why 1996 saw the creation of Departmental change to the project (Bourn, 6).

Indeed, a thorough commitment to the quality of the BP project was one of the reasons for their exceeded expectations. The team made sure that they carried out every stage of the implementation with utmost care and in the most efficient manner. However, the same thing cannot be said about the NBL project.

Here, quality management had been put at the periphery during implementation and the group paid a heavy price for choosing to do so. For example, cabling was done improperly and at a later stage of the job, the group soon came to find out that the work was faulty.

Furthermore, NBL was in a position where it could not undo some of the damage that had been done due to poor quality management in the job; this would prove to be too costly for them. In the end, an audit report showed that they were about 230, 000 elements that were faulty.

This was definitely something that was unacceptable in construction and could have been avoided if the team had been dedicated to quality management. The difference between these two projects in terms of quality control lies in the fact that the New British library waited for completed work in order to carry out quality control while their counterparts at British Petroleum kept doing this throughout the entire process.

Their commitment towards finding minor faults within the project prevented them from having to dismantle an already complex system in order to rectify some of these problems. The opposite case arose at the New British Library Project because they waited too long in order to capture most of their defects. Reactive decision making was at the heart of this major hurdle in project implementation.

How the delivery of the New British Library might be improved

Egan (27) explains that the major problem with the construction industry is that entities tend to put too much focus on practical implementation of the project while placing design elements on the periphery. The same thing happened to NBL as they were carrying out their project. Experts recommend that this is flawed thinking and it needs to be reoriented.

One way of achieving this is through a through dedication of project time and resources towards project design. This can then be tied in with implementation or actual construction. If the NBL team members had done this, they would have benefited from increased integration of subcontractors and suppliers in the process. As noted before, NBL was having a hard time integrating their subcontractors and this needed to change.

As stated earlier, the distinction between the two groups started with a lack of clear goal and role clarification. Consequently, for NBL to do well, it needs to set out these common objectives. One of the methods for achieving this is the creation of common objectives. It should be noted that BP was slightly different from NBL because two clients were involved in the NBL project while only one client procured the BP project.

Nonetheless, this does not imply that NBL should have resigned itself to mediocre work. Instead, they should have worked together to create a unified team with firm commitment to the project. This is exactly what the project team needs to do now in order to be able to move forward.

Alternatively, NBL have the choice of establishing one comprehensive client to be in charge of the entire project. It is always complicated when two clients are working together in one project because this creates a lot of rivalry and time wastage (Bourn, 7).

NBL should also borrow a leaf from construction experts in the industry. It should be dedicated towards quality control so as to avoid all the wastages that the company underwent throughout the project. Since quality is a major issue in the process, then it should be included in the design phase of the project. The team members had made the mistake of dwelling too much on cost while ignoring the quality aspects.

These are all important issues during project implementation and utmost care should be given to both of them. It should also develop a culture of right time first as suggested by Egan (27). If NBL employ computer systems that facilitate the design process then they may be in a position to improve their quality control systems.

There are several simulation programs that can be helpful in ensuring that defects in a construction project are identified and prevented. This could definitely be helpful to NBL because the latter party has been having problems in preventing occurrence of flaws.

The company also needs to be very vigilant about budgetary and financial matters. One way in which it can do this is by proactive budget allocation. Contingency funds need to be set aside only for unforeseeable expenses but all other major aspects of the project should be planned for in advance.

The New British Library team needs to change their procurement process. They can do this by comparing all the suppliers that have made an offer to them and then utilise industry standards in order to assess which ones will deliver the best outcomes for them. Furthermore, the procurement process should also be characterised by performance targets.

Participants should know what is expected of them through the use of these targets. They should contain expectations on major project milestones as well as targets for the budgets to be utilised in the construction process as well (Egan, 31). It should be noted that since NBL is a public body then this process may not be as straight forward.

However, for the latter project to move forward then some sacrifices have to be made. The said individuals need to be such that they can be fully involved in determination of the participating contractors. One way of achieving this is by taking control of the procurement process themselves.

Lastly, technology can be an effective way of transforming the mode of operation within the NBL project. It should be noted that most players in the construction industry will rush to use a certain piece of technology without necessarily considering the existing work culture within an organisation. NBL would be mistaken to use the same approach.

They need to first look at all the processes in place and then identify the challenges existent in them. Thereafter, they can look for other ways of integrating technology into these processes. Additionally, the use of computer aided design (CAD) software can go a long way in creation of prototypes.

So much wastage can be eliminated by the latter groups if they can look for certain simulations in carrying out these processes as they go about completing the construction.

It should be noted that CAD as a form of technology is not merely restricted to new constructions; it can be employed in the process of redesigning as well (Egan, 28). Instead of always enacting redesign processes on site, the New British Library team would be more informed or better off if they had utilised this approach.

Conclusion

The major variations between the two project teams were differences in making clear cut roles for team members, differences in quality control implementation, differences in the design phase as well as differences in teamwork and cohesion.

NBL might have done well if they made quality control an ongoing process rather than end process, also, if they utilised technology more efficiently and directly to redesign or design the building and also if the team had been more vigilant in procurement as well as budget making processes.

Works Cited

Egan, John. Rethinking construction. Report of construction taskforce, 1998, 18-29

Bourn, John. Progress in completing the New British Library. London: HMSO, 1996

Latham, Michael. British Petroleum Management report. Latham Report, 1994