Oil & Gas
Projects Risk Management
Nowadays,
it has been imperative for all the business firms to execute innovative
strategies and tactic to ensure a long term success in the industry and enhance
annual revenue. When a firm imposes new and innovative practices in any area or
in any project, it has to face several difficulties and challenges. In the oil
and gas industry, due to the highly unpredictable environment, it has become
difficult for the companies to execute various strategies and actions as it leads
higher risk of failure of the projects (Shuen, Feiler & Teece, 2014).
According to Skogdalen and Vinnem (2012) due to unstable environment and
volatile prices of the commodity in the oil and gas industry, it is really
difficult for the firms to rely on single strategies and projects. Differences
in the change rates and several safety issues increase the extent of risk for
the workers in the workplace.
Along
with this, it is really important for the companies in the oil and gas industry
to focus on the different issues like pollution, workplace accidents, plants
and environmental issues, political interruption, etc. The Oil and Gas Industry
have a complicated business environment, where several political, economical
and environmental regulations are imposed.
Risks in the oil and gas industry often causes high time and high cost
of the project, which eventually make it difficult for the stakeholders to get
desired outcomes and benefits (Yusuf, et al., 2014).
According
to Shuen, Feiler & Teece (2014), in a struggling economy, the oil and gas
industry, the companies require effective management in order to ensure the
successful running. Therefore, it is imperative for the oil and gas companies
to execute different risk management strategies to manage unpredictable and
environment and volatile in prices to maintain profitability. The risk
management practices also essential to ensure the success of the project and
maintain the operating cost as low as possible.
The
aim of this research proposal will be to critically evaluate the risks
available in the project management process of the oils and gas industry based
on my hands-on experiences in different projects and to evaluate the various
methods and strategies to overcome these risks. This study will have a mail to
explore a wide range of solutions and practices for the effective management of
risk in Oil & Gas.
In
order to focus on aim of the study, the researcher will answer several
questions in this study, which are as follows:
1.
What is the project risk management and why it is essential for a firm?
2.
Why is it important to identify different risks in different projects?
3.
What are the different risk management approaches to handle project risks in
the oil and gas industry?
4.
At what extent, these approaches are significant to
manage the identified risk in the projects of oil and gas industry.
The main aim of conducting this research is to
analyse the importance and significance of risk management in Oil and Gas
industry and also to identify the significance of project risk
management strategies in the oil and gas industry, following research
objectives will be understand by the researcher to explore valid outcome and
answer the research problem in an effective manner.
To
critically evaluate the various risks associated with the different projects in
the oil and gas industry.
To
analyze the role of risk management practices in projects of oil & gas
industry.
To
explore different benefits and importance of the risk management approaches to
the project of oil and gas industry.
To
determine different challenges and issues to implement different risk
management practices in the firm, mainly in the oil & gas industry.
To
propose different alternative solutions to manage the challenges of the risk
management and successfully execute the project in oil & gas industry.
The
feasibility of this research study is associated with the requirements of my
efforts to gather authenticate and credible data and information. The
information about the risk management practices is available in a wide range of
literature reviews and academic sources. This study will be feasible for me
because I can manage all the required resources to gather primary and secondary
information. Managing risk in the projects is a business and social issue,
which affects changes in the environment of oil and gas industry.
I
will access the information about risk management practices from the university
library, through different search engines, news articles and company annual
reports. There will no need of a huge budget to gather data from secondary and
primary sources and I have adequate time to organize a credible study.
Risk management in Oil and Gas industry plays an important role in
protecting the external environment of the global world. In case of first
proposal, the main objective is to find the risk in project management of oil
and gas industry and examine the significance of risk management practices. At
the same time, in second proposal, researcher has also identified different
challenges and that companies have to face in mitigating the risk in Oil and
Gas industry (Oracle White Paper, 2011). There are three different articles
that are useful in identifying the contribution, key arguments and findings of
the research study.
1st Article
In the first article, researcher has explained different types of risks
and strategies to reduce the risk in Oil and Gas industry. It is identified
that, there are different types of risks such as operational complexity,
increased production flexibility, shortage of experts and cyber security. In
case of operational complexity, it is analysed that emergence of new
technologies have increased the level of complexity in operational department.
Employees have to conduct regular experiments with new technologies in order to
survive in competitive market environment (Bigliani, 2013). This type of
strategy contain large amount of risk because sometimes experiments leads to
huge failures that reduce the overall profit of the companies.
Secondly, increased production flexibility in which, employees have to
manage their time according to the requirement in external market environment.
Business firms are not able to make decisions related to purchasing the crude
oil or not (Poitras, 2013). It us because sometimes, industries have to store
the crude oil in order to meet the future demand, but this will lead to huge
risk because they have to manage the production hours accordingly that contains
huge risk. Thirdly, shortage of experts is also a major problem for the oil and
gas industry. It is because less number of employees is interested in working
in oil and gas industry. Cyber security is also the major risk that should be
considered.
At the same time, there are various strategies that need to be adopted in
order to overcome with risk problems such as right information at right time,
data quality and prevention of non-compliance (Jacoby, 2012). Therefore, this
article gives major contribution to the researcher in understanding the
prevailing situation in oil and gas industry. It also guides the researcher,
how they can apply right type of strategy at right time.
2nd Article
In the second article, researcher focuses towards the strategies that are
useful in reducing the costs and managing risk in oil and gas industry. It also
suggests the enterprise project portfolio management solutions. It is
identified that, oil and gas industry contains high amount of risk in return of
major reward. Therefore, researcher is able to take guidance in relation to
managing their portfolio in effective manner, so that they can be able to
mitigate their risk efficiently (Oracle White Paper, 2011). It also suggests
the deep-water opportunities for the upcoming business firms. With the help of
this, researcher is able to forecasts the new techniques and demand of the
customers.
This article also contributes in completing the research study in
effective manner. It is because they are able to get different ideas about how
they can explore and grab new opportunities in Oil and Gas industry. It is
essential for the companies to conduct market research before doing investment
in particular industry. This article is also related to the research topic in
which, researcher will take guidance about the factors that need to be considered
before calculating costs of any project of oil and gas industry (Edwards,
2009). In today’s competitive market
environment, it is also necessary for the companies to understand the portfolio
requirement and strategies to manage these portfolios.
Researcher will also contain the
information in relation to providing information to the business firms for
identifying and selecting right project, predict and manage the risks, reduce
the project complexity through interactive dashboards, improve collaboration,
control contracts and documents, implement earned-value management and manage
project change and quickly resolve values (Simkins & Simkins, 2013). All
these strategies contribute to the researcher in including different strategies
related to portfolio management in Oil and Gas industry. It is essential that,
researcher has to include different information about the risk management in
oil and gas industry.
Article 3:
In the third article, researcher is able to collect the information about
the major accidents that has been occurred within the global world. There are
large numbers of accidents that has been occurred, which has increased the
level of risk in oil and gas industry. In addition to this, researcher is also
able to get answer about different questions such as company policies, major
accident risk, types of methodology that can be used for assessing major
accidents, potential conflicts between the safety, environmental and financial
performance, different types of corporate standards and practices, crises
management and emergency response and strategies to measure and monitor the
company performance (RPS Energy, 2010).
All these factors are helpful in completing the research study in
effective manner. It is also necessary for me to include these factors in the
research study. There are large numbers of companies that are providing the
risk management techniques in order to solve the issues in the companies. It
also suggests me, how they can overcome with major challenges in the accidents.
These accidents create huge loss for the companies due to which less companies’
are interested in investing in oil and gas industry.
I will also try to analyse the major advantages and disadvantages of risk
management techniques in oil and gas industry. It is important for me to
consider these articles before making the research study (Badiru &
Osisanya, 2013). With the help of this, I will be able to identify the
different aspects of risk management techniques in Oil and Gas industry.
References:
Badiru, A.B. & Osisanya, S.O. (2013). Project Management for the Oil
and Gas Industry: A World System Approach. USA: CRC Press.
Bigliani, R. (2013). Reducing Risk in Oil and Gas Operations. [Online].
Available From:http://www.emc.com/collateral/analyst-reports/minimizing-operational-risk-in-oil-gas-industry.pdf (Accessed: 25 January 2015).
Edwards, D. (2009). Energy Trading and Investing: Trading, Risk
Management and Structuring Deals in the Energy Market. USA: McGraw Hill
Professional.
Jacoby, D. (2012). Optimal Supply Chain Management in Oil, Gas, and
Power Generation. USA: PennWell Corporation.
Oracle White Paper (2011). How to
Reduce Costs and Manage Risk in the Upstream Oil & Gas Industry with
Enterprise Project Portfolio Management Solutions. [Online]. Available From:http://www.worldoil.com/uploadedFiles/Media/Whitepapers/PPM_US_EN_WP_HowReduceCost(1).pdf (Accessed: 25 January 2015).
Poitras, G. (2013). Commodity Risk Management: Theory and Application.
USA: Routledge.
RPS Energy (2010). Preventing Major
Accidents in the Oil and Gas Industry. [Online]. Available From:http://www.rpsgroup.com/Energy/Services/Advisory/Downstream/pdf/RPS-Final-Hazard-White-Paper_Nov2010_combined.aspx (Accessed: 25 January 2015).
Shuen, A., Feiler, P.F. & Teece, D.J. (2014) Dynamic capabilities in
the upstream oil and gas sector: managing next generation competition. Energy
Strategy Reviews, 3, pp.5-13.
Simkins, B. & Simkins, R. (2013). Energy Finance and Economics:
Analysis and Valuation, Risk Management, and the Future of Energy. USA: John
Wiley & Sons.
Skogdalen, J.E. and Vinnem, J.E. (2012) Quantitative risk analysis of
oil and gas drilling, using Deepwater Horizon as case study. Reliability
Engineering & System Safety, 100, pp.58-66.
Yusuf, Y.Y., Gunasekaran, A., Musa, A., Dauda, M., El-Berishy, N.M.
& Cang, S. (2014) A relational study of supply chain agility,
competitiveness and business performance in the oil and gas industry.
International Journal of Production Economics, 147, pp.531-543.
