Risk Management Strategies in Petroleum Industry in Nigeria

Dissertation

Abstract
This research study aims is to analyse the strategies which is used to minimize the risk in
petroleum industry in Nigeria. Also, this in turn provides an insight into how the effects the
political instability of their process. This report is based on qualitative study and both primary
research performed. However, the empirical framework for this research is founded on literatures
on different risk strategy to mitigate political instability. Primary data is collected through
questionnaires under qualitative study to answer the research questions. This report has
examined that, managing optimum utilization of natural resources is considered one of the
biggest political risks in oil and gas industry (Adekola and et.al., 2017). Political instabilities of
government have significant impact on the oil and gas industry. This report has interpreted that,
Oil and gas industry must induce in Enhanced oil recovery to increase the productivity of
company in mere future. This report has interpreted that, organization comply with risk
management structure within large oil and gas companies to improve the performance and
outcomes.
Key word – Political instability, political risk, oil and gas.

Acknowledgement
At first, I would like to thank God to make me capable enough to do something worthwhile.
I would especially like to thank my supervisor for his generous time and commitment.
Throughout my dissertation, he had taken his valuable time to help me whenever I needed; read
through my draft copies; listened to me patiently; quickly answered all my email queries and
supported me every step of the way. Starting from refining the research topic, he has encouraged
me to develop independent thinking and greatly assisted me with writing.
Thanks to all of those Managers who had taken time for filling in the questionnaires in
my research. Without their active participation it would not be possible to carry out this research.
Last but not the least, I thank to my family members, friends and relatives for their kind
help and cooperation during the research period.

TABLE OF CONTENTS
CHAPTER 1: INTRODUCTION....................................................................................................1
1.1 Background to research topic...........................................................................................1
1.2 Background to research organization...............................................................................1
1.3 Research rationale............................................................................................................2
1.4 Research question (s)........................................................................................................2
1.5 Research aims and objectives...........................................................................................2
CHAPTER 2: LITERATURE REVIEW.........................................................................................4
2.1 Introduction of literature review.......................................................................................4
2.2 Main body with heading and sub-headings......................................................................4
2.3 Conclusion of literature review........................................................................................9
CHAPTER 3: METHODOLOGY.................................................................................................10
3.1 Research process............................................................................................................11
3.2 Research approach..........................................................................................................11
3.3 Research strategy............................................................................................................12
3.4 Research methodology...................................................................................................12
3.5 Research instruments/tools.............................................................................................13
3.6 Sampling.........................................................................................................................13
3.7 Ethical implications........................................................................................................14
CHAPTER 4: FINDINGS (DATA PRESENTATION)................................................................15
CHAPTER 6: CONCLUSION, RECOMMENDATIONS AND IMPLICATIONS FOR
FURTHER RESEARCH...............................................................................................................28
Conclusion............................................................................................................................28
Recommendation..................................................................................................................29
REFERENCES..............................................................................................................................30
Appendix........................................................................................................................................35
A blank copy of questionnaire/interview script....................................................................35

CHAPTER 1: INTRODUCTION
1.1 Background to research topic
Nigeria tends to remain one of the largest oil producer within Africa. The Nigeria's oil in
turn has been situated within the Niger Delta which across coastal areas within south- east
Nigeria (Adekola and et.al., 2017). However, the Nigerian national petroleum corporation pay
for the prices which are below the international rate and helps in selling refined products. One of
the key focus of the study is to focus on examining the key risk management strategies which in
turn largely influenced by the political instability within the petroleum industry (Merem and
et.al., 2017). One of the key significant purpose of the research is that to take necessary
precautionary measure which helps in providing effective risk management strategies.
Through the research, scholar provides an overview of all the risk strategies which are
used by the oil and gas industry in order to solve many issues. Further, the entire study is based
upon country i.e. Nigeria and the country produce more than 90 million tones per year and
supply the same to other countries (Ruqaishi and Bashir, 2015). Thus, the current research paper
is based upon both primary and secondary data collection which in turn assist to meet the define
aim in the set tenure.
1.2 Background to research organization
Nigeria is considered to be as one of the key global player within the oil and gas
industry. Nigeria tends to have one of the largest natural gas reserve within Africa and also the
2nd largest oil reserve within Africa (Humphrey and Dosunmu, 2016). Nigeria has a total of four
oil refineries and also has an estimated refining capacity of 4,45,000 barrels per day. However,
the oil production within the Nigeria has started over the period of 100 years. There seems to be
two principal oil market within Nigeria i.e., downstream and upstream (Raimi and et.al., 2018).
The upstream oil market has been situated within prolific Niger river delta. The economy of the
Nigeria has been producing over 90% of the total exports.
In Nigeria, the major foreign stakeholder is Shell which has a strong financial
performance and consider the top competitor for oil and gas industry as well. But Nigeria's
financial spine is strong and that is why, it is able to survive and offer the best services to others.
Though there are many laws and legislation which must be complied by oil and gas industry so
that it offer the best services to other countries.
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1.3 Research rationale
The key driving force behind carrying out the research study is mainly associated with
the rise within the oil and gas industry. The researcher of the study can effectively resolve the
problem of the research by attaining distinctive set of interest which is highly relevant in
establishing between the political instabilities and risk management strategies. It is important to
gain information associated with the study because the previous study only focuses on emission
reduction of greenhouse gases and the environmental sustainability. The present research topic
has reflected on effectively examining the risk management strategies which has been
effectively employed by the large oil and gas companies which helps in mitigating the key
effects related with the political instability. Another significant reason behind the selection of the
research topic is to identify the key relevant political instabilities which can largely influence the
oil and gas companies within Nigeria.
1.4 Research question (s)
 What are the risk management strategies?
 What impact does the governments political instabilities have on the petroleum industry?
 To what extent our developing countries dependent on the petroleum industry to survive?
 What could the petroleum industry induce in future to ensure the company’s productivity
increases?
 What are the existing challenges the petroleum industry face that the authority should be
informed of, if any, what should they do about it?
1.5 Research aims and objectives
Aim
“To study and examine risk management strategies employed by large oil and gas companies in
order to mitigate the effects of political instability in developing countries like Nigeria.”
Objectives
 To understand the risk management strategies utilized and how these strategies are
implemented within the organizations
 To study the overall risk management structure within large oil and gas companies to
gain a better understanding on how the organization works
 To explore the political instabilities within developing countries like Nigeria and how
these political instabilities effect the large oil and gas companies
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 To provide a recommendation to the senior management of the business services which
can be improved from the evaluation of the literature study.
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CHAPTER 2: LITERATURE REVIEW
2.1 Introduction of literature review
A literature review is a comprehensive summary of previous research on the selected
topic. In the same way, for current study different books, articles, and relevant sources are
selected for a particular area of research (Sadaghiani and et.al., 2015). Under this section, the
researcher discussed different risk management strategies that are utilized by oil and gas
companies. Further, the section also elaborates on the risk management structure designed
within large oil and gas companies to understand how the different organization works. Lastly,
the current section will assist to examine how the political instabilities create a direct impact on
the large oil and gas companies using comparative case studies.
2.2 Main body with heading and sub-headings
Theme 1: Political risk that affects the oil and gas industry
Patey (2020) stated that political instability is a political risk factor that affects the entire
oil and gas industry of Nigeria. Thus it is all about to changes in government, riots, and policy
changes and as a result, most of the corporation do not invest in a country. Hence, political risk
is all about the probability that changes in the political environment which will reduce the
returns, and thus, the project is no longer profitable. It is also analyzed by Li, Chen and Zhu
(2016) that the oil and gas industry is covered by different laws and regulations which limit how
the extraction is done. Therefore, this is limit from state to state and country to country. Nwapi
(2020) also argued that oil and gas companies tend to prefer countries with a stable political
system and if there is no stability then the price of the oil and gas will fluctuate. Thus, it is
examined that there is a strong interrelationship between the fluctuation in political instability
and the price of the oil and gas industry.
As per the view of Das (2020) in the oil and gas industry, the company's entire activity is
controlled by the government of the host nation. So, these rules are sometimes unfavourable to
oil companies and sometimes not. Due to political instability, most of the companies operating
in the oil and gas industry are faces price issue, rather than industries and firm being helpless
victims due to political instability, companies start work on their advantage depending on how it
is managed (Shuen, Feiler and Teece, 2014). For example, in 2003 due to disorder in Nigeria's
petroleum policy, Shell can maintain its top position in the industry without entering other
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