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The Impact of Crude Oil Prices on UK based Exploration & Production Companies

   

Added on  2020-04-21

54 Pages13064 Words105 Views
Running head: DISSERTATIONThe Impact of the Decrease in Global Crude Oil Prices on The UK based Exploration &Production CompaniesName of the Student:Name of the University:Author note:

1DISSERTATIONAcknowledgementI would like to express my gratitude towards all the people, who have helped me in conductingmy research study. They have helped me in every possible manner to explore my potential andstrength and utilize it in the best manner for conducting the research paper. I also thank mysupervisor, who has guided me through the entire time of the research by providing excellentguidance and monitoring. I also express my gratitude towards my friends and family who havesupported and encouraged me throughout the research work so that I could complete the study inproper time.

2DISSERTATIONExecutive summaryThe purpose of this research paper is to find out the impact of the fall in the global price of thecrude oil on the exploration and production companies of the North Sea region of the UK. Forthis study, the researcher has collected secondary data on the oil price fall, level of employment,impact of lower Brent price, and the future scope of the oil and gas industry of UK. As theproduction cost of the oil companies of UK is highest among all the other oil producing countriesin the world, the fall in oil prices has a very hard impact on this industry. The level ofemployment has fallen sharply after the price has started to fall in 2014. Through variousliterature reviews, the causes of the fall in oil prices have been explored. The impact of the pricefall is also explored through various sources. It is found that, the employment of the sector washit hard the most along with the profitability of the industry.

3DISSERTATIONTable of ContentsChapter 1: Introduction....................................................................................................................61.1 Introduction............................................................................................................................61.2 Background of the study........................................................................................................71.3 Research aim..........................................................................................................................81.4 Research objectives...............................................................................................................81.5 Research questions.................................................................................................................81.6 Problem statement.................................................................................................................91.7 Rationale of the research.......................................................................................................91.8 Structure of the research......................................................................................................10Chapter 2: Literature Review.........................................................................................................112.1 Introduction..........................................................................................................................112.2 Background..........................................................................................................................112.2.1 Oil and gas industry of UK...........................................................................................112.2.2 Causes for fall in the global crude oil price..................................................................132.2.3 Fall in global crude oil prices: Winners and losers.......................................................152.2.4 Impact of falling oil price on the E&P companies of UK and North Sea Region........172.3 Conceptual framework.........................................................................................................18Chapter 3: Research Methodology................................................................................................193.1 Introduction..........................................................................................................................19

4DISSERTATION3.2 Research Philosophy............................................................................................................193.3 Research approach...............................................................................................................203.4 Research Design..................................................................................................................203.5 Research purpose.................................................................................................................203.6 Research strategy.................................................................................................................213.7 Data collection.....................................................................................................................213.8 Data analysis........................................................................................................................223.9 Limitations...........................................................................................................................22Chapter 4: Data analysis& research findings...............................................................................234.1 Introduction..........................................................................................................................234.2 Findings...............................................................................................................................234.2.1 Fall in the global crude oil price...................................................................................234.2.2 Impact of lower Brent...................................................................................................274.2.3 Impact on employment.................................................................................................304.2.4 Impact on capital investment, spending and profit level..............................................324.2.5 Future prospects............................................................................................................38Chapter 5: Conclusion and Recommendations..............................................................................435.1 Introduction..........................................................................................................................435.2 Linking to the objectives.....................................................................................................435.2.1 Linking to the first objective.........................................................................................43

5DISSERTATION5.2 Linking to the second objective.......................................................................................445.3 Linking to the third objective..........................................................................................455.3 Recommendation.................................................................................................................465.4 Future scope of the study.....................................................................................................47Bibliography..................................................................................................................................48Front In-text Bibliography.............................................................................................................53

6DISSERTATIONChapter 1: Introduction1.1 IntroductionThe purpose of this research paper is to find out the impact of the fall in global crude oilprice on the UK based oil and gas exploration and production companies. The significant fall inthe global crude oil prices had an important impact on the overall world economy. UK economywas no exception. Fall in the oil prices increases the activities for the entire economy as the costof production falls for all the businesses, particularly for those businesses, which are heavilydependent on the oil inputs. This led to improvement in the investment, as well as employment[ CITATION Yus13 \l 1033 ]. It has also been found that, the oil and gas industry was adverselyaffected by the decline in the oil prices. The profit of the oil and gas exploration and productioncompanies would fall as the oil prices fall. However, agriculture, coke and refined petroleummanufacturing, air transport, and oil intensive manufacturing sectors were benefittedsignificantly, due to the reallocation of the capital and other resources. Thus, reduction in globaloil prices led to improvement in the overall economic condition of the world as well as UKeconomy [ CITATION Jav16 \l 1033 ]. This research paper examines the effect of the reductionin global crude oil prices on the oil and gas exploration companies of UK. It is expected to get anegative impact on the industry, but to find out the extent of the impact is the objective of theresearch paper. For this purpose, the researcher would take a case study company and conduct asurvey to know how much the fall in oil prices affected the company business. The backgroundof the research focuses on the context of the study.

7DISSERTATION1.2 Background of the studyThe oil and gas industry of UK is one of the major industries and it caters mainly to theneeds of the domestic market. In 2014, the industry produced 1.42 billion boepd, out of which,59% was oil. The nation consumed 1.508 million of bpd of oil and 2.735tcf of natural gas in2013 [ CITATION Rau14 \l 1033 ]. Thus, it can be said that, the domestic demand is more thanthe production and it has led to importing of oil and gas in UK. 98% of the production isobtained from the offshore fields in UK. There is only one major onshore oil field, Wytch Farmin Dorset. Along with that, there are almost 113 oil wells and 189 gas exploration sites across thecountry [ CITATION Kel14 \l 1033 ]. UK imposes high cost on oil and gas production due tovery difficult offshore conditions. In 2014, the cost of exploration was £1.1 billion, operatingcost was £ 9.6 billion and capital investment was £14.8 billion for the oil and gas industry. Theindustry is also a big employer of the nation, providing employment of more than 100,000people[ CITATION Are14 \l 1033 ]. Hence, when the price of global crude oil fell significantlyin 2014, the UK oil and gas industry faced losses. The oil prices were fairly stable for almostfour years from 2010 to mid 2014. After that, it fell to almost half very rapidly [ CITATIONReb16 \l 1033 ]. Insipid growth of the economy across the developed world led to weak demandfor oil and gas, and increase in the oil production in the USA have contributed in the fall in crudeoil prices. Russia, being one of the largest producers of oil, was affected mostly by the falling oilprices [ CITATION Baf15 \l 1033 ]. UK was also affected by the oil price fall. Some of thesectors were benefitted due to oil price fall, but the oil and gas industry and its subsidiaries facedchallenges. Hence, the overall impact was a net effect of the profits of some industries and lossesby some. This provides the context of this research,

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