Strategic and Decision Making in Oil and Gas Industry

This article discusses the recovery of the oil and gas industry in Scotland and the opportunities for market entry in the decommissioning activities of the North Sea. It includes a SWOT analysis and recommendations for the industry. Course code, course name, and college/university are not mentioned.

Running head: STRATEGIC AND DECISION MAKING IN OIL AND GAS INDUSTRY
Strategic and decision making in oil and gas industry
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2STRATEGIC AND DECISION MAKING IN OIL AND GAS INDUSTRY
Table of Contents
1. Introduction............................................................................................................................3
2. Current market Conditions and Market Entry Opportunities.................................................3
3. SWOT analysis.......................................................................................................................5
3.1 Strengths...........................................................................................................................5
3.2 Weaknesses.......................................................................................................................6
3.3 Opportunities....................................................................................................................6
3.4 Threats..............................................................................................................................7
4. Recommendations..................................................................................................................7
5. Conclusion..............................................................................................................................8
Reference List............................................................................................................................9

3STRATEGIC AND DECISION MAKING IN OIL AND GAS INDUSTRY
1. Introduction
After a rapid demise in the period from 2014 to 2017, the Oil and Gas Industry of
Scotland is recovering and likely to experience a stable business growth phase for the few
upcoming decades. In the economic recovery of the Oil and Gas industry of Scotland, the
Decommissioning activities in the North Sea are going to be instrumental. According to
Smyth et al. (2015), the new energy policy of the Government of Scotland is aimed at
investing in innovation and sustainable decommissioning activities in the North Sea.
Research reports confirm that North Sea have proven to be the most poignant area of
investment for Scotland and UKCS, and most of their investments have went into the ‘well
plugging and abandonment’ phase”. The report leans on making a detailed analysis of the
business prospects of the different phases of the decommissioning activities of DECOM,
North Sea Company. Well in sync with plugging and abandonment, activities like onshore
dismantling as well as disposal have been source of huge profits in recent time for DECOM
and other Scottish organisations.
2. Current market Conditions and Market Entry Opportunities
After the prices dropped miserably in 2014, the incumbent owners of the organisation
shifted to the decommissioning activities of the UK North Sea and attempted. According to
the statistics provided by the Oil and Gas authorities of the UK and Scottish government, ot is
evident that about 700 million barrels of oil is supposed to be collected from the sanctioned
oil mining endeavours in the North Sea, in the year 2017, itself. Besides, Aguilar et al.
(2016), also opines that with the UK and Scottish government, who are ultimately responsible
for decommissioning activities destined to be carried out in the UKCS, more potential Oil
and Gas companied are going invest in building infrastructure for the decommissioning
activities. However, on the contrary, Ahiaga-Dagbui et al. (2017), opines that the companies

4STRATEGIC AND DECISION MAKING IN OIL AND GAS INDUSTRY
like DECOM making new market entry for decommissioning activities in the North Sea
should keep in mind the legislative regime of the UK government. The government
regulations are going to make the companies with license of petroleum assets liable for the
costs incurred by decommissioning activities. As opined by Allan (2015), the cost is also
bearable by the companies owning the facilities also them, who operate those facilities and
earn benefits from exploitation of the related petroleum.
At the time when the price of Oil significantly dropped, there were oil deals
happening occasionally, the situation being more complicated with growing concerns about
the decommissioning and an environment of difficult pricing. However now, Chandler et al.
(2017), opines, when the prices of oil have turned up to be approximately about USD $59 per
barrel, the buyers are able to make the potential profit thereby allowing the sellers the
comfort of operating with decommissioning activities even after meeting the liabilities of the
government. In the end, sellers like DECOM are able to get meaningful value against their
assets.
This situation is creating a stability in the industry that is arousing the interest among
the service sector and supply chains and new organisations are coming up with innovative
business models and deal structures based on decommissioning activities.
Pipelines’ and processing companies such as SIRGES and CATS have also started to
show interest in developing the infrastructure in the North Sea in contribution of the private
equity investing companies. Large private equity players like DECOM North Sea, have
enormous market exposure before them at present. The mix of smaller and independent
companies who are equity backed are actively operating in the region of North Sea with
decommissioning activities.

5STRATEGIC AND DECISION MAKING IN OIL AND GAS INDUSTRY
The model of joint venture partnership among companies with oil and gas facilities
also possess the potential to give business return from decommissioning activities in the sea.
According to Harrison and Falcone (2017), this is because the companies can establish a joint
fund so that adequate capital is available when individual facilities fail to satisfy the cost of
decommissioning. In this regard, the strategic partnership of DECOM, North Sea with
Accenture and Scottish Enterprise is going to provide a solid foundation to the organisation
on the verge of entering the new market of decommissioning activities (Decomnorthsea.com,
2018).
New and potential investors in the field of Oil and Gas are enjoying the facilities of
several factors. The governments of UK and Scotland are offering Tax incentives to the new
and potential investors of the Oil and Gas sector. As put forward by Kaldellis et al. (2016),
other factors like insurance against the products of decommissioning activities, deferred
dismantling as well as advanced technology are capable of offering significant savings to the
companies investing in the oil and gas sector.
The organisation, DECOM has signed up another deal with the Forth Ports Limited
establishing a companionship for a joint market venture the partners of Business venture
trusts that the new Ports where the infrastructure have been set up for the decommissioning
ventures have the potential of accommodating a greater share of decommissioning works of
North Sea. The proximity of these ports to the mining assets of the North Sea, their vicinity to
the linking of road as well as rail facilities and the favourable supply chain along with the
skilled workforce are other favourable set-ups that would favour the oil and gas in their
market entry with decommissioning activities (Decomnorthsea.com, 2018).
3. SWOT analysis
3.1 Strengths

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The sound engineering community is the greatest strength of the company in their
decommissioning activities. The UKVCS is adept in their engineering knowledge and thus
their work expertise is high and in alignment have a high supply capacity also that would
favour the business of DECOM who are attempting to make large investments in the form of
joint ventures with other market enterprises (Platteeuw et al. 2017). The strong asset
knowledge is also a big strength for the organisation. During the Preparation for CoP phase of
decommissioning activities, the suppliers engaged during the operational life are engaged for
providing service. Hence the service providers have a strongly knowledge base pertaining to
asset hardware and the infrastructure. As said by Legorburu, Johnson and Kerr (2018), the
suppliers as well as the operators have HSE standards in Scotland and in UKCS. Other
technological innovations like thermal imaging, online inspectional activities, and also survey
capabilities are major strengths of the organisation. The familiarity and compliancy of the
local suppliers with the regulatory framework of the UKCS governance is another
strengthening factor.
3.2 Weaknesses
The most vulnerable aspect is the lack of continuity of work. Very less companies
make a smooth shift from one phase of decommissioning activities to another. This is one
major reason why, investors have stopped supplying assets. Besides, independent small
suppliers dominate the activities of decommissioning projects heavily (Rouse et al. 2017).
Thereby a clash among various suppliers hampering the latter phases of the activities. The
late life procedures of most projects of the organisation are unclear. This hinders the
productivity of the projects. The phase planning of the company is also poor
(Decomnorthsea.com, 2018).
3.3 Opportunities

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The recent gradual changes to late life mind set can prove to be good opportunity for
the organisation. The phases of the decommissioning activities are planned in such a manner
by the technical experts of DECOM that the late life of the projects are strengthened.
Aligning then decommissioning activities with late life activities would also help in fostering
innovative ideas of mining and strategic collaboration among the business partners. The new
investors in decommissioning activities are exhibiting a trend of adapting to a more
standardised approach that can make the deliveries more structured as well as efficient. This
would also help the suppliers to realise their point of entries in the activities more promptly.
Another important move by the company is to execute the phases like plugging, abandonment
and cleaning before CoP. Thereby there is the opportunity of a more proficient project
delivery with heightened quality and reduced cost and time.
3.4 Threats
The uncertainty of working is the worst threat for the organisation. Variable factors
like legislative issues, oil prices, and fluctuation in the value of currency or confidential
commercial strategies of the company are responsible for this. Besides, the duration of the
various phases are also unknown to the engineers (Decomnorthsea.com, 2018). This makes
the scheduling hectic for the operators as well as the suppliers.
4. Recommendations
Fore mostly, the organisation should encourage the late life mentality. The investors
and suppliers should be related to the benefits of treating the operational life endings and the
earlier decommissioning phases as a continuous and synergised phase. The company should
also maintain a more diverse supply base. The use of a diverse supplier base should be
incentivised and the criteria of required knowledge to enter the market should be heightened.

8STRATEGIC AND DECISION MAKING IN OIL AND GAS INDUSTRY
The organisation should also bring the phase experts together to accomplish a
planning template. This would help in better sequenced and integrated activities for the whole
decommissioning phase. Other than that, phases like abandonment, cleaning and other few
phases should be highly integrated.
The disconnection suppliers must consult the operators and the removal contractors in order
to gauge likelihood of lessened work stemming from the single lift removing and the cases of
jacket derogation in the latter part of decommissioning activities. This can help in the
estimation of the approximate future demand and thereby help in making strategies to match.
5. Conclusion
Analysing the recent changes in the OIL and Gas sector of Scotland and UKCS, it can
be opined that with the entry of more specialist contractors and investors like DECOM,
Scottish Enterprise and so on, the decommissioning costs are supposed to decline. The
activities of DECOM in the North Sea would see multiple and drastic changes in the near
future, as the market of decommissioning products develop in Europe. Lastly, it can be
concluded that factors like standardisation of costs as well as creation of exquisite knowledge
pool for every phase of activity will lead the company to gain the reputation of a leading
organisation in decommissioning activities.

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Reference List
Aguilar, P., Johnson, C.R., Salazar, J. and Bogaerts, M., 2016, April. Plug and Abandonment
Solution for Oilfield Decommissioning in the North Sea. In SPE Bergen One Day Seminar.
Society of Petroleum Engineers. 18(2), pp. 1-18.
Ahiaga-Dagbui, D.D., Love, P.E., Whyte, A. and Boateng, P., 2017. Costing and
technological challenges of offshore oil and gas decommissioning in the UK North
Sea. Journal of Construction Engineering and Management, 143(7), p.05017008.
Allan, G., 2015. The price of oil and the Scottish economy. Fraser of Allander Economic
Commentary, 38(3), pp.41-46.
Chandler, J., White, D., Techera, E.J., Gourvenec, S. and Draper, S., 2017. Engineering and
legal considerations for decommissioning of offshore oil and gas infrastructure in
Australia. Ocean Engineering, 131, pp.338-347.
Decomnorthsea.com, (2018). Connecting Capability with Opportunity. Available from:
http://decomnorthsea.com/ [Available at: 24 June2018]
Harrison, B. and Falcone, G., 2017, May. Handling Decommissioning and Restoration
Liabilities within PRMS and their Impact on Reported Reserves of Producing Fields
Approaching Abandonment. In SPE Latin America and Caribbean Petroleum Engineering
Conference. Society of Petroleum Engineers.
Kaldellis, J.K., Apostolou, D., Kapsali, M. and Kondili, E., 2016. Environmental and social
footprint of offshore wind energy. Comparison with onshore counterpart. Renewable
Energy, 92, pp.543-556.
Legorburu, I., Johnson, K.R. and Kerr, S.A., 2018. Multi-use maritime platforms-North Sea
oil and offshore wind: Opportunity and risk. Ocean & Coastal Management, 160, pp.75-85.

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Platteeuw, M., Bakker, J., van den Bosch, I., Erkman, A., Graafland, M., Lubbe, S. and
Warnas, M., 2017. A framework for assessing ecological and cumulative effects (faece) of
offshore wind farms on birds, bats and marine mammals in the southern north sea. In Wind
Energy and Wildlife Interactions(pp. 219-237).
Rouse, S., Kafas, A., Catarino, R., Peter, H. and Handling editor: Steven Degraer, 2017.
Commercial fisheries interactions with oil and gas pipelines in the North Sea: considerations
for decommissioning. ICES Journal of Marine Science, 75(1), pp.279-286.
Smyth, K., Christie, N., Burdon, D., Atkins, J.P., Barnes, R. and Elliott, M., 2015.
Renewables-to-reefs?–Decommissioning options for the offshore wind power
industry. Marine pollution bulletin, 90(1-2), pp.247-258.