SDMO6060 Strategic Decision Making in the Oil and Gas

STRATEGIC DECISION
MAKING IN THE OIL AND GAS
INDUSTRY

REPORT:1
Contents
Introduction...........................................................................................................................................2
Porter`s five forces model......................................................................................................................2
SWOT analysis......................................................................................................................................5
Decision-making...................................................................................................................................7
Conclusion.............................................................................................................................................7
References.............................................................................................................................................9

REPORT:2
Introduction
The report brings out the investment opportunity for Mozambique`s current gas production
that is operated by the south Africa by Sasol in the provincial area of Inhambane province
that holds reserves of 2.6 trillion cubic feet. As China National Petroleum Corporation
(CNPC) wants to expand and extend its operation in Mozambique. The gas is produced and
processed at a central facility in Temane and transport it via 865 km (German et al., 2016). It
is important to get into consideration that china operates its oil and gas industry through
government.
It is necessary to apply one academic model to know whether the elements of business
situation would help to evaluate the entry in the Mozambique market. To analyse the entry,
the report is focuses on Porter`s Five Forces model is an strategic tool used to evaluate the
potential opportunities and risk related to oil and gas industry. The report also brings out
several market opportunities for the industry and the way to grab the opportunities. To
maintain a sustainable industry growth, a manager has to identify the traditional factors that
challenge the current growth of the industry (Taliotis et al., 2016).
Porter`s five forces model
The factors are-
Competitive rivalry or threat of competitors- the competitiveness of upstream industry is
intense. There are many players in upstream sector. Big IOCs or the private sector oil and gas
company that is integrated and China National Petroleum Corporation (CNPC) is government
regulated. The ranking and competitiveness among the gas and oil companies is based on
revenue that they can generate. The top companies are Royal Dutch Shell that had a sum of
385.6 billion as a revenue in 2015, Exxon Mobil situated in country of USA, which derive a
considerable revenue of 365.5 billion (Pavia, 2015). Moreover, BP from UK derive 6 billion

REPORT:3
dollars of revenue in 2015 and total revenue obtained from France announce a big sum of
money approximately 194.2 billion dollars. Even after serving the whole country china, it is
not among top competitors. Apart from these competitors, Chevron and Phillips from USA
generate a revenue of 169.2 billion dollars. The previous information relates to revenue in the
year 2015. The best indicator to become a known is to observe the size of the company to the
market capitalisation. Mozambique`s current gas production also faces a competitive rivalry
from several national and international oil companies (News, 2014). The opportunities of
China National Petroleum Corporation (CNPC) to grow in Mozambique. In regards to
exploration, the company continue to prioritise the strategies for resources and improve the
oil and gas production and achieve economically recoverable reserves. The company
announced in 2015 that it expects the output of crude oil to be 924.7 million barrels and gas
production to be around 3,172 billion cubic feet (Petrochina Company Limited, 2015).
Threat of new entrants- This factor has a huge influence on new companies that who enter
into oil and gas business. The establishment in the industry requires a huge capital. Moreover,
National oil and gas companies control 90 percent of the public companies because they are
proven reserves. The industry also has an increased internal competition. If any new company
is established, it requires R &D spending that will give a enhancement in innovation and
progress the existing technology. The new strategy can give a company a competitive
advantage over the new and oil companies. The big IOCs can convince the new competitors
to focus more on spending more capital. The prices of gas industry remains highly volatile.
These reserves are usually situated in war zones and the geographical area with several
geographical conflicts and political uncertainty (Hulshof, Maat, and Mulder, 2016).
Threat from the substitutes in the industry- there are not many alternatives available that can
be used in place of producing energy that assists electricity, heating, and transportation. The
alternatives are nuclear energy, coal, hydrogen, and biofuels and several other renewable