Brazilian Natural Gas Industry Challenges

This assignment analyzes the Brazilian natural gas industry, focusing on its challenges and potential strategies for overcoming them. It delves into various aspects, including petroleum supply planning, the integration of the petroleum supply chain at PETROBRAS, the use of VSC-based HVDC applications in offshore platforms, the impact of the oil and gas industry on boreal woodland caribou populations, enterprise risk management practices within large oil and gas companies, the influence of big data and knowledge management in the sector, and the life cycle assessment of alternative fuel vehicle systems compared to traditional oil-based options. The assignment also considers industry trends and the role of strategy consulting in shaping the future of the Brazilian natural gas market.

STRATEGIC
DECISION MAKING
IN OIL AND GAS
INDUSTRY

TABLE OF CONTENTS
INTRODUCTION...........................................................................................................................1
Evaluation of the entry strategy adopted by CNPC to explore East Africa market....................1
CONCLUSION................................................................................................................................4
REFERENCES................................................................................................................................5

INTRODUCTION
Oil and Gas are the basic needs of an individual and this industry of every country
contributes a larger part in GDP. Thus, in order to provide benefit to a country by increasing its
GDP it is essential to implement strategic decision making in the Oil and Gas industry
(Hebblewhite, 2017) . In the present study, strategic decision making of China National
Petroleum Corporation (CNPC) is discussed. CNPC is a National Oil Company(NOC)
headquartered in the Dongcheng district, Beijing, China. It is the largest oil and gas producing
and supplying company of China which is present in 70 countries of the world. Presently, this
company is planning to initiate an exploration project is East Africa and to design this plan,
strategic decision making is required. This study contains the innovations to the traditional
market-entry strategy. Further, the significance of focusing on critical business elements is
explained to evaluate the entry of CNPC in East African oil and gas market.
Evaluation of the entry strategy adopted by CNPC to explore East Africa market.
To explore new market place, some market entry strategies are required. These policies
are planned method of delivering services to a new target market. These market entry strategies
depends upon three critical elements namely, customer, company and competition. Strategies
should be approached while focusing on these factors (Hamdan and Kinsella, 2017) . There are
numerous market entry strategies which can be used while entering in a new market place such as
joint venture, merger and acquisition, exporting, licensing, franchising, strategic alliances, etc.
Some market entry schemes while entering market are explained below-
 Joint venture- A joint venture is formation of a complete new organisation by
combination of two different entities in order to achieve some specific objectives
(Wallington and et.al, 2017). But there is also a drawback associated with this strategy
and that is the rise of conflicts between two organisations leads to a heavy loss to the
newly formed organisation. This strategy can not be used by CNPC as they don't want to
form a new entity, rather want to expand the existing business firm.
 Strategic Alliance- This is also an investment entry mode, in this method two or more
than two entities co-operate to achieve a strategic goal. Sharing of cost can be done in this
system but there is also the same risk as joint venture has (Ahmad and et.al, 2017) , and
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that is conflict between partners. This method is also not applicable to the present
situation of business framework.
 Franchising- It is a contractual entry mode which is a low-risk mode of entry into new
markets. It is really an effective market-entry method when an establishment is wishing to
expand its business internationally (Strategy, 2017) . CNPC can adopt this method for the
market entry as the local individual will handle its branch there who will use the cultural
knowledge.
 Licensing- Licensing is allowing an individual or an entity to use the property for a
specified period of time. It can reduce the risk and is an effective way to finance
international expansion.
 Exporting strategies- In order to enter new market place the main emphasis is given on
the exportation of the services. Exporting can be done directly or indirectly (Animah and
Shafiee, 2017) . In direct exporting strategy services are sold directly to the end users
whereas in case of indirect exporting, the products are sold indirectly to the end users
through various intermediators such as trading companies, agents, etc.
Now, above all the strategies the strategy selected for the CNPC organisation to expand
its business in East Africa is franchising. This method is the most effective method out of all the
methods of market-entry depending upon the present business situation. There is a format which
states about the contractual relationship between the franchisor and the franchisee (Biscardini .
and et.al, 2017). This format needs to be follow when franchising is done and is as follows-
 Product/service deliverables- This part gives the competitive place of the entity in the new
market place. This is the unique feature of the format that is necessary to form concept of
the business.
 Benefit communicators- These benefits involves quality, dependability and expertness
which helps franchisee to create the assurance in product.
 Visual and auditory elements- These elements includes trade name, logo, colour, features,
etc. which are required to link the individual unit with the system (Sumbal and et.al,
2017) . These elements prevents any error in identifying the product specification.
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 Format facilitators- These are the process which allows format of franchise to work
effectively and efficiently at both the levels namely, individual and system. There are the
management and operational infrastructure to the entity which are generally invisible to
the customers but are really signification in effective functioning.
Franchising is important to spread the business on international level in order to increase
the business value of an establishment by attaining the desired goals (Sharma and et.al, 2017).
Thus, to achieve this companies adopt the best strategy for their international market and
franchising is one of them. It enables organisations to enhance their reach to geographic
diversification. They are better than that of other strategies such as joint venture and merger &
acquisition as franchising method just need the existing resources. It provides a business way
which comprises of low-risk, low-cost and high level of control. Also, franchising is a better
business model as it not only provide benefit to the franchisor company but also prove benefits to
the franchisee and it also contributes in employment. Advantage of franchising for the three
critical business situation frameworks i.e. customer, company and competition and their roles in
implementing business strategies are as follows:
 Customers- The customers of this firm will be the oil pumps, gas stations, small oil and
gas industries and residents of East Africa. Franchising provides most benefit to the
customers (Meidell and Kaarbøe, 2017) . It is mainly a customer-focused approach. The
main reason behind selecting this market entry approach by CNPC is to have franchisees
who keep more cultural knowledge and can satisfy customers. Local managers and
workers can easily identify the demand and needs of customers using simple evaluation of
culture. Also, this approach will recruit the local people of East Africa and help them to
gain an opportunity of employment.
 Company- For any business organisation the main aim is to set an ideal company.
Structure of company can be enhance using the Ansoff's Matrix model. This matrix is also
known as the product and market growth matrix. This matrix involves four factors-
market penetration, product development, market development and diversification. Out of
these four factors, two are used for new markets and they are market development and
diversification. Market development focuses on reaching new markets with the existing
products. This strategy is also knows ans market extension, this is possible through
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further market segmentation (Campos and et.al, 2017) . This strategy is used to answer
following questions-
 How market extension can be done?
 What will be the new market sectors?
 In what geographical areas market extension can take place?
Market diversification focuses on reaching new markets with new or improved products.
It is the most risky strategy among all four as the new products are created and the organisation is
unaware of the error occur in the process.
To apply any strategy it is important for an entity to conduct the analysis of risk
associated with both the strategies to gain a better understanding of the issues associated with the
market entry and depending upon the result choose the best option to implement in your
organisation.
 Competition- It is the most significant factor that needs the concentration of organisation.
Competition covers both, the advantages and disadvantages. In case of new market entry,
competition offer many hurdles. It is difficult to sustain in an already developed market
and attain the desired organisational growth (Furman and et.al, 2017) . In order to deal
with the competition and competitors present in the market CNPC needs to implement
some effective strategies such as evaluation of all the data like product, services,
technologies, etc. of existing organisations of oil and gas. Also, CNPC needs to examine
various threats that are present on the way of its growth and after examining them,
effective policies should be prepared by them to deal with those threats effectively.
Thus, above were some factors which should be undertaken while performing strategic
decision making of the organisation.
CONCLUSION
Strategic decision making is an important factor for every industry. In the present study,
the factors to be considered during performing decision making process of an oil and gas industry
are been discussed. The above learning provides an idea of understanding to CNPC, China to
expand its business in East Africa and in this expansion various factors plays a role. In order to
study their roles in the market entry procedure, this study is done. Further, different marketing
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methods are studies and the best marketing method is further selected and evaluated in this
assignment.
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REFERENCES
Books and Journals
Ahmad W. N. K. W. and et.al, 2017. Evaluation of the external forces affecting the sustainability
of oil and gas supply chain using Best Worst Method. Journal of Cleaner
Production .153 .pp. 242-252.
Animah I. and Shafiee, M., 2017. Condition assessment, remaining useful life prediction and life
extension decision making for offshore oil and gas assets. Journal of Loss Prevention in
the Process Industries.
Campos A. F. and et.al, 2017. A Review of Brazilian natural gas industry: Challenges and
strategies. Renewable and Sustainable Energy Reviews .75 .pp. 1207-1216.
Furman K. C. and et.al, 2017. The petroleum supply planning activity is an important link for the
integration of the petroleum supply chain at PETROBRAS as it is responsible for
refining the strategic supply planning information to be used at the operational level. In
this work we present the best strategies to solve this challenging problem. It is important
to note that although the solvers in the last decade have evolved enormously,...
Optimization and Engineering . 18(1) .pp. 215-240.
Hamdan H. A. and Kinsella B., 2017. Using a VSC Based HVDC Application to Energize
Offshore Platforms from Onshore–a Life-cycle Economic Appraisal. Energy
Procedia .105 .pp. 3101-3111.
Hebblewhite M., 2017. Billion dollar boreal woodland caribou and the biodiversity impacts of
the global oil and gas industry. Biological Conservation . 206 .pp. 102-111.
Meidell A. and Kaarbøe K., 2017. How the enterprise risk management function influences
decision-making in the organization–A field study of a large, global oil and gas
company. The British Accounting Review. 49(1) .pp. 39-55.
Sharma P. and et.al, 2017, May. The Dawn of the New Age of the Industrial Internet and How it
can Radically Transform the Offshore Oil and Gas Industry. In Offshore Technology
Conference. Offshore Technology Conference.
Sumbal M. S. and et.al, 2017. Interrelationship between big data and knowledge management: an
exploratory study in the oil and gas sector. Journal of Knowledge Management.
21(1) .pp. 180-196.
Wallington T. J. and et.al, 2017. When Comparing Alternative Fuel‐Vehicle Systems, Life Cycle
Assessment Studies Should Consider Trends in Oil Production. Journal of Industrial
Ecology.21(2) .pp. 244-248.
Online
Biscardini G. and et.al, 2017 Oil and Gas Trends [Online]. Available through:
<https://www.strategyand.pwc.com/trend/2017-oil-and-gas-trends>. [Accessed on 6th
July 2017].
Strategy, 2017. [Online]. Available through:
<http://www.mckinsey.com/industries/oil-and-gas/how-we-help-clients/strategy>.
[Accessed on 6th July 2017].
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