They set conditions under which the firms that will operate within their territory abide to. For instance, in the UK, the national government, through the Crown, issues licenses to firms that are interested in the search and production of oil and gas. The state has absolute power in deciding who to access the oil resources with regard to domestic and foreign firms. Political dimensions and considerations have a great role to play.
The state also gives directions on which resources are available and which should not be accessed. In addition, the state determines the impact of resource extraction to the environment and gives an appropriate direction. It has the power to halt a process that has already begun if it is deemed that the negative impact in the environment cannot be controlled. It is also the role of the state to determine what the government stands to gain in any deal with a firm. It also champions local employment.
In a nutshell, oil resources in the world within national territories are subjected to national political considerations in that nation. Therefore, oil firms have to contend and sing to the tune of the oil-producing states. Similarly, states that import the oil must create a good rapport with the exporting state in the political sense. States also participate in National Oil Corporations as investors.
Most of the top class oil companies are owned by state. These national oil companies dominate the world oil reserves and production. They are involved in determining the volume of oil production by the state. States opted to getting involved in the oil companies in order to make their oil companies have a superior bargaining power internationally.
For example, in the Middle East, the government found it necessary to participate actively in the oil companies in order to survive in the international competition by the international companies. In , Iraq made Iraq oil company a national company. These are just a few examples to show how states have decided to dominate the oil sector at all points. As far as exporting is concerned, national oil companies have a greater bargaining power.
They can also access a wider market than private companies. Thus, it is to the benefit of the exporting country to consider nationalizing oil companies. In addition, states that import oil have national oil companies.
Nations like South Korea, India and China have expanded their national oil companies overseas so that they can have access to the oil reserves easily. It is important to note that national oil companies in the importing states have an upper hand when it comes to striking deals with the exporting states.
Hence, there is every need for these national oil companies. The deals that are struck at the level of national oil companies are very strong. Furthermore, nationalizing oil companies has helped stop unhealthy competitions among the oil companies. States also play a role as regulators in the oil sector. They set and impose conditions regarding oil production as well as consumption. It is the duty of the government to ensure that oil production does not compromise the environment to the extent that the lives of the people are endangered.
For instance, pollution should be kept in check at all cost in the course of production. Furthermore, the rights of the consumer should not be compromised.
The government should not watch passively as consumers get exploited by the business people. Moreover, the state imposes taxation on the oil products hence influencing the prices of these products.
This way, the government can get revenue from the sales of the oil products. Through taxation, the state regulates the rate of oil consumption. The state also sets regulations and conditions that are meant to protect the rights of the workers.
This is a fundamental role of any caring government. Its people should be respected. These conditions are imposed on the firms that are operating within the borders of the state.
In short, the government sets out conditions on whether a firm will set out to explore for oil and under which conditions. This influence on the production of oil gives the state an upper hand in as far as its oil resources are concerned.
Coupled with political objectives, the state can impose restrictions on the oil companies operating both within the boundaries and overseas. For instance, the US government suspended all dealings with Libya until over allegations to links to terrorism. Therefore, oil companies in the US could not operate at all in Libya.
Similarly, the US government has restricted any of its companies from dealing with Sudan. Integration is very important in the oil sector. One of its key benefits is to ensure uninterrupted oil supply Inkpen, , 5.
Also integration reduces price fluctuations. The reason for this is that integration helps companies achieve economies of scale and attain geographical diversification. The economy of scale is achieved since there is less competition. Also the market is favorable. In addition, there are fewer fluctuations in prices and this makes the firms stable. They can make better predictions and forecasts in the market.
Without the integration, there would be stiff competition that would drive some companies out of market. Geographical diversification is looked at in two aspects. First, the sources of oil are diverse. That means that there are numerous geographical locations where oil is sourced. Integration makes it easy to aces all the locations. Secondly, the consumers of the oil are diversified in terms of geographical location. Integration makes it easy to reach all these customers.
Firms like Exxon, Shell and Total have made their mark in the world. They are the largest in terms of both capitalization and array of products that they produce. These firms have direct control at the upstream level and the downstream level of the oil supply chain. They have too much of influence regarding the oil prices.
Nationalization of the upstream sectors of oil supply chain curtailed their influence at that level. However, their dominance downstream has not been shaken. Besides these giants in the oil industry, state-owned companies also play a part in the network.
They are large companies that are involved with the production, refinery and sales. Their strength is measured in terms of the refinery capacity and the volume of sales.
These firms are, therefore, critical in the oil supply chain. These are new in the industry according to Inkpen , 7. They have taken over the oil market and grown in leaps and bounds. They are ranking in top ten in the oil sector. These companies have the support of the government.
They are not affected by the local politics. In addition, they are getting priority when it comes to carrying out explorations, production and distribution of oil products in the country. They also enjoy an upper hand in negotiations. This is another category of actors that are involved in the oil industry as part of the oil supply chain. They are referred to as upstream independents because they do not own any assets downstream Inkpen, , 8.
They are concentrated at the production level and their work ends there. These actors have helped remove the monopoly of the oil industry giants. In addition, due to their activeness, they have led to increased oil production. They have explored more and more sources of oil. These are actors that are actively involved in exploration of oil in Africa. For example, Tullow Oil is one of the largest oil companies that is independent working in Africa.
But what is the solution to this problem? Is it drilling in our national wildlife reserves in Alaska? Dropping the trade tariffs and promoting free trade around the world? Perhaps we should look for alternative energy sources; maybe even a combination of all three. But whatever the solution, it needs to be done quickly. Something needs to be done now. One solution to this problem is for America to restrict the amount of gas that it uses.
However, this would be quite difficult task because of our democratic society. Limits on amount of gas that is expended would be seen as a violation of our constitutional rights. The only thing we can do is cajole the country into understanding the issue and suggest that other means of transportation such as carpools and buses are easy to adapt to, and extremely economical. This of course has already been done with the use of carpool lanes and increases in city buses, with little effect.
With so much gas being exhausted in our economy the more oil needs to be drilled or bought. Bush has recently signed an executive order to begin drilling in nation forests up in Alaska. He proclaims that there are safe and effective ways to remove the oil and cause little or no damage to the surrounding wildlife. Skeptics of his plan suggest that there is only a small amount of oil in the Alaskan forests and would therefore do our country no good.
In any case the effects of this new oil excavation plan will not be in the upcoming future and thus is not an immediate answer to our current gas crisis. Stability in wellbore is just a favourable condition in oil and gas well drilling which can only be achieved when the problem associated with instability is properly managed.
Wellbore strengthening is a process which intends to build the resistance of developments to circulation loss amid boring or well cementing operations or resistance increase in formation to circulation loss during operations.
Lost circulation is known as a standout amongst the most noticeable drilling issues because of its regular occurrence and inconveniences. It can as well cause series of problem in oil and gas wellboring operations. Therefore, wellbore strengthening systems as preventive methodologies towards this issue have pulled in consideration in the previous two decades.
The rock strengthening increase during drilling operations may be achieved through different technologies described in the past. However, drilling fluid predicated wellbore invigorating is the most promising approach predicated on the field and laboratory observations and studies.
This approach pursues the engineered design of drilling fluids or specialized pills in order to reach the desired strengthening level. The main focus has been on the properties of the solid contents of the fluids, as they play a key role in the wellbore strengthening process. This system is additionally called particulate-base wellbore strengthening. Regardless the prodigious attention devoted to investigation of the efficacious parameters in drilling fluid design for rock strengthening purposes, most of the findings are constrained to qualitative analyses and explications and do not provide vigorous implements for engineering practices.
The principle of wellbore Strengthening help the driller to understand the mud weight window when there are a sudden losses or reduction of drilling fluid into fractured rock formation which lead to catastrophic like blowout and gas kick in wellbore, depleted reservoirs access reserves and reduction of potential casing runs in wellbore.
Also understanding the principle of forces that act and occur in wellboring eg. Help to understand the internal and external mud cake strength in wellbore. Elasticity and Plasticity of wellbore formation 3. Rock tensile strength 4.
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