Understanding Oil and Gas

Question: Describe about following points..The route of your product through the oil and gas industry sectors. The impact, if any, by International Oil Companies (IOCs), National Oil Companies (NOCs) and Government agencies. The factors that may effect the demand and supply of these products. Answer: Introduction Oil and gas industry is known as one of the largest in the world in terms of revenue generation. This report presents a brief overview of oil and gas industry. It presents a discussion about the products derived from natural gas and crude oil such as ammonia and petrol. Additionally, the report focuses on the impact of international oil companies, national oil companies, and government agencies on oil and gas industry. Moreover, this report provides the factors that affect demand and supply of ammonia and patrol, which are selected in this report. Oil and gas industry: It is a well-known fact that oil and gas industry is the biggest sector of the world in term of monetary value. This industry is assumed as a global powerhouse in terms of job creation and in generating revenues (Hilyard, 2012). In this way, the oil and gas industry is a major contributor to the growth of OPEC nations like Dubai, Kuwait etc. Natural gas: Natural gas is a highly flammable product. It is a mixture of methane, nitrogen, hydrogen sulfide, carbon dioxide, helium and other higher alkenes. It is used to make fuel, paint, LPG, ammonia etc. Ammonia: Ammonia is an inorganic product that is derived from Natural gas. Ammonia was discovered for first time in 1774 by a chemist Joseph Priestley. It is produced by Haber process from nitrogen and hydrogen (Roney, 2011). Firstly, the natural gas is cleaned from sulfur and then mixed with heated water and supplied it to reactors, where itis passed to catalyst beds. This stage is known as gas vapor conversion. After this stage, a mixture of methane, hydrogen, carbon oxide (CO) and carbon dioxide (CO2) are produced by the reactor. After then, this mixture is mixed with atmospheric oxygen, nitrogen, and vapor in appropriate proportion. Atthe end of this stage, carbon monoxide (CO) and carbon dioxide are detected from the mixture. After this, themixture of nitrogen and hydrogen is passed with high pressure of atmospheres to the high cooling area, and then it turns into liquid form. This form of ammonia is used to cleaning, deodorizing and bleaching activities. It also used for the pr oduction of fertilizer and chemicals (Liu, 2013). Crude Oil: Crude oil is a compound of hydrocarbons and other organic materials. It is processed to produce different products like Petrol, diesel, jet fuel, heating oil, kerosene and many more products (Shah, 2011). Petrol: Petrol is a liquid product that is produced by the refining of crude oil. The crude oil is heated to 900 F temperature in a Coker and boiled at 104 F to produce petroleum. This boiling process is conducted at a temperature of 1112+ F. This process uses hydrogen to remove Sulfur products and converts it into naphtha molecule, which is the end product of petrol. At the end of this process, heavy residual oils are converted into end product as petrol by using of delayed coking unit. This end product (i.e. petrol) is used for internal combustion of the engine for cars, bikes, boats, trucks and more. Upstream, Midstream, and Downstream in oil and gas industry: Oil and Gas industry is very big. It can be divided into three key areas such as upstream, midstream and downstream. Upstream: Upstream is also known as EP (Exploration and Production) sector. Upstream tends to identify the underwater and underground fields of gas and crude oil. It also includes exploration of drilled wells and operating the wells to recover oil and gas on the surface. Midstream: It is an operational link between the upstream and downstream units. Examples of midstream unit are Kinder Morgan and Williams Companies, which provide resources to Midstream and Downstream units. Downstream: Downstream tends to filter of raw materials that are obtained from the upstream phase. In other words, it is a phase, in which natural gas is purified and crude oil is refined. It also includes the marketing and distribution of crude oil and natural gas products like petrol, diesel, lubricants, kerosene, heating oil, LPG as well as in other forms of petrochemical products. The impact of International Oil Companies (IOCs), National Oil Companies (NOCs) and Government agencies (GA): International oil companies significantly affect oil and gas industry as well as its products. For example, if these oil companies produce a low quantity of crude oil and natural gas than the prices will hike in the whole world. This way, all the products related to this industry will become expensive. It is because the international oil companies control over all supply of petroleum products of the world. In the same manner, the National Oil companies will also affect the prices of oil and petroleum products in countries, as they rely on IOCs. NOCs will need to increase the price with a hike in crude oil prices by IOCs. In this concern, Government agencies keep high-level control on domestic oil and gas sector. Government agencies frame regulations related to health and environment safety for regulating this sector. These agencies control the trade of oil and gas by enforcement of regulations and taxes. It also designs different rules and waste regulations for controlling this industry. Factors that may affect the demand and supply of the selected products: There are various factors such as; price, the cost of production, natural conditions, technology, transport, government policies, prices of related goods etc, which affect the demand and supply of a petroleum/gas and related products (Moon, 2013). Descriptions of these factors are as below: The price of Crude: If the price of crude oil increases, the price of Ammonia and Patrol will also increase. The increase in the price of these products will affect the demanded quantity of these commodities negatively. In other words, there is an inverse relation between the price and demand. At the same time, from the point of view of oil and gas companies, the increase in the price of oil and gas products will lead to increase in the supply of these products (Mendes, 2011). Because, when prices increases than the suppliers of these products try to earn more revenue. For this, they will increase the supply of these products. The cost of production: If the cost of production of these products increases, then the profitability decreases. In this way, the seller will increase the price of its products. Increase in price will lead to a decline in demand (Ruttan and Thirtle, 2014). Natural conditions: Natural condition also affects the demand and supply of the products. In the rainy season, the demand for fertilizer products increases. The demand of Ammonia will rise because it is used in the production of fertilizer products. Technology: Technology is an important determinant of demand and supply. Advanced and best technologies decrease the cost of production and enhance the quality of the product (Meijer et al, 2012). This will lead to an increase in demand for products. It is because the cheap and qualitative products are more demanded in the market. So, the improved technology will increase demand and supply of these products. Transport: It an important factor, as it directly affects the demand and supply of the product. If there is a good transport facility for transportation of these products, then the supply of the products will increase (Desjardins, 2014). Due to poor transportation condition, the supply of the product will decrease and the demand for the product will increase there. Factor prices of input products and their availability: If the inputs like equipment, raw material, labor, and machines are available in enough quantity at lower prices, then it will increase the production of goods (Zinnert, 2010). This increased quantity of these products will increase the supply of the product. For example, if these factors are available nearby the manufacturing plants of Ammonia and Patrol, then it will be helpful in reducing the cost of manufacturing. As a result, it will increase the production and supply of the product. Government policies: The different government policies like monetary policy; fiscal policy etc. also have a greater impact on the supply and demand. If the taxes and excise duties are increased than the cost of production also gets increased (Nechyba, 2010). In this case, the companies will decrease the supply of the product due to low-profit margin. On the other hand, if the price of the product is increased by the manufacturing firms to maintain its revenue, then the demand for that product will generally decrease. Prices of related goods: This factor refers to the price of substitute goods and complementary goods. If the price of these goods is increased, then suppliers will increase the supply of products to earn more revenue. But, if the customers are switched to lower priced product then, it will decrease the demand for these products, Conclusion From the above report, it is concluded that Oil and Gas industry is an important sector of the economy of every country. Upstream, downstream and midstream are the important areas to recover the oil and gas on the surface. It is also identified from the above discussion that there are different factors affecting demand and supply of oil and gas products like the price of crude oil, change in government policies, change in technology and quality of transport facility etc. Additionally, IOCs, NOCs, and Government agencies also affect Oil and Gas industry in a great manner by the formulation of different policies and tax rates. References Desjardins, R. (2014) Rewards to skill supply, skill demand and skill match-mismatch: Studies using the Adult Literacy and Lifeskills survey. UK: Lund University. Hilyard, J. (2012) The Oil Gas Industry: A Nontechnical Guide. USA: PennWell Books. Liu, H. (2013) Ammonia Synthesis Catalysts: Innovation and Practice. UK: World Scientific. Meijer, M., Haar, M., and Lousberg, J. (2012) The Demand Supply Governance Framework. USA: Van Haren. Mendes, P. 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