Strategic Decision-Making: Current Issues in the Oil Industry

The future of oil and gas ventures is complex due to a number of challenges facing the industry. Although demand for oil and gas remains high, especially in the new giants, India and China, complications have emerged, particularly in the U.S., where the “shale revolution” has resulted in an oversupply of natural gas, and plunging natural gas prices. In the meantime, lack of infrastructure in some of the major plays (the Bakken in North Dakota, the Eagle Ford in south Texas), has made it necessary to employ expensive methods of transporting liquids-rich petroleum such as hauling via truck and rail, vs. pipelines. Further, the lack of natural gas processing and transportation infrastructure (gathering systems, pipelines, compressors, conditioning) has made it difficult to get natural gas to market. Water management remains a challenge as well, particularly in times of drought and public sensitivity to environmental issues.

At the same time, enormous opportunities abound, primarily due to the emergence of transformational technologies, which have allowed previously unproductive and unproducible resources to be exploited. Further, new technologies are making it possible to return to mature fields and to recover oil and gas that has been left behind.

In order to make strategic decisions in all industries, it is very important to have an understanding of the issues facing the energy sector.

Background and Contexts

Technological breakthroughs which have enabled companies to recover oil and gas that was previously unrecoverable have transformed the U.S. energy industry, and have helped lower dependence on imported oil. Some economists have predicted energy independence by 2020 (Citigroup, 2013, Energy 2020: North America, the New Middle East?). We can already see a change: in 2005, the U.S. imported 60% of its oil, while in 2012, only 40% was imported (U.S. Energy Information Administration, August 2013).

Understanding the opportunities and gaining knowledge of the multiple challenges that accompany the goal of sustainable expansion of oil and gas supplies (via exploration, production, transportation) and the appropriate / effective use of new technologies are vital.

Course Units (Issues)

Participants will select four issues from the list below and be given access to those readings and course materials. They then read the materials and respond to the Guiding Questions by writing responses, supporting their ideas with information from the readings and also by conducting their own research using reliable sources.

1. Current oil and gas exploration / production efforts hampered by insufficient cash / undercapitalization.
2. Skyrocketing costs in energy technology.
3. Environmental challenges.
4. Shortages of qualified personnel.
5. Bubble Economies and Carbon Economies / Fire sales and “vulturing”.
6. Alternative Energies: Easy-to-find, cheap-to-produce oil no longer exists.
7. Health and safety issues are increasingly complicated.
8. “Green” energy must combine with oil and gas.
9. Geopolitical power shuffles.
10. Non-renewables are “dirty” and difficult;
11. Renewables are expensive.
12. Global outlook: Sustained, worldwide growth.