Challenges faced by Oil&Gas Industry and their possible solutions

16. September, 2013 News 12 comments

A number of factors, such as changing geopolitical relationships, the emergence of new competitors, changes in supply and demand dynamics, social and environmental pressures are transforming and reshaping our industry. Among which there is one indisputable fact i.e. Global Demand for energy will continue to increase dramatically, driven in large part by population growth and the strong desire of developing countries to achieve economic prosperity.

Here I have tried to incorporate some of the challenges which are not only critical to our industry, but also to our world.

Health, Safety, Social Responsibility, Environment & Security
Human, environment safety and health protection remains the number one priority for the oil and gas industry. The technique for extracting gas from unconventional reservoirs — hydraulic fracturing— has raised environmental concerns about the water table. So these companies should pay greater attention to HSE issues within broader operations concerns i.e. across the entire span of their activity, from exploration and production, to pipeline management, down to refinery and marketing.

Management and Information
We need collaborative partnerships, alliances, or joint ventures involving oil companies, service companies, governments, and academia, all pooling their knowledge to achieve breakthroughs in the targeted areas in far less time and at lower cost than if everyone goes about it alone. Such collaboration should involve:

  • Integration across upstream, midstream, and downstream
  • Joint investments outside the host country
  • Different commercial terms and risk sharing
  • Greater shared control
  • More technology transfer and development of the local workforce

The People Shortage
One of the main challenges is having sufficient well-trained and capable technical people. However, we can solve this issue by attracting and encouraging more bright young people and “New Majority”—young women and ethnic and minority youth—into the science and engineering disciplines and then into our industry.

The Cost of Services
The other challenge is increased costs for services across the board, from exploration to production and refining of crude to its transportation, including seismic, drilling, deep water horizons and constructions. These are functions of higher commodity prices, which have driven industry activity to a point that exceeds the service industry’s capacity to respond. Capacity is being increased in some areas but larger, more complex, longer-lead-time projects are needed around the world.

Fluctuating Crude Prices
Fluctuation in crude prices has become common due to politics involvement. For example the price went from a high of nearly $150/Barrel in mid-2008 to below $40/Barrel at the beginning of 2009. Slow approval of new capital projects, resultant talent squeeze due to early retirement and acquisition activity were the main reasons for this un-stabilized pricing. So we have to remain operationally effective while maintaining margins within environment.

Economic Uncertainty
Uncertainty in economics is an unknown prospect of gain or loss, whether quantifiable as risk or not and it has a direct impact on employment, income prospects and communication among industries. However, we can overcome it with setting a goal and creating a roadmap detailing how to get there.

Capitalizing on the new interdependencies between senior management information, operational effectiveness, decision-making and the understanding of their impact on profitability can somehow resolve our problems.

The industry is under the influence of global forces such as geopolitical pressures. What supply chain management companies offer their clients facing pressures from geopolitical insecurity is the knowledge, contacts, and skills to adapt.  So Best in class supply chain performance will need to anticipate and react effectively to changes on the global landscape.


1. ShermanCpas

2. Google

3. Deloitte

4. IBM

Photos: Pennwell, graph by Mehwish Khanam

About author

Mehwish Khanam

I am Final Year Student of Petroleum & Gas Engineering at University of Engineering & Technology Lahore and Ambassador of YoungPetro in Pakistan.

View all posts by Mehwish Khanam