Oil and Gas Industry in essay

  • Length: 70 pages
  • Subject: Business
  • Type: essay
  • Paper: #13266410

Excerpt from essay :

A large body of literature has treated many different aspects of these influences on Asia, Europe and the United States (Busser & Sadoi, 2003). The importance of the study relates to the current trends taking place in Libya where aggressive steps have been taken in recent years to normalize relations with the international community. For example, Libya opened up its programs to develop weapons of mass destruction to international scrutiny and renounced terrorism as a political tool (Libya, 2010). Moreover, the country's political leadership has been equally forthcoming in its efforts to normalize their relations with Western nations since 2003 (Libya, 2010). More recently, Libya has been removed from the U.S. State Department's list of states that sponsor terrorism in 2006 and in 2008, Libya joined the United Nations as a nonpermanent member on the UN Security Council during the 2008-2009 term (Libya, 2010).

Other signs that clearly point to increasing normalization and trade between Libya and the West were seen in August 2008 when it signed a bilateral comprehensive claims settlement agreement with the United States and Libya has paid $1.5 billion to be distributed to national claimants in the United States for past injuries (Libya, 2010). Finally, as a clear indication that relations between Libya and the West in general and the United States in particular had normalized was the exchange of ambassadors in 2009, the first such diplomatic representation in each other's country since 1973 (Libya, 2010).

The importance of the study also relates to the fact that the economy of Libya is overwhelmingly reliant on revenues from the oil sector, account for fully 95% of the country's export earnings, as well as representing a quarter of Libya's GDP and 60% of its public sector wages (Libya, 2010). In fact, Libya is Africa's largest oil producer (Williams, 2009). According to a recent report from Petroleum Intelligence Weekly (2010), "Tracking down new oil and gas volumes likely to emerge from Libya and Algeria in the near future is tricky business: Big discoveries have been few in both countries, while in Libya, development work has advanced slowly under contracts renegotiated in 2007-09" (New flows hard to find in Libya, Algeria, 2010, para. 2). Despite these constraints, the oil industry in Libya is poised to take advantage of investments in exploration and development and has the natural resources to provide new production levels in the future. In this regard, analysts at Libya Onlne report, "Signs of life lurk, however. The U.S. partners at Libya's Waha concession, ConocoPhillips, Marathon and Hess, expect their Faregh Phase 2 project to yield 180 million cubic feet per day of gas for local use starting early next year, plus 15,000 barrels per day of liquids. Overall Waha oil output is set to rise to 400,000 b/d in 2011 after lingering for years at just over 350,000 b/d" (New flows hard to find in Libya, Algeria, 2010, para. 3). According to a recent press release from Al-Waha, "Faregh oil and gas field has recently become operational. This newest oil field is situated about 60 km to the south west of Gialo oil field. The Faregh field was first discovered in 1962 but because of the complex geological nature of the field and due to economic reasons, the field was left undeveloped by the company at that time. On the First of September 2003, completion of the first phase was celebrated. Faregh field development of phase II has already started. Basic and detailed engineering are in progress" (Recent achievements, 2010, para. 1).

There is also a glaring need for improved supply chain management practices throughout the country's oil and gas industry to help maximize the efficiency of these operations in order to provide a return on investment that can be used to help improve the quality of life for the average Libyan citizen. In the past, the majority of the revenues realized through Libya's oil and gas industry have been used to bolster the socialist government that was in place, allowing it to prosecute a campaign of terrorism that made it an international pariah. Over the past few years, though, the Libyan political leadership has made substantive progress in reversing these trends in an effort to rejoin the international community and regain access to the commercial trade that goes with it (Libya, 2010).

To help achieve its political and social reforms, the Libyan government has announced an ambitious program to almost double the country's oil production to 3 million barrels a day by 2012; however, the National Oil Corporation of Libya recently indicated that this target might have to be postponed to as late as 2017 unless and until improvements in technology and logistics can be effected (Libya, 2010). Other analysts also cite the Libyan government's ambitious oil production goals as being part of its overall efforts to attract increased foreign direct investment (FDI). For instance, analysts with Oxford Economic Forecasting report that, "The government is seeking greater FDI in oil and gas, hoping to raise oil production to 3 million barrels/day by 2013 from the current 1 .65 million barrels/day in order to fund its ambitious development plans" (Libya, 2009, p. 2). Moreover, these analysts believe that even with attempts to renegotiate production contracts with foreign firms, foreign oil companies will remain enthusiastic about the Libyan market as the "next big thing" in the region.

Clearly, the need for a set of best practices that can be applied to Libya's oil and gas industry is now and time is of the essence in helping the country achieve its goals of increasing oil production to help its nation's citizenry. According to analysts with the U.S. government, all signs point to continuing efforts on the part of the Libyan political leadership to sustain normalized relations with the West: "Libya faces a long road ahead in liberalizing the socialist-oriented economy, but initial steps - including applying for WTO membership, reducing some subsidies, and announcing plans for privatization - are laying the groundwork for a transition to a more market-based economy" (Libya, 2010, para. 3). The revenues generated by the Libyan oil and gas industry will also help fund the country's enormous investments in its tourism sector as part of an effort to diversify the nation's economy. According to a recent report from Williams (2009), "The blessings of a strong oil and gas industry -- Libya is North Africa's biggest oil exporter -- do confer some benefits to the tourism sector" (p. 39). This analyst suggests that these benefits are two-fold:

1. Given the vast revenues that accrue to the state from hydrocarbons, Libya can afford to build its tourism industry carefully; and,

2. Expatriates working in the oil and gas industry already represent a significant element of a growing domestic tourist sector, i.e. residents joining Libyans who take leisure time to explore the country's many attractions (Williams, 2009, p 39).

Pursuant to this overall national plan to increase its oil and gas production while simultaneously diversifying its economic base, the Libyan government has become absolutely enthusiastic about embracing expertise from the West in ways that represent a sea change in political views, but which also represent the focus of the study proposed herein, the conceptual framework of which is discussed further below.

Conceptual framework. The conceptual framework to be used in this analysis is that there is a best way of doing anything and that a set of best practices can be discerned from the methods being used by successful larger corporations that can be scaled to meet the needs of small- to medium-sized enterprises as well. This conceptual framework is congruent with a wide range of researchers who have used comparable approaches to identify a set of best practices for various industries and settings, including Kim (2000) who used both primary and secondary research to develop a set of best practices in building online communities. Likewise, Collet-Klingenberg (1998) used qualitative case study and quantitative methodologies to formulate a set of best practices for educators in transition classrooms, and Petr and Walter (2005) employed what they called a "best practices inquiry" that was based on primary sources as well as qualitative analysis. In addition, Baldwin, Camm, Cook and Moore (2002) provide a series of case studies of innovative commercial firms to develop a series of best purchasing and supply management practices. Likewise, Thierauf and Hoctor (2003) emphasize the major oil producers such as Mobil rely on identifying best practices to improve their competitive advantage, even if these best practices are identified in other industries. For instance, these authors note that, "An important way to judge the performance of a company is not only to compare it with other units within the company -- using KPIs and financial ratios (as noted above) -- but also with outsiders that represent the best industry practices. Commonly, this technique is called benchmarking where a company can take a look at its industry in order to get an idea of the product or service gap in meeting customer needs" (Thierauf & Hoctor,…

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