1. INTRODUCTION Royal Dutch/Shell officially opened an oil extraction facility on June 19, 2003 in Alberta, Canada where an estimated 180billion barrels lie beneath the tar sands. With the plant rolling out less than 200 000 barrels per day at $12 each, the company faces increased competitive pressures and a growing number of uncertainties. At this point in time, the strategic decision must be made of whether to expand capacity in the tar sands and if so, when. This study identifies key uncertainties and situational analysis tools to be used by Royal Dutch/Shell to answer the question of capacity expansion (See Figure 1). Uncertainties are classified into four levels with level one being low through to level four; the situation of true ambiguity (Courtney, Kirkland & Viguerie, 1997). “Residual uncertainties” which cannot be accurately predicted even with extensive analyses are of concern REFERENCE/cut out. Figure 1: Table displaying major uncertainties faced by Royal Dutch/Shell, respective levels of uncertainty and situational analysis tools. 2. UNCERTAINTIES FACED BY ROYAL DUTCH/SHELL 2.1 The Price of Oil and Investor Interest In Alberta Oil price and investor interest can have a significant impact on the success or failure of oil production ventures in Alberta. With the cost of production remaining relatively stable it is the primarily the price of oil that determines the profitability of the oil industry in Alberta and investor interest. In this situation the price of oil and investor interest are intrinsically linked. Advocates pro utilization of this vast and largely untapped resource have assumed that oil prices will remain stable when evaluating the future viability and potential investor interest in the Alberta industry. However, assumptions such as this can be disastrous if they are without sound basis. Key factors that may influence the price of oil in the future: Saudi Arabia’s vast reserves and low costs giving Saudi the ability to manipulate prices and in the past has instigated price collapses scaring investors away from marginal projects such as the tar sands project. Political and social unrest in the Middle East potentially jeopardizing oil and forcing prices upwards. This would encourage increased investment in less volatile regions such as Alberta. Global demand for oil; developing countries such as China have the potential to drive demand for oil and put inflationary pressure on prices as supply outweighs demand. The price of oil and investor confidence represents a level two uncertainty. There are a few distinct outcomes which define the future, one of which will occur.
The Alberta Oil Sands are large deposits of bitumen in north-eastern Alberta. Discovered in 1848, the first commercial operation was in 1967 with the Great Canadian Oil Sands plant opening, and today many companies have developments there. The Alberta Oil Sand development is very controversial, as there are severe environmental impacts and effects on the local Aboriginal peoples. This essay will discuss the need for changes that can be made for the maximum economic benefit for Canada, while reducing the impact on the environment and limiting expansion, as well as securing Alberta’s future. Changes need to be made to retain the maximum economic benefits of the Alberta Oil Sands while mitigating the environmental and geopolitical impact. This will be achieved by building pipelines that will increase the economic benefits, having stricter environmental regulation and expansion limitations, and improving the Alberta Heritage Fund or starting a new fund throu...
In a world where money is large part of everyone's lives. It gets harder and harder to define what methods are right in order to make money and weather preserving the environment is more important than maintaining our country's economy. One controversial area that usually brought up in these conversations is the Alberta oil sands. The Alberta oil sands is an industry where it involves bringing up oil sands (mixture of sand, water, clay and bitumen) through drilling or mining and getting crude oil to us in a variety items/ products. It is one of the largest industries in Canada and large part of what maintains our economy. The 2009 movie Avatar is the highest grossing movie of all-time. The movie itself revolves around humans coming to a planet
For the Canadian citizens, it is a good thing because low cost of oil equals low price for gas, therefore the people of this country will have extra money in their pockets: “typical consumers will be saving an average of $25 a week, or $300 in three months” says Elna Cain in her article titled Why Are Gas Prices Low And What Does It Mean For Canadians. That being said, other businesses can benefit from the extra amount of cash. In other words, the beneficiaries of this decline in oil prices are not only the citizens, but other business owners as well. The reason why oil prices fluctuate is because of the law of supply and demand, which states that if the supply is low then the price will be high and if the demand is low then the price will be significantly low, which is the case for gas today.
The modern world of today runs on fossil fuels with crude oil being the live blood of industrialized countries. Though much of the twentieth century old was plentiful easily acquired and low in cost it has only been in the past thirty years that we have seen oil prices rise substantially. This can be attributed to many different reason. These price changes have challenged the industrialized world to become more creative with their techniques of both acquiring oil and using it.
The unrest in the Middle East would be a valid disruption in normality of prices if the Middle East were exporting less oil than it did before the many revolutions. However, Saudi Arabia has said it will make up the difference in the supply if the supply were to drop of significantly (source). Other members of the Organization of the Petroleum Exporting Countries (OPEC) have vowed to “do more” if the region continues to become destabilized. Libya for example only accounts for 2% of the world’s resource of oil (source). Libya’s oil is special only because it contains 0% to .5...
This is a major problem for the U.S. because of our “American dream” lifestyle. We use oil for heating, transportation, and electricity. The U.S. depends on foreign oil so much that when something threatens our supply, the prices skyrocket. For people in general, the prices for oil and gasoline have been very high lately. People have no choice: either fill up your car and pay the extreme amount of money or don't drive at all. The only exception to this is if you own a smart car; however, smart cars are not very popular.
In 1970 oil reserves became more scarce, leading to a decrease in production, while consumption continued to grow rapidly (Wright, R. T., & Boorse, D. F. 2011). In order to fill the gap between rising demand and falling supply of oil, the United States became more and more dependent on imported oil, primarily from Arab countries in the Middle East. (Wright, R. T., & Boorse, D. F. 2011). As the U.S and many other countries became highly industrialized nations, they became even more dependent on oil imports. With demand being higher than the actual amount of supply, prices kept rising reaching a peak of $140 a barrel in 2008. (Wright, R. T., & Boorse, D. F. 2011).
The oil & gas sector faces specific risks affecting its financial performances. The main variables affecting the industry are political, geological, price, fiscal, supply and demand as well as cost risks. Given the specific risks, the demand for energy is still gr...
The commodities of the natural resources have enormous impact on accounting system in Saudi Arabia. Nature products involve minerals, oil and nature gas. According to the Organization of the Petroleum Exporting Countries (OPEC, 2013), 18% of the world’s proven petroleum was discovered in Saudi Arabia. Saudi Arabia now ranks as the largest exporter of petroleum (OPEC, 2013). The oil and gas account for nearly 50 per cent of gross domestic product. Although Saudi Arabia has the largest continuous sand desert all around the world, the earnings of oil and gas occupy most of its export revenues. Because the national revenue in Saudi Arabic rely on the export of petroleum, the revenue valuation focus on the annual production and the global price fluctuation, which is different from other developed countries like U.K. and U.S.A.
Moreover, numerous tools to estimate this amount will be discussed in the following sections. However, by adding the amount of contingency reserve to the amount of project cost estimate, we get the control accounts. On the other hand, management reserve is considered to be the amount of money allocated to cover the unknown-unknown risks that may face the project. Finally, the total project budget is the sum of the project activities cost estimate, contingency reserve estimate and management reserve estimate, which is illustrated in figure (2-1)
MSCI, a budgetary investigation firm with extraordinary aptitude in surveying the estimation of intangibles like carbon hazard, examined the petroleum business ' execution in five key classifications: operations, wellbeing and security; capacity to get to assets in developing markets; carbon discharges; interest in option vitality; and interest in unpredictable fossil powers like oil sands and oil shale, coal bed methane and coal crease gas, and both gas-to-fluid and coal-to-fluid energizes.
My interest in enhanced oil recovery and optimized production was sparked by a technical conference on oil and gas marginal fields I once attended in my home country, Nigeria. I learnt about how some multinational oil companies abandon or sell off assets which although are still rich in hydrocarbon resources, but production from s...
This sharp increase in the world oil prices and the volatile exchange rates are generally regarded as the factors of discouraging economic growth. Particularly, the very recent highs, recorded in the world oil market bring apprehension about possible slump in the economic growth in both developed and developing countries.
British Petroleum is in the top five largest energy producers by revenue in the world and can finance about any venture that it desires. This provides a distinct advantage in getting ahead of the curve and planning for the future. While others have to focus on survival, a company with nearly 400 billion in annual revenue can find the “many forms” of energy “vital for people and progress everywhere”. British Petroleum is insistent on having consistent and quality cash flows, which is a strategic management plan that they will not live to
This is the open-system view of the organization. Prior to the accident, BP was concerned with its procurement process, technology development, infrastructure and human resource. BP was also using SWOT Analysis through which the company examined strengths, weaknesses, opportunities and threats. Internal analysis here refers to BP’s capabilities and resources, which define her strengths, and weaknesses while opportunities and threats derive from the external context of BP operations. However, after the accident, BP became more aware that the external environment is where opportunities and threats exists and must be constantly monitored and scanned. This can be explained with The ‘PESTEL’ model which identifies the key elements of Political (Legislation/ Ideology, government expenditure and legislative factors); Economic (Macro-economic factors and business cycles); Socio-demographic (Changing societal attitudes towards ethical standards and life style choices); Technological (technologies that can affect an organization); Ecological / Green issues (Opportunities and threats, impact of pollution or reclying and carbon reduction) and legal factors (legislative or regulatory framework under which the company operates that create opportunities and threats). The essence of using the PESTEL model here is to identify the key drivers that allows scenario planning to occur in relation to market