Advantages and disadvantages related to commercial relationships between a Tier 1 contractor and oil company operating a field. Courses APA There are some advantages and disadvantages between these commercial relationships between Oil Company and contractor. Some of them are given below Related to Conventional list price plus an incentivisation bonus There are about some advantages and disadvantages of conventional list price and incentivisation bonus in the oil and gas industry. Advantages:

There are some advantages and disadvantages between these commercial relationships between Oil Company and contractor. Some of them are given below

Related to Conventional list price plus an incentivisation bonus

There are about some advantages and disadvantages of conventional list price and incentivisation bonus in the oil and gas industry.

Advantages: The main advantage of list price is that the customer will be sure about the rate of buying any product from them. In the oil and gas industry, such prices must be fixed because the buyers are buying their products in bulk.

Another advantage is that if this industry is changing the price according to the value of oil over the industry then it will give profit. Moreover, the company is able to upgrade the price list for the next year. On the other hand, if this industry is making excessive profit then it must be ensured that they are giving excessive incentive bonuses to their workers. This is because only due to workers they are able to improve the list price for the company. On the straightforward traditional project, the advantages are linked to the design consultants and main contractors. The tier 1 suppliers, main contractors, and employers have limited chain of their own suppliers.

Disadvantages: Moreover, there are also some disadvantages to the list price that include

List price is completely related to the fixed price. This means that the buyer has to buy any product from this oil and gas industry must be available at a fixed price. This shows that its price is not negotiable. The buyer is not able to negotiate about the given price of the oil and gas products. The buyer has to act according to the given list price. The major disadvantages are delay in the occupancy and it could be related to work, land acquisition, design, development of oil company processes, and cost of overruns that can cause issues in the forecasting errors. Therefore there are certainly risks associated with the oil company and it can cause issues to the Tier 1.

The dynamic pricing of the product in the oil and gas industry may harm overall profit. Moreover, it will also provide damage to the incentive bonuses list of the company. Due to this fact it may damage this industry up to some extent in the future. It will also damage its productivity for the future (National Institute of Education (U.S.), Educational Resources Information Center (U.S.), National Library of Education (U.S.), 2009). 

Part 2

Related to Gainshare based on a target operating cost for the year

It can be noted that in the oil and gas industry the gainsharing is playing an important role. Due to this case, there are some advantages and disadvantages of gain sharing for the target operating cost for the year of this industry. Another thing is that gain sharing must be based on industry standards.

Advantages: There are some advantages of gainsharing that is completely based on the target based operating cost annually.

It can be noted that companies often use incentives for motivating the employees that are working with them for a long period of time. Another thing is that if any company is giving such bonuses after their increase in production then it will be categorized in the gainsharing.

Due to gainsharing, the employees of this industry become more motivated and started to work with complete passion. This is because it is a huge program for the company that they started after an increase in productivity. According to the oil and gas industry, the rate of productivity will be about 26% from the past year.

Another advantage of gainsharing is that it will make a direct relationship with the performance of the industry in different parts of the world.

It can be noted that the oil and gas industry is quite huge and its condition is also stable. Due to this gainsharing based on the operating cost will be properly increased after each year.

 Disadvantages of gainsharing based on operating cost

Besides this, there are also some disadvantages of gainsharing and it includes

It can be observed that when a gain sharing program is completely based on the operating cost per year then it will create leadership challenges in this industry. The main reason is that sometimes the leaders are not able to plan successive gainsharing.

The next drawback is related to time management because it is a huge industry and it will become extremely difficult for them to measure the time for the employee. There are many employees that are not eligible for the gainsharing plan but they participate in it.

Moreover, the next thing is that there is a lack of communication for making the gainsharing plans based on required operating cost. This means that there are some members of the industry that are placed at senior rank but not able to participate in the gainsharing plan.

Sometimes, gainsharing plans are also creating a sense of entitlement between the employees. This will lower the actual confidence of the employee and they are not able to increase the productivity of the oil and gas industry in an effective way (Robert L. Mathis, 2016).

Part 3

Related to at cost pricing for day to day operations plus the contractor has a 10% equity stake in the field

It can be noted that in the oil and gas industry, there are also some workers that are taking pay for day to day operation. On the other hand, for some important projects in the oil and gas industry the contractor has some equity stake in the particular field. Due to this fact it will create a problem for the organization and also the industry. Due to this case, there are some advantages and disadvantages of "at cost" pricing.

Advantages: The main advantage is that the managers of this industry are able to make ideal operation planning for these employees. This means that due to this cost the industry is able to facilitate profit-planning data for the industry in a proper way.  

Another advantage of the “At cost” pricing of the daily operation is that the industry is able to adjust cost-volume-profit analysis in an ideal way. This is because there is much application that including break-even analysis that is used by the company for managing day to day operations of the employees. Due to this, there are many managerial decisions that are completely related to cost-related. For that case, the oil and gas industry managers have to understand these relationships.

Moreover, another advantage is that the management is able to make perfect decisions without any difficulty. The next thing that due to effective management decisions they can easily make a proper link between the contractor and the industry. Due to this equity rate will become low and the company can easily increase its profit for the future.

Disadvantages: There is only one disadvantage that includes

It can be considered that oil and gas is a huge industry. Due to this purpose, its financial accounting standards should be made according to the law. For that case, when this industry has to pay its employee day to day operations then it will become not easy to maintain contractor equity up to 10%. This rate will be increased and it will decrease the rate of profitability (Todaro, 2002).

Question 2

Part 1

Type of licencing regime

According to the UK offshore oil and gas, there are about a different type of licencing regime. It can be noted that all Seaward production licences containing the prefix number of P001. On the other hand, Seaward Exploration containing E001 prefix.   Some of them are given below with a complete demonstration.  The first one is joint venture concession and the next one is related to production sharing agreement

Production sharing agreement features

According to UK law, the production licences are able to run for just three successive periods except in some special cases. All of its teams are completely linked with the particular activity. Moreover, there are some important terms included in the production licences. The first one is related to the initial term. At this term, the production licence will be expired. But the main condition is that it must be agreed on the initial teamwork program of the oil and gas industry. On the other hand, its fixed amount of acreage is about 50% only. The next one is related to the second term. There will be no sign of the second term in a work program that is associated with the licence. The next thing is that the licence will be expired completely just after the end of the second term. For that case, it must be approved by the OGA development plan. Furthermore, the third term is intended for production means.

It can be seen that this licence is replacing different types of seaward production licences. These types include promoting, traditional and Fortier. On the other hand,  innovate licence is more flexible than the others in the duration of the first and second term. Due to its flexibility, it will help the industry to make proper decisions. It can be noted that if any applicant related to this licence wanted to propose durations for initial and second terms then there will be no problem for him. In this licence, the initial term is further divided into three main phases. Another fact is that this licence is more effective than others. In this licence, there is also a special case, for that if the manager is not able to propose any exploration and starting developing field discoveries. Due to this fact, there will be no initial term present in it and it is also known as straight to the second term. The best advantage of this licence is that if oil and Gas Company is located in Mozambique or Ghana, it will give proper production time. Due to this it will become easy for them to complete their required oil and gas production with perfection.

Feature of joint venture concession

There are some important feature of joint venture concession that is considered as important licencing regime for the oil and gas industry. This is because it will following the same pattern as other seaward versions. Such licences are also called as petroleum Exploration and Development licence. Moreover, there are also some model clauses related to this licence given in landward areas regulation 2014 (IBP, Inc, 2009).

These licences are extremely useful for the seismic contractors that are working in the oil and gas industry. This is because their wish is to gather important data for selling to the main person. They are not involved in exploiting geographical resources by themselves. The next thing is that they are also holding exclusive rights. Moreover, another fact is that such a licence is only granting some rights related to exploring new areas, not for production.

For a newly developing oil and gas industry I will suggest offshore innovate licence. This is because it is better than the production licence and also contains many features. Moreover, another interesting fact is that its initial term is further divided into three main phases. Due to this any new developing firm in this industry is able to achieve its goals.

The main advantage of this agreement is that it will give company a huge chance to cooperate with the political parties of the country like Ghana or Mozambique. Due to this they can easily make good relations with the political and government of the country.  (Shell International Ltd, The Development Research Center (DRC), 2017).  The joint ventures continue to gain higher popularity in the oil and gas companies. The advantage is that the companies develop the structures that manage ongoing capital constraints but the only uncertain thing in joint venture is the commodity price recovery. The joint venture plays a big role in case of funding capital projects. It will provide profit at low cost, start up push to the oil and gas company. There are different possible disadvantages of joint venture including vague objectives, flexibility, possible imbalance, clash of cultures, planning and research, partnership and other issues. The flexibility is restricted in joint venture.

Part 2

According to the evaluation model in the given spreadsheet. The T&R Regime in the F16 column. According to the given data, it can be noted that there is a huge impact on the investing company. This shows that if the company is not increasing their profit in the next upcoming years then it will create trouble in the future by varying the oil production and operating cost. Another fact is that there is also a change in the production factor and it is about 8% of the current given values in the table. Now by adjusting some values in the cells. The production efficiency is extremely important for the future of any oil and gas industry. If any company is not able to maintain the production efficiency then it will create trouble for the future because its value will be decreased exponentially. Therefore, it is necessary to improve the production efficiency of the company to keep up in the industry.

Question 3

According to the given fact, there are about five main categories of risk through which the life of oil and gas development is affected. These risks include, technical, economical, commercial, organizational and political.

TECOP framework for Risks changes through exploration

It can be noted that there is a proper need for initial interest during the exploration process in the oil and gas industry. The next fact is that exploration is an extremely important process in this industry. Without this process, the geologist is not able to find the right place and due to this development and production processes are useless. The technical risk can be minimized by introducing efficient machines that can easily judge where hydrocarbons are present beneath the earth. The company has to apply heavy machines with latest features for minimizing this risk. On the other hand, economic risk can be minimized through proper homework. It shows that if the explorers are involved in making complete datasets and analyse the particular part in a proper way then there will be a low budget will be required for exploration. This will minimize economic risk. The political risk can be minimized through the exploration of oil through proper agreement. If the political members of the particular respond positively towards the exploration process then it can easily minimize the political risk. Technical economic commercial organizational conditions are considered in the TECOP framework. The risk is considered as high probability and major consequences. The medium level risks are the issues related to the process that handle good level of knowledge. the risk event defines the uncertain events and set of circumstances. There is major exposure defined in the project related to the stakeholder and variations are linked with the outcomes. The oil and gas companies face project risk that are expected increase in labour cost and material used in the company. 

TECOP framework Risk minimized through the development process

It can be noted that good development is necessary for this step. After the exploration process, it is the next step. The technical risk can be minimized easily if a company is using high-quality equipment for good development. This is because, for that case, it will become easy for the company to complete the project with a high production efficiency of the oil. Another fact is that organizational risk can be minimized easily. This can be done through effective training of the employees. This means that if the employees are properly trained then they can easily remove this risk (the United States. Bureau of Land Management, 2008).

TECOP framework Risks minimized through production

The most valuable process in the oil and gas industry is production. Due to this process, all-important risk can be minimized easily. This shows that during production if the company is using efficient tools for completing process then the results will be different and it will minimize risk. The next thing is that if the production process is completed on time or before time then it will give a positive impact on the economy. Due to these economic risks will be minimized. The next thing is that when oil is produced then if the company applied fewer operations due to this its operational cost will be decreased. Due to this, it will become extremely easy to commercialized oil products. The organizational risk can be minimized easily when the company is using different training programs for the production of oil. Due to this, it will become extremely simple to minimize this particular risk. Moreover, the political risks will be minimized when efficient oil is produced from this particular area (the United States. Congress. Senate. Committee on Energy and Natural Resources, 2011).

Question 4

The major contributor to annual emissions

 It can be noted that carbon is the shorthand for greenhouse gas emissions and contains different types of gases in it. Moreover, all of these gases are released through different types of activities. These activities are different from the burning of fossil fuels but related to some industrial processes.

Furthermore, the global emission of gas is related to human activities in different ways. Some means are involved in emitting this gas in great amount. This shows that electricity and heat are involved in emitting about 25% of the carbon gas. On the other hand, industries are involved in 14% of the carbon gas emission in the air. The next fact is that the transport system, that contains cars, roads and another thing, they are emitting carbon gas for about 15%. Moreover, during the combustion of different gases, the rate of carbon emission is about 8.6% only. There are some industrial processes that are occurring in different industries. They are involved in emitting 4.4% of the carbon gas in the air. Agriculture is also emitting carbon gas in the air. The rate of emission is about 13.4% only. In the last due to waste materials, there is only 3,2% of the carbon gas is emitted. From the fact it is showing that only the energy sector is one of the biggest contributors in the carbon gas emission around the whole world. On the other hand, there is quite low participation of other sectors in the carbon gas emission (Teske, 2019). In oil and gas companies the global emission by gas are due to negligence in waste management and energy use. Total indirect greenhouse gas (GHG) emissions from oil and gas operations are now around 5200 million tonnes (Mt) of carbon dioxide equivalent and 15% of total energy sector are GHG emissions.

How changes can be made to the industry to stay within the carbon Changes budget.

There are some changes that should be made to the industry so they can easily stay within the carbon budget. It can be seen that there are about several changes are required to main 2-degree carbon budget for the oil and gas industry. Due to this, some changes are required to keep the carbon budget rate below 2 degree.

According to the fact of the fifth assessment report, humans are involved in emitting maximum carbon dioxide in the air. Now due to this if there is a requirement of setting the temperature of below 2 degree. This can be done easily by lowering the temperature of the industrial processes. It will help to maintain the 2 degrees budget of carbon gas effectively.

Moreover, the next fact according to the 2009 Copenhagen accord of America. It shows that if a proper conventional framework is made on the climate change process around the world. Due to this fact, it will become simple to maintain the temperature below this threshold. Therefore, 2 degrees below the carbon budget is easily maintained without any difficulty.  

The next important thing is that the two-degree is completely based on the consideration of the different scientific pieces of evidence. Therefore, all of this consideration will lead towards the target government for achievable temperature mostly judge by the government of the country. This show that if the government will change dangerous impacts on the climate. Then it will become quite simple for the country to maintain a 2-degree carbon budget.

The next important point is that if there is a need to decrease the temperature of the carbon then for that put a limit on carbon dioxide emission. This shows that if the rate of carbon gas emission is lowered then it will be comfortable to maintain such temperature for this gas. This is because the lower the emission rate of the gas the lower will be the temperature (United Nations Environment Programme, 2008).

Question 5

Steps were taken by an oil and gas operator

It can be noted that oil and gas production is a quite long process. Due to this case, it is important to take every step with perfection. There is complete information about the different steps taken by the operator.

Exploration: In this process the operator is involved in taking some important data from this place, this information will be taken from the geologist that is working for a particular area. The operator will analyse this data with the geologist team in a proper way. Decommissioning process for offshore structure considers the planning through the execution. The decommissioning is unlike some other process for production and exploration business. Decommissioning oil and gas installation can cause the cost of operators with average $4 - $10 million in the planning, engineering, and management of the project.  

Production: After this process now its turn for the production of the oil. The operation can be conducted on onshore and offshore. Due to this fact, the operator has to analyse the position for production. Now the next step in the production process is related to making upstream process sections. These sections include wellheads, manifold, gathering, meeting storage and other utility systems. Then after this operator will move towards the midstream process. For this, the operator will check the gas plants and pipelines for moving towards the next process. Now the oil will be moved for the refining process. In this process, all useless materials will be removed from the oil.

In the next step, there is the manufacturing of the reservoirs and wellheads. The operator will carry out each and every step with perfection. Moreover, in the next step, there is the manufacturing of well. For that case, in the start, the operator will work for the casing of well. Then after this, he will work for the wellheads in a proper way.

Development: In the next step, there is a need to work for the upstream oil and gas process for the manufacturing of oil and gas. This can be done easily by making manifolds, pipelines and other things for completing this process. In this step, the operator will ensure that every thing is perfectly placed. For that purpose, the protection test will be performed on the manifolds and pipelines. This test is performed for checking the overall performance and signs of leakage in the pipelines.

After the production test, the next step performed by the operator is related to separation. For this purpose, there are different techniques are used for separation. In the pipelines, there are about different types of separators are used. All of them are manufactured and tested in a proper way of getting absolute results.

In the next step, the operator will work for the gas treatment and compression process. For this process, there are several parts are used that include heat exchanger, compressors, scrubbers and reboilers. All of these parts are tested properly by the operator for ensuring proper gas exchange during the process.

In the next step, the operator will work for the different processes related to oil storage and export. There are some important processes that are important in gas storage that include fiscal metering, marine loading, and storage of oil. All of these processes are checked properly (Devold, 2013).

Then after this in the next step, the operator will work for ensuring different midstream facilities. In this process, the gas processing is extremely important. In this process, there are different processes are analysed by the operator. This shows that removal of acid gas. Removing of water from the gas, removal of mercury, treatment and recovery of NGL gas in a proper way.

In the next step, the operator will analyse different pipelines used for the manufacturing of oil and gas. In this step, the operator will test pipeline terminals, the valve station value of the pipelines and its proper management. After this, the operator will work for the manufacturing of different petrochemicals for the process. During this process, the raw materials will be separated from the oil products and pure oil is achieved at the other end. After this the whole process is complete. Then the operator is required to manage the oil products properly before commercialization. All of these steps are extremely important for the oil and gas industries (Spellman, 2012)

References of Tier 1 contractor and oil company operating a field.

Aguinis, H., 2019. Performance Management For Dummies. s.l.:John Wiley & Sons.

Akingbola, K., 2015. Managing Human Resources for Nonprofits. s.l.:Routledge.

Devold, H., 2013. Oil and Gas Production Handbook: An Introduction to Oil and Gas Production. s.l.:Lulu.com,.

Durai, P., 2010. Human Resource Management. s.l.:Pearson Education India, .

Grobler, P. A., 2005. Human Resource Management in South Africa. s.l.:Cengage Learning EMEA.

IBP, Inc, 2009. Papua New Guinea Oil and Gas Sector, Energy Policy, Laws and Regulations Handbook Volume 1 Principal Laws, Regulations and Policies. s.l.:Lulu.com,.

Ken J. Sousa, E. O., 2014. Management Information Systems. s.l.:Cengage Learning.

Mohammed Quaddus, A. G. W., 2015. Sustaining Competitive Advantage via Business Intelligence, Knowledge Management, and System Dynamics. s.l.:Emerald Group Publishing,.

National Institute of Education (U.S.), Educational Resources Information Center (U.S.), National Library of Education (U.S.), 2009. Resources in Education, Volume 13, Issues 4-6. s.l.:Department of Health, Education, and Welfare, National Institute of Education.

Rajasekar, J. a., 2017. Oman Air: Challenges of repositioning through business level strategy, s.l.: Journal of Management Cases,.

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Spellman, F. R., 2012. Environmental Impacts of Hydraulic Fracturing. s.l.:CRC Press.

Teske, S., 2019. Achieving the Paris Climate Agreement Goals: Global and Regional 100% Renewable Energy Scenarios with Non-energy GHG Pathways for +1.5°C and +2°C. s.l.:Springer, .

Todaro, M. P., 2002. Economic Development. s.l.:Pearson Education India,.

United Nations Environment Programme, 2008. Climate Action: Getting Greener : Getting Slimmer, and Going Digital!. s.l.:Concept Publishing Company.

United States. Bureau of Land Management, 2008. Geothermal Leasing in the Western United States: Environmental Impact Statement. s.l.:Northwestern University.

United States. Congress. Senate. Committee on Energy and Natural Resources, 2011. Oil Spill Legislation, S. Hrg. 111-653, PT.5, June 24, 2010, 111-2 Hearing,. s.l.:s.n.