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Luckily, a properly written oil and gas business plan is a key element to the process that can help your business raise the necessary capital to purchase equipment, hire staff, and cover operating expenses as you plan to enter the Oil & Gas industry.
The higher the risk, the higher is the potential return on successful projects.
However, with this elevated risk comes a higher possibility of large financial loss.
This module addresses how oil and gas companies plan for and evaluate the various risks in this wide set of options.
Industries such as auto manufacturing and homebuilding are considered labor-intensive, that is, it takes a high number of employees to produce and assemble the product.
Economic risk on international projects includes: Political risk is a detailed evaluation of all the risks of doing business inside a particular country.
A change in country management or political philosophy can often result in a new evaluation of a host country’s oil, gas, and commodity reserves.In reality, there is not a one-to-one correspondence in investment profiles, which makes it difficult to stabilize financial results with this simplified strategy.A key aspect of today’s oil and gas planning and decision making is accounting for the varying amounts of risk inherent in the wide range of asset investment options available to companies (refer to the graph, Illustrative Risk-Return Investment Profile).A few parts of the oil and gas industry are also labor-intensive such as the engineered equipment manufacturing sector of oilfield services.However, the entire oil and gas value chain requires much more capital than labor to produce results, so it is termed a capital-intensive industry.In the Balancing Investment Options diagram, low gas prices equal low returns for upstream oil and gas profits, but good returns for a chemical plant, because gas is used as the plant feedstock.Therefore, a balanced portfolio of chemical plants and gas production could provide stability, because gas price variations would offset each other.The chart, Managing Risk Across the Industry, is an index of the relative size of economic risk as it translates into capital and expense and affects a company’s financial performance.Every risk needs to be quantified as part of the project planning and investment evaluation decision process.All environmental risks that can affect project economics need to be considered and quantified.Another substantial environmental impact item in the upstream today is what the host governments are calling a “zero-flare tolerance.” Basically, the operator cannot produce the oil unless an outlet is found for the associated gas which is often flared, or burnt off, at the well.