How Business Acumen Contributes to the Success Of Your Oil and Gas Company
The oil and gas industry is powerful and complex, with many different players. There are large multinational, independent, and even national oil companies. With so many factors to consider, it's hard to stay relevant in pricing, initiatives, and L&D efforts. Business acumen can be the gateway point to growing and expanding your company in the oil and gas space.
Did you know that the top 5 oil producers in the world as of 2022 are the United States, Saudi Arabia, Russia, Canada, and China? This highlights the importance of business acumen to be able to understand the global energy market. These countries hold significant sway in the oil industry, and changes in their production levels can have a profound impact on the price and availability of oil worldwide. At the start of the Russia and Ukrainian war, Russia greatly limited the amount of oil they were willing to distribute. This shifted the market and increased the price as demand became extremely high. By staying informed of these key players, businesses can make informed decisions that take into account shifts in the market, allowing them to remain competitive and adjust their strategies accordingly. Furthermore, having a clear understanding of the major players in the oil industry can open up opportunities for businesses to form partnerships and collaborations that can lead to further growth and success.
Oil and Gas Business Cycle
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How to know if your company is business acumen savvy:
Business acumen is the ability to understand and make sound business decisions. For the oil and gas industry specifically, this means it is crucial to have a strong understanding of the market, the competition, the various risks that could come to fruition, and the many opportunities that the industry presents. Companies with strong business acumen can make strategic decisions that allow them to navigate the challenges of the industry and capitalize on opportunities.
For an oil and gas company, here are a few ways this could be improved:
Identify and invest in new technologies that improve operations and reduce costs
Identifying and investing in new resources or markets (like renewable energy sources or international markets) which can provide new growth opportunities
Effectively managing risks (ie. diversifying business operations or hedging against potential price fluctuations)
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Business Acumen within ExxonMobil:
XTO Energy was a leading independent natural gas producer in the United States, with a focus on unconventional natural gas resources such as shale gas. At the time, natural gas prices were at a low point and the industry was facing increasing competition from renewable energy sources. Despite the current downturn, ExxonMobil, XTO Energy's competitor at the time, recognized the long-term potential of natural gas as a cleaner and more sustainable energy source and saw the acquisition of XTO Energy as a way to strengthen its position in the natural gas market.
The acquisition was a bold move, as it was one of the largest in the industry at the time, valued at $41 billion. However, it paid off as the company was able to increase its natural gas production by 25% and increased its proven natural gas reserves by more than 50%. This acquisition helped ExxonMobil to become one of the largest and most diversified natural gas producers in the US, and — with the increasing demand for natural gas — helped them to remain competitive in the long-term. This is how ExxonMobil's business acumen helped them to make strategic decisions that have led to long-term success.
How to succeed in Oil and Gas:
Companies in the oil and gas industry that possess business acumen are better positioned to navigate the challenges of the industry and capitalize on opportunities, which can lead to long-term growth and profitability. In addition, with an increasing focus on sustainable
energy solutions, business acumen will become more important to adapt and
thrive in the industry.
In summary, the oil and gas industry is a complex and dynamic sector that is
essential for the global economy, providing energy to power homes, businesses, and transportation. Business acumen is the ability to understand and make sound
business decisions and is critical for success in this industry. Companies that
possess it are better positioned to navigate challenges and capitalize on
opportunities, which leads to long-term growth and profitability.
Oil and Gas Supply Chain
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