The oil and gas industry is considered a lucrative one. It generates billions of dollars and has employed hundreds of thousands of people all around the world. Most oil fields are found in the Middle East, and it is no wonder these countries have higher national GDPs.
In as much as the oil and gas industry is one of the biggest sectors of the economy, just like any other business, it has its ups and downs.
Many factors, including the declining worldwide economy and growing demand for oil resources, have led to oil and gas companies facing business operations problems.
In this article, we will look at the main challenges the oil and gas industries face.
Let us delve into specifics.
It is no secret; working in the gas and oil industry comes with associated risks. It is a dangerous work sector where accidents can happen. Spills fall, equipment failure and fires are a potential safety hazard.
Spills, significantly, can harm humans and animals alike when it seeps into freshwater sources. Spills can happen in the drilling site or while in transit. One of the first steps to minimize oil and gas spills occurrences; companies can invest in high-quality blind flanges.
Blind flanges are disks made with the sole purpose of blocking off a pipeline. So, when a gas and oil company is no longer using a channel, wants to conduct repairs on a faulty one, or adding new lines on existing pipelines, blind flanges are the safest way to go about it. They seal off the pipeline components, allowing the engineers to work effectively and without a cause for concern.
- Fluctuating Prices
The oil and gas industry is unpredictable. It can be confusing for especially investors willing to dive into the oil market. Sometimes, price fluctuations happen daily, disrupting business processes instantly.
An excellent example of how low gas prices can swing is what happened in the wake of the Coronavirus (COVID-19) crisis. Previously, a gallon of gas went for $4, drastically going down $3 less when the pandemic stroke.
At the same time, oil and gas prices can go up, dragging the economy. A slight fluctuation affects consumer spending in more ways than one, which, in turn, affects the gas and oil business as a whole.
- Pollution and atmospheric emissions
Leakages during oil transportation are one of the major sources of pollution in the oil and gas industry. Atmospheric emissions are also a cause for concern due to their adverse effects on the climate. Carbon dioxide, for instance, is notorious for facilitating global warming. Sulfur, on the other hand, is attributed to the formation of acid rain.
During installations, oil and gas may seep into the water, causing aquatic pollution. Not forgetting terrestrial pollution that affects the soil, causing land degradation, among other problems.
It is to this effect that the oil and gas community have come up with well-formulated frameworks to improve and regulate their operations. As compared to a few decades ago, pollution and atmospheric emissions have greatly reduced. However, since the industry has not fool-proofed itself from these adverse effects, they remain a challenge for the industry.
- Meeting environmental regulations
To take care of our environment, regulations to safeguard it need to be in place. Various independent and government bodies are in the forefront to ensure our environment remains safe for human and animal existence.
Since the oil and gas industry is one of the most sensitive sectors of the economy, companies dealing with the extraction, transportation, and distribution of these essential resources are subject to strict environmental standards. As such, companies undergo a rigorous licensing process to ensure their pieces of equipment and processes as in accordance with the law.
These laws are particularly harsher in countries like China, where levels of pollution are troubling.
Additionally, oil and gas companies need to comply with daily and weekly inspections. Other examinations are done on a monthly or annual basis. Such assessments require the company to put up temporary structures, have ladders, and other emergency equipment in some cases.
- Capital expenditure
Oil and gas companies are capital-intensive. They need an injection of massive amounts of capital. Company owners need a substantial amount of equipment that is expensive. Without the right infrastructure, business processes are bound to fail.
To maintain or expand their operations, oil and gas companies need additional financial injection, infrastructure, and manpower. Unfortunately, such expenditures are heavy on companies, bringing about major challenges in the extraction, transportation, manufacturing, and distribution processes.
- Aging workforce
Unfortunately, a large number of the elite workforce in the oil and gas industry is aging. The specialized knowledge and experience needed for the smooth running of processes are mainly concentrated in the older generations. With the younger generations gearing towards art and other forms of self-employment, there is workforce starvation creeping in.
To counter these, oil and gas companies are coming up with various strategies to educate and equip the younger generations with the gasoline business’s intricacies, which also has many challenges. Meeting the staffing demands and filling the elite workers’ shoes in the industry proves to be complicated.
- Adoption of smart technologies
Technological advancements have seeped into every sector of the economy, and the oil and gas industry was not spared. There is a dire need to improve productivity while keeping an eye on their assets. Company heads also need specialized technologies to ensure better communication with contractors and other relevant parties. To do these and more, gasoline companies need to adopt smart technologies to hasten business processes and ensure seamless communication between workers.
Digital technologies are what all companies need if they are to increase efficiency. As much as it is a challenge keeping up with the ever-changing technological demands, it is a growth opportunity as well as a way for gas and oil companies to improve their functional capabilities.