PESTE analysis of the UK UPSTREAM oil and gas industry

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PgDip/MSc OPERATIONS AND SERVICES MANAGEMENT

BUSINESS ENVIRONMENT

PESTE ANALYSIS OF THE UK UPSTREAM OIL AND GAS INDUSTRY

Prepared by George Gourlay                                        Date: 16 February 2004


Executive Summary

With this report is a PESTE Analysis of The Upstream Oil and Gas Industry in the United Kingdom. An analysis of the factors affecting the industry shows that it operates under legal, fiscal and environmental regulations where prices are determined by international organisations like the Organisation of Petroleum Exporting Countries (OPEC) and the Organisation of Economic Cooperation and Development (OECD). The Upstream Oil and Gas Industry in the United Kingdom is a mature one, and after 40 years of offshore exploration, the country remains self sufficient in oil and gas. This is an important sector for the UK, supplying the majority of the country’s energy needs, and virtually all the country’s transport fuel. Economic factors that affect the industry are oil demand, price, production, investment and employment. Awareness of sustainable development and renewable energy sources is the major social factor. Technology plays a crucial role in reducing the costs of exploration and production of oil and gas, in addition to making the process safer and more environmental friendly. There is considerable attention being paid to the affect of oil exploration operations on the environment, and this will also determine the future of the industry. The three scenarios that can emerge for the industry mainly depend upon the oil and gas reserves left in the North Sea, the viability of their exploration and the development of alternative renewable energy sources.

CONTENTS                                                                                PAGE

  1. Introduction                                                                        4

  1. Political/Legal Factors                                                        5

  1. Economic Factors                                                                6

  1. Socio-Cultural Factors                                                        7

  1. Technological Factors                                                        8

  1. Ecological/Environmental Factors                                                9

  1. Significant Issues/Trends in the UK Upstream Oil Industry                10

  1. Scenarios for the UK Upstream Oil Industry                                11

9.0        Conclusion                                                                        13

10.0        References                                                                        14

11.0        Bibliography                                                                        15


  1. Introduction - PESTE Analysis of the UK Upstream Oil & Gas Industry

What is a PESTE Analysis?

PESTE shows which external factors are influencing a business or an industry, also measuring the market potential and situation.

This report is to understand and assess the various determinates of the external environment that influences the UK Upstream Oil & Gas Industry. The factors assessed include Political, Economic, Socio-cultural, Technological and Ecological. Once completed this PESTE model will provide an in-depth understanding of the situational factors that affect and have the potential to affect the UK Upstream Oil & Gas Industry now and in the future.

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  1. Political / Legal Factors

Political stability and a good law and order situation are conducive to the smooth functioning of the upstream oil industry. Wars and terrorism can prove detrimental to operations. There are also several legislation’s passed by individual governments and associations who affect the functioning of the industry.

2.1 Legislation

The Upstream Oil Industry in the United Kingdom is well regulated.  In addition to the laws and regulations governing business in general, there are several laws that pertain to the Oil Industry specifically.

  • Petroleum Act 1998  (www.hmso.gov.uk/acts/acts1998/19980017.htm)
  • Hydrocarbons Licensing Directive ...

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