The Sinopec Group (Pvt) Case Solution & Answer

The Sinopec Group (Pvt) Case Solution 

Question 1

Area 1: Strategic Issue Diagnosis

Business Issues

Oil and gas industry is a major industry for any economy.Currently,oil industry is facing asignificant spike in prices. There are several risks that are associated with oil and gas industry. First of all, there is a political risk, the changing government policies related to oil prices and rules for limits of extraction. These rules and regulations vary from country to country. Oil and Gas industry also possesses geological issue, and the companies have to take care of environment and there is always an uncertainty about the quantity of the reserves. Geologist continuously work on pre estimation of the reserves area in which the companies are willing to extract. There are few spots that are easy for extraction, alongside some process that are very difficult for extracting oil, i.e. unconventional drill and vertical drill. Industry also has price risk because the oil prices are based on the extraction process and refining process. The more companies face geological barriers the more price companies charge. The installment and winding process requires huge investments. Oil and gas companies face huge challenge of controlling the cost. The operational costs depend on the extraction process and expensive drill issues (BEATTIE, 2021). Along with that, there are several other functional issues in the industry.

Industry Life Cycle

Oil and gas industry life cycle consists of five stages, which are:Explore, Appraisal, Develop, Produce and Close. Exploration of oil / gas resources that use geological surveys. And government hunts for investments and decides through direct interviews or bidding procedures. Government accepts the proposal of international companies for testing in a particular area locally. The duration of licenses and permits varies from country to country and from license to block. International companies can test on their own, or two or more companies can test build joint ventures for inspection and single designated company. In case any viable source of oil/gas is identified, then the companies follow further phases. The duration of Exploration projects is from one year to five year. Second phase is the appraisal phase, during which the government further checks the viability of site and further infrastructure planning is done to approach the site. Meanwhile, drilling and welling process is also planned. This phase’s duration is four to ten years. Third phase is develop phase, in which the government goes for further planning and renews their permits, to start production process on the site. This process has the duration of four to ten years. Moving forward, fourth phase is the production phase. In this phase, the companies start the production of oil/ gas and they also start the distribution-process but the production quantity is always uncertain, due to the uncertainty in the geological uncertainties. The duration of this phase is twenty to fifty years. Last phase is close phase. When it is no more cost effective then mutual decision of closing the site takes place. The duration of this phase is two to ten years.(Darko, 2014).

Cultural Issues

Every industry is influenced by the cultural factors, and the industry like oil & gas also faces challenges posed by the globalization and other social and cultural factors. Tension in Oil and gas industry has increased. The demand for energy is increasing and the international oil companies have limited the access to hydrocarbons reserves. Now the companies are involved in negotiation and struggle to maintain good relations, because any failure can cause any company to incur irrecoverable cost. (Oil, 2008).  Increasing environmental issues also possesses challenges and issues for oil and gas companies. Increasing climate change requires oil and gas industry to go for green and less impactful activities and reduce their adverse impact on the environment. It is quite challenging for the companies to manage such major issues. International companies work with organizations,i.e. Government issues permits to the international countries and due to having different cultures, the leadership style also gets influenced. It also affects the management style of the companies (Capello, 2020x).  Different cultures are very sensitive to the environmental concerns, some cultures are sensitive to their management practices and few cultures are sensitive to their business profits and governance. So these all factors affect the business requirements.

Cultural Web

Cultural web is the process of explaining the culture of an organization. As we discussed earlier,culture matters in oil and gas industry. Refer to appendix 1 for Cultural web of Oil and gas companies. In oil and gas industry; the role of Oil and gas companies is well defined and structured. There are myths in the oil and gas industry that oil & gas reserves will end soon and oil is made from Diana sour bones, along with that, oil can burst out of the ground and if people do not use petrol based gas, then the world’s condition will get better. Oil and Gas companies communicate positive stories. Oil and Gas companies use effective communication strategies and there are highly skilled employees working for these companies.. The systems and deliverable are kept simple and sorted to manage the business requirements. Government is involved with companies because, the companies have to follow the rules and regulations set by the government. Oil and Gas companies involve management to make their strategies. The power in Oil and gas companies is distributes and allocated.

Culture Classifications (Role, Power, Task, Personal)

Sinopec International Petroleum Exploration and Production Corporation has diversified culture. Corporate cultureof SIPC believe in trading two way deep integration in the Chinese culture and learning process. Chinese laborers learn global practices and unfamiliar specialists learn Chinese qualities, establishing an environment of trust, fortitude and comprehension. The vision of of SIPC is “Building a world-class petroleum corporation” and core values of SIPC are: integrity, enterprising, responsibility and integrity (SINOPEC, 2000). The role in the organization is defined. Organizational structure is divided on functional levels, and the responsibilities are also allocated.

Political/Governance Issues

Sinopec International Petroleum Exploration and Production Corporation is a subsidiary of Sinopec group. It deals with the external upstream of oil and gas corporation in place of Sinopec. It deals with exploration and production business and investments. It is a professional firm, which is working on upstream investments and operations. Decision making process takes place in the headquarters and the national companies are executive’s centers. The potential issues related to governance are the policies related to licensing of geology, and capacity and different rules and regulations in other countries (Valérie Marcel, 2012)…………………….

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