It is considered that oil and gas industry is a biggest sector in the world in term of monetary value. This industry is assuming as a global powerhouse with different job roles for workers worldwide as well as helpful in generating money for the related nation (Hilyard, 2012). In this way, the gas industry is known as a production house of natural gas and oil industry is known as industry of crude oil.
Natural gas is a highly flammable gas. It is a mixture of methane, nitrogen, hydrogen sulfide, carbon dioxide, helium and other higher alkenes. So, it is used to make fuel, paint, LPG, ammonia etc. Ammonia: This is an inorganic product produced from Natural gas. Ammonia discovered firstly in 1774 by chemist Joseph Priestley. It is produced by Haber process from nitrogen and hydrogen (Roney, 2011). In plants to prepare ammonia, firstly the natural gas is cleaned from sulfur and then mixes heated water and supplied it to the reactors where it is passed to catalyst beds. This stage is known as gas vapor conversion. After this stage a mixture of methane, hydrogen, carbon oxide (CO) and carbon dioxide (CO2) exited from the reactor. After then this mixture is mixed with atmospheric oxygen, nitrogen and vapor in appropriate proportion. At the end of this stage, carbon oxide (CO) and carbon dioxide are detected from the mixture. The mixture of nitrogen and hydrogen is passed from high pressure of atmospheres by high cooling, and then ammonia turns in to liquid form. The prepared ammonia is used to clean, deodorize and bleach. It also used for the production of fertilizer products and chemicals (Liu, 2013).
Crude oil is a compound of naturally occurring hydrocarbons and other organic materials. It is refined to get different usable products like Petrol, diesel, jet fuel, heating oil, kerosene and many more products that are called petrochemicals (Shah, 2011). Petrol: It is a liquid product produced by refining of crude oil and largest volume of the oil and gas industry. In this process at first the crude oil is heated on 900° F temperature in a Coker and boiled at 104° F to produce petroleum. This boiling process is finished at greater than 1112° F temperature to produce residuals. In the process uses hydrogen to remove Sulfur products and converts it in naphtha molecule which is the end product of petrol. At the end of this process by using of delayed coking unit heavy residual oils are converted into end product as petrol. This end product petrol is used for internal combustion of engine for cars, bikes, boats, trucks and more.
Oil and Gas industry is very big so, can be divided in to three key areas such as; upstream, midstream and downstream. Upstream: This component is also known as E&P (Exploration and Production) sector. Upstream tends to identify the underwater and underground fields of gas and crude oil. It also includes exploration of drilled wells and operating the wells to recover oil and gas on surface. Midstream: It is the operations link between the upstream and downstream units which operates mostly resources of storage and transportation like pipeline and the resources to establish a new system. Examples of midstream unit are Kinder Morgan and Williams Companies which provides resources to Midstream and Downstream units. Downstream: This component tends to filter of raw materials that obtained from upstream phase. In other words, it is a phase in which natural gas is purifying and crude oil is refining. It also include the marketing and distribution of these products to the consumers in different forms like; patrol, diesel, lubricants, kerosene, heating oil, LPG as well as in other forms of petrochemical products.
International oil companies affect oil and gas industry very well. In this manner, if these oil companies produces low quantity of crude oil and natural gas, than the prices will hike in whole world and the all the products related to this industry will be expensive. Because, the international oil companies control over all supply of the world. In this proportion, the National Oil companies will also affect and will may increase the prices of consumable products for maintain its revenues. In this concern Government agencies keep high level control on domestic oil and gas sector with the overview of health and environment safety. These agencies also trade in oil and gas by enforcement of regulations and taxes. It covers all the rules and decommissions waste regulations by giving proposals for improvement.
There are various factors such as; price, cost of production, natural conditions, technology, transport, government policies, prices of related goods etc. which affects the demand and supply of a product(Moon, 2013). Descriptions of these factors are as below: Price of the product: It is an important factor which affects the demand and supply of the product. If the price of Ammonia and Patrol increases than the demanded quantity of these commodities generally decreases. In other words, there is inverse relation between the price and demand. On the other hand, if the price increases than supply of these products will increase and if the price decreases than supply the supply will also decrease (Mendes, 2011). Because, when prices increases than the suppliers of these products earn more revenue. So, they will increase the supply of these products to get more profit. Cost of production: If the cost of production of these products increases than the profitability ratio of related firm decreases. In this way, the seller will reduce supply of the product and if the supply of these products reduced than the demand will increase in this propensity (Ruttan and Thirtle, 2014). Natural conditions: A natural condition also affects directly demand and supply of the products. Such as, in rainy season the demand of fertilizer products increases. So, the demand of Ammonia will rise, because it is used in production of fertilizer products. Technology: It is the important determinant of demand and supply. Advanced and best technologies decrease the cost of production and enhance the quality of the product which results raise in supply and demand of these products (Meijer et al, 2012). It is because, the cheap and qualitative products are more demanded in the market. So, the improved and new technology will increase the demand and supply of these products. Transport: It an important factor which directly affects the demand and supply of the product. If there is a good transport facility for transportation of these products than the supply of the products will increase (Desjardins, 2014). Due to poor transportation condition the supply of the product will decrease and the demand of the product will increase there. Factor prices and their availability: If the inputs or termed factors such as; equipments, raw material, labour and machines are available in enough quantity at lower prices than, it will increase the production of goods (Zinnert, 2010). This increased quantity of these products will increase the supply of the product. For example, if these termed factors are available nearby the manufacturing plants of Ammonia and Patrol than it will be helpful in reducing the cost of manufacturing cost. As a result, it will increase the production and supply of the product. Government policies: The different government policies like monetary policy, fiscal policy etc. has a great impact on the supply and demand of the product. If the taxes on excise duties are increased than the cost of production also increase (Nechyba, 2010). So, the firm will decrease the supply of the product due to low profit margin. On the other hand, if the price of the product is increased by the productive firm to maintain its revenue, than the demand of that product will generally decrease. Prices of related goods: This factor refers to the price of substitute goods and complementary goods which also affects the demand and supply of a product. In this way, if the price of these goods is high than the suppliers will supply more quantity to get more revenues. But, if the customers are switched to lower price product than, it will decrease the demand of these products,
From the above report it is concluded that Oil and Gas industry is an important sector of every country. The areas such upstream, downstream and midstream are the important areas to recover the oil and gas on surface. Along with this, the factors like price, government policies, technology and transport also important factor which affects the supply and demand a product. Additionally, the IOCs, NOCs and Government agencies also affect Oil and Gas industry in great manner by different policies or taxes.
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