ABSTRACT
Fundamentally, there is no business like the oil and gas business. The industry affects almost everything else in the general consumer market. The need to develop practical, efficient, and cost-effective energy infrastructure has never been more urgent. Developments in solar, wind, nuclear power, biofuels, and new oil and gas technologies have necessitated strategic project management practices. The influence sphere of oil and gas has grown dramatically over the years. A big decline in distributor costs of oil and gas directly drives a large portion of wholesale prices. Thus, it should be of interest to the general public to manage oil and gas projects so as to lower operating costs that can spread positively to consumer marketplace. As a demonstration of the influence of the industry, in 2012, Delta Airlines (Reuters, 2012) may have followed the cliché, “If you can’t beat them, join them.” Recognizing that its financial results and operating costs are closely tied to fuel prices, the airline decided to bid on an oil refinery. This price hedging approach is expected to be followed by other nonenergy-based large corporations in the coming years. Risk is also an inherent part of the oil and gas industry. Risk management must be a core component of a company’s project management portfolio in the oil and gas industry. Risks can be mitigated, but not eliminated. In fact, risk is the essence of any enterprise. In spite of government regulations designed to reduce accident risks in the energy industry, accidents will occasionally happen. Government regulators can work with oil and gas producers to monitor data and operations. This will only preempt a fraction of potential risks of incidents. For this reason, regulators must work with operators to ensure that adequate precautions are taken in all operating scenarios. Government and industry must work together in a risk-mitigation partnership, rather than in an adversarial “lording” relationship. There is no risk-free activity in the oil and gas business. For example, many of the recent petroleum industry accidents involved human elementserrors, incompetence, negligence, and so on. How do you prevent negligence? You can encourage nonnegligent operation or incentivize perfect record, but human will still be human when bad things happen. Operators and regulators must build on experiences to map out the path to risk reduction in operations.
