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Running head: The Global Business Environment
THE GLOBAL BUSINESS ENVIRONMENT
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Course
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Date
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The Global Business Environment
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Table of Contents
Introduction…………………………………………………………………………………………………………………… 3
Identification of the Sector ……………………………………………………………………………………………… 3
Sustainability for the Sector and the Effects on the Sector and the Company ………………………. 4
Conclusion…………………………………………………………………………………………………………………….. 7
Bibliography ………………………………………………………………………………………………………………….. 8
Appendix ……………………………………………………………………………………………………………………….. 9
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Introduction
Sustainability has become essential in the business environment in the delivery of products
and services. Sustainability in the business world ensures the long-term prosperity of companies
across the globe. Organizations in different industries that follow sustainable principles, and utilize
sustainable processes, produce products and services that have the most significant benefit to
society. The products and services also have minimal adverse consequences in general.
Organization sustainability maximizes opportunities and minimizes the negative impacts of
operations on the environment and the community. In general, sustainability in any sector of a
company promotes economic growth through the reduction of costs within particular industries
and influences overall development.
Identification of the Sector
The Sultanate of Oman’s oil and gas sector is the most flourishing. It has promoted the
nation’s economic growth through the provision of much of the revenue the government receives,
and therefore, the industry reflects significantly on the sultanate’s overall development (Calabrese,
2018). According to the World Bank, Oman’s gross national product increased by 8% between
1965 and 1987 (Oxford Business Group, 2019). The sector exports oil and gas, exporting more
than 80% of the industry’s total output. By the end of 2007, a review of world energy reported that
Oman has significant oil wells represent 0.3% of the global oil wells (Oxford Business Group,
2019). The report also pointed out that the average production for the sector was 1% of the world’s
total output.
The Sultanate of Oman’s industry is liberal more than that of other Middle East countries
because it has both private and public companies in addition to foreign companies. However, the
government controls the operations of the sector. The ministry of oil and gas coordinates the role
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of the government in the industry. The government, therefore, has the final word on policies and
investments, including sustainability policies and approaches in the delivery of products and
services in the industry. The government controls the sector through the Petroleum Development
Oman (PDO), the largest company in the industry.
It was established in 1937 as a partnership with other companies. The government has 60%
ownership in the company, with the minority shareholding being divided among different private
companies, including Shell Company (PDO Sustainability Report 2016, 2016). The government
controls the operations of the sector because of the majority ownership of PDO. PDO, therefore,
holds most of the nation’s oil wells and is responsible for more than 80% of Oman’s oil production
(PDO Sustainability Report 2016, 2016). PDO has subsidiaries that control Oman’s oil and gas
sector.
Sustainability for the Sector and the Effects on the Sector and the Company
Despite the Sultanate of Oman’s thriving gas and oil industry, it has been faced with
sustainability challenges, which have been worsened by the global decrease in the prices of oil and
gas. The depletion of the oil and gas resources has also been problematic for the industry, leading
to the Sultanate of Oman to seek means to achieve sustainability through PDO. One of the changes
that the government, through PDO, intends to make is economic diversification to eliminate the
exposure to financial risk because of heavy reliance on hydrocarbons (Calabrese, 2018). Oman’s
oil and gas industry is not as productive as those of other gulf countries, and its oil reserves are
dwindling.
As an approach to sustainability, the government of Oman has laid down a long-term
development strategy aiming at transitioning the economy from a hydrocarbon reliant economy to
an economy with a private sector and a broad industry with different thriving industries. This
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approach is a 2020 vision for the country’s economy. The government, through POD, aims at
regulating the industry by reducing resource allocation and shifting resources to other areas of the
economy such as manufacturing, transport, and logistics, tourism, mining, fisheries, among others
(PDO Sustainability Report 2016, 2016). Although the progress of economic diversification is
slow, the changes will improve the oil and industry sector by reducing the country’s dependence
on it.
During tough times of drop in oil prices, other sectors of the economy will be able to
provide revenue to the government promoting economic development. Diversification means that
the industry will be able to revamp because other industries are providing income for economic
growth. There will be the preservation of oil and gas resources because of the limitation of the
overutilization of the oil and gas reserves. Diversification means reduced control by the
government in the oil and gas industry, leaving space for other companies to explore oil and gas.
It will promote sustainability for the sector and the company. Proper utilization of the reserves
because of economic diversification by the government will not only reduce dependence on the oil
and gas sector but also ensure the long-term operation of POD Company.
Another sustainable change that will occur is the utilization of renewable sources of energy
in the oil and gas industry, such as solar power plants, to provide alternative sources of energy to
natural gas. PDO and the oil and gas sector will utilize renewable solar power instead of fossil
fuel, which is a sustainable approach because solar power energy is renewable and does not lead
to pollution of the environment. POD has contracted a company to construct a solar-powered plant
to power the exploration of gas and oil in the sector (Azam and Abushammala, 2017). The solarpowered facility will generate energy, which will be used by POD and will be located south of
Oman.
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The sustainability move will be made under an independent power producer model, and
therefore, the power generated will only be utilized by POD in the manufacture of oil. The
company and the sector will benefit through cost-saving, and the provision of constant renewable
energy, which is environmentally friendly. Businesses in the industry will incur low energy costs
and provide alternative sources of energy for companies, which want to promote sustainability.
Diversification of energy mix in Oman’s oil and gas industry means that businesses will have low
operational costs and improved efficiency, promoting the growth of the sector and environmental
protection.
Renewable and non-renewable sources can be combined as an approach to promoting
sustainability in the industry. To achieve the country’s sustainability vision of 2020, solar and
steam energy sources will be connected to provide energy for the industry instead of natural gas.
Solar power will be used to create steam, which will then be used to extract oil from reservoirs.
The solar facility will focus the sun’s rays on boiling water in the oil field to generate steam (Choi,
Lee, and Song, 2017). The steam will then be utilized in the oil reservoirs for pushing out the heavy
viscous oil that remains in the tanks.
The change means that companies in the sector save costs by not using natural gas, and
there are reduced emissions. The use of steam also promotes sustainability because it extends the
lifespan of the oil reservoirs meaning the industry can flourish, and businesses can operate
smoothly and have a longer life span because of constant manufacture and supply of oil. Using
steam generated by the sun in oil and gas manufacturing is no doubt a sustainable alternative for
companies and the oil and gas industry compared to using steam generated by natural gas. The
change is in line with Oman’s objectives for environmental protection and the sultanate objective
of using less of its natural resources in energy production.
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After the extraction of oil from reservoirs, a large quantity (40%) of heavy oil in Oman is
left in the reservoirs due to viscosity (Choi, Lee, and Song, 2017). The use of the EOR technique
for extracting all the oil from reservoir is a technology that will be implanted in the future as a
sustainable action. Light oil, which is easier to obtain from the reservoir, is less costly and is getting
increasingly scarce. The use of EOR technology will increase the production of oil properly
utilizing the oil reservoirs. POD will invest in EOR technology on behalf of the government,
increasing oil output for the company and the oil and gas industry. A constant supply of oil because
of EOR technology will improve the sector as well as the businesses within it.
Conclusion
As Oman aims at achieving sustainable growth in the oil and gas industry, the above
developments in the sector will help businesses and POD, which is government, owned to be
sustainable in delivering products and services. Sustainability is essential for the industry because
it will reduce energy costs, increase oil and gas output, reduce environmental pollution, prevent
overexploitation of oil reservoirs, and promote the industry and economy growth through
diversification. The sultanate of Oman should promote sustainability to attain the vision of 2020.
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Bibliography
Azam, M. H., & Abushammala, M. 2017. Assessing the Effectiveness of Solar and Wind Energy
in Sultanate of Oman. Journal of Student Research.
Calabrese, J. 2018. Oman’s Transition to a Post-Oil Economy: Arching Toward Asia. [online]
Middle East Institute. Available at: https://www.mei.edu/publications/omans-transitionpost-oil-economy-arching-toward-asia [Accessed 14 Oct. 2019].
Choi, Y., Lee, C., & Song, J. 2017. Review of renewable energy technologies utilized in the oil
and gas industry. IJ Rew. Energ. Res, 7(2), 592-598.
PDO Sustainability Report 2016. 2016. PDO Sustainability Report 2016. [online] Pdo.co.om.
Available at:
https://www.pdo.co.om/en/about/Documents/Sustainability%20Report%202016.pdf
[Accessed 14 Oct. 2019].
Oxford Business Group. 2019. Discovery of oil reserves and new concessions in Oman leverage
growth on global indices. [online] Oxford Business Group. Available at:
https://oxfordbusinessgroup.com/overview/pumped-reserve-discoveries-newconcessions-and-efficient-technology-leverage-steady-growth-global [Accessed 14 Oct.
2019].
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business and finance

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Financial Management

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Business Environment

Arab Open University

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