The National Iranian Oil Company Research Paper

Oil and Gas Industry

Introduction

The oil and gas industry is known to be one of the major energy commodities of any country in the 21st century. In the short term period, it is evident that the industrialized countries’ need for energy will continue to be met mainly by oil and gas and their compounds. The oil production on the continental shelf will develop especially rapidly (Do, Bhatti & Shahbaz 2016). It is expected that in the coming years, the share of oil and gas, obtained from offshore fields, will account for about 50% of all oil and gas produced in the world (Watts 2016). The oil industry is closely linked with the majority of sectors of the economy and has impact on the economy of both at the country level and globally. The modern trends in the global oil and gas industry market development point to a significant increase in demand for this type of fuels, more than before due to the fact that oil is a powerful argument in the conduct of political affairs with various countries. On the other hand, the technological gap and the imperfection of industrial relations do not allow achieving the high-efficiency levels of the oil, gas, and petrochemical industries. Hence, the position of the oil industry can be characterized as a rather complex; however, the ways to improve the situation still exist. They comprise reducing backlog maintenance industry in conjunction with active reforms and creation of favorable conditions for all enterprises of the industry under analysis. Therefore, this paper proves that in order to create a sustainable and prosperous oil and gas industry business, it is important to be engaged in the constant development not only of the ecological or economic compound of the issue but also in terms of corporate governance and technological development.

Organization’s Background

The formation of the national energy policy and the effective management of oil and gas sector as well as the prospects of their development in every country is impossible without a thorough and painstaking study of the historical heritage and the results of operations, comprehensive and realistic assessment of the current state based on the systematic analysis of all links and economic components of the production process (Do et al. 2016). To analyze the essential aspects of the industry from various points of view, it is significant to illustrate it with the proper examples. Hence, this paper will discuss the National Iranian Oil Company. Therefore, there are several key problems of the oil and gas industry, including the company mentioned which require immediate action (Olajire 2015; Do et al. 2016). First, the complication of conditions of oil production is associated with involvement in the development of deepwater fields and prospects. Second, the oil and gas industry lacks modern equipment and technology development of deep-sea areas, ensuring the reliability and safety of the work (Do et al. 2016). Third, there is a need to attract large capital investments and funds to increase exploration and oil and gas operations. Finally, it is necessary to constantly to ensure the reliable and efficient way to deliver oil to the world market.

Analyzing the experience of the oil and gas industry and the experience of the National Iranian Oil Company, it is possible to claim that to carry out reconstruction and technical re-equipment of production facilities, ancillary facilities and infrastructure, it is important to apply several steps. To start with, it is paramount to increase oil production and its leading position in the regional economies (Do et al. 2016). Moreover, the industry stakeholders should fully meet the needs of the economy and population of the country in natural gas to stop importing and start exporting natural gas to neighboring countries, Europe and other continents (Do et al. 2016). Furthermore, it is important to carry out the large-scale construction of export oil and gas pipelines and ensure reliable output of oil and gas to the world (Do et al. 2016). Finally, other important aspects include a sharp increase in the volume of prospecting and exploration drilling, evaluation of the prospects and opportunities of new units and sections and increase in the employment of workers, creation of new jobs, improvement of the skills of staff and the production of culture. These directions should be aimed to by both the industry and the company under analysis.

Corporate Governance and Managing Ethically

The effective corporate governance is a critical factor in improving the National Iranian Oil Company’s competitiveness. The development of the company is impossible without the presence of an effective structure that defines the relations between the board of directors, executive management and shareholders, investors’ confidence that their money is spent wisely by the company’s management and, thus, contribute to the growth of its capitalization.

Regarding the National Iranian Oil Company, it is necessary to state that the Corporate Governance Code, which was approved, achieved its essential goals. The purpose of this Code was the application of the rules among corporations, which work as affiliates of the National Iranian Oil Company. The Code has also solved the problem of compliance with corporate governance principles of good corporate governance standards in other countries (Do et al. 2016). The adoption of the new Code is aimed at the development of the companies in order to attract new investors, access to capital markets, and the movement of international cooperation.

Within the oil and gas industry, the corporate governance code is expected to be quite a lengthy document, surpassing the scale of their counterparts in a number of states (Do et al. 2016). Apart from the recommendations of corporate governance principles and the order of formation of the Board of Directors, the Corporate Secretary Code of oil and gas companies is expected to be aimed at regulating the functional content of the internal documents (Kirat 2015; Do et al. 2016). Analyzing the mixed ownership, it is important to emphasize that, along with such organizations to certain groups of the share owned by the state, the process occurs by which organizations are divided into two categories: public and non-public. Public and non-public joint stock companies in the framework of the oil and gas industry framework differ in the placement and circulation of shares on the stock market, which adjusts the corporate governance (Do et al. 2016).

Hence, the majority of the oil and gas companies turns their shares on the stock market and has to face increased requirements for data disclosure and corporate governance. Also, such a situation is found in the National Iranian Oil Company, the shares of which are publicly available, wherein the special importance is the relationship between the state and minority shareholders. In case of the National Iranian Oil Company, in accordance with its role of the dominant shareholder, the state acts against the interests of minority shareholders and facilitates the adoption of the necessary state opinions at the general meeting of shareholders without considering the opinion of the minority (Badiru & Osisanya 2016).

Also, the state has the ability to control the board of directors and its composition. In addition, the state may have other political and public tasks, whose realization affects the interests of minority shareholders. In any case, the state has an interest in the perception of its shareholders as a transparent and predictable entity, which fully complies with their rights (Comyns & Figge 2015; Do et al. 2016). Respecting the rights of minority shareholders, the state has a positive effect on its reputation, with the result that stock prices change and attract investment from foreign markets (Kirat 2015). Such a situation characterizes the National Iranian Oil Company due to the fact that its numerous affiliates seldom call for freedom and separation. Also, to create market conditions, the other shareholders are needed (Badiru & Osisanya 2016; Do et al. 2016). This is a prerequisite for the effective control of the company. Placing share of state corporations similar to the National Iranian Oil Company on the market has led to an increase in state influence on the economy, as there were a means of influence on it on a larger scale (Do et al. 2016; Tanner et al. 2016).

A significant reduction in world oil prices in the nearest future is expected to happen. In addition, it is essential that the complex social situations within the National Iranian Oil Company are still managed to strengthen public participation in the management of this strategically important sector (Do et al. 2016; Tanner et al. 2016). State-owned companies need greater transparency of objectives, transparency of decisions, the professionalism of the members of the Board of Directors and the collegiality of their work, a detailed discussion of each question and the level of awareness of responsibility of the company under analysis (Comyns & Figge 2015). These aspects will allow the National Iranian Oil Company to systematize the risks and reduce the impact, which are not always motivating agents. It can be concluded that an effective system of corporate governance and partnership of the National Iranian Oil Company with the state in various fields are able to increase the company’s profits, diversify its activities, opening the way for new projects.

Environmentally Friendly Products and Services

Another important concern of the National Iranian Oil Company is the environmentally friendly products and services. The oil and gas industries, in general, are one of the most ecologically dangerous branches of management. It is characterized by a large contaminant capacity, and high explosive and flammable industrial facilities (Patatoukas, Sloan & Zha 2015; Badiru & Osisanya 2016; Do et al. 2016). Chemicals used in drilling wells, oil production and treatment, as well as the produced hydrocarbons and impurities are the harmful substances for flora and fauna, as well as for humans.

The danger of oil and gas industry increases by the emergency of work, as the main production processes take place under high pressure. Fishing equipment and piping systems work in hostile environments. Within the National Iranian Oil Company, in regards to the environmental issues, there are two extremely opposing views. One of the views is to ensure that the intervention in the environment is necessary to limit sharply, since the modern methods of the management may lead to the disastrous consequences (Badiru & Osisanya 2016). Another view is that the potential for self-healing nature is great enough, and so it is not necessary to spend a lot of money on its protection and reclamation works.

The environmental management of the National Iranian Oil Company is a compromise between the need for action to ensure that economic activity and the corresponding state of the environment (i.e. the need to optimally combine 1 and 2 factor: develop and produce oil fields, minimizing the negative consequences as much as possible and restoring disturbed areas, preventing accidents oil spills) (Ramasubramanian, Sarkar & Bhatia 2015; Do et al. 2016). The successful implementation of any trade-offs can only be achieved through the formation of and compliance with the restrictive measures determining the content, the conditions of reasonable use of natural resources, and the environmental safety of decisions.

Environmental performance of the National Iranian Oil Company is built, taking into account the unity of purpose and fundamental interests of environmental protection at all levels of the enterprise to the national economy, as a whole. The main objective of environmental management of the National Iranian Oil Company and its member companies and organizations is to reduce the negative impact of production processes on the environment (Badiru & Osisanya 2016). Therefore, the main task of environmental protection services within the National Iranian Oil Company is the organization of work in order to reduce the negative impact of business on the environment of the region (Patatoukas et al. 2015; Nilsen 2016). Environmental protection covers a wide range of technical, technological, organizational and economic activities, carried out with one purpose, which is to reduce the impact of production processes on the environment. Hence, there is the need to develop an approach to the management of the organization in this sphere of activity of the National Iranian Oil Company.

The principle of comprehensiveness in environmental management involves taking into consideration all sides of environmental activities, including definition of the environment in the production process, the sources and extent of contamination, evaluations of the economic damage to the national economy of pollution, implementation of environmental measures and to determine their cost-effectiveness (Patatoukas et al. 2015; Nilsen 2016). The overall assessment of the environmental activities of enterprises and the development of effective ways to reduce the negative impact of production processes on the environment.

In the process of oil and gas development, a large-scale and very significant impact is carried out on the reservoirs (oil, gas, water-bearing and others) in the National Iranian Oil Company. Thus, the intense selection of oil on a large scale of high porosity sands collectors leads to a significant reduction in formation pressure, i.e. the pressure in the reservoir of fluid: oil, gas, and water (Patatoukas et al. 2015; Badiru & Osisanya 2016). The load of the weight of the overlying rocks, originally supported both by the stress in the rock layers of the skeleton, and due to the pressure of the formation fluid in the pore of the walls. All these aspects lead to the development of the environmentally unfriendly consequences (Ramasubramanian et al. 2015). Thus, the National Iranian Oil Company, regardless of the numerous attempts to save the environment, should care for the more development in this field.

Information and Communications Technology (ICT)

The main purpose of the implementation of information systems in industrial production is represented by the total monitoring of production and business processes at a particular company, reducing the maintenance of the costs of the equipment reliability (Do et al. 2016). This is achieved, among other things, by conducting financial and repair history of all pieces of equipment, statistics collection and processing of failures and malfunctions due to the conduct regulation equipment and for performance of maintenance and repair (Watts 2016). As a result, the leadership at every moment has complete and reliable information about the National Iranian Oil Company, and may know its weaknesses and time to insure against crises. In addition to information about the dates and amounts of works on the maintenance of specific pieces of equipment, the National Iranian Oil Company has implemented the special tools to the system, which receive data about the reliability of any class of equipment that enable a realistic assessment of the degree of risk occurrence of accidents (Ramasubramanian et al. 2015). In addition, the company received and completed the statistics on failures and malfunctions of specific types and kinds of equipment, which means that the company’s management has the ability to keep track of the specific technology in the long term that allows significantly reducing the production costs and improving profitability.

Application of the software system for planning production and delivery of oil within the National Iranian Oil Company is aimed at addressing the implementation of a large volume of accounting and computing the work performed in the manual mode, increase reliability, timeliness and quality of the output documents (Patatoukas et al. 2015; Ramasubramanian et al. 2015; Badiru & Osisanya 2016). Also, the information and communication technology in the National Iranian Oil Company enables the release of qualified engineers association from routine work, which will ensure their focus to concentrate on solving engineering problems, and reducing the redundant data on the processing operations (Do et al. 2016). Finally, it allows the timely planning documents to ensure all the interested consumers.

The peculiarity of preparing a model of technical design of the ‘oil’ subsystem is that all problems are solved on the basis of a common information base. Depending on their availability, they can be implemented in any order, but it will be a partial solution (Patatoukas et al. 2015). The system of the information and communication technology suggests a gradual transition from the general to the particular (deduction), as the basis for consideration is the ultimate purpose for which the system is created (Do et al. 2016; Watts 2016). Therefore, in the National Iranian Oil Company, the production planning program, preparation and delivery of oil and water injection (provided in the project) are developed and issued, in the first place, because they help to solve the main problem of planning to obtain the final product, which is oil and gas.

Conclusion

There are some superficial trends of improving the oil field activity, both in particular countries and all over the world. There are deeply hidden tendencies of its crisis. The crisis of the oil industry will lead to the country’s economic crisis and a change of the political system. However, the current situation in the National Iranian Oil Company is that the management’s main aim is the personal enrichment at the moment. However, in any case, it is significant to pay much attention to the development of the corporate governance, environmentally friendly approaches to the oil production and technologies implementation to help the company stay adrift and develop at the same pace.

Furthermore, concerning the various compounds of the oil and gas industry and the National Iranian Oil Company, in particular, it is significant to state that each of these points can be fulfilled to a better extent if there is enough capacity and desire. First and foremost, the environmental issue should be addressed with the utter importance due to the fact that the oil and gas production do not have any environmentally friendly approach in this cycle and need to pay the required attention to it to regulate the possible consequences to nature. This aspect of the National Iranian Oil Company is very expensive; however, if it is fulfilled, the economic compound will either rise due to the more efficiency of the production. As a consequence, using the most innovative information and communication technologies and equipment for the oil extraction, the National Iranian Oil Company can achieve environmental sustainability at least of the minimal level to ensure the natural safety and environmentally friendly approach.