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“Assignment of Strategic Management”

Submitted by:

MALIK KASHIF MALANA

Submitted to:

Sir Khalid

MBA (1.5) Evening

Roll no:

Topic: Porter's Five Forces For OIL AND GAS Industry

BZU MULTAN
OIL AND GAS INDUSTRY ON PORTERS FIVE MODEL

Bargaining power of Customers

The oil and gas industry has a very wide consumer base resulting in a very low power of
the customers.

Bargaining power of Suppliers

Currently, there are four major suppliers in the exploration sector of the oil and gas
industry including OGDC, Mari Petrol, Pakistan Oilfields and Pakistan Petroleum.
Additionally, there are around ten companies involved in oil refinery in Pakistan. Due to a
short number of suppliers, the supply side is very powerful in the industry. Due to a
large miss match in the demand and supply (demand > supply), a significant proportion
of oil is imported from other countries.

Barriers to Entry

The artificial barriers to entry are limited due to the control and regulation by the
government. However, the natural barriers to entry are very high as a huge amount of
investment is required to enter the market. Investment is needed for retail outlets, oil rig,
port facilities, transportation, pipeline network, key installations, terminals, storage facilities
etc.

Threat of Substitution

The threat of substitution is low as it is very difficult to replace oil and gas as a raw material
in most of the consuming sectors. Recently the use of coal in the energy sector and
renewable sources in some of the consuming sectors is on an increasing slope.

Competitive Rivalry

Being one of the largest companies, OGDC faces the competition of many domestic and
foreign oil producing companies.

e.g Pakistan State Oil (PSO) and MOL .There are a number of companies providing
competition in the oil and gas exploration side – UTP and OGDC are the main ones and
they supply more than 60% of the oil produced in the country. In the gas
exploration side, there are only a few small companies but majority of the gas produced
is by OGDC, Mari Gas, PPL and UTP. There are only 3 refineries at present but they will
increase once PARCO and Pak-Iran come online. Similarly in the oil marketing sector there
are only 3major companies, with Mobil and others comprising of a small share. OGDCL are not
only dependent on economy of Pakistan, but on the world economy also. The oil and gas
prices in Pakistan vary in accordance with oil and gas prices in Middle East. So, any
underperformance can also be attributed to decline the oil prices globally. Hence, OGDCL
has to take its decisions in line with prevalent economic conditions, both national and global.