OIL AND GAS

Problems and Issues of Oil and Gas Industry

Problems and Issues of Oil and Gas Industry

1. Introduction

Being an investment advisor, this report is principally elucidating upon the challenges and issues of the oil and gas industry, within which various companies are facing problems. In this paper, a comprehensive study of the problem being faced by the petroleum industry is put under consideration. To ensure an uninterrupted flow of oil and gas products, it is imperative that the petroleum industry utilizes compliant hardware and software. The level of automation and the many processes required to get oil and gas from the ground to the final customer create specific problems for the industry in its efforts. In particular, such problems may exist in areas such as oil and gas platforms, tankers, refineries, gas processing, and gas stations. The use of embedded chips in the industry further complicates the effort, leaving many to question whether companies in the oil and gas industry will be able to operate as usual in the Year 2020. The problem of correcting hardware and software from the bugs will be very expensive for many companies in the industry.

2. Discussion

2.1 Recent Surveys and Forecasts

A recent survey of oil and gas companies, presented by the American Petroleum Institute (API) and the Natural Gas Institute (NGI), indicates that the industry will achieve readiness by the end of 2020 (Goldthau, 2010). In addition, 94% of oil and gas companies expect to be compliant by 2020, and all indicate they will have contingency plans in place and tested by year's end. However, a study by the U.S. General Accounting Office (GAO) indicates that oil and gas firms maybe lagging in their efforts to become compliant. A further recent survey by the Gartner Group, a market-research firm, indicates that the instability problems in the oil industry worldwide are quite serious and may potentially result in 20 million to 250 million embedded systems failures (Goldthau, 2010). On a more favorable note, however, data also indicate that the U.S. oil industry is more likely to achieve instability by the critical date than petroleum companies in other countries.

The Securities and Exchange Commission (SEC) requires all companies, including oil and gas companies, to disclose detailed information about issues in their financial statements. These disclosures provide readers of the statements with details about the status of instability of individual companies.

2.2 Focus of the Discourse

Given the disagreement between experts and surveys about the current status of instability in the oil and gas industry and considering the latest directive by the SEC to expand disclosure requirements, the specific purpose of this paper is to investigate the following question.

“What is the impact of instability on the oil and gas industry and what are the implications of these disclosures for financial statement users in terms of instability within the industry?”

2.3 Highlighting the Issues

Experts address two issues regarding the instability of the industry. First, when should an entity be required to disclose information, and second, what type of disclosures should be reported in the ...