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Oil And Gas Industry In India Commerce Essay

Paper Type: Free Essay Subject: Commerce
Wordcount: 4556 words Published: 1st Jan 2015

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The history of oil and gas industry in India started since 1867 from Digboi in the state of Assam. After the independence of the India the oil and gas industry were controlled by the international companies. At that time India’s oil productions were below 250,000 tonnes / annum which were contributed from Assam. At that time some of the oil experts doubted about India’s oil production ability and for the new oil reserves. But Government declared oil industry as a core sector in India under IPR bill in 1954, which helps to change the face of Indian oil industry Indian Government established the Oil & Gas Industry in India. All the functions of the oil and gas industries are coming under various public sector organisations which are controlled and authorised by THE MINISTRY OF PETROLEUM & NATURAL GAS of India.

Structure of Indian Petroleum Industry

(IBEF, 2009)

Indian Oil and Gas industry holds an important role in Indian economy. It satisfies 42% of primary energy requirements in India and contributes around 15 % to the GDP. With an exciting combination of government and private firms, the industry is fixing their top position in domestic & international markets. The report from the Petroleum Planning and Analysis Cell (PPAC) shows that requirement for petroleum products increased by 4.4% to 144.35 million tonnes for the period of the financial year 2010-2011. Presently, India’s petroleum refining capacity is 144.35 million tonnes per annum. It is expected to increase by 240 million tons by Sept 12.

Source (CGES, 2012)

India’s economy is expected to grow at the rate of 7% per annum over the next five years; it means that demand for energy will also increase. 90% of coal consumption and 75% of gas consumption were met by domestic While Indian domestic oil industry can only covers 22% of oil consumption. This may drop in future years. This shows Indian oil and gas industry should have to depend more in oil imports, which will be 2.4 mbpd

Major Players in Industry


Indian Oil Corporation Limited (IOCL) and its subsidiaries were consist of roughly 48% of petroleum commodities market share, 71% downstream division pipelines capability and 34% nationalized refining capability in India.

Indian Oil Corporation Limited

(Indian Mirror, 2012)

Indian Oil Corporation Limited (IOCL) is the leading commercial ISO-9002 certified venture in India and it is the top public sector venture in India, Indian Oil Corporation Limited is the largest company by sales in India with a yield of $ 85,550 million and profit of $ 825 million for the fiscal year 2011-12. In IOCL is the first Indian company to reach at the 83rd position in latest Fortune ‘Global 500’ listings. Indian oil Corporation is the 20th largest petroleum company in the world. IOCL was established as Indian Oil Company Ltd. in 1959. In 1964 Indian Refineries Ltd. Merged in Indian Oil Company Ltd to form IOCL

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IOCL is an oil company based in India. Main operations of the company are refineries, marketing, Centre and Business Development, pipelines, enterprise and planning (E&P), R&D, petrochemicals and natural gas. 10 of Indian refineries and its cross-country crude oil network and gas pipelines are owned and operated by IOCL and its subsidiaries. Portfolio of brands consists of SERVO lubricants, Indane LPG, XTRAMILE diesel XtraPremium petrol and Propel Petrochemicals. Domestic portfolio of IOCL is consists of 13 blocks in its exploration and production, among these two of the blocks Indian Oil as an operator have 100 per cent participation interest. The international portfolio having 9 blocks stretch over Iran, Libya, Nigeria, Gabon, Venezuela & Yemen. In the fiscal year of 2011- 12 around 0.62 million tons of crude oil processed from the Digboi Refinery.

Market watch 2012

(reuters, 2012)


To analyse the factors that affecting management performance in Indian oil corporation ltd, what are the issues and to what extend it effects in the management performance of Indian oil corporation ltd.


How the HR factors do affects on the management performance and issues in Indian Oil Corporation in India?

What are the economic factors influenced on the management performance and issues in Indian Oil Corporation in India?

How the competition factors affects on management performance and issues in Indian Oil Corporation in India?

How the IT influenced in management performance and issues in Indian Oil Corporation in India?

How the customer satisfaction impact on the management performance and issues in Indian Oil Corporation in India?


To evaluate HR factors that affects in the management performance and issues in Indian oil corporation in India.

To examine the economic factors that influenced in the management performance and issues in Indian oil corporation in India.

To find out completion affects in the management performance and issues in Indian Oil Corporation in India.

To realize the influence of IT in management performance and issues in Indian oil corporation in India

To analyses customer satisfaction impact on the management performance and issues in Indian oil corporation in India


(media.wiley, 2008)


Human resource practices can be says as the management of an organization’s human force or work force. HRM is the responsible for managing the employees in the organization. So the HRM has an inevitable roe in the managing performance of an organization. Management functions of HRM are consisting of attracting, selecting, training, evaluating, and rewarding the personnel’s in the firm.

Expected industry growth in oil and gas sector took country to a level of high demand for the skilled labours in the industry, the work-force demand for vital skilled sets all over the oil and gas value chain and the supply of resources in India (Earnest & Young, 2010).

IOCL sustained its attempts to encourage workforce contribution in diverse actions by idea sharing, proposal scheme, rewards and recognitions, etc. HR Index was designed to assist efficient execution of HR practices and policies. IOCL owns and operates 10 out of 22 Indian refineries with a combined capacity of around 65.7 MMT per annum. IOCL is the largest company in terms of turnover in India. It is the 98th largest public corporation in world and it operates with a strong work force of 34,233. Out of it, 19,382 were workers and about 14,831 were officer cadres. Among the workers, 68 % of the workers have experience of more than 25 years. Most of the employees in IOCL were since its starting period. In this industry, the other companies are also competing with IOCL to attract skilled workers. IOCL has lot of experienced workers so that recruiting fresher through campus interview and other sources and they shaping the personnel through the training. IOCL is a public firm that follows best HR practices, even though they are facing lot of challenges and issues in their HR sector that affects in their management performance as well.

HR Issues that Affects Management Performance in IOCL


This is the most important issue that going to face by the IOCL. Due to retirement of labours IOCL will loss roughly 16000 workers in 2021. Most of them were highly skilled and positioned in top authority. “By 2021, we will lose half of 34,000 strong employees,” Ashok Jambur, chief training manager IOCL. (Nair, 2012). By this issue fifty year old firm forced to depend upon outsourcing to overcome this situation. This will not be an easy task for the management. Company will loss both white as well the blue-collared personals. This will affect both HR and top management sectors this may lead to underperformance management sector.

Skills & Age Requirements.

As per the trend in Indian oil and gas sector, the average age is the main issue that faced by everyone in the sector, especially in Indian Oil Corporation it pretty is high. Not only is the age company asking for but also the experience and skills up to their expectation. Which one is not much easy to find out in this competitive industry? Every company is looking for the best and experienced candidates to strengthen their work force. Here the skills are bigest question mark before the leading public listed firm in India


(Earnest & Young, 2010)


It is another unavoidable headache for the HR department and the management. From the recent studies, it estimated as a loss of 7 per cent of current employees in next 5 years. (IndianOil coporation, 2012). The management scared with the attrition from the middle management employees. Who were flying towards the international opportunities. 5% of the highly qualified personals were working for experience only. The management and HR department have to take necessary steps to avoid the loss of their employees.


IOCL, BPL and HP lost around Rs.138, 800 crore in income from sales of domestic LPG, kerosene and diesel under cost in 2011-12. Revenue loss in this financial year estimated as Rs. 208,000 crore. Both Indian Oil and Gas sector and economy has a mutual understanding in each other. Indian economy is a changing economy. It is very difficult to predict the Indian economy. IOCL and its subsidiaries have most vital part to play in altering the Indian economy. The economy is affecting by the increase of demand and price of the crude oil. The inflation of the Indian currency is the major issue that affects the entire petroleum industry in India. Indian currency value is changing vastly, is also a burden to the industry.


IOCL is the largest firm as per its turnover even-though by the depreciation of Rupee leads the company to a loss, which affects lightly in their performance. Indian market witnessed strong demand growth despite weakening economic activity. Due to the foreign exchange difference the company records a loss of Rs 3,187 crore in last fiscal year.


When considering the net crude oil importing in MMT for last 2 years imported crude oil is decreased in 2010-11 than in previous year. But while considering the cost of importing increased by 12% – 15% this shows the economic how Indian economy affected the oil and gas industry


Global economic situations continued to be pathetic and challenging. This fiscal year saw describing of many new challenges. It reflects in Indian economy indirectly through some other ways. The major challenges were towards the Indian oil and gas industry. Global Economic crisis resulted in the price hike in crude oil market. As India, one of the largest crude oil importing country, it affects India badly especially the IOCL. IOCL records loss of Rs 22,451 crore due to the economic challenges in country as well in globally.

The financial crises were a double strike to the Indian Oil Corporation ltd.

Crude oil price hike

As per IOCL domestic production of crude oil is very low as concerned with the demand in the country. But the demand for oil products increased. And the company has to depend on other sources. By the effect of the economic crisis the price and demand of crude oil increased.

These two graphs show the demands and the increase in the crude oil price in India oil markets. This is one of the major challenge that facing by the Indianoil. The trends showing that it will continue its flow of hike. Expected figures will be a nightmare for both IOCL and the Indian economy.

Share Market Price

Economic crises are usually affecting Share markets. Market fluctuations depend on the global economic factors. IOCL is a largest public firm in India .the majority shares were owned by the president and the rest handled by some bankers and investors.

Stock rate

This figure shows how the economic issues affect the share market of IOCL from April 2011 to March 2012. BSE and NSE are the two important stock exchanges in India. In both BSE and NSE share price decreased by 15%. These all shows the after effects of financial crises in Indian Oil Corporation Ltd.


Risk management and security strategy involves the detection of threats, susceptibility, anticipation of crisis, reaction towards situations and revival of assets and safety of employees. IT infrastructure in Indian oil corp. was an extremely decentralized mix up of diverse systems. The corporation required to shorten its IT atmosphere and to increase its efficiency. IOCL running with more than 32, 000 employees and16, 000 PCs over various sections consisting of R&D, pipelines, refineries and marketing. However, the corporation has a centralized administration over these sections. Mr. R. Krishnamurthy, Chief Manager of IOCL accepting that they had not installed standard IT infrastructure in the firm. Each section had separate set of apps and software to manage its operations.

Major IT issues in IOCL

Database Management, Identity and Access

One of the major challenges is lack on single sign-on. The portable labour force of the IOCL had no system access while on action. Accessing of IT systems is only takes place when the employees are on the work desk. Due to this, the time consuming for the activities and updating of the information about of ongoing activities destruction are some issues faced by IOCL. These issues are reflecting throughout business activities. An efficient database system can generate high assurance atmosphere and protected planning, with safe identity management, remote access network and data security.

Secure Communications Systems.

Consumers need accurate and safe information that connects the home site with additional company’s sites. IOCL should have to increase their efficiency in their communication system. Currently the system is not much efficient and they are following the older versions and system. Therefore, they have to concentrate on the security and effectiveness of the system.

Security Risk Management

Field actions involve in risk evaluation and development of practical security measurements to moderate risks. These practices necessitate identifying of prospective risks, establishing borders, assessment of effects and method of anticipation and recovery plans for business. Risk management system is an important factor in Oil industry. Hacking, terrorism is the major threats facing by the industry. It is very important to prevent such intervene from the external source.


Indian oil industry was monopoly sector till recently owned by the petroleum ministry as various sectors. By the setting up of liberalisation in country, privatisation in the petroleum sector has been implemented. At the beginning the Government had APM (Administered Pricing Mechanism) for pricing the products. Which cause higher pricing than the market determined price have been. This situation made the Government to implement privatization in transportation fuel including HSD (High Speed Diesel). The main competitors to the IOCL are Hindustan Petroleum Corporation Ltd, Bharath Petroleum Corporation Ltd from the public sector and private firms like (RPL), Essar and Reliance Petroleum Ltd. The ministry of petroleum maintain to hold licensing around in an attempt to support exploration process and boost domestic oil production.











Essar Oil


IOCL is the largest public sector in country in basis of its turnover. IOCL has its dominant position in Indian oil industry even though the private companies like Reliance Petroleum, Essar, Shell etc getting stronger in the industry. Now a day market getting competitive more than198o’s and 1990’s.

Competition in Exploration

Exploration is the primary step in production of oil and gas. Exploration and production of oil and gas is vital for India’s economic growth and energy security. IOCL has been concentrating exploration and production process both inside and outside India in association with syndicate partner. IOCL is related with 2 flourishing inventions in oil exploration blocks, one each in Iran and India.

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From the above table it is very clear that the IOCL is facing very tight competition from the private as well as the public firms which are in same industry. Exploration and production of petroleum and gas is the major factor that affects in the economy of the country so the Government is also encouraging the competition in the refining and the production. The main competitors are ONGC and OIL Corporation. ONGC is consisting with the gas production also that’s why they having domination position in the exploration sector. IOCL have to develop some e good strategies to attain a good position in this sector.

Competition in petrochemicals

Petrochemicals govern universal chemical market about share of 40 %. The industry is looking towards the undergoing metamorphosis, in this IOCL have to compete with some of the forign companies as well. Petrochemicals are related to daily life products.

In the production of petrochemicals IOCL had a dominant position in the early period of the industry. Now-a-day the dominant position is being challenged by the competitors in the industries. Reliance and Essar also knows their market credibility in the industry so by 2015 the competition for the market production will be strong and huge. It estimated as, by 2011-12 production will decrease in huge by intervene of the competitors. These will keep the management in a critical situation, as per the statistical information they have to the prevention measure for the situations in front of them.

Competition in Refining Industry

Indian oil industry is consist of 18 refinaries public sector and 3 in private sector,which have the total installed capacity of 127.35 MMTPA (ministry of petroleum, 2011). Out of these 18 refineries 8 belongs to IOCL. By June 2011 as vision to increase the productivity of oil and GDP Government granted three new refineries two of them s in the private sector. This will increase the competition from the private sector.

IOCL is the largest refining company in India from its starting. Currently they are in good position comparing to the other public sectors. Their production is high because of the number of refineries. By the new Government policies the competitive market is rising towards the dominant position of IOCL. Private companies like Reliance, Essar showing fast growth in this sector this will be a threat to IOCL in future.


Competition in Indian oil industry is being increasing so the company should have to take necessary steps to retain their customers. Now in the business customer is the keen factor that is, “Customer sat-is- faction”. Therefore IOCL have to focus on their customer’s needs and satisfaction.

It is the method of measuring how product and services distributed by a company meets or surpasses his expectation from the current situation the customers in country are not satisfied by the IOCL. IOCL has a good brand position in Indian oil industry that’s why lot of customers are choosing IOCL products. But the firm is not much bothered about their customers. There are lot of complaints regarding their distribution, products availability, service quality, customer service one of the major problem faced by the customers are the booking system. The management is utter fail in that system. The management should have to implement innovative systems. By the privatisation the private firms are coming with attractive customer oriented products Reliance and Essar providing good and timely customer service for their consumers now-a-day the trend shows most of the customers are depending private firms by giving preference to the conformability .

IOCL’s distribution channel controlling is very narrow with limited systems which were not connecting customers with the company. They have to accept some of the new effective systems in the management that giving customer preference.

The customer service in IOCL is one of the major drawbacks of the firm. The customer service should have the ability to satisfy the needs of the customers.

Customers are not satisfied with the newly implemented e-payment system. It is remaining as burden over the head of management.

Increase in the industry also affected the customer attrition and customer reaction.



According to (Geoffrey Marczyk, 2005) Research Design is the structure and the plan for investigating and covering the collected, measured and investigated data in a blue print. As per AHM (American Heritage College Dictionary) research is a systematic enquiry or investigative study or to analyse something thoroughly. In most simple words it is the method of finding solutions to problems. (Mackey & Gass, 2005)

Research onion


Source : (Saunders et al., 2006)

This is a model of research. In this model collection and study of information are considered as layer of onion each layer shows each stage of studies.



Source: (Detmar strub, 2010)

Exploratory Research:

This is a method of research using to evaluate the issues and the possibilities of a firm. Forms of this study are secondary data investigation, experience surveys, Pilot studies, focus groups, and pilot study of case analysis. It is mainly based on qualitative information other than the quantitative factors. This method will be helpful to find out the quantitative information about IOCL and Indian Oil and Gas Industry.

Source: (Courses, 2012)

Conclusive research

If considering a conclusive research on IOCL. To find out the quantitative data we have to apply two different type of conclusive research.

Descriptive Research

This method have been using widely for the researches to study the current position, evaluate the industry and the competitive nature. (DJS Research, 2011). This method is using to analyse the effect of the Crude oil price of IOCL in Indian oil sector.

Causal Research

This method used to find the factors that cause another issues for the company. It is the evaluation of cause and effects of factors (MJ Research, 2008). Here In the case of IOCL, competitors plays in the downfall of market share price.


Taking decision on what type of sample should have to choose for study or survey. Method of planning the steps and the procedure to collect the information from the sample of people that available (OECD, 2006)

cost effectiveness

reasonable factors

thorough study

time management


Various methods of samplings are using for research purpose. These methods are using for obtaining a sample from general population and it is vital process to evade bias in selection process. (Cramster, 2012)




Systematic Sampling

Stratified Sampling

Multi-stage Sampling

Convenience Sampling:

Judgement Sampling:

Quota Sampling:

. (Castillo, 2009)


In this method the researcher can accept a sample from a population of same nature. It’s a method of collecting samples from a population having equal chances to be selected. There are three types of probability sampling.


This can be says as collection of samples from a specified category of population. It can be says as taking a sample from workers in the IOCL in India and taking information from them. Sample selection will be a random process and cannot be estimate respondents nature. Essentials in non-probability are chosen arbitrarily and there is no chance to estimate any individual built in the sample. (StatisticsCanada, 2009)

Collection of Data

It is practice or procedure that uses to collect experimental data. There are lot of methods are using for collecting data. The relevancy of the data decides the method that has to follow. There are lot of collection method, Triangulation method is one among them.


This method is consisting of three steps they are,

Historical Research it includes with secondary data collection. In this step should have to collect all the previous data including qualitative and quantitative data. While considering IOCL, collection of information about domestic production of oil in last 8 years.

Key Informants is collecting of primary data consisting of qualitative nature. Collection of information regarding performance of HR in IOCL is involved in this step.

Surveys final step of collecting data through surveys from samples, customers workers etc it is also a primary data collection. Collection of information of IOCL by giving questionnaires to customers. This data are consisting of both qualitative and quantitative data.


(Koppa, 2011)

This figure shows the methods and areas of data collection data collection. In this figure it describes about the steps of the collecting data.

Types of Data


(ROHAN Academic Computing, 2011)


This study is based on the qualitative factors of IOCL India.it is to find out how the issues affecting its management performance? This study is based on the employee’s survey. It would help to know the management challenges due to the internal and external issues. Methods like focus group interview and pilot studies helped lot to get straight information about IOCL.


Data analysis is the process getting collectively quantitative and qualitative data to develop answers to the research questions. (national service resources, 2008)

(national service resources, 2008)



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