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CHAPTER - 3

3.1 Research Methodology

3.2 Review of Literature

3.3 Brief Profile & History of Selected Oil Industry

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3.1 RESEARCH METHODOLOGY

3.1.1 Introduction

3.1.2 Title of Research Problem

3.1.3 Scope of Research study

3.1.4 Period of the Study

3.1.5 Objective of the study

3.1.6 Hypothesis of the study

3.1.7 Significance of the study

3.1.8 Research design

3.1.9 Sample Design

3.1.10 Data Collection

3.1.11 Statistical Technique

3.1.12 Chapter Plan of the Study

3.1.13 Limitation of the study

3.1.14 Future Scope of the Study

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3.1.1 INTRODUCTION

Research in common parlance refers to a search for knowledge. Research, simply

put, is an endeavor to discover answers to problems through the application of

scientific method to the knowable universe. “Research is essentially a systematic

enquiry seeking facts through objective verifiable methods in order to discover the

relationship among them and to deduce from them broad principles or laws1.” It is

really a method of critical thinking.

For most of the last century, firms in certain industries, especially public utility

industries such as energy, transportation and communications, have been public

owned or regulated to alleviate public fears that such firms would use market power

to raise prices artificially. Many of these industries exhibited scale economies, which

mean that a single firm would have the lowest cost of production and could

monopolize the industry. Hence, these industries were treated as natural monopolies

and regulated to control entry, prices and profits. Energy privatization has been part

and parcel of a recent trend, which has placed greater reliance on market forces and

less dependence in government in the allocation of resources. For many nations,

their formerly state owned energy companies have been among the largest of

companies to be privatized. Energy companies that have been privatized include

some of world‟s largest Oil & Petroleum companies based in the industrialized

nations. Giants, such as British Petroleum, British Gas, ENI (Italy), Petrol (Canada),

Repsol (Spain) and TOTAL (France), have all undergone transitions form state –

owned to significant degree of private ownership.

By global standards, India is just at the beginning of the energy reforms. We

however have an ideal opportunity to learn from these worldwide experiences of the

restructuring of the energy industries and put in place the policy framework that

draws from the best international practices. This will then enable us to leapfrog into

new scales of development process. Seeing to oil sector development process, the

crude oil production shows uneven growth from 1972 to 2001. During 2000-01 230

crores of rupees import was recorded whereas 203 crores rupees were exported by

India. It shows the gap of 2 crores rupees. Beside this, the demand of petroleum

product in India was increased every year. 1950s and the 1960s were the years of

rapid rates of increase of global oil demand, when oil demand grew by an average of

7.7 % per year. The World‟s total Primary Energy Consumption in 2000 was 9,096

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million tons of oil equivalent, and with a world population of 6,056 million. The total

investment envisaged over the next 25 years in the downstream petroleum sector is

a whopping Rs.3,70,000 crores or US $ 80 billion.

Energy Intensity of an economy refers to the energy consumption per unit of GDP.

The Economic growth and Energy demand are linked, however energy intensity is

influenced by the stage of the economic development of particular economy and the

standard of living of individuals. There is an unequivocal agreement that the quality

of economic infrastructure particular, in India is a serious impediment to accelerating

growth. Energy industry is obviously one of the most critical areas. Improving India‟s

energy infrastructure requires a massive increase in investment in all the sub

sectors. It also requires much greater levels of efficiency to ensure low cost and

good quality of service.

Thus, the researcher would like to conduct the research in Oil Industry. The study is

important in views of researcher by considering important of financial performance in

profitability, liquidity, asset of leading refineries of oil sector industry. The researcher

will try to shows the whole pictures of selected Oil Industry and their various financial

factors which affect the industry in various financial aspects.

Meaning of Research

Clifford Woddy has defined research. According to him, “the research comprises

defining and redefining problems, formulating hypothesis or suggested solutions,

organizing and evaluating data, making deductions and reaching conclusions, and at

last carefully testing the conclusions to determine whether they fit the formulating

hypothesis.”

According to Robert Ross, “Research is essentially an investigation, a recording and

an analysis of evidence for the purpose of gaining knowledge2.”

Meaning of Research Methodology

Social scientists grapple with numerous problems of bay to bay life. The complexity

of problems of present day society makes it imperative for the social scientists to

present day society makes it imperative for the social scientists to pursue a reliable

course of action or a scientifically devised procedure of inquiry. Value free research

or social inquiry without bias is the need of the twentieth century social sciences. Our

search for definition of methodology would require us to know the nature of the

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course pursued by research scholars in social sciences. “The procedures by which

researchers go about their work of describing, explaining and predicting phenomena

are called methodology3.” All the methods used by social scientists in their fact

finding mission constitute methodology.

3.1.2 TITLE OF RESEARCH PROBLEM

The petroleum product and crude oil is core sector for any country. Now a days this

sector is open for free market. The main benefits for exploring activity are fiscal

incentives as a royalty and tax connection by the government. In addition to this

attractive pricing and venture capital is another scope for the growth. It plays a vital

role in the development of economics of the enterprise as well as country. So, the

researcher would like to conduct the research on financial performance of oil

industry. The main purpose of the study is to see the basic oil & petroleum scenario

and what is the level of financial performance of the units undertaken the study. In

modern times a number of financial problems are faced by the industry and for

effective and corrective solution of all problems, some analytical study of the

financial performance must be there. This is a doctoral research agenda on…

“A Study of Financial Performance of Selected Oil Industry of India”

The study of financial performance turns out to be very significant and important for

the financial managers, to analyze with various financial aspects. The industry uses

various indicators for measuring its financial performance. This indicates average of

great importance and tells us the true financial position of the industry. Financial

analysis report the efficiency with which the funds entrusted to the management has

been deployed. This attempts to furnish the relevant information for its various users

like creditors, bankers, financial institutions, equity share holders, suppliers,

consumers, government, etc. for their decision making. These indications help in

identifying the strength and weaknesses of the industry and suggestions.

Financial analyst depends primarily on financial statements to diagnose financial

performance. Because as long as accounting biases remain more or less the same

overtime meaningful inferences can be drawn by examining trend and raw data in

financial ratios. As well as similar biases characterize various firms in the same

industry, inter firm comparisons are useful. If properly analyzed and interpreted,

financial statements can provide valuable insights into a firm‟s performance. Analysis

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of financial statements is of interest of lenders, investors, security analyst, managers

and others. Financial statement analysis may be done for a variety of purposes

which may range from a simply analysis of short-term liquidity position of the firm to

a comprehensive assessment of the strength and weaknesses of the firm in various

aspects. It is helpful in assessing corporate excellence judging creditworthiness,

forecasting bond writing, predicating bankruptcy and assessing market risk.

An analysis of financial statement can highlight a company‟s strength and short

comings. This information can be used by management to improve performance and

by others to predicate future results. Financial analysis can be used to predicate how

such strategic decisions as a sale of a division, major marketing program or

expanding a plant are likely to affect future financial performance.

So, the main purpose of the research is to be helpful to take financial and managerial

decisions by the external and internal stoke holders.

3.1.3 SCOPE OF THE RESEARCH STUDY

The scope of this research study is as under:

Functional Scope

Functional scope of this study is to analyze Financial Performance of selected Indian

Oil industry.

Geographical Scope

In this study researcher selected 10 Oil Industries which are working and producing

crude oil & petroleum production in India. So, whole India is geographical criteria for

this research study.

3.1.4 PERIOD OF RESEARCH STUDY

This research study covered the data of last ten years of the functioning of the

selected Oil Industries. A longer period could have been still better but due to time

and resource constraints, the last ten years not very short period has been taken for

analyzing the data of research program. The study period is 10 years, starting from

financial year 2003-04 to 2012-13.

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3.1.5 OBJECTIVES OF THE STUDY

Objective is a base for any work. The objectives determine the future and outcome of

the research. No one work is started without any objectives. The present research

work has the following objectives.

To study the financial position of selected Oil Industries of India.

To study the effective financial structure of selected Oil Industries of India.

To evaluate the financial performance of selected Oil Industries of India

through the annual accounts of appropriate ratios.

To examine the Impact of global competitiveness on the overall profitability of

the selected Oil Industries.

To make comparative study of relation of financial performance of selected Oil

Industries of India.

To make suitable suggestions based on research findings to improve the

effectiveness and efficiency of Indian Oil industries.

3.1.6 HYPOTHESES OF THE STUDY

In present study is based on some of the hypothesis which is explained as below:

Ho: There is no significant difference in Gross Profit Ratio of selected Oil Industries

during the period of study.

H1: There is significant difference in Gross Profit Ratio of selected Oil Industries

during the period of study.

Ho: There is no significant difference in Net Profit Ratio of selected Oil Industries

during the period of study.

H1: There is significant difference in Net Profit Ratio of selected Oil Industries

during the period of study.

Ho: There is no significant difference in Operating Profit Ratio of selected Oil

Industries during the period of study.

H1: There is significant difference in Operating Profit Ratio of selected Oil Industries

during the period of study.

Ho: There is no significant difference in Current Ratio of selected Oil Industries

during the period of study.

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H1: There is significant difference in Current Ratio of selected Oil Industries

during the period of study.

Ho: There is no significant difference in Debt Equity Ratio of selected Oil Industries

during the period of study.

H1: There is significant difference in Debt Equity Ratio of selected Oil Industries

during the period of study.

Ho: There is no significant difference in Debtors Turnover Ratio of selected Oil

Industries during the period of study.

H1: There is significant difference in Debtors Turnover Ratio of selected Oil

Industries during the period of study.

Ho: There is no significant difference in Fixed Assets Turnover Ratio of selected Oil

Industries during the period of study.

H1: There is significant difference in Fixed Assets Turnover Ratio of selected Oil

Industries during the period of study.

Ho: There is no significant difference in Return on Capital Employed Ratio of

selected oil Industries during the period of study.

H1: There is significant difference in Return on Capital Employed Ratio of selected

Oil Industries during the period of study

Ho: There is no significant difference in Dividend Payout Ratio of selected Oil

Industries during the period of study.

H1: There is significant difference in Dividend Payout Ratio of selected Oil

Industries during the period of study.

Ho: There is no significant difference in Earnings per Share of selected Oil

Industries during the period of study.

H1: There is significant difference in Earnings per Share of selected Oil Industries

during the period of study.

3.1.7 SIGNIFICANCE OF THE STUDY

As earlier mentioned in the introduction the industry is core industry and it has a very

large investment in the country. So it can be said that the large investments are

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blocked in the oil industries undertaken for the study for the research purpose, there

have been many reasons for the significance of the study. The significance of the

study is as under:

If analysis is done with respect to various aspects like liquidity, profitability,

asset utilization, the relevant information can be furnished to its various users

for their decision making. It is also necessary to find out some important

factors which affect internal decision of industry. So this research will be

useful to Oil & Petroleum Industry itself.

As far as many financial and non-financial institutes and government institutes

are affected by their various financial aspects, the various ratios should be

analyzed and the most common factors affecting is oil industries‟ financial

position should be studied. So researcher feels its necessity and importance

and therefore has chosen this subject for his doctoral research purpose.

Privatization is taking place in the oil sector. So, there should not be

monopolization of any industry and competitiveness should be increased

among all the industries. To create this situation, every unit or industry should

find out their financial position and various factors which affect their financial

conditions. This study will help to create this type of condition.

A large mass of the country has started to invest their money in the share

markets. The financial analysis will be helpful to them to take proper decision

to invest their money in these sectors.

Oil & Petroleum are natural product and their sources are very limited. But the

demand of petroleum product is increasing day by day. Oil demand grew by

an average of 7.7% per year in last few years. For this, government should

control its profitability and rate of oil prices. So if the data should be analyses

financially profitability and other financial aspects can be brought to the notice

of this core industry.

The thesis will be a guiding path for the analysis of the study of the units,

companies & industries.

Saurashtra University or Other University M. Phil students have undertaken

the research study by taking two Oil Industries and tried to make financial

analysis of relevant data. This study that undertakes Ten Oil Industries for the

research purpose will be the further analysis of the industry.

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3.1.8 RESEARCH DESIGN

According to Claire Selltiz, “Research Design is the arrangement of the conditions for

collection and analysis of data in a manner that aims to combine relevance to the

research purpose with economy in procedure „Architects Design‟ a plan before

constructing a building bearing well in mind the purpose for which the building is to

be used4.”

For the financial analysis, each unit first of all finds out the ratio of gross profit ratio,

net profit ratio, operating profit ratio & current ratio with its graphical representation.

Every Oil industry unit‟s working capital efficiency level has been tested through

debtor‟s turnover ratio and fixed turnover ratio indicates the extent to which the

investments in fixed assets contribute towards sales. To check the financial position

ratio of all Oil industry units will be used chi-square test. The test is a technique

through the use of which it is possible for all researchers to test the goodness of fit,

test the significance of association between two attributes and test the homogeneity

or the significance of population variance.

After testing every unit of ratio further, a hypothesis will be tested for the ratio that

whether there is significant difference in the ratio trend for the period of study for the

units undertaken for the study. If the hypothesis is accepted there is no significant

difference in the ratio of units and if it is rejected, there is significant difference in the

units for the period of study. Thus there is analysis test of chi-square of selected Oil

Industries.

Thereafter, to will be conducted to find out the F-test Analysis of Variance (ANOVA)

of each units of oil industry, whether all ratios have been correlates with one another

and thus a table of F- test has been calculated. ANOVA is a general technique that

can be used to test the hypothesis that the means among two or more groups are

equal, under the assumption that the sampled populations are normally distributed.

After testing every unit with F - test further, a hypothesis will be tested for the ratio to

see whether there is significant difference in the ratio trend for the period of study

among the units under taken for the study. If the hypothesis is accepted, there is no

significant difference in the ratio of units and if it is rejected, there is significant

difference in the units for the period of study .Thus, there is comparison analysis and

hypotheses testing of all ratios.

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3.1.9 SAMPLE DESIGN

The petroleum products and crude oil is core sector for any country. Now days, this

sector is open as free market. The main benefits for exploring activities are fiscal

incentives in the royalty and tax connection by the government. In addition to this

attractive pricing and venture capital is another scope for the growth. It plays a vital

role in the development of economics of the enterprise as well as country. So, the

researcher would like to conduct the research on financial performance of oil

industry. The main purpose of the study is to see the basic oil & petroleum scenario

and what is the level of financial performance of the units undertaken in the study. In

modern times a number of financial problems are faced by the industry and for

effective and corrective solution of all problems, some analytical study of the

financial performance must be there. Thus, the researcher would like to conduct the

research in Oil Industry. The study is important in view of researcher by considering

importance of financial performance in profitability, liquidity, asset of leading

refineries of oil sector industry. The researcher will try to show the whole picture of

selected Oil Industry and their various financial factors which affect the industry in

various financial aspects.

The Universe of the study is all the leading units which are working in the

Oil/Refinery sector. At initial stage researcher has decided to take all the unit of

Oil/refinery sector for his research purpose but after collection of data, researcher

decided to include only 10 Oil Industries for his research. These are the best

companies in oil and gas exploration.

The following Oil/Petroleum Industries which give the picture of oil sectors of India

have been taken for the study.

1. Bharat Petroleum Corporation Limited (BPCL)

2. Chennai Petroleum Corporation Limited (CPCL)

3. Essar oil Limited (EOL)

4. Gas Authority of India Limited (GAIL)

5. Hindustan Petroleum Corporation Limited (HPCL)

6. Indian Oil Corporation Limited (IOCL)

7. Manali Petrochemicals Limited (MPL)

8. Mangalore Refinery & Petroleum Limited (MRPL)

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9. Oil & Natural Gas Corporation Limited (ONGC)

10. Reliance Petroleum Limited (RPL)

3.1.10 DATA COLLECTION

The data collection is very important task for the researcher for the research study.

This research study is mainly based on secondary data. The secondary data shall be

collected from the records, documents, related subject matter and related websites.

Besides, the researcher shall collect and analyze published data as per the

requirement.

As such, the universe of this research study is restricted to selected Oil Industries

which are working in India, so, researcher has selected 10 Oil Industries. The data

regarding selected Oil Industries have been obtained and collected from the annual

report of the Oil Industries and related websites.

3.1.11 STATISTCAL TECHNIQUES

The main base of this study is to analyze Financial Performance of Selected Oil

Industries of India. Verifying and testing these hypotheses, some statistical

techniques have been used. Here, mainly applied test or techniques are as under.

1. Average/Mean

The most commonly used average is the arithmetic mean, briefly referred to as the

mean. The mean can be found by adding all the variables and dividing it by total

number of the years taken. It gives a brief picture of a large group which represents

and gives a basic of comparison with other groups.

2. The Standard Deviation

The Standard Deviation concept was introduced by Karl Pearson in 1823. It is by far

the most important and widely used measure of studying dispersion. Standard

deviation is also known as root mean square deviation for the reason that it is the

square root of the mean of the square deviation from arithmetic mean.

3. T-Test

T-test is based on T-Distribution and is considered an appropriate test for judging the

significance of a sample mean. It can also be used for judging the significance of the

Co-efficient of simple and partial Co-relations. The relevant test is calculated from

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the sample data and then compared with its problem value based on T-distribution at

a specified level of significance for concerning degree of freedom for accepting or

rejecting the Null Hypothesis.

4. F-Test or ANOVA (Analysis of Variances)

Analysis of variance is an extremely useful technique concerning researches in the

fields of economics, biology, psychology, sociology, business industry and in

researches of several other disciplines. This technique is used when multiple sample

cases are involved. The basic principle of ANOVA is to test the differences among

the means of the population by examining the amount of variation within each of

these samples, relative to the amount of variation between the samples. In terms of

variation within the given population, it is assumed that the values differ from the

mean of this population only because of random effects i.e., there are influences

which are unexplainable whereas in examining differences between populations we

assume that the difference between the means of the population and the grand

mean is attributable to what is called a „specific factor‟ or what is technically

described as „treatment effect‟. Thus while using ANOVA; we assume that each of

the samples is drawn from a normal population and that each of this population has

the same variances. We also assume that all factors other than the one or more

being tested are effectively controlled.

The value of F is to be compared to the F-limit for given degrees of freedom. If the F

value researcher works out is equal or exceeds the F-limit value, researcher may say

that there are significant differences between the means.

ANOVA is a general technique that can be used to test the hypothesis that the

means among two or more groups are equal, under the assumption that the sampled

populations are normally distributed. The ANOVA is classified into one-way and two-

way. One-way ANOVA evaluates the effect of a single factor on a single response

variable. Two way classifications are applicable when the data is classified on the

basis of two factors5.

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5. Chi-Square Test or Test

In order that we may apply the chi-square test either as a test of goodness of fit or as

a test to judge the significance of association between attributes, it is necessary that

the observed as well as theoretical or expected frequencies must be grouped in the

same way and the theoretical distribution must be adjusted to give same total

frequency as we find in case of observed distribution. Chi-Square is then calculated

as follows6:

∑[( )

]

Where

fo = Observed frequency of the cell in row and column.

fe = Expected frequency of the cell in row and column

6. Time Series Analysis

Morris Hamburg defines time series as - “A time series is a set of statistical

observations arranged in chronological order.” One of the most important tasks

before economist and businessmen these days it is make estimates for the future.

The first step in making estimates for the future consists of gathering information

from the past. In this connection one usually deals with statistical data, are collected,

observed or recorded at successive intervals of time. Such data are generally

referred to as “Time Series”. In the analysis of time series, time is the most important

factor because the variable is related to time which may be either year, month, week,

day, hour or even minutes or seconds. Time series data are of two kinds viz., period

data and point data. Period data refers to the accumulated value of a flow variable

during a particular period. Point data refers to the value of a stock variable at a point

of time. The essential requirements of a time series are:

1. It must consist of a homogeneous set of values.

2. The data should be available for a sufficiently long period say, for 7 to 10

relevant time periods.

3. The time elapsing between various values must, as far as possible, be equal.

4. The gaps, if any, in the data should be made up by interpolation.

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The analysis of time series is useful in administration, planning, evaluation of socio-

economic progress as well as for research in various scientific field including pure

science and humanities7.

3.1.12 CHAPTER PLAN OF THE STUDY

1. Overview of Oil Industry of India

This chapter includes Introduction of Oil Industry, Meaning and Definition of the Oil &

Oil Industry, Brief History of the Oil Industry, History of the Oil Industry in India,

Globalization & The Indian Oil Industry, Structure & Current Status of Oil Industry in

India, Performance of Indian Oil/Petroleum Industry, Indian Economy & Oil Industry,

Evolution of Indian Oil & Gas Industry, Development of Oil Industry Sector in India,

The Oil Industry Present Scenario and Careers in the Oil & Gas Industry.

2. Conceptual Framework of Financial Performance

This chapter includes Concept, Types, Objective, Characteristics and Nature of

Financial Statement, Essential Qualities and techniques of Financial Statement,

Classification of Ratio, Ratio Analysis, Advantages and Limitation of Ratio Analysis,

Limitation of Financial Statement and Use of Financial Data for the Performance

Evaluation of the unit.

3. Research Methodology, Review of Literature and Brief Profile & History of

Selected oil Industries

This chapter includes the Title of Research problem, Scope of Research study,

Objective, Hypotheses, Significance and Period of the Study, Research & Sample

Design, Data Collection, Statistical Techniques, Limitation of the study & Plan of the

Study, Meaning of literature Review and Literature Survey for the Research Work.

This chapter also includes brief profiles and History of 10 selected Oil Industries.

4. Data Analysis & Interpretation - I

This chapter covers the analysis of Chi-Square test of Selected Oil Industry. This

chapter also covers the broader hypotheses testing and the conclusion drawn on the

basis of the analysis.

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5. Data Analysis & Interpretation - II

As the title states, this chapter covers the analysis of the results obtained with the

research methodology and also includes Comparative Study of Financial

Performance of Selected Oil Industries using various statistical tools and techniques

and also includes F-test (ANOVA) Analysis.

6. Summary, Findings, Conclusion and Suggestions

This chapter covers major findings and suggestions for the Financial Performance

and Profitability. So, researcher can say that this chapter provides solid and useful

information to the Oil industry and at last conclusion of this research study will be

included.

3.1.13 LIMITATIONS OF THE STUDY

Any study cannot be free from limitations. Some limitations such as, the limitation of

time, areas, economic factors and scope as well as the method of the study. Some

limitations for present research work are as under.

Scope of this study is wider but sample size is limited to only 10 Oil Industries

in this study.

This research study is based on secondary data collected from annual reports

of various Oil Industries units and related websites. The limitation of the

secondary data and its findings depend entirely on the accuracy of such data.

The data, which is used for his study is based on annual report of the Oil

Industries units and secondary data collected from published reports from

time to time. Therefore, the quality of this research depends on quality and

reliability of data published in annual reports.

Results of this research are confined and limited to the selected Oil Industries

units

The study is limited to 10 years (2003-04 to 2012-13) only.

There are different methods to measure efficiency, effectiveness and

profitability.

The present study is based on ratio analysis and it has its own limitation that

applied to this study also.

Financial statements are normally prepared on the concept of historical cost.

They do not reflect values in terms of current cost. Thus, financial analysis on

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such financial statements or accounting figures would not portray the effects

of price level changing over the period.

Financial analysis does not depict those facts which cannot be expressed in

terms of money, for example; efficiency of workers, reputation and prestige of

the management.

3.1.14 FUTURE SCOPE OF THE STUDY

Ten Oil Industries have been taken for the period of ten years i.e. 2003-04 to 2012-

13 for the analytical study of performance of the sampled units. The researcher has

covered most of the financial parts of the sampled units. However there are more

scopes for further study.

The financial aspects of these 10 units have been analyzed by performance

analysis. Still many aspects of these units such as inventory, managerial

decision, costing method, market policies, social responsibilities, human

resource management etc. can be studied in future. There is a great scope for

further research in these areas.

This study is limited up to the period 2012-13. Still their financial performance

can be continued for coming years. Thus, this field is open for further

research.

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REFERENCES

1. Kothari C. R., “Research Methodology: Method & Techniques”, Published by

New Age International (p) Ltd., New Delhi, 2004, p. 1.

2. Ibid, p. 2.

3. Ramanath H.R., “Research Methodology & Operation Research”, Published

by Himalaya Publishing House Pvt. Ltd., Mubai, 2007, p. 26.

4. Sachdeva J. K., “Business Research Methodology”, Published by Himalaya

Publishing House Pvt. Ltd., Mumbai, 2008 p. 43.

5. Parmar S.J., “Financial Efficiency Modern Methods Tools & Techniques”,

Published by Raj book enterprises, Jaipur, 2001, p. 61.

6. Gupta S.P., “Statistical Methods”, Published by Sultan Chand & Sons

Educational Publishers. New Delhi, 2001, p. 282.

7. Ibid, p. 284.

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3.2 REVIEW OF LITERATURE

3.2.1 Meaning of Literature Review

3.2.2 Literature Survey for the Research Work

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3.2.1 MEANING OF LITERATURE REVIEW

A literature review is designed to identify related research, to set the current

research project within a conceptual and theoretical context. When looked at that

way, there is almost no topic that is so new or unique that they can‟t locate relevant

and informative related research. The literature review section examines recent

research studies company data or industry reports that act as a basis for proposed

study. Begin your discussion of the related literature and secondary data from a

comprehensive perspective, moving to more specific studies that are associated with

your problems. If the problem has a historical background, begin with the earliest

references.

The literature review also explains the need for the proposed work to appraise the

short comings and informational gaps in secondary data sources. This analysis may

go beyond scrutinizing the availability or conclusions of past studies and their data,

to examining the accuracy of secondary sources. The credibility to the sources and

the appropriateness of earlier studies close the literature review section by

summarizing the important aspects of the literature and interpreting them in terms of

your problems. Refine the problems as necessary in light of your findings.

3.2.2 LITERATURE SURVEY FOR THE RESEARCH WORK

Literature survey for the research work is as follows:

Manoj Anand (2005)

In this paper, difficult times have their own merits. This is as truer for an individual as

it is for an organization. These are the times when the entire organization gets an

opportunity to display its resilience through its innovative skills and creative abilities.

After the liberalization of the Indian economy in 1991 and the opening of the oil

sector, CIL focused on volume growth and achieved a market share of 20 percent. In

the growth phase, cost efficiency and cost effectiveness of the operational aspects

were ignored. In the late 1990, due to increased competition and acquisition of CIL

by British Petroleum, the focus shifted from high growth to efficient supply chain

management. This brought about a sea change in the cost and performance

management systems at CIL. It required a cultural change from chasing production

volume targets to developing competitiveness through total quality management,

http://papers.ssrn.com/sol3/cf_dev/AbsByAuth.cfm?per_id=372553http://papers.ssrn.com/sol3/cf_dev/AbsByAuth.cfm?per_id=372553

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business process reengineering, activity-based cost management system, and

change in mindset. The focus of performance contract changed from a few financial

measures to a broad set of perspectives to achieve the company's corporate

mission1.

Srinivas Kolluru (2005)

In this study, the Indian steel industry has been showing tremendous improvements

in terms of growth in capacity, production and exports and has become a major

competitor in the global arena, thanks to the forces of deregulation and globalization.

Keeping in view the current performance, the future looks bright for the domestic

steel industry. India will be among the top 5 consumers of steel by 2010. The primary

objective of this study is to measure an overall index of performance across the

Indian steel companies based on eleven financial ratios including the profit ratio for

each company by using the globally popular method – the Taxonomic Method. This

method is preferred over the parametric methods using flexible functional forms and

the Data Envelope Analysis (DEA). The empirical results show that, overall

composite index would serve as a better performance indicator than the conventional

stand-alone operating profit margin. Statistically speaking, the performance of eleven

companies appeared to be converging during 1999-2003. The regression results

reveal that the size factor - log (assets) - has been dominant. Contrary to

conventional expectations the sign of market share shows positive and significant

relation with overall performance2.

Surender Kumar (2005)

In this study assesses the oil prices-macroeconomic relationship by means of

multivariate VAR using both linear and non-linear specifications. Scaled oil prices

model outperforms other models used in the study. It studies the impacts of oil price

shocks on the growth of industrial production for Indian economy over the period

1975 to 2004. It is found that oil prices Granger cause macroeconomic activities.

Evidence of asymmetric impact of oil price shocks on industrial growth is found. Oil

price shocks negatively affect the growth of industrial production and they find that

an hundred percent increase in oil prices lowers the growth of industrial production

by one percent. Moreover, the variance decomposition analysis while putting the

study in perspective finds that the oil price shocks combined with the monetary

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shocks are the largest source of variation in industrial production growth other than

the variable itself3.

P. Srinivasan (2007)

In this Study, the Johansen‟s co-integration technique followed by the Vector Error

Correction Model (VECM) were employed to examine the causal relationship

between National Stock Exchange (NSE) spot and futures markets prices of selected

nine oil and gas industry stocks of India. The empirical analysis was conducted on

the daily data series from May 12th, 2005 to January 29th, 2009. The analysis reveals

that there exists a long-run relationship between spot and futures prices of each of

the selected individual securities. Besides, the study also indicates a bidirectional

relationship between spot and futures markets prices in the case of four oil industry

stocks, spot leading the futures price in the case of three stocks, and the futures

leading the spot price in the case of two selected gas and oil industry stocks4.

Narayan Rao Sapar (2008)

In this paper earnings management occurs when managers use judgment in

financial reporting and in structural transactions to alter financial reports to either

mislead some stakeholders about the underlying performances of the company or to

influence contractual outcomes that depend on reported financial performance. Many

research studies are conducted to investigate the earnings management in

developed economies. Due to regulated operating environment of in India until 1992

earnings management was not a fertile topic for research. But, post-1992 companies

are given freedom to price their capital issues. This freedom motivates the issuers to

manage their earnings prior to capital issues. The objectives of the study are to

investigate if firms in India manage earnings prior to launching of equity rights issues

and the post issue performance of the firms. They used discretionary current

accruals (DCAs) to measure the extent of earnings management. Modified Jones

Model is used to estimate DCAs during three years prior to the rights issue (pre-

issue period) and three years after the rights issue (post-issue period). DCAs of

rights issue firms are adjusted for DCAs of control sample (non-rights issuers).

Adjusted mean DCAs of pre-issue period are compared with adjusted mean DCAs of

the post-issue period to detect earnings management. The results suggest that there

has been earnings management prior to the rights issues. Analysis of pre-and-post

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issue performance the sample firms corroborate the findings based on DCAs. Study

period is 1993-94 to 2003-04. Sample size is 2595.

Vaibhav Datta Pangam (2009)

In this study, energy use has been central to the development of the world economy

over many centuries, and remains crucial for alleviating poverty, expanding

economic opportunities, providing light, heat and mobility, and enhancing the

welfare. To the fore are fossil fuels that provide more than 90% of the world‟s total

commercial energy needs, with oil the leading source in the global energy mix. The

study deals with global Oil and Gas Industry, a case study on the Indian Gas

industry. Use of Discounted Cash Flow technique to value Selected Oil Marketing

Companies and Gas Companies, The study was undertaken for a period of 7 years

i.e. from 31st March 2005 to 31st March 2011, taking into consideration the financial

performance of the companies over a period of time. Financial Performance from

2009 onwards is forecasted taking into consideration the present financials of the

company, its business and key development6.

Harpreet Singh Bedi (2009)

In this paper, the form and content of the capitalist world economy is fast evolving

and they find capital being increasingly concentrated and centralized as the battle of

market competition intensifies. Companies have to keep running just to stay in the

same place so intense is the competition. One of the factors that make the critical

difference between the companies is the public perception of a business's value

systems that are best exhibited by initiatives in discharging its Corporate Social

Responsibility (CSR). From a long time several Researchers have reported a

positive, negative, and neutral impact of corporate social responsibility (CSR) on

financial performance. This inconsistency may be due to flawed empirical analysis.

In this paper, they study the relationship between social and financial performance of

a company. In present study Top 1000 Indian firms are examined for the financial

year 2007-08, which are rated by karmyog (Mumbai base NGO), but for the purpose

of research only 37 companies were considered, who spend some amount to full fills

their corporate social responsibilities and then relationship between their financial

performance and expenditure on corporate social responsibility is measured by using

correlation and regression. The analysis reveals that there is a positive relationship

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between CSR and financial performance and the descriptive and inferential

measures shows that corporate social expenditure depends upon the financial

performance of the Company. But at the same time they also observe that most of

the top Indian companies are spending nothing on part of their social

responsibilities7.

Sridhar Gogineni (2010)

In this study, they investigate the impact of daily oil price changes on the stock

returns of a wide array of industries. They find that in addition to the stock returns of

industries that depend heavily on oil, stock returns of some industries that use little

oil also are sensitive to oil prices perhaps because their main customers are

impacted by oil price changes. In addition, they present robust estimates of

industries‟ cost-side and demand-side dependence on oil. These measures can

serve as reliable benchmarks when classifying industries into oil-intensive and non-

oil intensive groups, a distinction widely used in studies and media without any

quantitative justification so far. Further, they find that the sensitivity of industries

returns to oil price changes depends on both the cost-side and demand-side

dependence on oil and that the relative effects of these factors vary across

industries8.

Varun Rai (2010)

In this paper, the state-owned company Oil and Natural Gas Corporation Limited

(ONGC) is India‟s largest company devoted to exploration and production (E&P).

This paper attempts to unpack the dynamic of the government-ONGC relationship.

Focusing specifically on how government ownership and control has influenced

ONGC‟s performance and strategy, this paper makes four main arguments. First,

ONGC exists, just as with national oil companies in many other countries, because

of a legacy of suspicion about outsiders. It performed well when it was tasked with

things that were not that difficult and when it had help for the more difficult ventures,

such as frontier E&P and development. Second, ONGC has run into trouble as it

matured, and the roots of its troubles are mainly in its interactions with the GoI and

secondarily in its management. Third, a slew of reforms instituted since the mid-

1990s have fundamentally changed the landscape of the E&P sector in India and the

dynamic of government - ONGC relationship. Targeted at improving corporate

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governance, enhancing competition in E&P, and eliminating price controls, those

reforms have had a mixed impact on ONGC‟s performance and strategy. They also

highlight the difficulties the government has had in encouraging higher efficiencies in

ONGC and the oil and gas sector. Fourth, given the deep interconnects of the oil and

gas sector with India‟s political economy, fixing the oil and gas sector essentially

entails fixing the larger political economy within which the sector is embedded9.

Sunita Sukhija (2010)

In this study, the banking sector is the most dominant sector of the financial system

in India and with good valuations and increasing profits; the sector has been among

the top performers in the markets. Undoubtedly, being tech-savvy and full of

expertise, private banks have played a major role in the development of Indian

banking industry. In the process they have jolted public sector banks out of

complacency and forced them to become more competitive. At present, Private

Banks in India includes leading banks like ICICI Banks, ING Vysya Bank, Kotak

Mahindra Bank, SBI Commercial and International Bank, etc. Private Banks such as

HDFC Bank and ICICI Bank are posting a rapid increase in their asset base every

year as compared to public sector banks. The objective of present paper is to

analyze the financial position of the private sector banks. The analysis reveals that

HDFC is the most efficient bank in terms of generating earning per share. KMB has

higher P/B Ratio it shows that, the higher the premium the market is willing to pay for

the company above its hard assets10.

Priyanka Gupta (2010)

In this study, most organizations today realize that a „satisfied‟ employee is not

necessarily the „best‟ employee in terms of loyalty and productivity. It is only an

„engaged employee‟ who is intellectually and emotionally bound with the

organization, feels passionately about its goals and is committed towards its values.

Employee engagement relates to the employee‟s commitment to the organization‟s

success. Engaged employees who are inspired and guided by the leadership,

equipped with the right tools and managed by the right systems and processes

deliver superior performance. The objective of this study is to determine the level of

employee‟s passion about their work and emotion commitment to their company and

to their coworkers. The study will also provide additional evidence about the impact

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of drivers on employee engagement. Further, the survey is designed to translate the

'softer' aspects of workplace emotions and behaviors into a hard measure of

engagement, which in turn can be linked to organizational outcomes. Employees

respond to each of the 40 questions on a scale of Strongly disagree to Strongly

agree on a range of topics related to employee needs in the workplace such as Pride

for the company, involvement, commitment, friendships, pay, benefits, progress

reports, and job related growth opportunities etc. High scores reflect engaged

employees whose needs are being met and who are fully engaged in improving

workplace productivity. Middle of the range scores reflect workers who are not

engaged, whilst low scores imply disengagement - those employees whose needs

are not being met and who can actually discourage productivity. Study has shown

there is no significant relationship between various variables like age, gender etc.

with Employee Engagement. Trust & Integrity, Compensation & Benefits, Co-

Workers & Work Resources majorly affect the Employee Engagement11.

Pooja Chatterjee (2011)

In this Paper, the shale gas industry in India is poised for rapid development after the

Oil and Natural Gas Company (ONGC) found an „unlimited reserve‟ of shale gas at

Sarpi spread over an area of 1250-1300 sq. km. The Sarpi deposit is Asia‟s first

shale gas pool and the only tapped shale gas reserve outside the commercial

developments in the US and Canada. This has pushed India to identify areas for

commercial exploration and exploitation and formulate a policy to attract investors

and regulate the industry. However development of such resources could face

several roadblocks, if a potential investor chooses project financing as the

mechanism to develop the fields. The objective of this paper is to ascertain the

barriers to project financing shale gas development and how those barriers could be

trounced. To achieve this objective the paper will provide an overview of the fledgling

shale gas industry in India and the problems in financing in light of the political,

financial and market trends. Five primary barriers have been identified: the

regulatory and legal risks, environmental risks, market risk, land acquisition risk and

capital availability risk due to the recent global credit crisis. To mitigate these affects,

this paper recommends certain strategies for overcoming these barriers12.

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Surbhi Arora (2012)

As India is opening up its regions of oil & gas Exploration, Production, Refining and

Marketing and is set to become a potential exporter in this multi-billion dollar

industry. India is well placed to be a major player in the hydrocarbon value chain as it

has 20 refineries with a total refining capacity at over 179 MMTPA and is emerging

as an international destination for oil refining. It is expected to enhance its refining

competence by 45% in the next 5 years and is becoming a significant exporter of

petroleum products. India being the 4th and 6th largest consumer of oil and importer

of oil respectively, imported about 72% of our total oil consumption in the year 2004-

05. During the year 2008-09, Indian refineries have imported 132 million metric

tonnes and our import requirement is expected to increase to 91% by 2003-04 as our

demand for crude oil has been increasing every year but production being stagnant

since last five years. For importing more than seventy percent of our crude oil

requirement, our Indian refineries will have to take lot of vessels. This paper

assesses/analyzes the crude oil import scenario, the number of vessels required for

importing the crude oil from different countries and to estimate the tonnage

requirement for shipping industry in the coming future so that the Indian shipping

industry can take an advantage of this big emerging opportunity13.

Sreeram R. Gopalakrishnan

The Oil Industry in India is mixture of public sector and private sector players. The

prominent ones among these companies are ONGC, GAIL, IOCL, HPCL, BPCL, RIL

and Essar. All these companies are comparable with each other in terms of turnover,

profits and the importance they have in ensuring the energy security of the nation. In

fact, RIL has the biggest presence in the minds of investors, business community

and institutional stakeholders. The company also has a larger than life image often

associated with the entrepreneurial spirit of Dhirubhai Ambani and the somewhat

grudging admiration for the present benefactor of that effort, Mukesh Ambani. But,

for the retail customer, the millions of homemakers and the large consumer of bulk

fuels the three companies IOCL, BPCL & HPCL have a dominant presence too.

Collectively known as the Oil Marketing Companies these three have a triopoly of the

downstream marketing segment of the industry. This segment is also perhaps the

most affected by the policies of the Government14.

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INTERNATIONAL REVIEW

Daniel W. Collins, Michael S. Rozeff & Dan S. Dhaliwal (2000)

In this paper examines the economic reasons for the observed negative abnormal

common stock performance of firms whose reported earnings and stockholders'

equity were negatively affected by the proposed elimination of full cost accounting in

the oil and gas industry. Four explanations of the market effects of this mandatory

accounting change are examined: 1. Naive investor theory, 2. Modified naive

investor theory, 3. Contracting cost theory & 4. Estimation risk theory. These

hypotheses are developed in detail and used to generate variables for a cross-

sectional model which explains observed return behavior. The effect of the

accounting change on total stockholders' equity, the existence of financial contracts

denominated in terms of accounting numbers and, to a lesser extent, firm size are

shown to be important explanatory variables. The importance of these variables is

consistent with both the contracting cost and estimation risk theories15.

Peter C. Reiss (2000)

In this paper studies the investment activities of 44 independent oil and gas firms

from 1978 to 1986. It develops a dynamic model of oil and gas exploration and

development. The model predicts less of a decline in exploration activity than

actually occurred in 1985-86. They consider the extent to which financial factors may

have affected firms' investment plans during the 1985-86 deflation. There is some

evidence that credit contracts in this industry did place important limitations on firm's

abilities to respond to the energy price deflation. These constraints were imposed

because lenders could not separately distinguish between unfavorable industry

developments and poor individual firm performance16.

Roberta Salomone & Giulia Galluccio (2001)

As environmental performance is increasingly seen to have an influence over

financial performance and financial risk assessment, disclosure of environmental

issues in the Annual Reports is a fundamental requirement for a company in order to

satisfy the information needs of its stakeholders. Given this pressure there is a

definite trend among leading companies to report their environmental performances

within the financial statements, but the way companies disclose environmental-

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related information varies from company to company and from country to country.

Besides, the qualitative level of this kind of disclosure, in term of relevance,

comparability and credibility, is not generally very high. More and more voluntary and

regulatory guidelines are emerging to encourage companies to disclose

environmental issues in Annual Report. The aim of this paper is to examine literature

relating to environmental disclosures in the Annual Report and to identify this

environmental disclosure, but also its location and typology, thereby defining current

practices on environmental reporting in Annual Reports of selected firms in the

chemical and oil & gas industries17.

Virginia Lee Acha (2002)

In this study, they seek to unravel the relationship between technological capabilities

and operational performance amongst a peer group of integrated oil companies in

the upstream petroleum industry. They argue that the development and deployment

of technological capabilities and their complex relationship with operational

performance is conditioned by the interpretative frameworks or technology frames of

the firm. The concept of a technology frame builds upon two theoretical flows:

organizational sociology and the resource-based view of the firm. The technology

frame is defined as the firm‟s self-image of its technological resources, capabilities

and opportunities. The technology frame should not be confused with strategy; the

frame is comprised of the evident and latent beliefs that provide the context for

determining strategy. Using conventional metrics, they compiled a dataset of

technological capabilities and operational performance measures for the 10 leading

oil companies for the period 1984 to 1997. Fieldwork interviews and industry

research developed and expanded this analysis. These findings indicate that, not

only is the relationship between technological capabilities and operational

performance too complex to be modeled by simple variables and functions, but also

that the proxy variables reveal the technology frames rather than the technological

capabilities of these firms. To explore the technology frame, they consider two

elements: the firm‟s appraisal of the upstream industry and the nature of the role for

technology. The gearing ratio and R&D expenditures are used as indicators of the

firm‟s appraisal of the dynamics of the upstream industry, while the nature of the role

for technology is proxies by the inclusion or absence of technology management at

the executive board level and the positioning of technology within the Annual Report.

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The existence and value of the frame as a heuristic is then tested through panel data

regressions on key expectations of strategic behavior and outcomes in the area of

technological capabilities of firms. On this basis, they have able to interpret the data

on technological capabilities and their complex relationship with operational

performance in a more consistent and comprehensive manner18.

Matteo Manera & Alessandro Lanza (2003)

In this Paper, the identification of the forces that drive oil stock prices is extremely

important given the size of the Oil & Gas industry and its links with the energy sector

and the environment. In the next decade oil companies will have to deal with

international policies to contrast climate change. This issue is likely to affect

companies' shareholder values. In this paper they focus on the long-run financial

determinants of the stock prices of six major oil companies (Bp, Chevron-Texaco,

Eni, Exxon-Mobil, Royal Dutch Shell, Total-Fina-Elf) using multivariate co-integration

techniques and vector error correction models. Weekly oil stock prices are analyzed

together with the relevant stock market indexes, exchange rates, spot and future oil

prices over the period January 1998-April 2003. The empirical results confirm the

statistical significance of the major financial variables in explaining the long-run

dynamics of oil companies' stock values19.

Anne - Marie Brook, Douglas Sutherland, Douglas Sutherland &

Robert Price (2004)

This paper analyses the factors influencing the price of oil and its likely evolution

over the next quarter century. It begins by investigating the fundamental forces

shaping long-term oil price developments, highlighting the importance of growth-led

demand for oil, particularly that emanating from fast-growing, energy-intensive

developing countries, and the implications of increasingly geographically

concentrated oil reserves. The paper presents oil price projections to 2030 and

examines the sensitivity of the projections to the assumptions about growth and non-

OPEC supply. While certain combinations of factors could lead to a significantly

higher oil price, the projections also suggest that the optimal strategy of resource-

rich oil producers would be to prevent it rising too far. The paper then documents

short-term influences on the oil price, which peaked at $50 a barrel in 2004, and

notes that they have probably led to a significant departure from the long-run

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equilibrium price which could persist for some time. Finally, the paper assesses the

effects of higher oil prices on OECD-area economic activity and inflation. It argues

that these effects have diminished over time, but that monetary policy should remain

vigilant in preventing second-round effects on inflation. At the same time, fiscal policy

should remain orientated towards long-term goals while structural policies should

assist in the development of greater transparency in oil markets20.

Agusman & Elis Deriantino (2005)

This study examines the impact of oil price changes on stock returns of nine industry

sectors in Indonesia using monthly data during the period January 1996 to June

2008. The results suggest that that in general oil price changes do not have

significant impacts on industry stock returns. However, the Government decision to

liberalize domestic oil price in October 2005 has a positive and significant impact on

stock returns of the mining, but a negative and significant impact on stock returns of

the trading sectors. Moreover, using a dummy interaction variable to observe the

impact of oil price hikes following the oil price liberalization policy, they find a

consistent result for the mining and trading sectors, although the impact is also

negative and significant to the consumption and infrastructure sectors. Nevertheless,

the sensitivity of stock returns of these sectors on oil price changes is asymmetric,

given decreasing oil price does not have significant effects on stock returns of any

sectors. This may indicate that decreasing oil price does not always bring good news

to investors21.

Jacqueline Lang Weaver (2006)

This article examines the future of our petroleum-based economy in light of the

voluminous debates over Peak Oil and includes the perspectives of the Western

multinational oil companies themselves. The article surveys the Peak Oil discussions

and the media campaigns of the major oil companies and finds that they reflect three

different, although related, concerns: First, the “true” Peak Oil debate about when

world-wide, long-term oil production will follow the downward slope of the famous

Hubbert curve; second, the causes of the recent doubling in short-term energy

prices, not forecast even as late as 2003; and third, the long-term national security

implications of the Western world's increasing dependence on oil and natural gas

imports from hostile and unstable countries. The article compares the analyses and

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forecasts of the Peak Oil debaters with the views of the major oil companies,

primarily by examining the recent ExxonMobil Energy Outlook through 2030. This

Outlook projects that the world will use 50% more energy in 2030 than in 2005, even

with energy efficiency improvements in both OECD and non-OECD countries. In

2030, oil and gas will still constitute 60% of our energy supplies, the same

percentage as in 2005, but the world has adequate remaining reserves to fuel this

demand. The world's dependence on OPEC crude oil will increase significantly and

consuming countries will become increasingly reliant on imports of LNG. Yet, two

key, understated assumptions of this Outlook are that “timely and adequate energy

supplies” will be available and that “investments can be made in a timely fashion.”

These assumptions appear to assume away the very issues sought to be addressed.

The import of these assumptions is then discussed through BP's analysis of energy

supply and demand fundamentals: that “events always override the fundamentals.”

The article then addresses the six key factors or “events” that, in the author's view,

underlie much of the current Peak Oil discussion, such as the proposition that “Big

Oil is not so big” and “China believes in Peak Oil”. The Shell Global Scenario of

integrated capital markets, trade and market liberalization (the “Open Doors”

scenario) is contrasted with its “Flags” scenario of national preferences, post-9-11

security concerns, and distrust of markets and corporate governance in a post-Enron

world. The article concludes with policy implications of the “eventful” future facing the

traditional petroleum-based economy today22.

Amir Hossein Mabadi (2007)

This article examines the transfer of Technology is one of the significant issues in oil

and gas contracts. At one side petroleum developing countries are concern about

controlling and operating of all phases of their industry‟s operation which in turn, has

led to their awareness of the need to acquire at least an adequate understanding of

the related technology. At the other side, referring to old concession contracts, the

physical and temporary imports of the machinery and the equipment and skilled

expatriate personnel, have been sent back to the countries where they have come

from or are maintained on the job as long as is necessary, without any effective

transplanting of the know-how involved to the recipient countries. Even in the case of

proper and permanent transfer of technology, it seems essential to remark that there

is a genuine divergence of interests between the developing petroleum countries and

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the International or foreign oil companies which have most important role in

developing and investing in the developing petroleum countries oil and gas industry.

“It is fundamental to the understanding of the transfer of technology to appreciate

that development of the local technological capacity is not in the interest of

multinational corporations.” Apart from the problems mentioned above, usually,

certain amount of vagueness, beyond the normal political and sometimes economic

problems which may arise, cast shade on the transfer of technology; the substance

of transfer of technology or a real transfer of technology, the capacity of developing

petroleum countries for absorption and adoption of required technology, the various

channels for transfer of technology in oil and gas industry and the suggested

alternative ways. With these initial considerations as a background, we will attempt

to compare transfer of technology through different oil and gas contracts, with

consideration on Iranian Oil Buyback Contracts, to find their problems and make

some suggestions for improvement of transfer of technology through oil and gas

contracts. For this purpose this article proposed in three main chapters to investigate

the issue; in the first part we will try to clarify the concepts of “Technology” and

“Transfer of Technology” For the purposes of this essay, in two distinct parts. In the

second chapter, they will discuss “Transfer of Technology through Oil and Gas

Contracts” as one of the main legal arrangements through that petroleum industry

technology has been transferred in three sections. Third chapter relates to the

Alternative Channels for the Transfer of Technology in Oil and Gas Industry apart

from the traditional ways in the oil and gas contracts. They will also discuss this

chapter in three sections. Finally they will conclude with due regard to all above

mentioned issues23.

John L. Simpson (2008)

This paper examines oil stock market and oil company stock price data in 30 and 60

day windows either side of OPEC production allocation meetings. The study

continues on to investigate co-integration and erogeneity over the full period in the

sample. The results justify asking the question as to whether or not oil companies

anticipate and use information on the outcomes of these meetings. The study

concludes that the pricing of crude oil has more to do with the behavior of oil market

protagonists than freely interacting supply and demand forces. This continues to

have implications for the health of the global economy and financial system24.

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Amir Hossein Mabadi (2008)

Since oil and gas industry - as an Iran economic back bone - has a vital importance,

financing in this sector has attracted huge amount of attention among economists

and even owing to its inherent political character, politicians have involved in this

crucial discussion. In this research leaving aside any economic discussion

concerning necessity of foreign investment in the Iranian oil and gas industry, they

have attempted to find out what are the main differences between the three

important upstream oil and gas contracts bearing in mind the desire of international

oil companies to enter into one of these contracts and the elements that bring about

differences. Moreover what changes should be applied to Iran‟s contractual clauses

to attract foreign investment through upstream oil and gas contracts and why those

amendments will be attractive for foreigners are also examined in details. To achieve

the mentioned goals, this dissertation has been divided to three separate parts, each

one includes several chapters. In Part One, they have attempted to describe main

elements of this dissertation i.e. two most important upstream oil and gas contracts

which are buyback contracts and production sharing contracts and joint venture

contracts. In Part Two, they have an overview on some contractual clauses that

could have direct effects on foreign investors‟ decision making process on an oil and

gas project and foreign investment attraction capacity of host country as a result.

The last Part of this dissertation, based on aforesaid situation in upstream oil and

gas contracts, they will suggest some amendments in contractual clauses to be more

attractive for foreigners to invest their capital in Iran investment and make Iran able

to absorb required investment for developing Iran oil and gas fields to highest

possible level25.

Stephane Dees & Audrey Gasteuil (2008)

This paper examines the rapid rise in the price of crude oil between 2004 and 2006

are the subject of debate. This paper investigates the factors that might have

contributed to the oil price increase in addition to demand and supply for crude oil, by

expanding a model for crude oil prices to include refinery utilization rates, a non-

linear effect of OPEC capacity utilization, and conditions in futures markets as

explanatory variables. Together, these factors allow the model to perform well

relative to forecasts implied by the far month contracts on the New York Mercantile

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Exchange and are able to account for much of the $26 rise in crude oil prices

between 2004 and 200626.

Christian O. H. Wolf & Michael G. Pollitt (2008)

This study empirically investigates the impact of privatization on firm performance in

the global oil and gas industry, where questions of resource control have regained

widespread attention. Using a dataset of 60 public share offerings by 28 National Oil

Companies it is shown that privatization is associated with comprehensive and

sustained improvements in performance and efficiency. Over the seven-year period

around the initial privatization offering, return on sales increases by 3.6 percentage

points, total output by 40%, capital expenditure by 47%, and employment intensity

drops by 35%. Many of their observed performance improvements are already

realized in anticipation of the initial privatization date, accrue over time, and level off

after the initial ownership change rather than accelerate. Details of residual

government ownership, control transfer, and size and timing of follow-on offerings

provide limited incremental explanatory power for firm performance, except for

employment intensity. Based on these results partial privatizations in the oil sector

might be seen to capture a significant part of the performance improvement

associated with private capital markets without the selling government having to

cede majority control27.

Sergei M. Guriev & Anton Kolotilin (2008)

In this paper they study nationalizations in the oil industry around the world in 1960-

2002. They show, both theoretically and empirically, that governments are more

likely to nationalize when oil prices are high and when political institutions are weak.

They consider a simple dynamic model of the interaction between a government and

a foreign oil company. The government cannot commit to abstain from expropriation

and the company cannot commit to pay high taxes. Even though nationalization is

inefficient it does occur in equilibrium when oil prices are high. The model's

predictions are consistent with the panel analysis of a comprehensive dataset on

nationalizations in the oil industry since 1960. Nationalization is more likely to

happen when oil prices are high and the quality of institutions is low even when

controlling for country fixed effects28.

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Christian O. H. Wolf (2009)

This paper sets out an analytical framework for assessing the performance and

value creation of National Oil Companies (NOCs). NOCs differ greatly in their

institutional environments, their corporate objectives and operations, and their

domestic and international socio-economic linkages, which makes a comparative

assessment of NOCs‟ value creation far from trivial. But because the petroleum

sector is of significant importance to many countries around the world, the attempt of

identifying, measuring, benchmarking and improving NOC value creation is vital for

the broader effort of improving standards of living in these countries. A central

contribution of this framework is the proposal of the „NOC Value Creation Index‟, a

composite indicator that attempts to integrate measurement of NOC operational

performance, financial performance and delivery on the national mission29.

Kyla Tienhaara (2011)

In this study, the literature on environmental regulation of the upstream oil and gas

sector in developing countries and economies in transition has focused largely on

domestic legislation as well as a number of intergovernmental agreements and,

more recently, voluntary industry initiatives. Much less notice has been taken of

environmentally relevant content of contracts negotiated between international oil

companies and petroleum producing states, which often have a significant if not

dominant role in shaping the regulatory regime for oil and gas operations. The only

major study on this subject, carried out by Zhiguo Gao, was published in 1994. Gao

concluded that environmental issues had not received enough attention in the oil and

gas contracts that they had reviewed. A limited survey indicates that oil and gas

contracts negotiated and signed in the last fifteen years generally give greater

attention to environmental protection than those signed previously, but the coverage

of specific topics varies widely as does the strength of terms. Additionally, concerns

that certain contractual provisions may actually undermine rather than bolster

environmental protection efforts have become more prominent in the period since

Gao‟s study. Thus, there remains significant scope for oil and gas contracts to be

improved from an environmental governance perspective30.

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Emma Ik Okoye (2011)

This study examines Oil revenue has been and is still the main stay of the Nigerian

economy and is likely to remain so tor sometime to come. Total annual revenue from

Oil runs into several billions and the importance of ensuring that effective machinery

exists for the collection of this massive wealth cannot therefore be overemphasized.

They are going to look at the history of exploration and production or upstream

activities in Nigeria in order to better appreciate the accounting aspects. The nature

of the cost incurred and revenues earned from exploring for and revenues earned

from exploring for and producing petroleum products will be examined. Issues

involved in developing accounting policies in the upstream oil and gas industry will

be considered. The Impact of full cost and successful effort method on financial

statements and their usability will be highlighted. The upstream petroleum industry is

capital intensive necessitating the type of financing arrangement obtainable in the

industry. In this paper, an update in the financing arrangements will be discussed. Oil

and gas are two most important natural resources in Nigeria. Taxation is one tool;

government can use to maximize the benefit of these resources to the nation. The

issues and problems of assessment of tax in the industry will be presented31.

Onyekachi Wisdom Duru (2011)

In this Paper, the oil and gas sector in Nigeria is undoubtedly going through serious

crisis, due partly to a sharp reaction by the oil producing communities, which suffer

grievous hardships resulting from the operations of the laws governing the sector.

The various attempts to suppress these people through the gun have failed woefully.

The only option clearly available to the key players in the industry (the government

and the oil producing/servicing companies) is to adopt fair and equitable laws as a

framework for the exploitation of the oil and gas resources in Nigeria. This paper

assesses the available laws regulating the oil and gas industry in Nigeria and

recommends a progressive legal framework for the regulation of the Nigerian oil and

gas sector, with a view to remedying the perceived lapses in the law32.

Giulio Greco (2012)

In this paper they investigate the impact of corporate governance and ownership

structure variables on earnings management in the European oil industry. They used

quarterly data and a panel data methodology. The findings show non-linear

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relationships among institutional investor‟s ownership and governmental ownership

with the magnitude of earnings management. For governmental ownership, they

found that a positive association within lower levels of ownership, consistently with

the incentives for oil companies to avoid closer political scrutiny on the reported

results. They found a negative association with earnings management magnitude in

firms where governments are the controlling shareholders or large block holders.

The findings also show that relevant governance variables, such as the proportion of

independent directors, the audit committee‟s size and meeting frequency, contribute

to constrain earnings management. Overall, the results suggest that key variables

related to ownership and governance structures impact on earnings management

across different national settings and governance systems. Moreover, the

relationship of ownership structures with earnings management appears to be

complex and varying at different levels of ownership. This study could have several

practical implications. Firstly, accountability and stricter control could be two issues

for firms where governments are shareholders that engage in earnings management

practices. Secondly, higher participation of institutional investors in the ownership

and in the governance may be an effective monitoring device over earnings

manipulation33.

Mohammad Ahmed (2012)

This study examines project management methodology is a set of established

guidelines that are used for executing projects in every industry. They are broadly

based on initiating, planning, organizing, executing, and monitoring & controlling

process group. However, project management is carried out through nine project

management knowledge areas i.e. integration, scope, time, cost, quality, human

resource, communications, risk and procurement management. Projects are

governed by certain factors that have major influence in directing the success or

failures. Broadly cost, time & scope have been identified as key important success

factors for projects. This research is carried out to identify the critical success factors

in EPC/PC projects in Oil & Gas industry of Kuwait and to compare the results with

previous established success factors. Previously established researches were used

to define the frame work for the research to facilitate in identifying success factors. A

questionnaire was developed, based on the nine knowledge management areas,

and data were acquired from the selected participants of a particular organization

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which is operating in the oil & gas industry executing EPC/PC projects. The data

were collected based on convenience sampling technique. Acquired data were

analyzed through factor analysis technique and critical factors based on these data,

acquired from the selected organization, were identified. The findings indicated