In this article, we’re going to go into the fundamentals of entering this market, despite its incredibly high barriers to entry, with a hypothetical situation where YOU, are planning to start a business in it. Within the oil and gas industry, there are three main segments: Upstream, Midstream, and Downstream—companies usually specialize in one. For purposes of clarity and ‘digestability’, I’ll be delving into the ‘Upstream’ segment, to show you what a start-up firm would do at this respective stage.

Note that you’ll need initial capital in the range of tens of millions of dollars for this!
Do not try at home.

Upstream activities involve exploration and production, which is why businesses in this specialized section are also called E&P companies. 

At the very beginning, before anything else, your company must start its “exploration” phase, which involves the arduous process of locating an oil reserve or two, or more. Regardless if your firm is international or not, you must gain permission from the government to explore a specific geographic area, something that is conducted either through direct negotiation or the process of bidding. The period of which this permission is granted differs depending on the country or license, and to avoid wasting individual time and effort, some international firms may choose to merge forces with other companies to execute these operations—an action which is referred to as a ‘joint venture’.

Once this authorization is obtained for the area, you will have to commence an in-depth examination of the region, with extensive research, usually costing millions of dollars—hence why you need a considerably large amount of initial capital to begin this venture. This research covers all aspects needed for drilling the oil, for instance, infrastructure and a detailed plan developed to map out potential reserves in the vicinity. This is often done through the conduction of geophysical surveys, examples being analyzing rock formations, and seismic data—or in our technologically advanced society, various mechanics to detect the presence of deposits.

Taking into account neighbouring communities that may be affected by the location, companies are also obligated to establish contact with these relevant stakeholders, to prevent potential delays later on in the scenario if a neighbouring community feels discontentment towards the process. It is around this time, after intensive research, that a large portion of companies halt their oil projects in the region, either due to the absence of reserves, or the unsuccessful attempt to locate a fruitful source. Although this can be perceived as a colossal waste of time and effort, given that the standard research phase can take around 10 years to complete, if there are no oil or gas reserves, there is no reason to continue.

So, if you were to start a company and successfully discover one,  you would have already accomplished and made it past a stage most have failed and given up at. A commendable achievement indeed!

On the rare occasion that a site is deemed appropriate, the location is prepared and set up for its drilling phase. This will require the usage of drilling rigs, the type of which is dependent on the rock formations as well as the circumstance the location is under, and helps develop a well, which then can be fitted for the installation of tubing, equipment, and other components needed to bring the oil to the surface.

The duration of which oil takes to be extracted is not only entirely dependent on machinery, making this stage of oil production incredibly capital-intensive, but also dependent on the location. It has become more and more noticeable that the average depth of oil wells, which are drilled to extract the oil, has increased over time, with the average depth of 3,500 feet in 1949 jumping to the currently deepest well in the world at a staggering 40,000 feet deep, a number nearly 7 times more than the average in 2008. 

After extraction comes transportation, an endeavour taken up by ‘Midstream’ companies. It should be noted here too, for your reference that transporting crude oil is not only complex but also costly. Because oil, as well as gas, are commonly found in remote locations or under the sea, the transportation method is usually executed through a pipeline or a tanker. This is often rather costly as well and adds to the list of expenses associated with oil and gas exploration.

As you can see from this article’s contents, due to the high technical requirement, cost of operation, as well as startup cost, the number of firms in the oil industry market is drastically less in comparison to other industries. Wishing you nothing but the best of luck, if you wish to start one! 

There are two particular reasons why individuals experience the mere-exposure effect. One is linked to Charles Darwin’s Theory of Evolution, suggesting that humans instinctively draw parallels between seeing an item without negative after-effects, and the assumption that it is harmless and safe, therefore establishing a sense of security. This in turn leads humans to develop positive feelings about things we are more familiar with, in contrast to things that we aren’t. The origin of the mere-exposure effect can also be traced back to the idea that our minds tend to lean towards familiar rather than new paths, as this increases processing speed and reduces mental strain, making it easier to understand information. For instance, when an individual rewatches a movie for the second time, they are generally able to pick up on smaller details that they may not have recognized the first time.

 So, what is this phenomenon, under what circumstances can it occur, and what are the potential adversities that come with it?

Although not very widespread, this phenomenon can be seen frequently in the world around us. Modern-day billboards are designed to captivate an individual’s attention as well as imprint a message into their minds by incorporating signature logos, texts, or new trending products, and placing the most attractive and best-selling products towards the front of the store or the top of websites to further expose consumers to them, and draw them into browsing further. On the business spectrum, numerous multinational corporations have also utilised mere-exposure effects in different scenarios, intending to appeal to a large and diverse range of audiences. For example, many brands seek common ground and familiarity by incorporating the theme of ‘family’ into advertisements—a concept a large majority of the world’s population is able to resonate with. Coca-Cola, the world’s largest nonalcoholic beverage company, utilised the title “Together Tastes Better” as a name for a global platform launched in 2020, which accompanied a new film, plans to support local restaurant businesses, and even a partnership with Disney, each one reflecting the idea of unity—whether between couples, families, friends, or housemates.

Alongside this, one particular marketing technique often used in accordance with the mere-exposure effect is the incorporation of popular music in video adverts. Dr. Bradly Vines, in his article ‘The Celebrity Power of Music in Advertisements’ concludes from research that the adaptation of pop culture music can increase attention, emotion, and memory by 20%. Individuals already familiar with a song playing in the background of commercials gradually become accustomed to the product and the tune going hand in hand—and are therefore more likely to remember the brand as well as become more engaged with the commercial. 

Although the mere-exposure effect comes with its benefits, it could also lead to overexposure, where members of the target audience begin to get frustrated from seeing the same advertisement regularly, and the company’s reputation starts to sour. Psychologist Robert Bornstein concluded from research that mere-exposure becomes ineffective after around 20 exposures—linking this decline in interest to the concept of getting tired of listening to the same song on repeat. Additionally, exposure can cause negative rather than positive feedback, especially if a user views an advertisement or news portraying the product in a negative light. Because of this, businesses find it paramount to maintain a clean image for their brand.

Nevertheless, despite the fact that the mere-exposure effect plays an integral role in our decision-making, the feelings an individual can develop towards a product’s overexposure vary—for example, Grammarly, the spelling and vocabulary checker, despite being widely hated for its frequent Youtube advertisements, still has over 10 million users. Next time when you’re outside on the street, see if you can recognize any parts of the mere-exposure effect—whether through billboards, digital screens, or even products in a store!