The threat of new entrants, which refers to the strength of potential new competitors, in the oil and gas industry is extremely low due to high start-up costs, of volatile oil prices, high operating costs, high number of government policies and regulations and non-existent access to distribution channels. Say no to plagiarism. Get a tailor-made essay on “Why Violent Video Games Should Not Be Banned”? Get an Original EssayThe first thing worth mentioning is the huge capital requirements for fixed initial investments related to the development of oil fields or the construction of production facilities. An example of these huge investments is the Libra oil field in Brazil, whose development costs are estimated at 174 billion. USD and the development of the Arctic field in Russia by Gazprom, the costs of which are estimated at 41 billion. USD, for example due to the construction of 355 miles of railway and an even longer oil pipeline. With such high start-up costs, a few companies are even trying to position themselves in this market.[1][2]Beyond the enormous capital requirements, the price of oil is a major factor in assessing whether an investment is worth it. penalty. Particularly unconventional extraction methods may result in higher costs. This does not mean that oil projects are immediately canceled due to an unexpected collapse in the price of oil. These projects, for the most part, cannot be quickly shut down and then restarted when the price of oil begins to rise. Before the company decides to start a project, it forecasts the oil price to assess its feasibility and if it starts, it must bear the risk of oil price volatility.[3] The drop in the price of oil in June 2014, from 110 USD per barrel to 55 USD per barrel at the end of 2014, is due to the growth in supply, particularly of shale, the drop in demand from Asia and to the impossibility for OPEC to reduce oil production to regulate. the price.[4] These events threaten the profitability and even survival of oil and gas companies that require minimum prices to finance their planned expenses.[5].[6] This could cause companies to go from being large distributors of capital to companies that have to do a lot of refinancing. For example, Rosneft had to repay almost 30 billion in loans at the end of 2015.[7] This is why oil companies must again invest in expensive oil exploration projects that could explore oil at low cost, to minimize the risk of falling oil prices. Additionally, a potential entrant could be disadvantaged by different government policies favoring domestic firms. Most of the time, oil and gas are state-owned resources and the government prefers to give domestic companies access to raw materials or allow the exploitation of oil fields simply through a partnership with a national company. Additionally, regulations limit where, how and when extraction is possible. Thus, this government policy risk increases when companies work abroad. To reduce this risk, a company should prioritize projects in countries with stable political systems. Particularly in unstable political systems, the initial state of a project may change over time, as the government may change its views once capital is invested. Therefore, a company that wants to enter the oil industry and..[9]