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<p align="justify">Surgutneftegas is a state-owned Russian oil and gas company based in Surgut, Russia. It was founded in 1977. Its activities include prospecting, exploration, and operation of oil and gas fields, manufacturing and marketing of petroleum and petrochemical products, gas processing, crude oil refining and associated petroleum gas processing, production of different types of petroleum and petrochemical products, wholesale and retail sales of fuel, and related goods and services (Surgutneftegas, 2021).</p>
<p align="justify">Surgutneftegas sales network is represented by five subsidiaries, which perform wholesaling, retailing and storage of petroleum products and render a set of supplementary services at the gas stations. Porter&#8217;s five forces model is a valuable tool to identify threats and opportunities faced by Surgutneftegas in the oil and gas industry.</p>
<h2 align="justify">Competitive Rivalry in the Market</h2>
<p align="justify">Russia is a significant producer of global crude oil. In 2020 Russia produced 11% of the world crude oil compared to 20% of the United States and 12% of Saudi Arabia (EIA, 2020). It is considered as the world player in oil and gas production. Surgutneftegas is of the biggest oil producers in Russia. It faces intense competition from two state-owned local competitors including Rosneft, and Lukoil.</p>
<p align="justify">Surgutneftegas reported annual revenue of $ $24.349 in the financial year 2019 (Macrotrends, 2020). Surgutneftegas around 55 Million Ton of oil 2020, which was behind Rosneft, and Lukoil. There is intense competition considering the state conglomerate in the petrochemical, oil and gas exploration, and energy sector.</p>
<h2 align="justify">Threat of Substitutes</h2>
<p align="justify">The demand for reducing carbon emission to stop climate change is increased in the last decade. It has severely damaged the earth’s ecosystem. Russian is one of the most significant greenhouse gas emissions producers, mainly because of the oil and gas industry. Gazprom, Surgutneftegas, Rosneft, and Lukoil are major oil and gas producer in the region. It agreed to reduce greenhouse emissions by 30% by 2030 to a level below to emission levels of 1990 (Reuter, 2020). Energy production, transportation and industry depend on it. The world is searching for its substitute for some time now.</p>
<p align="justify">In electricity production, viable solutions are becoming popular day by day. Wind farming and solar energy is growing at a steady pace. The developing countries are moving toward renewable resources for energy production. In the next decade, significant change will occur. The threat level against the industry is high.</p>
<h2 align="justify">The Threat of New Entrants</h2>
<p align="justify">The oil and gas industry has a different type of entry barriers. The sector is highly costly and technical. The firms to enter into this industry need to have a solid ability to raise funds, which becomes somewhat complicated in the presence of substantial sunk costs and high assets (Worthington, 1995). The industry runner keeps on investing in research and development to reduce the production cost and increase efficiency. Besides, this industry is strictly regulated, and compliance cost way too much for newcomers. Those regulated bodies control the production and export of oil. So, for new entrants to take any share of the market seems complicated. Considering the facts mentioned earlier, the threat of new entrants remains low</p>
<h2 align="justify">Bargaining Power of Buyers</h2>
<p align="justify">The bargaining power depends upon the availability of the product and the purchasing capacity of the buyers (Porter, 1979). The primary buyer of hydrocarbons are the powerful countries; There&#8217;s consumption level are higher than most of the world, including countries like The United States, China, Japan, and India. It provides them with some sort of power in negotiating the deal.</p>
<p align="justify">The product&#8217;s availability plays a crucial part because if product quality is good, it is readily available (Distribution Cost, etc.), or no other product is available. The buyer will need to settle for it. States can exert their power to bring the cost down, get the better quality product or get a product on a priority basis. Considering the available facts, buyers have no or low bargaining power.</p>
<h2 align="justify">Bargaining Power of Suppliers</h2>
<p align="justify">The hydrocarbon industry is a complicated industry. Geopolitical and geographical situation directly impact this industry. It is heavily dependent on the geopolitical situation of the region. The industry is vertically integrated to protect itself to deal with any consequences of political disturbance. Vertical integration reduces risk and maximizes profitability at every stage of the chain from wellhead to gasoline station. It helps the oil companies balance their operations and protect themselves from markets instability. For instance, when the crude oil price goes down, the refining and marketing margins would generally be expected to be positive (Al Moneef, 1998).</p>
<p align="justify">The industry takes full advantage of being vertically integrated. The equipment supplier can exert some sort of power due to the importance of equipment. Any malfunctioning can cost money and stop the operation. In this case, overall, the supplier doesn&#8217;t hold any significant power.
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<h2 align="justify">References</h2>
<p>Al-Moneef, M. A. (1998). Vertical integration strategies of the national oil companies. Available at: The development economics 36(2):203-222<br />
Macrotrends (2020) Surgutneftegaz OAO Revenue 2013-2019 – SGTZY. Available at: https://www.macrotrends.net/stocks/charts/SGTZY/surgutneftegaz-oao/revenue<br />
Porter., E. M (1979) How Competitive Forces Shape Strategy. Available at: https://hbr.org/1979/03/how-competitive-forces-shape-strategy<br />
Reuter (2021) Putin orders Russian government to work towards Paris climate goals. Available at: https://www.reuters.com/article/russia-climatechange/putin-orders-russian-government-to-work-towards-paris-climate-goals-idINKBN27M27R<br />
Surgutneftegas. (2020). The Company Today. Available at: https://www.surgutneftegas.ru/en/company/today/<br />
Worthington, P. (1995). Investment, Cash Flow, and Sunk Costs. Available at: The Journal of Industrial Economics 43(1) PP 49-61.</p>
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