The threat of new entrants, which refers to the strength of new potential competitors, in the oil and gas industry is extremely low due to high startup costs , oil price volatility, high operating costs, high amount 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 Shouldn't Be Banned"? Get an Original Essay The first thing to mention is the huge capital requirements for initial fixed investments for developing oil fields or building 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 estimated costs of which amount to 41 billion. USD, for example due to the construction of 355 miles of rail and an even longer pipeline. With such high startup costs, some companies even attempt to position themselves in this market.[1].[2]In addition to the huge capital requirements, the price of oil is an important factor in evaluating whether an investment is worth it. Especially unconventional extraction methods can lead to higher costs. This does not mean that oil projects will be immediately canceled due to an unexpected collapse in oil prices. These projects, in most cases, cannot be stopped quickly and then restarted when oil prices start to rise. Before the company decides to start a project, it forecasts the price of oil to assess its feasibility, and if it starts it, it has to bear the risk of oil price volatility.[3] The decline in oil prices in June 2014 from USD 110 per barrel to USD 55 per barrel at the end of 2014 occurred due to growth in supply, especially shale, lower demand from Asia and OPEC which failed 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 expenditures.[5].[6] This could lead to companies moving from being large distributors of capital to companies that have to do a lot of refinancing. Rosneft, for example, had to repay almost 30 billion in loans by the end of 2015.[7] That 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. In addition to this, a potential competitor may have disadvantages resulting from various government policies that favor domestic companies. In most cases, oil and gas are state-owned resources, and the government prefers to give national companies access to raw materials or allow the exploitation of oil fields only with a partnership with a national company. Furthermore, regulation limits where, how and when extraction is possible. Therefore, this risk related to government policies increases when companies work abroad. To reduce this risk a company should prefer projects in countries with stable political systems. Especially in unstable political systems, the initial condition of a project may change over time, as the government may change its perspective, after the capital has been invested. Therefore, a company that wants to enter the oil and gas industry and wants to reduce this risk should carefully analyze the government's policies.[9]