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Theoretical and Practical Aspects of Logistical and Operational Activities

The Cairn Energy PLC is one of the Europe's leading and independent companies that is accountable for oil and gas exploration and development of other companies ( 2017). The mission of Cairn Energy PLC is to develop their organization as a pioneer within a balanced portfolio by developing a successful partnership. These partnership are formulated with governments, communities, suppliers and joint venture associates ( 2017) Moreover, the concerned organization’s vision is to become a sustainable cash generative and an exploration-led oil and gas business that provides their stakeholder’s exposure to material capital growth potential ( 2017). Cairn Energy’s exploration programme majorly emphasizes on the exploration of oil in developing countries like Senegal and they also focuses on identifying assets. Through this approach significant and sustainable growth of those organizations can be attained. Furthermore, building respect with stakeholders, nurturing relationships with them and acting responsibly throughout their business partnership are some objectives of this organization ( 2017).

However, unlike other organizations, Cairn Energy PLC does not make profit on the other hand they have incurred with loss. The statistical estimation of this loss was $555.9 million for the year 2013, $381.1 million in 2014 and $515.5 million for the year 2015 ( 2017). However, they have attained US$603 million and US$869 million group net cash for the year 2015 and 2014 respectively ( 2017). There top competitors in the market are- BG Group Limited, Chevron North Sea Limited, Serica Energy Plc, SOCO International plc and Western Standard Energy Corp ( 2017). Their customer profile is business to business (B2B) and they intend to serve other organizations by exploring new oil wells in developing countries and provide the product to their partners. 

The prime objective of this business report is to review of the theoretical and practical aspects of logistic system of the oil and gas industry in support with the Cairn Energy PLC. Moreover, the specific challenges in the manufacturing and service operations for the same industry will also be carried out along with the conclusion and recommendation based on the critical evaluation on the assessment topic.

It is mentioned by Schonsleben (2016) that the supply chain or the logistic process in the oil and gas organizations comprises of the steps- exploration, production, refining, marketing and end-user.

Thus, it can be concluded that in the process of delivering the final oil and gas product to the customers, the oil and gas industry have to explored the oil, refine them for delivering it to the markets prior to offer the same to the end-users (Bichou 2014). Dyckhoffet al. (2013) on the other hand depicts that oil companies needs a phalanx of vendors so that their system can be continuously re-supplied. In context of the Cairn Energy PLC, their supply chain process comprise of- local contractors and partnerships with other organizations. The exploration prices of the oil can be further categorised as seismic, geophysical and geological operations (Mangan et al. 2016). Shuen et al. (2014) furthermore depicts that drilling, reservoir, production and engineering signifies the production process of the oil. Moreover, retail sale of gasoline and engine oil are the refined outcome of the explored oils and is left on the liability of marketing department of the logistic system. However, in context of the Cairn Energy PLC, their major focus is to execute of appraisal drilling campaigns every year. They have invested in the local contractors so that profit can be attained through low cost of production. Saad et al. (2014) highlight that for the year 2015, 15% of the contractors are national where project are carried out; while, 85% of the contractors are non-national. These oils are transferred through large tank barges and underground pipelines and for transferring the engineers and advisors, helicopter are used by Cairn Energy PLC.

Challenges in Manufacturing Operations

Oil and gas industries have to plan their decisions before implementation in order to avoid the risk of explosion or oil spills through any of the mode of transportation. Thus, it is important to have clear methods for configuring and coordinating an efficient operations supply network. Cairn Energy PLC integrates its decisions with chain of their customer and suppliers (Stephenson and Agnew 2016). In this way, the concerned organization can attain effective coordination of supply-chains by satisfying the stakeholder’s relations. They also have to oblige the governing legislations regarding environment sustainability so that the environment cannot be harmed with the action of oil exploration and carrying it to other territories. In this case, Cairn’s slogan in context of security is “Safety first, last and always” and in order to attain this objectives, they have appointed a security advisor for their Senegalese HSE project (Halsey 2016). In UK, the Health and Safety Executive (HSE) monitors the terms dealing with the sales of oil and there is an agreement to place of delivery by a common carrier through shipment contracts.

In the year 2015, Cairn does not have any Lost Time Incidents (LTIs) or Recordable Incidents for over 900 days during their exploration and oil transferring process (Fernie and Sparks 2014). 

Prior to the year 2015, the Cairn Energy PLC has suffered from loss of lives and hence, UK Health and Safety Executive introduced the Offshore Installations to conform to the EU Offshore Safety Directive in the supply chain management for transferring the oil ( 2017). As a result, the numbers of lost lives are reduced and in terms of both operated and non-operated drilling operations, major accidents are prevented. Moreover, Garcia et al. (2014) furthermore highlighted that in order to successfully accomplishing the supply chain; they have implemented a ‘Project Delivery Process (PDP)’ for accomplishing critical requirements for CR performance at regular interval of time. Furthermore, Stephenson and Agnew (2016) argued that apart from risk of losing life, risk of oil spills also have to be considered in the supply chain. In this context, Yusuf et al. (2014) presented a view that the Senegal plan of the Cairn Energy PLC developed using IOGP practices and proper training was provided to the stakeholders so that this explosion and transferring risk can be avoided. They also maintain appropriate prevention barriers of oil spill and apply the new and revised guidance of International Association of Oil & Gas Producers (IOGP) Joint Industry Project (JIP) on oil spill risk assessment and response planning ( 2017). As a result, the number of spills reduced and the further activities are also planned to execute for their other drilling programs- surface response capability, subsea cap and secure capability. 

Challenges in Service Operations

Fernie and Sparks (2014) depicts that the service and manufacturing industries differs in terms of four aspects- goods, inventory, customer and location. Service industry produces intangible final products that cannot be touched but a manufacturing company produced a tangible output. Zurich (2016) on the other hand explains that manufacturers do not hold inventories; while, the service industry does. Moreover, service industry does not produce the final product till customer demands but manufacturer formulates final product and then offer their products to customers. Thus, in context of the Cairn Energy PLC, they also sent their un-refined oil to other organization for refining. Lastly, service industry does not need an infrastructure to serve customer; on the other hand, manufacturing industry needs an infrastructure. However, Heizer and Barry (2013) depicts that in terms of oil and gas sector, three manufacturing related risks are- lack of exploration success, cost of production challenge and maximise acreage position.

Lack of exploration success- Kastalli and Van Looy (2013) explain that not all oil wells has large capacity of oil and if such locations are selected, where there is less oil, the success in exploration cannot be attained up to the benchmark set by the organization. Moreover, failure of the balanced portfolio business model and loss of investor confidence are some negative impact of this challenge.

Operational and project performance- Baines and Lightfoot (2013) stated that in this context, Cajun Express rig have incurred unscheduled maintenance requirements for the enhancement of the project performance. However, absence of these maintainace results in cost pressure in the industry both in terms of manufacturing and carrying it through logistics modes. Moreover, as most of the oil wells are in the foreign countries, Cairn Energy PLC, have to align their business objectives with that of the foreign country’s legislation in order to transfer their business from one place to the other. The misalignment can result in huge loss in the business as they are dependent on these countries.

Maximise acreage position- The 2015/16 Senegal drilling is occurred in the African state and it is considered as unstable political situation by business experts. In these political sensitive nations, environmental legislation is represented by soft law and due to less technological advances, cost of production is high ( 2017). The refinery section cannot be installed in these places due to lack of resources and thus have to transfer to other refineries. This also leads to extra cost in supply chin apart from the delivering oil to the final consumers. Moreover, the roads and infrastructures are underdeveloped in these nations that results in delay in oil supply.

Conclusion and Recommendations

Human resource- Lack of skilled personnel and manpower in the developing area like Senegal, Nigeria is a major service related challenge in the upstream sector of the concerned oil and gas organization (Saad et al. 2014). Thus, with less skilled employees in exploration, production of oil through oilfield and logistics management, chances of explosion and spilling is increased in Cairn energy PLC. Thus, technically skilled people have to be chosen for supply chain management of oils and if not trained, proper training prior to the recruitment has to be provided.

Crude oil resources- Environmental problems are the most active challenges in this context. This is because; these resources and non-renewable. Moreover, crude oil become pivotal to the modern society and thus it cannot be omitted from the regular routine of the community (Cigolini et al. 2015). Thus, there is a chance that these resources are continuously diminishing. In such case, the availability of these resources is getting lowered. Moreover, Sadaghiani et al. (2015) argues that another big problem is intense problem of demand and supply of the oil and gas in the upstream sector. In this case, Cairn Energy has to produce more oil in order to make satisfying the increasing crude oil demand of the increasing population.

Business Joint Ventures- Cairn Energy PLC already took initiative of business joint ventures for avoiding Information knowledge management (IKM) adversities. (Zurich 2016) highlight that risk of conflicts among the business partners affects the services of the oil. It is evident that if oil and gas industry do not obey the governing legislation of energy export, the final products cannot supplied to other nation and the customers or marketers. This also hampers the logistic and supply chain operations of the organization.


Thus, it is concluded that drilling of appraisal wells on the SNE Oil field is the recent project objectives for the Cairn Energy PLC. Cairn Energy PLC is one of the Europe's leading and independent companies that is liable for oil and gas exploration and development of other companies. Even though, this organization has significantly increased their 2C oil resources and intends to discover further domestic energy resources to overcome the imbalance between energy supply and demand in Senegal; they had made a continuous loss for many years. Operation and services related risks are associated with this industry and hence this needs to be overcome so that explored oil can be consumed by the end-user. Moreover, among the identified defiance lack of exploration success, maximise acreage position and poor operational and project performance are the challenges in manufacturing operations; whereas, ineffective human resource, insufficient crude oil resources and failed business joint ventures affects the service operations of the oil and gas industries.

In order to mitigate the manufacturing as well as service sector related problem the oil and gas companies must reform their operational strategy. In this context, there are several key techniques, which would be highly useful for the success of the organizations. These techniques or approaches are described below:

Talent Acquisition: The organizations need to attract and encourage a greater range of talented human resources towards petroleum sector. The organizations must focus on facilitating high level of training to various parts of the globe so that the petroleum sector can attain most knowledgeable individual within its workforce.

Initiating supply-chain modern technology: The organizations must utilize an ultra-modern supply chain technology, so that they can mechanize the oil supply operation and information sharing. It will help the organization to access all computational web servers in order to enable high graded visualization and sensible collaboration.

Corporate Communication: In order to determine the efficiencies in various organizational processes the corporate communication plays a significant role. The proper use of information technology can help the organization to ensure real time information sharing within the stakeholders. It will be effective to curb out the issues taking place in trading as well as refining the petroleum. 

Reference List

Baines, T. and W. Lightfoot, H., 2013.Servitization of the manufacturing firm: Exploring the operations practices and technologies that deliver advanced services. International Journal of Operations & Production Management, 34(1), pp.2-35.

Bichou, K., 2014. Port operations, planning and logistics.CRC Press., 2017. Cairn Energy. [online] Available at: [Accessed 4 Mar. 2017].

Cigolini, R., Pero, M., Rossi, T. and Sianesi, A., 2015.Using simulation to manage project supply chain in the offshore oil and gas industry.Production Planning & Control, 26(3), pp.167-177.

Dyckhoff, H., Lackes, R. and Reese, J. eds., 2013. Supply chain management and reverse logistics. Springer Science & Business Media.

Fernie, J. and Sparks, L., 2014. Logistics and retail management: emerging issues and new challenges in the retail supply chain. Kogan Page Publishers.

Garcia, R., Lessard, D. and Singh, A., 2014. Strategic partnering in oil and gas: A capabilities perspective. Energy Strategy Reviews, 3, pp.21-29.

Halsey, T.C., 2016. Computational sciences in the upstream oil and gas industry. Phil. Trans. R. Soc. A, 374(2078), p.20150429.

Heizer, R. and Barry, R., 2013. Operation Management, Sustainability and Supply Chain management (Vol. 11). Pearson, UK.

Kastalli, I.V. and Van Looy, B., 2013.Servitization: Disentangling the impact of service business model innovation on manufacturing firm performance. Journal of Operations Management, 31(4), pp.169-180.

Mangan, J., Lalwani, C. and Lalwani, C.L., 2016. Global logistics and supply chain management. John Wiley & Sons.

Saad, S., Mohamed Udin, Z. and Hasnan, N., 2014. Dynamic Supply Chain Capabilities: A Case Study in Oil and Gas Industry. International Journal of Supply Chain Management, 3(2).

Sadaghiani, S., Ahmad, K.W., Rezaei, J. and Tavasszy, L., 2015, April.Evaluation of external forces affecting supply chain sustainability in oil and gas industry using Best Worst Method. In Gas and Oil Conference (MedGO), 2015 International Mediterranean (pp. 1-4). IEEE.

Schonsleben, P., 2016. Integral logistics management: operations and supply chain management within and across companies. CRC Press.

Shuen, A., Feiler, P.F. and Teece, D.J., 2014. Dynamic capabilities in the upstream oil and gas sector: Managing next generation competition. Energy Strategy Reviews, 3, pp.5-13.

Stephenson, S.R. and Agnew, J.A., 2016. The work of networks: Embedding firms, transport, and the state in the Russian Arctic oil and gas sector. Environment and Planning A, 48(3), pp.558-576.

Tao, F., Zhang, L., Liu, Y., Cheng, Y., Wang, L. and Xu, X., 2015. Manufacturing service management in cloud manufacturing: overview and future research directions. Journal of Manufacturing Science and Engineering, 137(4), p.040912.

Yusuf, Y.Y., Musa, A., Dauda, M., El-Berishy, N., Kovvuri, D. and Abubakar, T., 2014.A study of the diffusion of agility and cluster competitiveness in the oil and gas supply chains.International Journal of Production Economics, 147, pp.498-513.

Zurich, L.B., 2016. Service Operations and Management.

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