Understanding Oil And Gas For Supply Chain Of Petroleum Products

Oil and Gas Industry

Describe about the Understanding Oil and Gas for Supply Chain of Petroleum Products.

The oil and gas industry of the UK benefits the lives of citizen in various ways. The products are catered to the modern society, energy supply to power industry and transport fuel (Ruqaishi and Bashir 2013). By the help of extensive usage of supply chain, this sector employs numerous people to contribute in the UK economy relating to tax revenues, exports and technology.

In this report, a description of the history and structure of the oil and gas industry will be presented. The difference between the supply chain of petroleum products and natural gas will be discussed along with a comparison to contrast the characteristics of National Oil Companies, International Oil Companies and Government-Sponsored Enterprises. Finally, a brief reflection will be provided in relation to self-career aspirations in the oil and gas industry.

History

In the year 1908, Newton Abbot discovered oil in the Persian Gulf and from there by the influence of Britain the oil and gas industry has transformed itself largely (Arapostathis et al. 2013). In the 17^th Century, the owner of Kimmeridge oil shade started utilizing oil as fuel for boiling seawater and glass making (Pollitt and Haney 2013). After that, in the year 1848, Bituminous Shale Company started exploring and exporting oil, which helped in feeding 130 gas lamps in the UK street (Kern, Kuzemko and Mitchell 2014). From then, the importance of oil and gas industry started to grow over 3 million oil shale tons, which was further contributed in constructing the Heathfield Railway Station. In this way, the United Kingdom Oil and Gas (UKOG) Industry accelerated to serve for 250 operating wells in 120 “onshore oil and gas sites”. From late back, the UKOG industry produces 1.4 oil equivalent barrels of which 59% is oil or liquids (Ghandi and Lin 2014).

The Oil and Gas industry structure is composed of the following:

Serial Number	Structure	Composition
1	Power generation	·         Rivalry between power plants; regulation and deregulation. ·         Access to distribution network and transmission as a necessity.
2	Transmission Networks	·         220 Kv and 400 Kv trunk network. ·         Regulation requirements. ·         Network Monopoly. ·         Profitability determination.
3	Distribution	·         110 kv- owned by distributors. ·         Regulation can be restructured if sales competition increases.
4	Trade	·         Total competition allowed. ·         Regulation necessity with each segment is interlinked.

Table 1: Distributive Structure of Oil and Gas Industry in UK

(Source: Tordo et al. 2013)

The Oil and Gas structure for business is composed of electricity and natural gas, which can be simplified with the following diagram.

Figure 1: Oil and Gas Industry Structure

(Source: Shuen, Feiler and Teece 2014)

From the above structure, it is evident that the UKOG industry supports the two most important sectors, which are electricity and natural gas. Natural gas is both stored and traded in other nations so that sustained economy is persistent in the UK.

Structure

Petroleum products

The supply chain of petroleum products consists of purchasing crude, crude storage and refining. Crude is purchased from top suppliers such as the “UK Universal Group”, Prax petroleum and Exxonmobil (Yusuf et al. 2014). After that, separate stakeholders ensure storage of the products. Distribution planning is the final stage after the manufacturing process of petroleum, which is distributed through the transport department to the respective countries”. (Demski, Poortinga and Pidgeon 2014).

The petroleum supply chain is consisted of four factors, which are:

Exploration	Geological, geophysical and seismic operation
Production	Engineering process through drilling, reservoir, production and facilities
Refining	Complex operation resulting to output for marketing
Marketing	Retail sale consisted of engine oil, gasoline and other refined products

Table 2: Supply Chain Factors

(Source: Yusuf et al. 2013)

Figure 2: Supply Chain of Petroleum Products

(Source: Yusuf et al. 2013)

The natural gas supply chain consists of three stages, which are production and processing, transmission and storage and distribution.

Serial Number	Stages	Underline processes
1	Production and processing	1.      Well and drilling Completion. 2.      Gathering lines. 3.      Producing wells. 4.      Gathering stations. 5.      Gas processing plant.
2	Transmission and storage	6.      Transmission Compressor Stations. 7.      Pipeline Transmission. 8.      Storage (Underground).
3	Distribution	9.      Distribution Mains. 10.  Regulators and meters.

Table 3: Supply Chain Process of Natural Gas

(Source: Yusuf et al. 2014)

From the above table, it is understood that processing, transmission and distribution are the three stages, which are quite different from the petroleum products supply chain. Crude oil is purchased, stored and then refined in the petroleum industry, whereas in natural gas industry, oil is liquefied and then transmitted through the pipeline (Yusuf et al. 2014). There is no refining process in natural gas but only liquefying process, which is quite different from the petroleum industry.

The supply chain process of natural gas is produced in Appendix 1, where it can be found that gas is produced from wells and are then processed in gas plants. On the contrary, in petroleum industry, crude is purchased and finally refined and only after that, it is transferred through road or tanker transportation (Logan et al. 2013). Natural gas is processed through liquefaction and then is transferred for marketing.

National Oil Companies (NOC)

NOCs are the strong energy sector, which act as the net hydrocarbon exporter.

High differences prevail in NOCs regarding their performance to achieve commercial and non-commercial objectives.

NOCs are rapidly becoming commercial in nature.

NOCs are operating to compete against each other to set a competitive benchmark.

Such companies are trying to position operators and partners.

Highly competitive in global business.

They act as the partner of IOCs.

Has to face a lot of issues related to environmental protections and transparency.

Certainly impact on the operations of International Oil Companies (Fidler and Noble 2012). IOCs are pressurized by broad social and economic participations from the developing countries.

Act as the part of upstream oil and gas companies.

Supply Chain

Consist of full cycle of operation including exploration, production, transport and storage and finally marketing and sales.

Vertical Integration is the vital characteristic of IOC.

Operation requires huge investment for new market entry, including gas-to-liquid and liquefied natural gas (LNG).

IOCs are confronted by the turning down of their reserves substitution ratios from their accessible oil fields.

Operations are highly risky and sensitive and therefore, investments are unstable.

Production costs rise with the rise in risk.

IOCs usually invest more in the R&D category so that in-house investments are boosted (Cruz and Krausmann 2013).

Such companies are not highly competitive.

Companies are mainly financial service corporation.

Main function is to enhance credit flow to targeted economy sectors.

Such companies reduce the risk of capital losses.

These companies are quite different from oil companies and the operation is related to only the government bodies (Tang, Snowden and Hook 2013).

Thus, from the discussion, it is sure that all the three sectors are quite different from each other in terms of operation and services. NOCs are competing with each other, whereas IOCs are facing challenges while operating in different countries (Dholakia et al. 2015). NOCs are facing competitive challenge and IOCs are facing financial challenges and investment risks. On the other hand, Government-Sponsored Enterprises are completely different in terms of operation and services, as they are linked with financial services (Merrill and Schizer 2013). Furthermore, it can be said that Government-Sponsored Agencies are providing financial services to the oil companies so that investment related considerations are made.

Oil and gas companies are rapidly increasing their operation in the UK and in other international developing countries such as India (Bergh et al. 2014). Therefore, I find a huge prospect in establishing my career in the oil and gas industry. With the advancement of technology, natural gas has become the perfect energy resource in industry related to power generation. The Oil and Gas sector is wide range and highly sophisticated in numerous countries in the world (Mitchell and Mitchell 2014). Therefore, for me it will be the opportunity to experience wide range of domains and trainings from experts, which will be accompanied by pastures and better jobs along with wide range of workers.

Finally, to be specific, for my career growth, I found that the following points would be highly promising:

Ongoing education and training in the most advanced sector.

Characteristics

Rapid opportunity to enhance my skill with the organization.

A well trained management team for career growth of employees.

Great opportunity to get mentored and monitored by industrial experts.

Safety, health and insurance plans.

Specialization and education support.

Employee assistance programs which are multifaceted.

Onsite fitness facilities.

Conclusion

While concluding, it can be said that the Oil and Gas industry is largely contributing in energy resource for a developed country like the United Kingdom. From its structure, it has been identified that power generation, transmission networks and distribution are the core operations. On the other hand, from the types of supply chain it is evident that refining and liquefaction are the distinguishing factors between petroleum industry and natural gas industry. While comparing and contrasting the characteristics of NOCs and IOCs, it has been found that one sector is trying to create competitive essence through benchmarking and the other sector is associated with risk determination in terms of investment. Finally, with the rapid expansion of Oil and Gas Industry, it is evident that the sector provides high career growth opportunities for candidates.

Reference List

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