SUPPLY CHAIN ANALYSIS

The petroleum industry traditionally had prices decided by the Government of India.
Effective from August 1, 2004, the Government put in a revised methodology
allowing oil companies to revise the prices of motor spirit and High Speed Diesel
(HSD).
The total investment estimated in the petroleum sector from 1995 till 2010, is
expected to be Rs. 4,32,000 cr (US$120 bn), out of which Rs. 2,58,000 cr (US$80 bn),
are for the upstream sector alone
Petrochemical industry in India employs around 40,000 people directly and around 4
lakh indirectly.

PROCESS
Exploration Production Refining
Marketing Consumer
Exploration: Seismic, geophysical and geological operations
Production: Drilling, reservoir, production and facilities engineering.
Refining : complex operation and its output is the input to marketing.
Marketing : The retail sale of gasoline, engine oil and other refined products.

The Upstream Processes Include:-

Acquisition of crude oil.
Operations Exploration ,Forecasting , Production .
Logistics management - Delivering crude oil from remotely located oil wells to
refineries.
The Downstream Processes Include:-

Refinery- The crude oil is manufactured into the consumable products that are the
specialty of refineries and petrochemical companies.

Processes - forecasting, production, and the logistics management of delivering the

crude oil derivatives to customers around the globe.

OBJECTIVES OF A SUPPLY CHAIN

Minimization of material procurement
Maximization of manufacturing capacity and sales
Meet demand numbers
Respond quickly to market opportunity by purchasing the production shortfall
from other players
Objective of each production unit would be to maximize the throughput and
its margin
Procurement would purchase the feedstock with not the best yields at lowest
cost.

SUPPLY CHAIN STRATERGIES AT OIL AND NATURAL GAS

CORPORATION
A. Planning
Which feed stock to buy
Where to process
How much to buy readymade and how much to make
What to make and where
How to transport

B.Scheduling
When and in what order feedstock should arrive at manufacturing facility
When and in what sequence or modes to run the equipments
Which orders to meet and what dates to promise
A. Demand planning: For demand forecasting and aggregation of the final demand
numbers based on requirements of supply chain

B. Integrated Planning: Planning for the complete supply chain of the customer
based on demand numbers

C. Distribution Planning: Generating operational plans for distribution

D. Production Planning: Generating operational plans for production.

These modules are supported by various enablers that facilitate planning

activity that include:

(1) Supply Chain Database (SCD)

(2) Geographical Information System (GIS)
(3)Data Interfaces

LOGISTIC MANAGEMENT OF SUPPLY CHAIN AT ONGC

1. Facilities
They have a total of 21 rigs, nine of them deployed on the east coast and 12 others
on the west.
Twelve of them are one hire while nine others are owned by them
have nearly 5,000 km of pipeline for operation and maintenance.
2. Inventory
Inventory in ONGC has been classified into two broad groups:
Stores
Spares
 1. Transportation
For Transportation ONGC uses pipeline, ship, rail or road. Pipeline is the cheapest for
the bulk transportation but cannot be used for small quantity.
Small quantities are supplied through road in remote areas. Coastal cities can be
supplied through sea.
4. INFORMATION
Oil and Natural Gas Corporation Limited (ONGC) has chosen the SAP NetWeaver
Process Integration (SAP NetWeaver PI) offering.
Now ONGC collaborates in real-time gaining vast efficiencies in production and
accounts payable.
5. Sourcing
State-owned Oil and Natural Gas Corp (ONGC) has extended pact with Hinduja Group
for sourcing of liquefied natural gas from Iran and other Middle East nations by one
more year.
6. Pricing
The steep fall in crude prices means that the discount ongc has to give on its produce
is higher than the actual oil price.
While ONGC has to give a discount of $56 a barrel to public sector buyers as part of
the governments subsidy-sharing mechanism, international crude oil prices are $6-
7/barrel below that level.
ONGC and Oil India offer discounts to their counterparts in the refining-cum-retailing
business.

ISSUES IN SUPPLY CHAIN OF ONGC

Complex operations- logistical coordination for large complicated projects
becomes a problem
End to end visibility- this is also an issue since there exits a time lag between
operations on the ground or at sea and information available to the
management in the offices
Fragmented supply chains- since there are numerous stakeholders and
multiple drilling sites, visibility of materials becomes an issue and this results
in fragmented supply chains
Unpredictability- Due to presence of multiple stakeholders and with data
management and materials monitoring being an issue there exists a degree of
unpredictability in the supply chain which is undesirable
 WAYS TO IMPROVE PETROLEUM SUPPLY CHAIN
1. Inventory Carrying Costs:
Use of a reliable transportation system and quick information exchange can
reduce carrying costs
Government should aim at reducing the minimum safety stock, which oil
companies are supposed to keep
2. Integration of Supply Chain Partners:
Oil companies should aggressively use information technology to
integrate suppliers and customers.
Effective use of ERP can help in this regard.

3. Raw Material Supplies:

Formulating a long term agreement with some of the oil
producing nations and in order to take care of price fluctuations
Government should allow the petroleum companies to use
hedging for finalizing deals involving purchase of crude oil.
4. Transportation Costs:
Use of Pipeline transportation
Length of Supply Chain:
Facilities at the ports should be improved and their capacity to
be increased so that more tankers could berth at the harbour