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Value chain petrol diesel-final draft

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Value Chain Analysis of the Petroleum industry

Value Chain Analysis of the Petroleum industry

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    Value chain petrol diesel-final draft Value chain petrol diesel-final draft Presentation Transcript

    • Analysing the Value Chain for the Petroleum IndustryProf. Dr. Howard Sutton Ramkumar RajagopalanStrategic Management Sherif Mohammed 1December 7, 2011. 1 Sunil George
    • Agenda 1. The Value Chain for Oil 2. Adding value from oil to gasoline 3. Upstream Processes 3.1 Exploration 3.2 Drilling 3.3 Production 4. Midstream Processes 4.1 Transportation 4.2 Refining 5. Downstream Processes 5.1 Transportation 5.2 Storage 5.3 End Consumers 6. Internal or External Value Chain 7. Major Challenges for Provision 8. Summary Strategic Management 2
    • The Oil Chain – Detailed View Source: Crain, Abraham , Using value-chain analysis to discover customers’ strategic needs, Strategy and Leadership, VOL. 36 NO. 4 2008, pp. 29 Strategic Management 3
    • The Oil Chain - Simplified Upstream Midstream Downstream Source: URL: http://www.centreforenergy.com/AboutEnergy/ONG/Oil/Overview.asp?page=1 Strategic Management 4
    • Adding Value – Crude Oil to Gasoline Oil Exploration Upstream 25% Drilling Production 50% Transportation 5% Midstream Refining 13% Distribution 5% Downstream Marketing 2% Source: URL: http://www.petrostrategies.org/Learning_Center/oil_and_gas_value_chains.htm Strategic Management 5
    • UpstreamProcesses Strategic Management 6
    • Oil ExplorationWorlds leading oilfield services company Investment of 919 million USD in R&D in 2010 Source: Schlumberger Annual Report, 2010 Strategic Management 7
    • DrillingWorld’s largest offshore drilling contractor Source: Transocean Annual Report, 2010 Strategic Management 8
    • DrillingWorld’s largest offshore drilling contractor Deepwater Horizon 11 Crewmembers were killed in the explosion Litigations and lawsuit penalty upto 400 million USD Source: Transocean Annual Report, 2010 Strategic Management 8
    • Oil Production Source: Apache Annual Report, 2010 Strategic Management 9
    • Oil Production Source: Apache Annual Report, 2010 Strategic Management 9
    • Oil Production Source: Apache Annual Report, 2010 Strategic Management 9
    • MidstreamProcesses Strategic Management 10
    • Midstream Processes – Oil TransportationTeekay is committed to being an essential marine link in theglobal energy supply chainTeekay Corporation transports approximately 10 percent ofthe world’s seaborne oil, Source: Teekay Corporation Annual Report, 2010 Strategic Management 11
    • Midstream Processes – Refining Source: Shell Annual Report, 2010 Strategic Management 12
    • Midstream Processes – Refining Source: Shell Annual Report, 2010 Strategic Management 12
    • Midstream Processes – Refining Source: Shell Annual Report, 2010 Strategic Management 12
    • DownstreamProcesses Strategic Management 13
    • Downstream Processes Midstream Source Refinery Transportation Oil Trucks Train Oil Pipelines Intermediary or Storage Facilities Distribution facility External Internal Micro Distributors Businesses Retailers Retailers Retail End Consumers Strategic Management 14
    • Transportation Trains – Oil Tankers • Most cost efficient – (Beneficiary – Government, Railways) • Only suits large scale transportations (Railway track restrictions) • Very high risk involved Oil Trucks • Suits small scale transportations • To desired client locations • Inefficient External Logistics (Small and many players) Oil Pipelines • Most Efficient method to transport oil • High fixed costs and low operational costs • High safety (Compressing stations, Leak detection facility) • Beneficiary – Piping companies, Maintenance, other countries Strategic Management 15
    • Storage Facilities (Reservoirs) Reservoirs • External Private companies • Cost effective in certain countries • Reduced control and risk • Own reservoirs – SHELL Filling Stations • LPG bottling facilities (B.P.) • Liquefying Gas by cooling (Shell) • Filling Stations (Trucks) (Shell) Strategic Management 16
    • End Consumers B2B • Gas and Electricity (Industrial & Domestic usage) • Business Usage (Airports) • LPG • Chemical products • Lubricants • Plastics • Coatings • Detergents External & Internal Retailers • SHELL Gas stations • Other Gas stations Strategic Management 17
    • Internal or External Value Chain ? 18000 16000 14000 Upstream Income 12000 10000 Downstream income 8000 Production costs 6000 Selling & Distribution 4000 costs 2000 0 All values in Millions 2009 2010 Internal Downstream value chain is profitable only when the trade volumes are high. Strategic Management 18
    • Major Challenges for Provision Inaccessibility of Oil Extraction sites • Regional issues (Different country) • Political and legal issues • Environmental issues • Natural calamities • Accidents Disruption in External value chains • Strikes • Higher demands from third party vendors • Internal or External Social issues (CSR) • Accidents Depletion of Oil resources • Lack of new oil sites • Excessive extraction of oil Strategic Management 19
    • Summary – SWOT for Oil Value Chain •Increasing demand for oil •Ecologically unsustainable •Price fluctuations •High revenues •Technological developments •Alternate products •Depletion of easy resources •Finding new reserves •Alternate energy •Government policies Strategic Management 20
    • Questions? Strategic Management 21
    • Backup Slides Strategic Management
    • Value Distribution Cost Cumulative Value Value ProfitOperation Price Value Add Add % Net Profit DistributionExploration 2.97 16.33 16.33 25% 13.36 36%Production 17.78 49 32.67 50% 14.89 41%Transportation 1 51.96 2.96 5% 1.96 5%Refining 3.7 60.46 8.5 13% 4.8 13%Distribution 1.9 63.69 3.23 5% 1.33 4%Marketing 0.8 64.85 1.16 2% 0.36 1%Net value beforetax 28.15 36.7 Source: URL: http://www.petrostrategies.org/Learning_Center/oil_and_gas_value_chains.htm Strategic Management