Logistics and supply chain of IOC & ONGC
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The document discusses the oil and gas industry in India, highlighting its importance as a core sector and detailing key players like Indian Oil Corporation Limited (IOCL) and Oil and Natural Gas Corporation (ONGC). It outlines the growth drivers, operational challenges, and supply chain management strategies employed by these companies, including their reliance on advanced technologies like SAP. Additionally, it addresses issues like logistical coordination and fragmented supply chains while offering recommendations for improvement.
Logistics and supply chain of IOC & ONGC
- 1. LSCM PROJECT Anand S 14016 Nikita Lalwani 14089 Rohit Shettar 14124 Rony Francis 14126 Tony Sebastian 14171
- 2. OIL AND GAS INDUSTRY • The oil and gas sector is one of the six core industries in India. • India is the fourth-largest energy consumer (2013) of oil & gas in the world, accounting for 37 per cent of total energy consumption. • India has 19 refineries in the public sector and three in the private sector. • Domestic oil output is anticipated to grow to 1MBPD by FY16. • Domestic production accounts for more than three-quarter of the country’s total gas consumption. • India increasingly relies on imported LNG; the country was the fifth-largest LNG importer in 2013
- 3. GROWTH DRIVERS • The country’s natural gas pipeline network amounted to over 15,340 KMs in 2013 and a proposed expansion of 30,000 KMs is envisaged by 2018-19. • The government has decided to set up strategic storage of 5.03 MMT of crude oil at 3 locations – Visakhapatnam, Mangalore and Padur. • major discoveries in the Barmer basin in Rajasthan and the offshore Krishna-Godavari basin by smaller companies such as the Gujarat State Petroleum Corporation and Andhra Pradesh Gas Infrastructure Corporation hold some potential to diversify the country’s production. • The government unveiled plans to add another 91 Million barrels to
- 4. 45.50% 41% 13.50% Shares in Crude pipeline by length IOCL ONGC Others In terms of length, IOCL accounts for 45.5% (4448 km) of India’s crude pipeline network Continued..
- 5. Continued.. 3.1 3.2 3.3 3.5 3.7 3.7 4 0 0.5 1 1.5 2 2.5 3 3.5 4 4.5 2008 2009 2010 2011 2012 2013 2016 Oil Consumption In India (MBPD) Oil Consumption In India…
- 6. SUPPLY CHAIN OF OIL AND GAS INDUSTRY • Exploration includes seismic, geophysical and geological operations. • Production operations include drilling, reservoir, production, and facilities engineering. • Refining is a complex operation and its output is the input to marketing. • In the oil and gas industry, almost all significant and important operations are planned in advance.
- 7. INDIAN OIL CORPORATION LIMITED (IOCL) • Indian Oil Corporation Limited, or Indian Oil, is an Indian state-owned oil and gas corporation with its headquarters in New Delhi, India. • It is the world's 88th largest corporation, according to the Fortune Global 500 list, and the largest public corporation in India when ranked by revenue. • Indian Oil and its subsidiaries account for a 49% share in the petroleum products market, 31% share in refining capacity and 67% downstream sector pipelines capacity in India. • The main services offered by Indian Oil are Refining, Marketing, Pipelines, R&D and Training. • The company is mainly controlled by Government of India which owns
- 8. SUPPLY CHAIN OF INDIAN OIL CORPORATION LIMITED (IOCL) Indian Oil Corporation Limited (IOCL) has implemented Honeywell’s Supply Chain Management solution to integrate and optimize the supply chain of five separate refineries. The project has resulted in the following benefits: • Integrated supply chain planning which optimizes the entire supply chain. • Optimal distribution planning considering transportation costs, taxes and duties and transportation constraints. • Optimal refinery production planning considering crude assays, unit
- 9. The Supply Chain Management solution provided by Honeywell consisted of the following modules: • Demand planning: for demand forecasting and aggregation of the final demand numbers • Integrated planning: for the complete IOCL refining supply chain • Distribution planning: for generating operational plans for allocation and product distribution • Refinery production planning: for generating operational plans for production
- 10. 1. FACILITIES The Indian oil group of companies owns and operates 10 of India's 22 refineries with a combined refining capacity of 65.7 million metric tonnes per annum (MMTPA).It has over 23,900 petrol and diesel stations, including over 6000 Kisan Seva Kendras (KSKs) in the rural markets. 2. INVENTORY Indian Oil Corporation encompasses all raw materials, work in progress, and finished good in large bulk. Main raw material crude Oil, is purchased from OPEC countries to meet the demand. LOGISTICS DRIVERS OF SUPPLY CHAIN OF IOCL
- 11. 3. TRANSPORTATION For Transportation Indian Oil Corporations uses pipeline, ship, rail or road. LNG is transported in specially-built tanks on double-hulled ships. Coastal cities can be supplied through sea. 4. INFORMATION IOCL deployed SAP NetWeaver Process Integration technology and the SAP NetWeaver technology platform. This ERP Improved data accuracy by 99% and Minimized inventory levels. 5. PRICING The company use flexible price for its products. The price is mainly based on international crude oil price.
- 12. ONGC • SIZE IS WORTH RS. 2,100 CRORE ANNUALLY AND THEY EMPLOY NEARLY 2,000 PEOPLE. • THERE ARE 22 ONSHORE LOCATIONS, HAVING DECENTRALISED LOGISTICS AND SUPPLY CHAIN MANAGEMENT, WHERE PRODUCTION AND EXPLORATION ARE IN PROGRESS. • ONGC HAVE TOTAL OF 21 RIGS, NINE OF THEM DEPLOYED ON THE EAST COAST AND 12 OTHERS ON THE WEST. • BOTH ONSHORE AND OFFSHORE OPERATIONS
- 13. SUPPLY CHAIN STAGES IN ONGC • ACQUISITION OF ONSHORE AND OFFSHORE FOR EXPLORATION • OPERATIONS – EXPLORATION, FORECASTING, PRODUCTION. • LOGISTICS MANAGEMENT - DELIVERING CRUDE OIL FROM REMOTELY LOCATED OIL WELLS TO REFINERIES
- 14. LOGISTICS DRIVERS OF SUPPLY CHAIN OF 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
- 15. 3. 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
- 16. 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 GOVERNMENT’S 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.
- 17. COMPARISON BETWEEN THE TWO COMPANIES • INDIAN OIL CORPORATION LIMITED (INDIAN OIL) IS THE LARGEST OIL REFINING AND MARKETING COMPANY IN INDIA. • APART FROM THE 61.7 MMTPA (MILLION TONNES PER ANNUM) OF EXISTING REFINING CAPACITY WITHIN THE INDIAN OIL GROUP, A NEW REFINERY AT PARADIP, ORISSA IS COMING UP WITH A CAPACITY OF 15 MMTPA. • THE COMPANY ALSO OPERATES OVER 10,541 KILOMETERS OF CRUDE OIL AND PRODUCT PIPELINES. • IT ALSO HAS A RETAIL NETWORK OF OVER 18,643 OUTLETS. ITS GROUP COMPANIES INCLUDE CHENNAI PETROLEUM CORPORATION LIMITED, INDIANOIL (MAURITIUS) LTD, LANKA IOC PLC, IOC MIDDLE EAST FZE, INDIANOIL TECHNOLOGIES LTD AND INDIANOIL - CREDA BIOFUELS LIMITED. • TECHNOLOGY USED: PROCESS INTEGRATION TECHNOLOGY, SAP NETWEAVER TECHNOLOGY PLATFORM
- 18. • ONGC IS THE COUNTRY'S LARGEST OIL EXPLORATION AND PRODUCTION (E&P) COMPANY ACCOUNTING FOR NEARLY 90% OF INDIA'S PROVEN OIL AND GAS RESERVES. • AT THE CURRENT RATE OF PRODUCTION, THE COMPANY ACCOUNTS FOR OVER 80% OF OIL AND GAS PRODUCTION. APART FROM E&P, THE COMPANY ALSO PRODUCES VALUE-ADDED PETROLEUM PRODUCTS SUCH AS LPG, KEROSENE, NAPHTHA AND DIESEL. • WHILE LPG IS SOLD TO THE PSU MARKETING COMPANIES, A MAJOR CHUNK OF NAPHTHA IS EXPORTED AND DIESEL IS USED FOR CAPTIVE CONSUMPTION. ONGC ALSO HAS A 72% STAKE IN MRPL, A STAND-ALONE REFINERY WITH A CAPACITY OF NEARLY 9.7 MMT (MILLION METRIC TONNES). • TECHNOLOGY USED : UOP TECHNOLOGY, BIOREMEDIATION TECHNOLOGY MNRE, LED ERP, SAP, R3
- 19. FINANCIAL COMPARISON INDIAN OIL CORPORATION 2014 2013 2012 2011 2010 Number of Days In Working Capital 18.76 33.14 30.55 26.43 13.2 Inventory Turnover Ratio 7.31 7.54 8.15 7.56 8.37 Return On Capital Employed(%) 9.11 8.64 13.08 10.32 15.83 Operating Profit Margin(%) 3.31 3.07 4.2 3.8 5.6 Average Raw Material Holding 58.23 62.8 60.85 56.27 45.53 Average Finished Goods Held 22.8 24.65 26.32 23.96 24.77 ONGC 2014 2013 2012 2011 2010 Number of Days In Working Capital 6.1 47.82 80.99 46.43 151.48 Inventory Turnover Ratio 14.26 14.55 14.81 16.59 87.82 Return On Capital Employed(%) 23.53 24.6 28.56 28.38 34.54 Operating Profit Margin(%) 52.72 52.53 60.01 58.81 62.57 Average Raw Material Holding 2.34 2.5 3.4 1.5 0.27 Average Finished Goods Held 8.5 9.21 6.24 10.8 7.42
- 20. ISSUES • 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
- 21. RECOMMENDATIONS AND SUGGESTIONS Segment Customers Based Their Needs: Form Partnerships to Enhance Supply-Chains Apply Strategic Sourcing Adapt a Supply-Chain Wide Technology Strategy