Logistics and Operations for Oil and Gas

This article discusses the logistic and operational challenges faced by Saudi Aramco in the Indian downstream market, including cutting transportation costs, processing large quantities of information, segmented and customized servicing, and manpower management and regulations. It also explores potential competitors in the oil and gas industry, such as Reliance Petrochemicals, Cairn India, and Essar Oil, and the challenges linked to their design and delivery of services. Additionally, the article examines the supply chain economic and environmental performance of Reliance Petroleum and its asset advantage and optimization.

Running head: LOGISTICS AND OPERATIONS FOR OIL AND GAS
LOGISTICS AND OPERATIONS FOR OIL AND GAS
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Table of Contents
1. Logistics and Operational Management Challenges..............................................................3
1.1 Cutting the Transportation costs.......................................................................................3
1.2 Processing large quantity of information.........................................................................3
1.3 Segmented and Customised Servicing.............................................................................4
1.4 Manpower management and regulations..........................................................................4
2. Service provision of potential competitors in the Indian downstream sector........................5
3. Challenges linked to the design and delivery of the services offered by the Competitors....6
4. Supply chain economic and environmental performance of Reliance Petroleum.................7
5. Implications for HR management by Aramco in India..........................................................9
Reference List..........................................................................................................................12

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1. Logistics and Operational Management Challenges
The logistic and operational challenges that Saudi Aramco is likely to face in the
Indian downstream market are the follows:
1.1 Cutting the Transportation costs
The constant and steady growth of the fuel prices in indigenous market of India have
increased the supply chain management pricing. The supplying partners in the oil and Gas
sector now demands 15% higher payment in comparison to the was demanded 5 to 7 years
earlier. As identified by Kelland (2014), the price of transportation fuel have also increased
by 10% approximately over the last 5 years. In companion with that, the indexes of peaking
inflation works in tandem to increase the daily transportation costs in India. In the initial
phase, setting up a logistics platform including rail, ocean, and rail as well as air routes is
difficult and expensive also. This is why logistics managers have to remain well informed
about the current as well as the future orders in order to avoid the surcharges owing to urgent
deliveries (Raut, Narkhede and Gardas 2017). The cost related to transportation that Saudi
Aramco have to bear in the Indian market includes cost of maintaining a large fleet of
vehicles for delivery, cost of salaries for large number of drivers and freight management
staff, along with the on road charges and other freight related taxes.
1.2 Processing large quantity of information
In order to ensure smooth operation of the logistics network, the mangers of logistics
have to maintain a high level database including dates, volume and payment of the big array
of freight vehicles transporting oil in their favour. As Badiru and Osisanya (2016), informs,
the position of the drill in Maharashtra is situated near the coast line. Hence, the company can
use the vessels for distribution along the Western coastal states. However in east and South,
they have to use land and air routes for transmission only. Hence, the logistics management

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body of the organisation have to deal with the safety of their indigenous as well as out-
sourced staff associated with logistics, keep track of the loading and unloading of the fleet as
well as check the route maps for the shortest distance delivery. In India, Kanikdale and
Venugopal (2015), opines that last mile delivery is a big concern as communication with the
oil reserves that are mainly located in the outskirts is very difficult in India. Hence, mapping
and scouting of delivery requires a lot of resources in India. In this context, Bildirici and
Bakirtas (2014), states that the sanctioning of fuel bills for every organisation with which
they deals is very important. This requires a large quantity of manual attention and continued
labour.
1.3 Segmented and Customised Servicing
Market management is gradually becoming a multi-layered affair in India. Most of the
organisations and smaller networks as well, are using multiple supply chain. As an outcome,
one significant task of the managers is to have a database as well as understanding developed
of the major trends that is being followed in the country regarding contracting and selecting
oil and gas partners. In this context, Mitchell and Mitchell (2014), mentions that in the Indian
market, the oil and gas supply partners have ties with large corporations for providing
personalised supply. Saudi Aramco should have such potential market contracts since this
would increase their brand value as suppliers of oil and gas.
1.4 Manpower management and regulations
Managing the manpower is one of the trickiest affairs for an oil and gas corporation
that is trying to penetrate the market. Having essentially human approach towards the Indian
employees is very essential as pertaining to various parts of the country, they are adapted to
various patterns of work culture. In case if they are not treated with compassion and

5LOGISTICS AND OPERATIONS FOR OIL AND GAS
trustworthiness, Kang, de Gracia and Ratti (2017), states that the integration of the workforce
would not be accomplished.
Another factor that requires mention here is the need to be stringent towards compliance to
regulations and rules regarding transportation. The norms related to transportation varies
from one city to other ad from one state to another. These can be a grave challenge as the
company have to be informed about the norms that exists in various states and they should
also give extensive training to the delivery agents so that they are able to comply with the
transportation norms of every state.
2. Service provision of potential competitors in the Indian downstream sector
The oil and gas industry in Australia is one of the most competitive sector in India.
Economic growth of the country is directly linked to the demand for energy. Hence major
investment of all the sectors are conducive for investment in oil and gas. As Sharma et al.
(2015), states, several policies have been taken up by the government in this context to meet
the increasing demand for oil and gas in the country. The Indian government have allowed
hundred percent of direct foreign investment towards many segments in the oil and gas sector
in the country. As per the opinion of Heidersbach (2018), Reliance Industries as well as Cairn
India are the two main bodies in the Oil and Gas industry of India that attracts the main bulk
of foreign investments in the Oil and Gas sector of the country.
In terms of oil marketing, the three big firms are directing the ways in the oil and gas
sector. They are Bharat Petroleum, Hindustan Petroleum and Indian Oil. However, these
three organisations have a MOU signed with Adnoc, the trading partner of Aramco in the
country. Reliance Petrochemicals is one of the potential companies that can pose a big
challenge for Aramco in India. This organisation is highly favoured by the customers in India
as well as abroad (Wright 2017). In fact, they have the reputation of being the most favoured

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as well as versatile customer based company. With its headquarters in Ahmadabad, the
annual turnover of the organisation is 700 million Dollars approximately. The number of
employees associated with the organisation is 100000. The organisation has tie up with
another industry leader, namely Chevron India Holdings of Singapore.
The second most potential threat to the path of spreading business in the country is
Cairn India. This is the highest grossing private organisation in the oil and gas sector in the
country with an annual turnover of 3500 million Dollar USD (Shvarts, Pakhalov and
Knizhnikov 2016). This organisation is still emerging and is probably the biggest threat to
any new entrant in the oil and gas sector of the country. The business coverage of the
company is the greatest in India and this is the most prospective emerging oil and Gas
Company in South East Asia. Again, this is a public sector company that is engaged in
contract with many of the frontline organisations in the country as frontline suppliers of best
quality oil, petroleum as well as natural gas.
The dominant presence of Essar Oil in Maharashtra would also challenge the growth of
Aramco in India. In the recent years, this company have had active participation in
exploration of new drills of crude oil in India as well as abroad parallely involving them in
the purifying of crude oil and actively advertising for petroleum products. As Smith and
Richards (2015), states, with 9 billion Dollar production value and 75000 employee strength,
Essar Oil is also engaged in the drive of becoming the greatest grossing oil and gas
corporation of the country.
3. Challenges linked to the design and delivery of the services offered by the
Competitors
The rising consumption of oil and gas products in India is characterised by high
ambiguity. However, apparently, the consumption strength is less with merely 0.6 tons per

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capita oil consumption on an average in the country. In this situation, the demand is highly
ambiguous and confusing. As Perrons (2014), thinks, the indigenous organisations that have
been surviving in the circuit of the Indian Oil and Gas sector only have the potential to know
the market pulse of the market. This is one area where the organisation is facing large issues
in controlling the market. They have to get hold of an advisory consultancy group that can
guide them regarding the knowledge of the most potential markets of oil and gas in India.
India have about 3.85 MMTPA of oil refining capacity. The LNG import proximity of India
is also the fourth largest. Hence, the company would face a complexity in deciding which
segment to invest in. However, they cannot afford a delay in market acquisition also. The
LNG import market is mainly captured by the ONGC and the Reliance Petroleum (Gaurav et
al. 2017). As an impact, the organisation would have to face large adversity to bump in to the
LNG market with a big investment. The growth of infrastructure and development of
resources are also relative with the large oil and gas production and refining agencies in
India. In this context, Bharat Petroleum would be a big threat for the organisation. The major
oil drills in the Mumbai-Maharashtra belt are under the acquisition of the Bharat Petroleum,
ONGC and Reliance petrochemical Industries. In this context, Iyer (2016), states that the
organisations would firstly come in conflict with the Bharat Petroleum with whom their
trading partner in India, namely Adnoc who have signed a MOU with Bharat Petroleum.
Hence, in serving the Indian market, the organisation have to majorly rely on the import of oil
from the OECD union countries
4. Supply chain economic and environmental performance of Reliance Petroleum
The Jamnagar unit of the Reliance Petrochemicals is the largest refining hub of the
world. The organisation showed professionalism of highest level by constructing the plant at
a competitively much lower cost. The speedy growth of the refinery helped the company to
capture the market rapidly and Reliance Petrochemicals gradually became the backbone of

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petrochemical supply in India and even started exporting outside India. The technologies
implemented in the refinery have made the plant absolutely future ready and have the
potential to deliver gasoline as well as diesel of any grade. The Saudi Aramco also have high
and technological expertise. However, as per the opinion of Singhal and Ghosh (2016), the
cost of establishing the same technology and set up in India would be at least 30% higher
than their native set up (Gogoi et al. 2016). Besides, the location of the plant is exclusive
since it is situated in a special economic zone, which is facilitated with amenities like easy
transportation facilities and easy land acquisition and settlement agreement. It is not easy for
Saudi Aramco to find an easily facilitated set up location to accommodate 600,000 BPD of
oil.
In the above context, the key components of the R&M business model that is key to
the success of the Jamnagar plant of the Reliance Industries the operating excellence of the
company is owing to the automated facilities and high horse power machineries at the
organisation. Besides, as discussed earlier also, the refinery of the Reliance Petroleum is also
located strategically on the western coast of India. From this region, the cost of transportation
is already low owing to the feedstock and closeness of the high growth markets. Owing to the
presence of the oil yielding facility in the Maharashtra region, it would be almost impossible
for the company to set up such a favourable unit at such a lucrative location.
The primary goal of the business model of the organisation is to ensure the deliverance of
industry leading returns to ensure medium term growth alongside keeping focus on safety and
sustainability of the environment.
Asset Advantage of Reliance Asset Optimisation of Reliance
 High capacity of production ensures
industry leading capital for per
 The integrated supply as well as
trading team of Reliance gives real

9LOGISTICS AND OPERATIONS FOR OIL AND GAS
barrel
 High end marine facility that gives
access to the largest crude as well as
product vessels
 The large scale of operations as well
as the energy efficiency of the
organisation ensures much lower
operational cost for the company,
inside as well as outside India
time benefit to the organisation
regarding the refinery operations.
This in turn helps the organisation in
optimisation of the asset utilisation.
 The organisation have the ability to
process all the qualities of crude oil
as well as meet the more variegated
as well as demanding specifications
of the product.
Table 1: Asset Advantage and Asset Optimisation of Reliance Petrochemicals
(Source: Xie et al. 2014)
There is a wide variety of crude oils as well as production of large range of petrochemical
products for the purpose of exporting as well as supplying in the market of India.

10LOGISTICS AND OPERATIONS FOR OIL AND GAS
Table 2: Listing of the products of Reliance Industries and their applications
(Source: Soam et al. 2015)
5. Implications for HR management by Aramco in India
In spite of the recent developments in the Oil and Gas sector, the analysis of Soam et
al. (2015), proves that there is still the shortage of 25,000 additional staff in the industry. The
learning and development that the candidates receive at an academic level is not sufficient
and matching with the recent industrial standards. As an outcome, the problem of lack of
experienced staff in the oil and gas sector is hovering over the industry and this is going to be
a dangerous implication for the future sustenance of industry. Before the beginning of the
operations in the Indian oil and gas environment, the organisations should be aware of this
problem. As an outcome, they would also face the same implication and in order to overcome
that they have to set a proper criteria of industrial standards for getting appointed at the

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various positions of the organisation. Working in India, the organisation have to have 30%
native workforce. Besides, it would be cost enduring if they have to appoint staff from other
parts of the world at competitively higher wages (Saudiaramco.com 2018). In India, the
organisation have to pay a minimum of 25% lesser wage than that expected by the staff of
Aramco in other countries.
Another thing that the organisation might consider is setting up their own training
institute in India. This institute would focus up on making the collegiate students industry
ready and adaptive to the technologies and methodologies that the workers have to work
with, in the organisation. The selected candidates should be given at least 6 to 10 months of
industrial training and then absorbed in mainstream work. This would be ultimately
beneficial for the organisation as the trained workforce would be able to provide a 20 to 30%
higher productivity to the organisation at the same wage rate.
The experienced workforce that is involved in the oil and gas sector is only 25% of the total
employed workforce. Moreover the average age of the experienced workforce is above 40
years. At the stage of employment they are into, they have developed a certain stage of
involvement with the organisation they have been serving. Hence the chance of appointing
experienced workers in the mainstream job roles is very limited.
Another Human Resource related issue that the company would be acing while
working in the Indian standards is that in India, most of the promising employees as well as
deserving candidates feel the need to be outsourced in a foreign job site. Even, this is the
dominant trend in the industry. The dominating Indian companies which have operations
outside India place most of their experienced and most potential workers outside India.
Hence, in case if the organisation wants to retain the employee base formed after training and

12LOGISTICS AND OPERATIONS FOR OIL AND GAS
scheduling, they have to pay wage at a rate higher than the specific industry demands of the
oil and gas sector.

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