Understanding Oil and Gas: Supply Chain, Products, and Market

This article provides an overview of the oil and gas industry, including its supply chain, types of companies, and products. It also focuses on the market for petrol or gasoline, including its marketing mix.

Running head: UNDERSTANDING OIL AND GAS
Understanding Oil and Gas
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1UNDERSTANDING OIL AND GAS
Table of Contents
Introduction......................................................................................................................................2
UK Oil and Gas Industry.................................................................................................................3
History and Origin.......................................................................................................................4
Structure and Formation..............................................................................................................4
Types of companies in the industry.................................................................................................5
National oil companies................................................................................................................5
Government Sponsored Enterprises............................................................................................6
International oil companies..........................................................................................................6
Supply chain of oil and gas..............................................................................................................6
Oil and gas products........................................................................................................................8
Product.........................................................................................................................................8
Price.............................................................................................................................................8
Promotion....................................................................................................................................9
Place.............................................................................................................................................9
Conclusion.....................................................................................................................................10
Reference List................................................................................................................................11

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Introduction
The oil and gas industry is significant in any economy as it is one of the most impactful
expenses or income that would shape the nature of the economy. OPEC countries have around
81.5 percent of the crude oil in the world as per the numbers indicated by 2016. An organisation
that operates in the petroleum industry can be divided in three sections, Upstream, Midstream
and Downstream. The following figure will explain the structure and its sub-parts.
Figure: Supply chain structure of Oil and Gas sector
The utility of oil and gas is attributed to a number of aspects like cooking, transportation,
heating as well as electricity is also dependent on the oil and gas etc. However, 84 percent of the
oil and gas is channelized towards transportation fuel. OPEC plays an important role in
controlling the world consumption of oil and gas (Griffin and Teece 2016). There are a number
of products developed for various purposes like kerosene, petrol, LNG, LPG, Diesel, propane
Petroleum
Industry
Upstream
Exploration Production
Midstream
Transportation Storage
Downstream
Refining &
Processing
Distribution &
Marketing
Final
Consumers

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etc. oil companies can be divided in three segments National Oil Company, Individual Oil
Company and Government sponsored enterprise (Kelland 2014). The national oil companies
began with the incorporation of the OPEC. One of the most important elements that any
organisation in the industry should ensure are up to the standards of the industry are the safety
standards as the elements are flammable and can be hazardous. The supply process in the
industry also has a negative impact on the environment and has been criticized by a number of
environmentalists around the world. In the contemporary oil and gas industry the companies try
to incorporate socio-environmental sustainability (Gao and You 2015).
This assignment is going to focus on one of the most popular products which are widely
used all over the world for transportation, Petrol. This assignment will showcase the various
stages of the oil and gas supply chain; compare Petrol with liquefied natural gas. It will also
explain the market of your petrol, focusing on factors such as demand etc.
UK Oil and Gas Industry
The UK oil and gas industry is observed to have a significant impact on the society and
the community of that region. The products of it, is observed to supply the energy to the power
industry and is treated as the fuel for the transportation vehicles in order to transfer the goods.
Apart from this, the industry has great significance as it is observed to create considerable
number of employments in the region and the industry is able to produce notable contribution to
the economy of the nation through the tax revenues. In addition to this, the industry provides
significant improved technology and exports for the community and helps in the growth of the
country.

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History and Origin
The history of Britain’s oil and gas industry is significantly rich as it is more than 100
years old. The nation was observed to get the resources nationalized by the Petroleum Production
Act of 1934 and along with that, the leaders of the country initiated a search process for the oil
on the UK mainland. The speed of the search process was significantly triggered with the
outbreak of the Second World War. Later in the year 1950, the nation was observed to
experience a shift of focus to the southern England. This was the part of the nation where oil was
discovered in the Triassic Sherwood Sands along with the development of the Wytch Farm
Oilfield. The discovery of the Groningen gas field in the year 1959 in Netherlands was
significantly influential in the linkup between the onshore and offshore oil in the North Sea
(Yusuf et al. 2013).
Structure and Formation
As mentioned earlier, the industry is able to grow in a significant manner in the last 40 to
50 years where it was one sector which provided the maximum treasury along with the creation
of innumerable skilled jobs. In addition this, the industry’s major contribution to the society is
the making sure that UK get a secure future in terms of the supply of energy. The UK offshore
oil and gas industry was observed to have a capital investment of 5.6 billion pound n the year
2017 and apart from that, the concerned industry was seen to invest an amount of 7 billion pound
for operating the assets of it (GOV.UK. 2018). The concerned industry was seen to lower down
the operating costs from 30 dollar/ boe of 2014 to 15 dollar/ boe of 2017 as an immediate effect
of the lower oil prices (GOV.UK. 2018). The industry is observed to feed more than 75 percent
of total primary energy of the nation. The industry is observed to have a significant rise in the
production as it was observed to produce 1.73 million barrels of oil and gas in the year 2016

5UNDERSTANDING OIL AND GAS
compared to the 1.42 million barrel of oil and gas. The industry is observed to create more than
300000 jobs and it is considered to be one true national asset as it is instrumental in producing 60
percent of the jobs of it from England (GOV.UK. 2018). The industry is observed to create
various career opportunities design, drilling engineers, data managers, technicians, IT support,
WHS service managers, project management and many more (Yusuf et al. 2014). Innovation has
a major role in the structure of the industry as the industry observes a network of 36000 km of
pipelines connecting 300 platforms with the shore. The formation of the oil and gas platforms are
observed to be generally underwater. The presence of technology is evident in the operational
efficiency, safety and reliability along with the recovery of the safe extension of the field life in
the concerned industry (Lindøe, Baram and Renn 2013).
Types of companies in the industry
There are three types of companies that operate in the industry as discussed above:
National oil companies
These are mostly state-owned organization that controls most of the supply and
production of the products from the industry. OPEC being the pioneer of this format of
companies there are a number of other organizations as well. This sector is dominated by the
Saudi Aramco, which produces 13% of world’s global consumption. In these companies that
stakeholders have very less opinion as it is majorly owned by the government (Griffin and Teece
2016). Other examples from around the world are: Petroliam Nasional Berhad (Petronas),
Malaysia, Kuwait National Petroleum, Saudi Aramco, ADNOC etc.

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Government Sponsored Enterprises
These are the companies that are partly owned by the state and are partly by investors.
Therefore there are conflicts of interest in such companies, as the government’s agenda will be
different from the private profit making agenda of the company (Papavinasam 2013). Examples:
Petroleo Brasileiro SA (Petrobras), and OMV Petro.
International oil companies
These are comparatively smaller organisation that the ones that are previously discussed.
Some of these companies are independent producers and are not vertically integrated in the
supply process like the other companies. Some of the examples in the international market are:
BHP Billiton, British Gas.
There are companies in this segment that are only involved in the services as these organisations
are smaller in size, there supply chain is different from the above two. The private shareholders
have the profitability objective in running the business (Papavinasam 2013).
Supply chain of oil and gas
The global supply chain of the oil and gas industry involves a number of steps, for
example: domestic and international transportation, information and communication technology
ordering and inventory visibility and control, materials handling and import/export facilitation.
As explained above there are three stages in the process of supply chain, there are a number of
companies that operate in these levels that are either a part of the entire system or is a part of the
supply chain (Yusuf et al. 2014). Depending on the product the supply chain stages change. It is
usually a complex process and there are a number of B2B and B2C organizations involved in

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making the products available for consumption. One of the major issues as discussed above is
the impact that the supply chain have on the environment. Contemporary leaders in the industry
are focused on understanding their responsibility and devising plans and research towards
mitigation of the environmental impact (Yusuf et al. 2014).
For liquefied natural gas, the hierarchy of the supply chain is fairly simple. Most of the
work is in the upstream process. Then the LNG is transported in the market in the market it is re-
gasified and then marketed for the consumers (Papavinasam 2013). Supply chain of petroleum
starts with exploration, after that it comes production process, then it comes the process of
refining and marketing. Upstream process is associated with acquisition of crude oil and in
operations process; it is associated with exploration, forecasting and production. Logistics
management is associated with delivering crude oil from remotely located oil wells to refineries.
Moreover, midstream operation is the link between upstream and downstream entities.
Midstream operation is associated with resource transportation and shortage like gathering
system and pipeline. Midstream processes are markets, stores and transport commodities like
natural gas and crude oil along with Sulphur. The midstream has the link between petroleum
producing area and population centre where consumer are located (Menhat and Yusuf 2018).
Finally, downstream operation in oil and gas is included refineries and marketing.
Downstream operation is related to the crude oil which is usable products like petroleum based
products and fuel oils. In refineries, crude oil is manufactured into different consumable products
and process is associated with production, forecasting and logistics management to delivering
crude oil to derivatives to customers across the globe (Silverstre 2015). Marketing helps to move
finished products from energy companies to end users.

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Oil and gas products
There are a number of products that are made from oil and gas and they are put to a
number of use. Electricity power plants are also run with the help of oil and gas and thus the
products of the industry have become the part of everyday life. Transportation and cooking are
all based on the products of the industry, the product that has been chosen to discuss is Petrol or
Gasoline. Petrol is one of the widely used oil and gas industry products which are used for
transportation all around the world (Lin 2013). Petrol is a highly volatile hydrocarbon that is
extracted from crude oil. This product is used to fuel internal combustion engines for most
transport vehicles like cars, buses etc. When the petrol is further refined and process it can also
be used as aircraft fuel (Lin 2013). Petrol and diesel are the two competing products in the
industry in fueling the transportation. The rating of octane distinguishes the different varieties of
Gasoline; typically the fuel that is used for transportation is of premium quality. 91 or 92 is the
most commonly found petrol in most countries around the world. Here is a marketing mix of
Petrol or gasoline in order to understand the marketability of the product (Lin 2013).
Product
Petrol or gasoline is product of the crude oil which helps in the combustion of the internal
engines of various machines. Apart from transportation the product is also used to run electricity
generators and other heavy machines in the factories as well. The use of the product is now
found in the everyday lives of the people who own a car or runs a manufacturing unit (Lin 2013).
Price
The price of the product in the international market varies from one country to another
depending on the availability of the product. If the government has to import the product then the

9UNDERSTANDING OIL AND GAS
price of Petrol or Gasoline is high. The government relations and strategies play an important
role in the settling the price of petrol (Lin 2013). For example, the price of liter petrol in India is
around 80 Rs; on the other hand the price of a liter of petrol in US is around USA is $ 0.85 which
is of a lower value than that of what is available in India.
Promotion
The product is not promoted by the companies as it is one of the essentials for
transportation. There are hidden promotions in the form of sponsorships and public relations
activities (Lin 2013).
Place
The product is available in the gas stations which is a physical brick and motor store that
has storage facilities of the fuel (Lin 2013). There gas stations are owned by the companies in the
Industry that refine crude oil and ensure that it reaches out to the public (Lin 2013).
The demand of the product is high and as long as there will be transportation and
mechanisms there will be a demand to fuel the combustion. However, as a non-renewable
resource there are a number of research and development that has been going on to replace the
fuel (Lin 2013). On the combustion of the fuel it gives out smoke which is harmful in large
quantities inhalation (Kelland 2014). One of the most widely used substitute to power the
transports and machines are the use of solar energy. It is a source of energy which is renewable
and also does not involve a number of steps to get the job done. Popular transport manufacturing
organizations are focusing on the development of solar powered cars and other vehicles to reduce
the use of gasoline or petrol (Kelland 2014). The major difference in between LNG and Gasoline
is the state of the product one is a gas and the latter is in the form of liquid because of this they

10UNDERSTANDING OIL AND GAS
have different usage. Natural gas is also "cleaner" than gasoline from a carbon emission
perspective (Kelland 2014).
Conclusion
Form the above discussion it can be concluded that the national oil companies are the
most significant kind of organisation in the industry. LNG and Petrol are two of the products of
the industry which has similar use of that of a combustible fuel. However, petrol is marketed to
be one of the most widely used fuels for transportation. The demand for both the products is high
in the households.

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Reference List
Gao, J. and You, F., 2015. Shale gas supply chain design and operations toward better economic
and life cycle environmental performance: MINLP model and global optimization
algorithm. ACS Sustainable Chemistry & Engineering, 3(7), pp.1282-1291.
GOV.UK. 2018. Oil and Gas Authority. [online] Available at:
https://www.gov.uk/government/organisations/oil-and-gas-authority
Griffin, J.M. and Teece, D.J., 2016. OPEC behaviour and world oil prices. Routledge.
Kelland, M.A., 2014. Production chemicals for the oil and gas industry. CRC press.
Lin, Y., 2013. The gasoline industry: A review for marketing research. The Marketing
Review, 13(1), pp.3-22.
Lindøe, P.H., Baram, M. and Renn, O. eds., 2013. Risk governance of offshore oil and gas
operations. Cambridge University Press.
Menhat, M. and Yusuf, Y., 2018, April. Factors influencing the choice of performance measures
for the oil and gas supply chain–exploratory study. In IOP Conference Series: Materials Science
and Engineering, 342 (1), pp. 91-99.
Papavinasam, S., 2013. Corrosion control in the oil and gas industry. Elsevier.
Silvestre, B.S., 2015. Sustainable supply chain management in emerging economies:
Environmental turbulence, institutional voids and sustainability trajectories. International
Journal of Production Economics, 167, pp.156-169.

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Yusuf, Y.Y., Gunasekaran, A., Musa, A., Dauda, M., El-Berishy, N.M. and Cang, S., 2014. A
relational study of supply chain agility, competitiveness and business performance in the oil and
gas industry. International Journal of Production Economics, 147, pp.531-543.
Yusuf, Y.Y., Gunasekaran, A., Musa, A., El-Berishy, N.M., Abubakar, T. and Ambursa, H.M.,
2013. The UK oil and gas supply chains: An empirical analysis of adoption of sustainable
measures and performance outcomes. International Journal of Production Economics, 146(2),
pp.501-514.