Summer 2019 LOOG5026: Logistics and Operations in Oil and Gas Report

This report examines logistics and operations within the oil and gas industry, focusing on Shell Company. It begins with an introduction to the importance of logistics and operations management in the modern business environment, emphasizing the need to identify factors that could harm business operations and the challenges faced. The analysis includes a review of theoretical and practical aspects of supply chain management, highlighting the differences between the oil and gas industry and normal industries, and the application of key theories like vertical integration and outsourcing. The report discusses the importance of integration, communication, and the use of technology in supply chain management. Furthermore, it analyzes operational challenges such as increasing visibility, collaboration, and the impact of deep drilling and oil spills. The report provides insights into how companies can address these challenges to improve efficiency and sustainability.

Running head: Logicistcs and operations
Logicistcs and Operations
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Table of Contents
1.0 Introduction..........................................................................................................................3
2.0 Analysis................................................................................................................................3
2.1 A review of theoretical and practical aspects pertaining to the management of logistical
and operational activities in the oil and gas industry.............................................................3
2.2 Analyse both types of challenges.....................................................................................8
3.0 Conclusion..........................................................................................................................12
Reference list............................................................................................................................13

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1.0 Introduction
In the modern business, through the introduction of logistics and operation management,
the companies will definitely aim in indulging better and lion share of the market. In order to
maintain the development of the business it is highlighting the fact that in order to indulge the
improvement in the monitoring of logistical and operational activities in oil and gas industry,
the Shell Companies need to identify the factors that may harm the business operation. Not
only this, but the identification of the challenges that are coming on the way of business
operation is basically help the study to indulge in better policies that will not only increase
the rate of production but the overall level of security will also be maintained. The
significance of the study is lying in highlighting the impact of the supply chain management
for better development of resources.
2.0 Analysis
2.1 A review of theoretical and practical aspects pertaining to the management of
logistical and operational activities in the oil and gas industry
Supply chain management in normal industry and supply chain management in the oil
& petroleum industry are quite different from each other. The point of difference that is
unlike the normal goods in the market, the oil and petroleum products needs to be explored
from below the ground. One of the major steps that has been seen in the supply chain
management within the oil and petroleum industry is shown in the diagram below.
Figure 1: Process of Supply chain management in oil & petroleum industry
Exploration
Production
Refining
Marketing
Consumer

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(Source: created by author)
The above figure above is claiming the fact that before marketing the oil and
petroleum product, the companies will have to refine the oils. Involvement of high-tech
technologies in the oil production and refining actually makes the situation of supply chain
management within oil industry (Arvis et al. 2016). The technologies that are being used in
the supply chain management within the oil and petroleum industry. Tubes and tubular goods
are the most imported products that are being supplied to the industry on the daily basis.
Through the process of supply chain management within the oil industry is the process that
includes pipes, tubing, and casing are ordered, manufactured, transported, stored, prepared,
and then delivered to the website for installation into a well.
Most of the companies that are doing business in the oil and natural gas industry faces
turmoil in the development of filtration of oils and petroleum products. Some of the key
theories that has been taken by this industry is as follows (Mena et al. 2016). Through the
incorporation of these theories, the companies that are mainly dealing with the improvement
in the development of process of filtration and other process.
Vertical integration
The need of the companies dealing with the oil and petroleum sector in modern days
is being integrated. These developments includes the increase in demand of the customers,
globalisation of oil and natural gas business and to the most important, the use of information
technology in fascinating the change in the information that will definitely going to highlight
the incorporation of better level of business coherence (Bealt et al. 2016). Integration and
cohesiveness is going to improve the business in an efficient manner. Depletion of existing
oil mills and oil wells are one of the biggest challenges that has been faced by many
companies in the modern period. One of the important strategy that has been taken from the

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perspective of oil and gas industry is that there should be high connection and high
correlation among the producers and suppliers. However, integration does not mean only in
one direction. However, the firm may choose to have forward or backward integration.
Through the involvement of forward integration or vertical integration, the company will
have to determine what they want to produce and what they will be able to keep for future.
However, it is important for the Shell Company to determine the importance of the vertical
integration in order to expand their business in the UK.
In order to integrate the development of configuration and coordination, the company
will have to think clearly about the policies and strategies that the Shell Company should take
to increase the development of resource distribution process. This will help the configuration
of resource development and through the indulgent of better level of filtration process, the
Shell Company will be mainly looking to expand the business across the international border
of UK through an extensive co-operation of the employees those are working within the
company (Hübner et al. 2015). More or less behavioural issues are being found within every
organisation but the main thing is every company tries to minimise the issues that has been
found in them. Most of the organisations that are doing business in the international market is
mainly looking to bring in some kind of discipline within the employees. Now in order to
minimise the behavioural issues that are arising within the organisation, there should be open
level of communication among the producers and suppliers (Li, 2014). It is highly important
in the sense that through the open level of communication, Shell will be able to understand
the gaps in education that their employees are having and in order to grow further in the
business, it is important for the Shell Company to indulge better level of production that will
definitely going to increase the production ability of the human resources.
Communication is an important concept in the sense that through the development of
resources, it is important for the Shell Company to increase the distribution of resources that

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will definitely increase the improvement in the business. It is important for most of
multinational companies to bring in high rate of communication among the employees and
the managers so that even in the international business, the company like Shell should mainly
focus on the integration and communication level with the employees so that if any further
training regarding various job process is required, the current employees can showcase their
skills and potentiality. Now using the theory of comparative advantage, Shell Company need
to identify the opportunities that are having within the organisation for future use of
resources. Controlling most of the assets within a supply chain management will be solely
responsible for any kind of economic loss and its impact on the business development of
Shell Company. However, the use of vertical integration is mainly showing lack of expertise
in the management level and this can be huge problem for the company in the long run.
Outsourcing theory is another theory that can be beneficial for the oil and gas
companies like Shell. Sometimes, outsourcing is helpful for the company in making drilling
pipes and underground oil transportation pipes. Through the incorporation, of various kinds
of sourcing like sole sourcing or multiple sourcing, the Shell will be able to highlight their
distribution of capital resources. Now distributing the amount of capital resources in the
goods and services for the benefits of society along with the motorists, the comparative
advantage is mainly going to be increased. Through the increase in the comparative
advantage and effective use of vertical integration, the Shell Company will be able to bring in
high rate of better goods and even the raw materials of oil and gas products can be
manufactured for delivering them to the customers. It is important for the company to bring
in high class of technology for filtration of crude oils.
Managing of the staffs in the form of drill bits, piping, cement, fluid mood, staff, etc
will definitely going to help in the improvement of better level of drilling actions that will
definitely increase the capacity of oil production. Through making a control on the decisions

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that has been taken by staffs will be an important factor for the development of long run
objectives of the company. Designing present and future operation in line with the factors of
circular economy is mainly going to identify the fact that Shell Company will have to identify
their potential customer base that will definitely going to increase the potential revenue base
of the company. It is important for the company to predict the future behaviour of the
customers and they need to identify the current view of organisation. Now if the objective of
the organisation is being set then it will be highly beneficial for the Shell Company to design
the policies that will definitely going to increase their business position within the oil markets
of UK. Not only maintaining the natural resources, it is highly important for the Company to
indulge the development of 24 hours operation. This is important in the sense that oil mills
and oil well are more susceptible for explosions and it is the sole responsibility of the
company to identify the possible factors of explosion and resisting them as early as possible.

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2.2 Analyse both types of challenges
The operation of oil & gas industry is mainly happening within the complex
environment. Now the company is facing many operational and manufacturing challenges
and it is important for the company to identify those challenges and minimise them as soon as
possible. The problem of deep drilling is more crucial and as well as highly valuable. This is
because since oil is a non-renewable resources and extensive use of the resource will
definitely create a problem for the future time as it will take long time to regenerate oils.
Another form of challenge that can be seen while transferring the oils through waterways.
Most of the time, incident of oil spills is heard and many tons of oils gets disbursed into sea
during process of transportation. Seven challenges that can be seen in the oil and natural gas
industry are as follows:
1) Increasing visibility
This is an important challenge that has been seen in the oil and natural gas industry is
the increasing the visibility in both human and capital resources. Taking into consideration
these factors the operation of the oil industry is being operated is becoming complex in
nature. Introduction of the visibility in the assets production in every companies that are
dealing within the oil and gas industries. It is highly important for every company to bring in
high class of visibility so that every resources of the company can operate in a transparent
manner (Kubasakova et al. 2014). Through the involvement of the visibility, it is important
for the company employees to deal with upcoming challenges and they will be able to
identify the present gaps that are being present within their organisations. Through the
increased level of the visibility in the operation it is important for the Shell Company to
increase their communication level within their employees.

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Making a correlation with the development of resources can be highly important
because of making accounting visibility will definitely reduce the problems. The chance of
having potential correlation of increasing visibility is that the through the use of transparency,
the Shell company will be able to stop the data leakage that the competitors are claiming
through the use of information technology (McFarlane et al. 2016).
Improvement in the collaboration
Collaboration is highly important in the oil and natural gas is the collaboration with
the existing companies that will definitely impact the rate of production in the oil industry.
The potential correlation among the collaboration and increase in the visibility is that through
the increase in mutual understanding and strong level of communication will definitely going
to highlight the development of resource channelization. Through the involvement of
resource channelization, it is highly important for the Shell Company to identify the gaps in
the investment that are mainly going to bring in high quality of resource development.
According to Bichou (2014) now in order to increase the development of resources, the Shell
Company will be mainly looking to indulge the level of foreign direct investments that will
definitely bring in high class of technology. Through the improvement in the technology, the
Shell Company will be able to make business with the international companies across the
border.
In order to make a correlation among the identified challenges, the study has seen that
Shell Company will have to identify the gaps that are being present in the investment
structure. This is an important aspects in the sense that through the incorporation of
collaboration among various drivers of the oil and gas producers, the Shell will successfully
able to minimise the gaps in their own investment (Grabara et al. 2014). Moreover, there is

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another scope of improvement in the human resource as inter-transfer of knowledge and
skills will definitely up bring the skills and resources of employees.

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Potential impacts of challenges on the operation
In order to indulge the incorporation of the identified challenges on the operation of
the Shell Company need to be in an effective method of marketing and drilling the oils and
petroleum products. In order to build up immense level of resources it is highly important for
the company to identify the skills of their employees and the potentiality of the employees to
learn new abilities (Lai and Cheng, 2016). This is an important aspects for the development
of manufacturing and operational services that are having impacts on the company prospects.
In order to indulge the development of resource utilisation, Shell is mainly looking to bring
an expansion of the business in the international border. Three operational challenges that has
been seen in the oil and gas industry are as follows.
i) Create networks of excellence and enable knowledge transfer to maximize operational
excellence
ii) Get senior executives to engage with process opportunities — and move OPEX from
cost to value driven performance
iii) Use metrics as a “vital sign” of the effectiveness and the efficiency of your
operational improvement efforts.
Apart from all these operational challenges, it can be seen that oil and gas industry are having
service related challenges and they are
i) Reducing costs to remain competitive
ii) Improving performance to ensure the valorisation of assets
iii) Improving the Environmental footprint to meet increasingly stringent standard

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3.0 Conclusion
The whole study has come to the conclusion that in order to increase the market reach,
the Shell Company in UK will have to look out for the improved level of technology and
knowledge should be pertained within the employees so that they can learn new technologies.
It is an important aspects for the company to bring in high quality of effective technologies
and through better level of communication will definitely help the company in doing better
level of business in the UK. Moreover, due to high level of communication within the
suppliers, the nature and environment of the business is more or less complex in nature.