Logistics and Operations for Oil and Gas: Business Development Report

This report provides a critical analysis of logistics and operations within the oil and gas industry, focusing on the benefits of expanding into gas processing, transportation, storage, and marketing. It addresses challenges faced in the sector, including quality and project management, and recommends an appropriate supply chain design for expansion into South Korea, emphasizing the importance of technology for human-machine interaction. The report also contrasts product and service supply chains, highlighting the need for collaborative planning and advanced inventory management. The report also covers company background, challenges faced, and the role of technology in mitigating negative impacts, offering a comprehensive overview of key operational aspects.

Running head: LOGISTICS AND OPERATIONS FOR OIL AND GAS
Logistics and Operations for Oil and Gas
Name of the student
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Executive summary
This report had critically discussed the benefits of expanding into gas processing, transportation,
storage and marketing. Oil and natural gas industry have faced many challenges in their
operations and such issues have been discussed. This had dealt with areas such as quality
management, project management, planning and control. The analysis of the report provided a
few key findings. Expansion into gas processing, transportation, storage and marketing is crucial
to mitigating the rising demand for energy resources in the developing countries. The report had
been able to identify the appropriate supply chain process for expanding into South Korea which
showed that effective use of technology for facilitating the human machine interaction had been
essential for gaining competitive advantage and sustainability in the market.

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Table of Contents
Introduction......................................................................................................................................3
Company background......................................................................................................................3
Learning outcome 1.........................................................................................................................4
Benefits of expanding into gas processing, transportation, storage and marketing.....................4
4 challenges faced in logistics and Operations............................................................................5
Learning outcome 2 and 3...............................................................................................................6
Recommending appropriate supply chain design........................................................................7
Difference between service and product supply chain................................................................9
Learning outcome 4.......................................................................................................................10
Interaction between staff behavior and process technologies....................................................10
Use of technology to ease Human Machine Interaction and mitigate negative impacts...........11
Conclusion.....................................................................................................................................12
References......................................................................................................................................13

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Introduction
This report will critically discuss the benefits of expanding into gas processing,
transportation, storage and marketing. Oil and natural gas industry face many challenges in their
operations and such issues will be discussed. This will deal with areas such as quality
management, project management, planning and control. British petroleum has been selected as
the company of choice and the second part of the report will develop an appropriate supply chain
design which is essential for expanding into South Korea. The final part of the report will depict
the human machine interaction essential for providing the consumers with the product and the
services along with identification of the negative impact due to this interaction.
Company background
BP plc is one of the multinational companies in the oil and natural gas sector which has
its headquarters in London. It is among the world’s top ten oil and natural companies and is
among the top six companies in terms of market capitalization (bp.com 2018). The organization
has implemented vertical integration into their business model and has been operating in all areas
of the natural gas and oil industry consisting of production, exploration, distribution, refining,
marketing, petrochemicals, trading and power distribution. Moreover, the organization also deals
with wind power and bio fuels.
British petroleum has been involved in large number of major safety and environmental
incidents. The major incidents in this regard are the largest spill of oil on the Torrey Canyon and
Prudhoe Bay. Moreover, the explosion in the Texas City Refinery led to the death of 15 workers.
The largest Oil spill in the marine waters is the Deepwater Horizon oil spill which resulted in

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severe health, economic and environmental issues (bp.com 2018). The organization had been put
under various charges for these incidents where they were forced to pay a heavy fine. British
petroleum operates at both offshore and onshore fields and has expanded their business to 72
countries. The main business segments for British Petroleum are Oil refining and marketing, oil
and natural gas and, alternative and low carbon energy.
Learning outcome 1
Benefits of expanding into gas processing, transportation, storage and marketing
Supply chain plays a key role in improving the chances of sustainability of the
organization. When crude oil is extracted it is always accompanied by natural gas which is
mixed with the oil. The energy demand in the world is increasing at a rapid rate and the current
trends in the market shows that there will be 1.6% increase in the energy trends all over the
world (Mazyan et al. 2016). There has been drastic evolution in the role of natural gas in the
global market as there is drastic rise in demand for natural gas in developing countries. Gas
processing is used for refining the impure gas into refined gas products which is then transported
through pipelines. The gas produced is stored in reservoirs for future demand and are sent
through the pipelines when it is required. However, marketing of the products to the potential
buyers and the target consumers is also another crucial aspect (Ríos-Mercado and Borraz-
Sánchez 2015). There is a competition between LNG and natural gas as both can fulfill the basic
need of energy in the developing and develop countries. However, the recent trends in the market
show that there will be shortage in the supply of Liquid natural gas. The deficit in the global
supply in the upcoming years will change the market significantly. Therefore, there is huge

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scope in expanding into gas processing, transportation, storage and marketing as it can facilitate
in gaining competitive advantage in the market.
4 challenges faced in logistics and Operations
The operations in the oil and natural gas industry are divided into upstream, midstream
and downstream operations. The scope in the downstream operations is broad and this will
consist of processes such refining, trading, crude supply, product distribution, retailing and
marketing. The downstream is faced with many challenges in the oil and gas sector due to the
constraints in the global refining process and there is a need of expansion in all these phases
(Shuen, Feiler and Teece 2014). The regulations and rules in the production of oil and natural gas
have increased significantly which has drastically changed the product specifications and the
organizations have to adapt to these changes to meet the strict environmental legislation. This
factor has led to the decrease in the marketing margin due the competition from the new
competition.
The first major problem faced by the organization is the business joint venture. There is
a lack of information knowledge management in the downstream processes of most of the
organization so there is a need of alliances and joint forces between different industries so that
this problem can be minimized. Therefore, different companies will have to work together to
develop better processes. Therefore, integrating different value chain processes of the oil and
natural gas industry can result in better production and efficiency. The next major issue is the
global refining capacity. The significant economic growth in the different regions will result in
global surplus in terms of structure. There has been significant increase in the refining capacity
in areas such as Asia and Middle East. There will be significant reduction in margins as the
expected net growth is between 25-30% which is much higher the existing capacity (Campos et

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al. 2017). It is tough in the downstream sector of the oil and natural gas industry to mitigate the
challenges in the field of refining incapability. There are different factors that have significantly
affected the refineries such as economic downturn, improvement in vehicle efficiency and higher
prices. These factors have reduced the margin of profit drastically which had drastically reduced
the number of refineries in most of the countries. Therefore, it is necessary to develop refineries
that are more integrated, flexible and efficient.
Distribution activities for the various products are also an issue for the global
organizations. Distribution of the products is one of the crucial aspects of downstream and
establishing effective avenues of trading is necessary for maintaining their sustainability in the
market (Badiru and Osisanya 2016). Therefore, developing effective distribution channel will
determine that steady price can be achieved. Generally, distribution center increases the prices
of the products in some countries which led to excess burden on the consumers. There is high
level of pricing in many regions as they derive their products from different regions where it is
difficult to extract oil. Therefore, within then operation cost in most of these regions there will be
significant increase in the price of the products.
Learning outcome 2 and 3
South Korea has been chosen as the country for expansion in the global. The energy
demands in South Korea are increasing at a rapid rate but their supply is limited. Moreover, the
disposable incomes of the individuals are high so expanding into that country is ideal for the
company.

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Recommending appropriate supply chain design
Figure 1: Natural gas supply chain process
(Source: Natural Gas Supply Chain 2018)
The increase in the global demand in the natural gas and imminent of refining processes
it is advisable that British Petroleum expands their business in South Korea due to the expected
increase in demand in the upcoming years. Collaborative planning is the basis of developing an
effective process for setting up effective delivery process in the organization. The responsibility
for mitigating the problems depends on both the sides. Even though the OFS companies tend to
decrease the rigidness of their supply chain but there is no guaranteed success (Gao and You
2015). Therefore, in order to develop an effective supply chain relying on collaborative effort is
the recent trend in the market.

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The effective measures that should be taken by British Petroleum are deployment of
cloud-based platforms that can develop collaborative bond between different companies. The
cloud platform will be used for interchanging essential planning information which will able to
develop and transmit data in real time. This will lead to better forecasting of requirements of
material and resource needs (Silvestre 2015). The organization will have to develop an analytical
based forecast improvement program which will be used for analyzing the large amount of
historical data to identify demand and supply trends and develop plans according to it. By using
these techniques the organization will be able to gather a detail picture of the production level
and the market responses. This will enable in delivering an effective planning process for British
petroleum.
This supply chain process gives importance to gas processing, transportation, storage and
marketing. The organization will have to use advanced inventory management tools for
maintaining the standardized practice mentioned in the industry. This will require the use of
effective ERP management so that the data can be easily shared among the field operators and
the materials management (Gao and You 2015). British Petroleum will have to identify suitable
location for the setup of their plant so that they can effectively supply natural gas to all parts of
the country. The organization will have to initially effective sources of oil and natural gas in the
industry. Therefore, before, the surrounding environment will have to be analyzed so that no
harm is imposed on the geographical topography, marine and other life forms. The above chart
shows the effective way of delivering natural gas to the consumers in South Korea. Therefore,
the organization will have to make use of effective technological support to make sure that
processes like drilling, extraction, recovery, processing, pipeline, regasification, storage and hubs
are at maximum efficiency.

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Difference between service and product supply chain
Product Supply chain Service Supply chain
Product supply changes gradually over a period
of time and it is easier to predict the changes.
The factors for service supply chain cannot be
measured or predicted easily. Therefore, the
services will have to be adaptive so that it can
change very quickly.
The supply chain has been developed on a long
term basis and schedules are decided in
advance by the different managers.
In service supply chain the schedules are
developed immediately according to the needs
and wants of the customers in the service
sector.
The products in the manufacturing supply
chain are fewer in number and focuses on
specific few products.
The service supply chain consists of large
number of products in the supply chain and the
overall product history is included in the
supply chain.
The products in the product supply chain are
similar products
The service supply chain consist of products
are variable and depends upon the end users of
the products.
The distribution channel consist of multiple
distributors in order to increase the efficiency
and reduce the time span
The distribution channel consists of a single
distributor and various products are distributed
from the single distributor channel.
The consumer relationship ends when the
product is sold.
The customer relationship has a longer life
span and continues even after selling of the

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products.
The inventory management tries to increase the
speed of the resources movements due to the
use of the production process.
The resources are moved up at the price at the
right according to the needs and wants of the
consumers.
Table 1
(Source: Aitken et al. 2016)
Learning outcome 4
Interaction between staff behavior and process technologies
There is constant demand for change in the market so human interaction with process
technologies are essential for adapting to the changing nature of the organization. the primary
resources for all the natural gas companies is knowledge and knowledge management are
required for increasing the learning capacity of the employees within the organization. The
advancement of technology has enabled the companies in the oil and natural gas industry to
develop effective health and safety measures (Sumbal, Tsui and See-to 2017). British Petroleum
has been responsible for major hazards over the past two decades and therefore, use if modern
technologies along with human interaction is essential. The green completion is one such process
technology which captures the leaked, wasted or vented natural gas from the wells during the
execution of the extraction process. The second set of system is the plunger lift which can be
used for removing the blockages form the older wells due to accumulation of liquids.
This will stop the capturing of methane into these blockages. The next is the TEG
dehydrator emission controls that reduces the leakage of methane from TEG dehydrator and