Logistics and supply chain issues for export and import of POL

in India

Introduction:-

•The petroleum industry traditionally had prices decided by the Government of India.

•Effective from August 1, 2004, the Government put in a revised methodology allowing oil companies to revise the prices of motor spirit and High Speed Diesel (HSD).

•The total investment estimated in the petroleum sector from 1995 till 2010, is expected to be Rs. 4,32,000 cr (US$120 bn), out of which Rs. 2,58,000 cr (US$80 bn), are for the upstream sector alone

•Petrochemical industry in India employs around 40,000 people directly and around 4 lakh indirectly

Total Exports and Imports of Refined Petroleum Products in India

Motor Gasoline Jet Fuel Kerosene Distillate Fuel Oil Residual Fuel Oil LPG Others0

50

100

150

200

250

53.12 60.42 2.56

172.99

32.86

1.68

127.07

0.04 18.66 14.96 14.4 75.77 96.62

Imports Exports

Thou

sand

Bar

rels

per

Day

Net Imports: 220.45Net Exports: 450.70

2008

2009

2010

2011

2012

2013

2016

0 0.5 1 1.5 2 2.5 3 3.5 4 4.5

3.1

3.2

3.3

3.5

3.7

3.7

4

Oil Consumption In India (MBPD)

Oil Consumption In Indi...

SUPPLY CHAIN IN PETROLEUM INDUSTRY

Crude Purchase

Retailing / Consumer

(Demand Centre)

Crude Storage

Product Transptn/Distribution(Tanker/PL/Rail/Road)

Mktg Product Storage

(Terminal/ Depot/ Port)

Refining

Supply Planning

Distribution Planning

Crude Transptn.

(Tanker/PL)

Name of Pipeline Length in KMs Capacity in MMTPA

1. Mumbai Pune Sholapur Pipeline (MPSPL)

508 4.30

2. Visakh Vijayawada Secunderabad Pipeline (VVSPL)

572 5.38

3. Mundra Delhi Pipeline (MDPL) 1054 5.00

4. Ramanmandi Bahadurgarh Pipeline (RBPL)

243 4.71

5. Ramanmandi- Bathinda Pipeline (RBhPL)

30 1.13

6. Awa Salawas Pipeline (ASPL) 93 2.30

7. Bahadurgarh Tikrikalan Pipeline (BTPL)

14 0.75

Total 2514 23.57

Pipelines in Operation of India

IMPORTANCE OF SUPPLY CHAIN IN PETROLEUM INDUSTRY

•Petroleum industry is highly asset intensive

•Like other chemical companies supply chain can account for upto 70% of overall cost .

•Highly specialized business processes encourages fragmentation.

•Chemical supply chains are typically non-linear in nature

• Supply chain optimization at a strategic and operational level is a value creating opportunity for chemical companies and a potential source of competitive advantage

Petroleum Supply Chain In IndiaMinistry of Petroleum & Natural Gas

UpstreamExploration & Production

DownstreamRefining & Marketing

Industry Bodies

• Petroleum Planning & Analysis Cell

• Centre for High Technology

• PCRA• PetroFed• Oil Industry Safety

Directorate• Petroleum India

International• Engineers India

Limited• Director General

of Hydrocarbon

ONGC

OVL

Oil India Limited

Pvt E&P Cos.

IndianOil

CPCL, BRPL

Reliance Industries

Ltd.

Bharat Petroleum

NRL

Hindustan Petroleum

MRPL

PETROLEUM FINISHED PRODUCTS IN INDIA

OBJECTIVES OF A SUCCESSFUL SUPPLY CHAIN IN PETROLEUM

• Minimization of material procurement • Maximization of manufacturing capacity and sales• Meet demand numbers • Respond quickly to market opportunity by purchasing

the production shortfall from other players• Objective of each production unit would be to

maximize the throughput and its margin• Procurement would purchase the feedstock with not

the best yields at lowest cost

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.• The whole process can be massaged and fine-tuned into a high

performance money making machine

Financial Comparison INDIAN OIL CORPORATION

2014 2013 2012 2011 2010

Number of Days In Working Capital 18.76 33.14 30.55 26.43 13.2Inventory Turnover Ratio 7.31 7.54 8.15 7.56 8.37

Return On Capital Employed(%) 9.11 8.64 13.08 10.32 15.83Operating 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

ONGC2014 2013 2012 2011 2010

Number of Days In Working Capital 6.1 47.82 80.99 46.43 151.48Inventory Turnover Ratio 14.26 14.55 14.81 16.59 87.82Return On Capital Employed(%) 23.53 24.6 28.56 28.38 34.54Operating Profit Margin(%) 52.72 52.53 60.01 58.81 62.57Average Raw Material Holding 2.34 2.5 3.4 1.5 0.27Average Finished Goods Held 8.5 9.21 6.24 10.8 7.42

Problems in the supply chain of Indian refineries:

• 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

unpredictability in the supply chain which is undesirable

Segment Customers Based Their Needs:

Form Partnerships to Enhance Supply-Chains

Apply Strategic Sourcing

Adapt a Supply-Chain Wide Technology Strategy

Usage of new industry pipeline systems and storage units will act effective for

optimizing the supply chain as storage is a very important factor.

Best practices of other industries could be profitably adopted by the petroleum

downstream and how they could be implemented

Recommendations and Suggestions

Formerly a supply chain has been recognized and coordination mechanism is in place, it can still be enhanced. Today, petroleum organizations are looking for new ways in civilizing working & supply chain effectiveness. In some cases technology may allow several mechanisms for configuration across the supply chain. Generally oil & gas organization should view their supply chain pattern & coordination systems as worthy of improvement.

This process involves relationship management by the company. Both customer and supplier relations are key to effective coordination of supply chain. Very few industries other than the oil & gas industries can benefit by maximizing the supply chain efficiency.

A successful supply chain strategy development will need to carefully establish plans for process re-engineering, change management, and information technologies design and implementation.

Conclusion

Thank you