Challenges of the Upstream and DownstreamSector

Think OilIntroductionThis is why the costs of other commodities increasewithincrease in the cost of oil and gas. This makes it veryimportant toregulate the cost of oil and gas in order to ensurethat the costs of othergoods and services are reduced or keptoptimal.No modern society can run smoothly without oil and gas.Thisis why these products are very important today. Essentially,

the demand ofoil and gas exceed their production. This alsoexplains the reason whycountries with huge deposit of crudeoil are among the richest nations of theworld. Since thefunctionality of a modern society relies to a huge extent oncrude oil, it is then very important to employ high tech andcutting edgetechnological processes towards this importantfield in order to ensure effectivenessin the process.Oil and gas are highly demanded in industries as wellas forcommercial and domestic purposes. The products are usedfor lots ofpurposes ranging from the driving of machineries tothe production of plasticsand fertilizers. Indeed, the worldwould lose its taste if oil and gas areremoved from existence.

An Overview of the Upstream and DownstreamSectorof the IndustryTo really understand the processes involved in the oiland gasindustry, it makes sense to consider its subdivisions.The oil and gasindustry is essentially subdivided into threephases and these include:Upstream sectorMidstream sectorDownstream sectorBefore examining these phases, it is important to notethat themidstream sector is also included in the downstream sector.

Upstream sectorThe upstream sector of the oil and gas industryinvolvesprocesses including the searching for and the recovery ofcrude oil aswell as its production. In the upstream sector,discovery or exploration ofcrude oil takes place. This involvesintensive and extensive efforts towardsascertaining the actualplaces where crude oil is located.Exploration is a very difficult process and thereforerequires theservice of experts in the field. More so, information technologyplays active roles in the exploration or searching of crude oil inorder toeasily discover new grounds where oil is located andtherefore take advantageof them.The upstream sector includes different operations suchas thesearching for prospective underwater oil and gas fields,drilling ofexploratory wells and also making requisiteoperations on the well so as tobring the crude oil or natural gasto the ground surface.

Downstream sectorThe downstream sector of the oil and gas industryinvolves therefining of the crude oil and/or raw natural gases obtained intheupstream sector as well as selling or distributing theproducts obtained. Manyproducts are derived from the refiningof crude oil and these may includediesel oil, liquefiedpetroleum gas (LPG), asphalt, petroleum coke, gasoline,

fertilizers, antifreeze, plastics, rubbers, pesticides, syntheticrubber, jetfuel and many more.The downstream sector of the industry is the sectorthat relateswith the consumers. Facilities involved in this sector includepetrochemical plants, oil refineries, natural gas distributioncompanies,retail outlets and so forth.The main processes involved in the upstream anddownstreamoil and gas operation include the following:ExplorationExtractionRefiningTransportingMarketing

Information Technology and the Oil and GasIndustry

Information technology has become very relevant indifferentfields of life, industrial and commercial activities over the pastfew decades. Today, no industry can exist or became fullyoperative withoutinformation technology. As much asinformation technology is very relevant inother industrial fields,it is highly essential in the oil and gas industry.Differentoperations in the oil and gas industry depend solely oninformationtechnology and can only achieve efficiency thereof.This simply implies that advance in informationtechnologywould simply result to the betterment of the oil and gasindustry aswell as every other field of life. This is why lots ofintensive researches arebeing done on information technologyin the recent time and these have resultedto unimaginableimpact in the oil and gas industry.One of the most striking developments in the ITindustry which

has helped information dissemination in the oil and gasindustrywas developed by the World Wide Web Consortium(W3C) about a decade ago. Thistechnology known as XML(Extensible Markup Language) uses tags and unstructuredpatterns in developing requisite data (referred to as well-formed and validdata) for information dissemination. The mostwonderful thing with XML is thatit is structured in such a waythat the information would be readable by bothmachines andhumans. Other technologies such as SGML and HTML fortransferringdata were also developed by the W3C; howeverXML is the most beneficial of themall in informationdissemination.

Upstream Challenges

We will look at the challenges and opportunities in theupstream oil and gas industry facing in current informationtechnology era.1) Management and InformationGlobal forces such as geopolitical pressures aretroubling theindustry. We therefore need the knowledge, contacts andskills toeffectively adapt to these troubles and geopoliticalinsecurity in theindustry. It is also very important that we makeappropriate efforts towardsanticipating and reacting to theradical changes on the global sphere.Some challenges in the upstream oil and gas industrycan beeffectively resolved if we lay emphasis on the newinterdependenciesbetween senior management information,operational effectiveness and decisionmaking. We also needto appraise and understand their impact on our overallprofitmargins. This can go a long way in solving our problem.The management involvement in information system (IS)andMSI advancement is really crucial like MIS Quart. 9. Originally,managementmay feel it difficult to come to be engaged muchbeyond the front end of ISadvancement as a result of theextreme distinction in between the methods andlanguages ofthe data processing (DP).One more essential developmentthat haveactually made it possible for administration to takepart additionaltoday. ISdevelopment has actually been theinformation analysis methods. These haveactually made it

possible for the data and processes of company systems tobe assessedin totally logical terms, generating a logicalinformation model independent ofany type of DP terminologyor hardware considerations2) Increasing theproduction of liquid fuelsOil and Gas has facing a real challenge of shortage ofliquidfuel in this era. There is great need to increase the productionofliquid fuel in the upstream sector. The output from Canada’soil sand can beincreased by threefold by 2035 which isequivalent to 4.5 billion barrels perday has the capacity toextract more oil and made effective. Not only that, butalsothere should be efficient avenues in place to bring theextracted productsto the market. The American PetroleumInstitute pointed out that oil sandproduction can be limited in2014 because of shortage or inadequacy ofpipelines leadingfrom refineries to the market.To make the Canada’s oil sand to become more beneficialandefficient, there is need to put the right upgraders and pipelinesin place.Shell has achieved substantial success by increasingcapacity at the AthabascaOil Sands Project in Alberta by100000 barrels per day. It has also opened asecond mine inwhich it expanded the upgrader which converts bitumen tocrude.Again, the rising demand for oil and gas can be met bydiversifying the transport fuel mix with hi-tech technologies.This can beachieved by increasing the contribution of biofuels.

Biofuels are highlybeneficial as they are very compatible withexisting infrastructures andtherefore can be sold anddistributed in ordinary filling stations.3) Sources ofCrude OilIf we take a close look at the sources of oil and gas,we willrealize that they are not renewable natural resources. Theintensiveuse of oil and gas today places the fate of the world’scrude oil supply atrisk. In some countries like Brazil, China,and India, crude oil is used inalarming rate on a daily basis.Thus, this is a big challenge to the oil andgas industry.However, it is quite obvious that the challenge cannot besolvedby preventing people from using oil and gas or theirproducts. Oil and gas arevery pivotal to the modern societyand without them the modern society will notrun smoothly oreffectively. Thus, an alternative means should be sought inorder to solve this challenge.The primary way of dealing with this problem is bydevisingalternative means and avenues for oil exploration. Alternativesourcesof oil can be devised in order to save the world’s oiland gas. More so, we canemploy the state of the arttechnologies available today in order to convertvarious naturalresources to petroleum products. A good example of this isagricultural products and biofuel. Shale oil can also beemployed as analternative source of oil or energy.Information technology is needed to achieve these aims.It canbe employed in discovering and analyzing the alternative

sources ofenergy. Data can be effectively collected andorganized in a useful form so asto create a basis for decisionmaking. This forms decision support systems(DSS) used invarious companies for decision making and drawinginferences.With the presence of much intelligence softwaretoday, this can be achievedwith ease.4) OperationalChallengesThe models used by the oil industry in the 20th centuryarebecoming rather antique. The models are now seriously facingchallenges andof course new models are being invented. Theintegrated model has an originaldigital logic aimed at providinga natural hedge, market access and balancedfunding. With thehelp of integration, the operation and value chain can beoptimized. The downstream sector can finance the upstreamsector in order toachieve greater operation. By ensuring betterintegration, the oil and gasindustry can balance its upstreamand downstream operation and hence reducevolatility andrisks.Oil industries such as ExxonMobil, Royal Dutch Shell,andConocoPhilips oftentimes employ vertical integration modelwhich involvethe entire value chains. Anxiety in investmenthas also increased since capitalmarket does not realize thevalue of integration. Economies of scale and accesstotechnology are not enough to solve the problems faced in theupstream sectorof the oil industry. Some of the challengesfaced in the upstream sectors todayare caused by the

structure of the downstream sector and investors.Exploration automation seeks to do simply that throughprocessrenovations, enhanced rate of penetration, constant smoothqualitydrilling and overall exploration efficiency. Norway'sRobotic Drilling SystemsAS, previously Seabed Rig,developed an innovative autonomous roboticexploration gearfor unmanned exploration operations. The business assertsthatthe new device, Robotic Drilling System (RDS), establishesbrand-new criteriawith raised security and cost-effectivepreparation and drilling and could beapplied on existing, inaddition to new exploration structures, both offshoreand onland. Presently, the RDS utilizes autonomous robot workingproceduresthat could be controlled by remote control systemwith an interactive 3D userinterface5) Energy Demandand SupplyThere is intense problem of demand and supply in theupstream sector of the oil and gas industry. It is quite obviousthat thedemand for crude oil is greater than its supply. Ongoingtensions in the MiddleEast and economic uncertainty werepointed out in the 13th international OilSummit but this pointstowards improved outlook of course the risks cannot bedenied.Due to population and economic growth, the globalenergydemand may double in the first half of the century. IEA statedthat theglobal fuel demand could rise by 26 percent in the next25 years; that is over110 million barrels per day. Asianemerging economies will experience the mostof the growth.

Vehicle fleet in China could triple to 600 million vehicles in20years time. Global oil supply will struggle to keep pace withthe demand dueto decreasing output in mature fields by about80 percent in 2035.The high end data management and analytics availabletodaycan be wielded towards solving these challenges. Therequisite data canbe analyzed, archived, digitized and definedappropriately. This will dependheavily on the new XMLtechnology while deals with unstructured data format.Differentkinds of data can be parsed with it to ensure high efficiency intheprocess. Structured data analysis should also play a part inthis game. Thetext based XML can be transformed intodatasets with the use of data adaptersso as to connect it torequired structured databases such as SQL Server, OracleDB,Access DB and so forth. This can be channeled towardsrevolutionizing theoil and gas industry.6) EnvironmentalPollutionEnvironmental pollution is a major issue in theupstream oil andgas sector. There is lots of oil and corroded pipelines stillusedtoday resulting to oil spill which degrades the environment.For example: Shell has led to lots of environmentalpollution inthe Niger Delta. Lots of their pipelines in the region are old andcorroded, resulting to oil spillage and pollution. However, theoil company hasdenied responsibility for pollution. Thus, NigerDelta residents and citizenshave protested greatly againstShell and similar oil ventures. In a case inJanuary 2013, a

Dutch court rejected four out of five allegations posed onShellon pollution in the Niger Delta but a subsidiary firm was foundguiltyand asked to pay compensation to Nigerian farmers.Same issue was experiencedin Magdalena, Argentina. HereShell was also responsible for environmentalpollution. On 15January 1999, a shell tank in the region collided with anotheroiltank and polluted to fresh water.Storyboards can be geared towards solving this problem.Itdeals with the simulation of industrial accidents (gasleakages) andcondensate.Storyboard is a term borrowed from the filmmaking industry; itinvolves narrating series of complex tasks. It can storehundreds of events.These can involve sensitive information.This can be employed towards buildinga framework involving“knowledge base” with the use of NKRL (NarrativeKnowledgeRepresentation Language) which involves the collection offormalstatement with negligible loss of information.7) FluctuatingCrude PricesPolitical instability and problems in various regionsof the worldhas led to the fluctuation in fuel prices. Crude price went fromahigh value of $150 per barrel in the middle of 2008 to lessthan $40 per barrelat the beginning of 2009.The political issues resulting to the fluctuation incrude pricesinclude slow approval of new capital projects, the squeezing oftalents as a result of early retirements and acquisition activity.It is veryimportant to maintain effective operation as well as

ensure that the margin is maintainedin the environment.Atomization of drilling mechanism and robotic technologycanplay a pivotal role to overcome this challenge.8) EconomicUncertaintyThis is another risk faced in the oil and gas sectorwhich hasled to the slow movement of some firms in the upstreamsector. Mostpeople will not classify economic uncertainty as achallenge or risk but oncarefully analyzing, it will become veryobvious that this is a challenge.It is simply the uncertainty in economics. It can bedefined asthe unknown prospect or possibility of gain or loss. Whetherthisfactor is quantified as a risk or not, it has a direct impact onemployment,income aspects and communication among thevarious companies and firms in thevalue chains of the oilindustry.Information technology has great influence on businessactivities and economics. Changes take place in every part ofthe business;development of goods and technology,procurement, production, sales,distribution, and post-saleservices. Due to CAD and CASE, enterprises laygreatimportance on rapid development of diverse goods andtechnology in orderto satisfy customers. Companies canchange production system from massproduction undereconomy of scale into production on demand by CAM andERP.9) ThePeople Shortage

The lack of skilled personnel and manpower or mainoperationsrequiring high tech processes in the oil and gas industry is achallenge in most parts of the world especially in the upstreamsector of theindustry. Processes in the upstream sector suchas exploration and productionrequires high technicality andtherefore there is need for skilled manpower.This has limitedmany operations in different parts of the world such as inNigeria.This problem can however be solved by attracting andencouraging more talented young men and women into thescience and engineeringdiscipline and hence into the oil andgas industry. Trainings have to be madehighly efficient invarious parts of the world especially in the informationtechnology aspect to help young people understand how tomanage the operations?10) MarketingMarketing is another heavy issue in the oil and gasindustry.China produces far less crude oil and has less than half therefiningpower than the United States of America but researchstates that the oildemands of China will exceed that of the USby 2035. To have these problemssolved or adapted to, the IEAmade estimation that there is need for $10trillion new oilinfrastructures by 2035. This involves $3 million investmentpersecond for up to 25 years, adding to the huge challenge.Therefore theavailable resources have to be channeledtowards making better investments toimprove marketing and

pricing in the upstream oil and gas operations.In upstream and especially in downstream, the mostengagingmodification of the strategy to the marketing feature becausethemillennium has actually been changing from OutboundMarketing to InboundMarketing. Building from the experiencespicked up from doing business in thenew Web 2.0 era,businesses have actually pertained to acknowledge theoverwhelming benefits of drawing consumers towards theiritem, as opposed todriving their products towards theircustomers.

Downstream Challenges

The downstream sector of the industry has broad scopeand

tentacles. These include crude supply, trading, refining,productdistribution, marketing and retailing. Lots of productsare involved hereincluding conventional fuels such as gasolineand diesel and low carbon fuelssuch as bio diesel.Lots of challenges are faced in the downstream oil andgassector. The operating capacity of the global refining industriesiscontinually constrained and therefore there is need forexpansion in theirvarious phases. Crude oil produced today isbecoming heavier and sourer andproduct specifications aretightened by increasing strict environmentallegislation. Thishas led to the need for changes in the refining configurationofmany oil players. More so, marketing margins are gettinglower as a resultof competition from advantaged entrants.The main challenges faced by downstream sector arediscussed as below:1) Business JointVenturesDownstream sector is facing serious challenge due tolack ofInformation knowledge management (IKM). In order toovercome, there isneed for joint forces and alliances betweenvarious industries to be able toarrest this problem in the oil andgas sector. Some important industries suchas oil companies,service companies, academia, government and so forth shouldpoll their knowledge together so as to achieve a better resultand solveproblems plaguing our industry at reduced cost andas fast as possible.To really achieve the desired aim at purposes then itis

important to ensure the following:The various value chains of the oil industries shouldintegrateand target at the same purposes.Joint and targeted investment should be made in theindustryoutside the host country.Risks should be shared and there should be diversecommercial terms.The workforce is very important and therefore should bedeveloped. More so, state of the art technologies should betransferred inorder to aid efficiency at all levels and valuechains of the industry.The collaboration should also include a greater sharedcontrol.Shell launched the Raizen joint venture with Cosan inBrazilwith the aim of producing and distributing up to 2 billion litersofsugar-cane ethanol each year. The ethanol emits 70 percentless pollution thanstandard petrol through its lifecycle andtherefore with their use, liquid fuelwill be more environmentallyaccepted in regions of tighter legislation.Natural gas is another promising area. The developmentofnew resources such as shale gas gives promising future.There is good supplyof natural gas in North America today.Natural gas can be converted into liquidfuel and it can be useddirectly as a transport fuel. Shell and Qatar Petroleumbringnew innovations and significant changes into the industry.They have madea total investment of between $18 and $19billion showing the scale ofinfrastructure needed to meet rising

demands. Pearl is also another promisingcompany whichproduces lots of GTL gasoil that can fill 160000 cars a day.Theyalso provide other products, chemicals and lubricantshelping to generaterevenue to the nation.Shell is also developing and LNG refueling station inCanadawhich will enable trucks to use natural gases instead of diesel.Withdeveloping technology, liquefied natural gases will play avital role in the transportationof fuel mix.2) Global RefiningCapacityThere is an emergence of a structural global surpluswithsignificant economic growth in various areas. This is driven byincreasingrefining capacity in various regions such as Asia(China and India), the MiddleEast (Saudi Arabia and theUnited Arab Emirates) and in Latin America (Brazil).Thecumulative impact on a global scale would be reducedmargins. The netgrowth rate would be between 25 and 30percent higher than the existingcapacity with a CAGR of 4%per year. Of course, the planned expansions may notall besanctioned or completed.However, the key factors of the growth are as follows:Much of the planned expansions were sponsored bynationaloil companies.Most of the new capacity will capture economies ofscale withgreater degree of efficiency and sophistication.Old refineries will rather die than close and alsoenvironmental

and social costs of closure can be very high in countries likeEurope and America.The industry has to do a number of things to avoidthese risks.These include increasing liquid fuel supplies, diversifying thetransport fuel mix and building greater flexibility in thedownstreaminfrastructure.Reliable instrumentation and controls, and trustedtechnologieslike robotic system could raise ability. Basically, the rate ofdevelopment in the downstream industry is being assisted byusing innovationsand expertise frequently created in variousother industries to boost legacyrefining procedures.Developments in sophisticated procedure instrumentationandcontrols have enabled refineries not only to operate moreefficiently andsafely but likewise to create fuels to more-exacting product high qualityrequirements in a much moretrustworthy way, minimizing their "performancewindow" andenhancing high quality guarantee has enabled refinery driversto create cleaner and higher-performance gases3) CorporatecommunicationCorporate communication involves orchestrating andmanagingdifferent internal and external communications in order tocreatefavorable point of view among stakeholders. Thisinvolves issuing a message byan organization to its audienceswhich might include the employees, the media,partners and soforth. With the aid of corporate communication, organizationswillbe able to explain their missions and gear towards

achieving their purposes andvisions. It helps stakeholders tobe linked to the company in question.In the downstream oil and gas operation, corporatecommunication is very important in order to determineefficiency in the variousprocesses. The stakeholders should beable to know issues taking place in thetrading and refining ofthe oil. Information technology plays vital role incorporatecommunication as it can be wielded to ensure that it is doneeffectively.Various measures can be involved in order toessentially supervise and monitoractivities taking place at realtime in the rig. With the aid of advancedsoftware, liveperformances can be compared with historical trends in orderforquick conclusions to be drawn with ease. SWOT analysisand IE Matrix need to bepracticed intensively to enhanceeffectiveness of corporate communication.Requisite softwarecan be used in establishing alerts to notify the requiredsourcesof events taking place at each point in time.4) DistributionActivities for Oil ProductsDistribution and trading is a very vital aspect of thedownstreamsector of the oil industry. Without establishing appropriateavenuesfor trading, the operation of the oil and gas industrywill be futile. Thus,the value chains should be properlyexamined in order to ensure efficienttrading and distribution ofthe products.More so, efficient avenues should be devised forensuring thatthe products are maintained at steady prices when it comes to

distribution. In some parts of the world, the price of theproducts isunnecessarily increased in their distribution centersleading to intenseburdens on the consumers.Like upstream industry Outbound Marketing to InboundMarketing must be examined. Building from the experiencesselected up fromdoing company in the new Web 2.0 age,businesses have in fact concernedrecognized theoverwhelming perks of attracting consumers to their item, asopposed to steering their products towards their clients.5) Crude SupplyMechanismVarious challenges are faced in the supply mechanism ofcrudeoil. The performance of the supply chain can be greatlyaffected bytimely flow of accurate information. All hope lies oninformation technology toensure optimization in the processalthough it currently seems to be a hugechallenge. To ensureefficiency in this process, various processes andtechnicalitiesshould be brought together. These include modeling, designingand monitoring of engineering assets.With the use of reliable transport system and quickmethod ofdisseminating information, oil supply can be mechanized andcarryingcost can be reduced. Information technology should beincorporated by oil firmsto integrate suppliers and customers.This can be effectively achieved with theappropriate use ofERP. An example of state of the art solution is mechanismsuchas GTL project with Qatar Petroleum. Shell has also beenplaying vitalrole in this by perfecting the technology behind

Pearl and therefore it holds3500 patents in the GTL project.In addition, adapting a supply-chain modern technologytechnique could additionally result in every user of the systemcould accessall computational web servers with higher speeddata access, link to real-timehigher rate visualization, and takepart in sensible collaboration, and beprovided on-the-spot firmirrespective of the user's area or desktop gadget.This allowsthe supervisors to handle better crude oil supply. In addition,suchpractical aspects as business-process modeling,automated notice, informationaccessibility and sharing, andvisualization ought to be offered to theprovider simply as it is toemployees and other interested events. This step isessential inorder to optimize the potential advantages of the collaborationinbetween oil and gas business and its vendor organizations6) Health, Safetyand Environmental SecurityThe safety of the human environment as well as healthprotection should be the number one priority or concerns inthe oil and gasindustry. Legislation like implementation ofISO15926 has forced oil and gascompanies to comply it.Hydraulic fracturing, a common technique in extractinggasfrom unconventional reservoirs have resulted to lots ofenvironmentalconcerns and issues with the water table.Therefore, oil firms should paygreater attentions to health andsafety issues with broader operation concernsthrough thevarious stages of the value chains.In a gas and oil sector context, as matter of fact,thesetup of

conceptual descriptions is ISO 15926 ("Industrial automationdevices and combination-- Integration of life-cycle informationfor procedureplants consisting of oil and gas productionfacilities"), Several positionpapers presented at the "W3C Oil &Gas" Workshop have actuallyproposed, as a matter of fact,some kinds of combination in between ISO 15926and the W3Clanguages.ISO 15926 presently consists of 7 Parts. The publishedonesare Parts 1, 2 and 4. Component 1 is the "Introduction". Part 2,the "Data Model", associated with the 4D model-- executedmakingusage of the STEP information modeling languageEXPRESS. This model is used todefine basic (axiomatic)ideas like "thing" , "specific" or"property", and “class”, thespecific principles and connections usedto carry out the space-- time method and to describe after that adjustments ofphysicalparameters, and some common connections appropriate toengineeringtasks like "link", "configuration", "containment"and"participation". This data version could be mapped to anOWL-based taxonomy.Requisite technologies can be employed in order tomonitorand recognize gas leakage alarms in a gas processing plantandtherefore trigger various processes to activate a gasturbine. Narrative KnowledgeRepresentation Language(NKRL) can be utilized to reveal this sort of detailsand to setup the data base. NKRL is a conceptual meta-model createdto deal inan intelligent and full way with complicated andcontent rich narrativeinformation sources.

7) Manpower andEconomyA new study entitled “The Economic Impacts of the OilandNatural Gas Industry on the US” made by Price WaterhouseCoopers (PWC)discovered that the US oil and natural gasindustry supports over 9 millionAmerican jobs and makessignificant contribution to the economy which is underimmensepressure and has become a serious challenge.The industry contributes over $1 trillion to theeconomy whichamounts to 7.5 percent of the US GDP. The studies alsoshowedthat oil and natural gas play vital role in the US evenbeyond oil producingstates and regions. Oil and natural gas isthe backbone of the US economy. Itis a major source of growthand job creation in the nation. It was a succorduring recessiontime and creates more jobs and employment than any otherindustry.8) Refineryincapability and the Need for ExpansionIt has not really been easy in the downstream sector oftheindustry to meet the challenge of refining incapability. Lots offactorssuch as economic downturn, higher oil prices andimproving vehicle efficiencyhas reduced demands in thedownstream sectors. Refinery closures have also beeneruptedby tightened margins.Automatic devices can be incorporated in refineries forthecomplying with functionality to overcome as:Automatic tracking of all procedure specifications andtoolsstatus parameters,

Automatic security of procedure devices in case kepttrack ofcriteria get to emergency situation,Upkeep of common procedure methods,Quit shutoffs control,Programmable control and security of pump systems,Procedure parameters control.In this context we consider example UK, the number ofrefineries in 1970s was 18 but today they have reduced to 8.Some existingrefineries are not really suitable and capable ofrefining more difficultcrude. Increasing import of higher-sulphurcrudes puts pressure on Chineserefineries designed forprocessing sweeter crudes.To solve these problems, there is need for moreefficient,flexible and integrated refineries. With the tough investmentclimate of today, this is obviously a big task. However, abeacon of hope isthe Shell and Saudi Aramco’s Motiva JointVenture targeted at expanding thePort Arthur Refinery in theGulf of Mexico in order to increase the barrels ofcrudesproduced per day from 275000 to 600000. This is a part ofShell’s planfor selective downstream expansion.9) PricingSome major challenges in different regions of the worldposelots of problems and results to increased pricing. For instance,theeasily accessible oil is trapped in some regions of the worldand therefore isinaccessible. Therefore supply oftentimes

comes from challenging and remoteregions of the world andthis result to high oil prices.If the production cost of crude is high then priceswill also gethigh. Because of the above mentioned factors, crude pricesarerelatively high in the world. To solve the challenge,information technologycan be brought into the scenario todiscover alternative sources of oil andgas. Cutting edgetechnologies can be employed to leverage oil sources such asshale gas and so forth. However, another challenge in thedownstream isshifting demand and increasing reliance oncomplex oils.10) The cost ofServicesIncreased cost of services is another huge challengefacing oiland gas. This increased cost cuts across the value chains fromexploration to production as well as refining andtransportation. This simplyresults to higher commodity pricesand it has driven the industry activity to apoint where theservice industry lacks the capacity to respond.Virtualization can maximize the usage of existingresources;simplifies facilities and software application management,maintenance, and deployment; and decreases hardwarerequirements, causing lesspower consumption, and lessercooling costs. Downstream sector can use ServerVirtualizationand Desktop Virtualization to manage cost of services. UsingEsri's server innovations in a virtualized setting indicates thatindividualshave more access to GIS processing capacities with

lesser hardware and energyexpenses

Conclusion

Obviously, the upstream and downstream value chains oftheoil and gas industry face lots of challenges which have beenclearlyevaluated. These challenges have constrained lots ofactivities in the oil andgas industry and crippled lots ofprocesses. However, it has also become quiteclear thatinformation technology and automatic devices includingrobotics arehighly needed to solve these challenges in the oiland gas industry as well asevery other industry in the twentyfirst century.The latest technologies for data management, analysis,relaying and dissemination can be channeled towardsensuring effectiveness inthe various value chains of the oil and

ABOUT FOREIGN AFFAIRS FORUM

Foreign Affairs Forum is a network of foreign affairs staffed by professional contributors from the worlds ofjournalism, academia, business, non-profits and think tanks, the FAF tracks global developments on GreatDecisions topics, daily.

The FAF network is a production of the publications, Founded in 2010 by a Diplomat and a group of concerned

gas industry. The text based format ofXML as well as thestructured format of DBMS would fit into many of theseprocesses and would go a long way to ensure effectivedocumentation of theprocesses so as to ensure appropriatedata management.NKRL (Narrative KnowledgeRepresentationLanguage) can be used to express information and to set upknowledge base. This will go a long way in monitoring gasleakages inprocessing plants and therefore set up appropriatealarm systems andnotifications. Many other IT state of the arttechnologies can be used inmonitoring rig activities at real timeso as to ensure all round efficiency inthe process andovercome the challenges.Truly, for oil and gas industry to make headways in thenextphase of this century, information technology should be usedas a strongbackbone to the industry. The good news is thatmany key players in the oilindustry have already begunleveraging the benefits of information technologybut this is notenough. The IOCs (Integrated Oil and Gas Companies) havetocooperate in both the upstream and the downstream sectorto ensure efficiencyin the entire processes.

journalists and citizens, the Foreign Affairs Forum, serves as a catalyst for developing awareness, understandingof, and providing informed opinions on global issues.

All ideas and opinions expressed on the Foreign Affairs Forum and its affiliate networks are attributed solely tothe author.

Have a question about the FAF network? Contact our blog team at info@fuf.ae

Want to blog with us? Send your idea for a new blog, along with why you think it would make a great addition tothe FAF network, two sample posts and a resume or CV to our Online Editor.

Foreign Affairs Forum, United Arab Emirates, Dubai, 121828

Foreign Affairs Forum newsroom