LSCM PROJECT

Anand S 14016

Nikita Lalwani 14089

Rohit Shettar 14124

Rony Francis 14126

Tony Sebastian 14171

OIL AND GAS INDUSTRY

• The oil and gas sector is one of the six core industries in India.

• India is the fourth-largest energy consumer (2013) of oil & gas in

the world, accounting for 37 per cent of total energy consumption.

• India has 19 refineries in the public sector and three in the private

sector.

• Domestic oil output is anticipated to grow to 1MBPD by FY16.

• Domestic production accounts for more than three-quarter of the

country’s total gas consumption.

• India increasingly relies on imported LNG; the country was the

fifth-largest LNG importer in 2013

GROWTH DRIVERS

• The country’s natural gas pipeline network amounted to over

15,340 KMs in 2013 and a proposed expansion of 30,000 KMs is

envisaged by 2018-19.

• The government has decided to set up strategic storage of 5.03

MMT of crude oil at 3 locations – Visakhapatnam, Mangalore and

Padur.

• major discoveries in the Barmer basin in Rajasthan and the offshore

Krishna-Godavari basin by smaller companies such as the Gujarat

State Petroleum Corporation and Andhra Pradesh Gas Infrastructure

Corporation hold some potential to diversify the country’s

production.

• The government unveiled plans to add another 91 Million barrels to

45.50%

41%

13.50%

Shares in Crude pipeline by length

IOCL ONGC Others

In terms of length, IOCL accounts for 45.5% (4448 km) of India’s crude pipeline network

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Oil Consumption In India (MBPD)

Oil Consumption In India…

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

INDIAN OIL CORPORATION LIMITED (IOCL)

• Indian Oil Corporation Limited, or Indian Oil, is an Indian state-owned

oil and gas corporation with its headquarters in New Delhi, India.

• It is the world's 88th largest corporation, according to the Fortune

Global 500 list, and the largest public corporation in India when

ranked by revenue.

• Indian Oil and its subsidiaries account for a 49% share in the petroleum

products market, 31% share in refining capacity and 67% downstream

sector pipelines capacity in India.

• The main services offered by Indian Oil are Refining, Marketing,

Pipelines, R&D and Training.

• The company is mainly controlled by Government of India which owns

approximately 79% shares in the company

SUPPLY CHAIN OF INDIAN OIL CORPORATION LIMITED (IOCL)

Indian Oil Corporation Limited (IOCL) has implemented Honeywell’s

Supply Chain Management solution to integrate and optimize the supply

chain of five separate refineries. The project has resulted in the

following benefits:

• Integrated supply chain planning which optimizes the entire supply

chain.

• Optimal distribution planning considering transportation costs, taxes

and duties and transportation constraints.

• Optimal refinery production planning considering crude assays, unit

The Supply Chain Management solution provided by Honeywellconsisted of the following modules:

• Demand planning: for demand forecasting and aggregation of the finaldemand numbers

• Integrated planning: for the complete IOCL refining supply chain

• Distribution planning: for generating operational plans for allocationand product distribution

• Refinery production planning: for generating operational plans forproduction

1. FACILITIES

The Indian oil group of companies owns and operates 10 of India's 22

refineries with a combined refining capacity of 65.7 million metric

tonnes per annum (MMTPA).It has over 23,900 petrol and diesel

stations, including over 6000 Kisan Seva Kendras (KSKs) in the rural

markets.

2. INVENTORY

Indian Oil Corporation encompasses all raw materials, work in progress,

and finished good in large bulk. Main raw material crude Oil, is

purchased from OPEC countries to meet the demand.

LOGISTICS DRIVERS OF SUPPLY CHAIN OF IOCL

3. TRANSPORTATION

For Transportation Indian Oil Corporations uses pipeline, ship, rail or

road. LNG is transported in specially-built tanks on double-hulled ships.

Coastal cities can be supplied through sea.

4. INFORMATION

IOCL deployed SAP NetWeaver Process Integration technology and the

SAP NetWeaver technology platform. This ERP Improved data accuracy by

99% and Minimized inventory levels.

5. PRICING

The company use flexible price for its products. The price is mainlybased on international crude oil price.

ONGC

• SIZE IS WORTH RS. 2,100 CRORE ANNUALLY AND THEY EMPLOY NEARLY 2,000

PEOPLE.

• THERE ARE 22 ONSHORE LOCATIONS, HAVING DECENTRALISED LOGISTICS AND

SUPPLY CHAIN MANAGEMENT, WHERE PRODUCTION AND EXPLORATION ARE IN

PROGRESS.

• ONGC HAVE TOTAL OF 21 RIGS, NINE OF THEM DEPLOYED ON THE EAST COAST

AND 12 OTHERS ON THE WEST.

• BOTH ONSHORE AND OFFSHORE OPERATIONS

SUPPLY CHAIN STAGES IN ONGC

• ACQUISITION OF ONSHORE AND OFFSHORE FOR EXPLORATION

• OPERATIONS – EXPLORATION, FORECASTING, PRODUCTION.

• LOGISTICS MANAGEMENT - DELIVERING CRUDE OIL FROM REMOTELY LOCATED

OIL WELLS TO REFINERIES

LOGISTICS DRIVERS OF SUPPLY CHAIN OF ONGC

1. FACILITIES

THEY HAVE A TOTAL OF 21 RIGS, NINE OF THEM DEPLOYED ON THE EAST COAST AND

12 OTHERS ON THE WEST.

TWELVE OF THEM ARE ONE HIRE WHILE NINE OTHERS ARE OWNED BY THEM

HAVE NEARLY 5,000 KM OF PIPELINE FOR OPERATION AND MAINTENANCE.

2. INVENTORY

• INVENTORY IN ONGC HAS BEEN CLASSIFIED INTO TWO BROAD GROUPS:

• STORES

• SPARES

3. TRANSPORTATION

FOR TRANSPORTATION ONGC USES PIPELINE, SHIP, RAIL OR ROAD. PIPELINE IS THE

CHEAPEST FOR THE BULK TRANSPORTATION BUT CANNOT BE USED FOR SMALL

QUANTITY.

SMALL QUANTITIES ARE SUPPLIED THROUGH ROAD IN REMOTE AREAS. COASTAL

CITIES CAN BE SUPPLIED THROUGH SEA.

4. INFORMATION

OIL AND NATURAL GAS CORPORATION LIMITED (ONGC) HAS CHOSEN THE SAP

NETWEAVER PROCESS INTEGRATION (SAP NETWEAVER PI) OFFERING.

NOW ONGC COLLABORATES IN REAL-TIME – GAINING VAST EFFICIENCIES IN

PRODUCTION AND ACCOUNTS PAYABLE.

5. SOURCING

STATE-OWNED OIL AND NATURAL GAS CORP (ONGC) HAS EXTENDED PACT WITH

HINDUJA GROUP FOR SOURCING OF LIQUEFIED NATURAL GAS FROM IRAN AND

OTHER MIDDLE EAST NATIONS BY ONE MORE YEAR.

6. PRICING

THE STEEP FALL IN CRUDE PRICES MEANS THAT THE DISCOUNT ONGC HAS TO

GIVE ON ITS PRODUCE IS HIGHER THAN THE ACTUAL OIL PRICE.

WHILE ONGC HAS TO GIVE A DISCOUNT OF $56 A BARREL TO PUBLIC SECTOR

BUYERS AS PART OF THE GOVERNMENT’S SUBSIDY-SHARING MECHANISM,

INTERNATIONAL CRUDE OIL PRICES ARE $6-7/BARREL BELOW THAT LEVEL.

ONGC AND OIL INDIA OFFER DISCOUNTS TO THEIR COUNTERPARTS IN THE

REFINING-CUM-RETAILING BUSINESS.

COMPARISON BETWEEN THE TWO COMPANIES

• INDIAN OIL CORPORATION LIMITED (INDIAN OIL) IS THE LARGEST OIL REFINING AND

MARKETING COMPANY IN INDIA.

• APART FROM THE 61.7 MMTPA (MILLION TONNES PER ANNUM) OF EXISTING

REFINING CAPACITY WITHIN THE INDIAN OIL GROUP, A NEW REFINERY AT PARADIP,

ORISSA IS COMING UP WITH A CAPACITY OF 15 MMTPA.

• THE COMPANY ALSO OPERATES OVER 10,541 KILOMETERS OF CRUDE OIL AND

PRODUCT PIPELINES.

• IT ALSO HAS A RETAIL NETWORK OF OVER 18,643 OUTLETS. ITS GROUP COMPANIES

INCLUDE CHENNAI PETROLEUM CORPORATION LIMITED, INDIANOIL (MAURITIUS)

LTD, LANKA IOC PLC, IOC MIDDLE EAST FZE, INDIANOIL TECHNOLOGIES LTD AND

INDIANOIL - CREDA BIOFUELS LIMITED.

• TECHNOLOGY USED: PROCESS INTEGRATION TECHNOLOGY, SAP NETWEAVER

TECHNOLOGY PLATFORM

• ONGC IS THE COUNTRY'S LARGEST OIL EXPLORATION AND PRODUCTION (E&P)

COMPANY ACCOUNTING FOR NEARLY 90% OF INDIA'S PROVEN OIL AND GAS

RESERVES.

• AT THE CURRENT RATE OF PRODUCTION, THE COMPANY ACCOUNTS FOR OVER

80% OF OIL AND GAS PRODUCTION. APART FROM E&P, THE COMPANY ALSO

PRODUCES VALUE-ADDED PETROLEUM PRODUCTS SUCH AS LPG, KEROSENE,

NAPHTHA AND DIESEL.

• WHILE LPG IS SOLD TO THE PSU MARKETING COMPANIES, A MAJOR CHUNK OF

NAPHTHA IS EXPORTED AND DIESEL IS USED FOR CAPTIVE CONSUMPTION. ONGC

ALSO HAS A 72% STAKE IN MRPL, A STAND-ALONE REFINERY WITH A CAPACITY

OF NEARLY 9.7 MMT (MILLION METRIC TONNES).

• TECHNOLOGY USED : UOP TECHNOLOGY, BIOREMEDIATION TECHNOLOGY

MNRE, LED ERP, SAP, R3

FINANCIAL COMPARISON

INDIAN OIL CORPORATION

2014 2013 2012 2011 2010Number of Days In Working Capital 18.76 33.14 30.55 26.43 13.2

Inventory Turnover Ratio 7.31 7.54 8.15 7.56 8.37

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

Operating 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 24.77ONGC

2014 2013 2012 2011 2010Number of Days In Working Capital 6.1 47.82 80.99 46.43 151.48

Inventory Turnover Ratio 14.26 14.55 14.81 16.59 87.82

Return On Capital Employed(%) 23.53 24.6 28.56 28.38 34.54

Operating Profit Margin(%) 52.72 52.53 60.01 58.81 62.57

Average Raw Material Holding 2.34 2.5 3.4 1.5 0.27

Average Finished Goods Held 8.5 9.21 6.24 10.8 7.42

ISSUES

• 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

RECOMMENDATIONS AND SUGGESTIONS

Segment Customers Based Their Needs:

Form Partnerships to Enhance Supply-Chains

Apply Strategic Sourcing

Adapt a Supply-Chain Wide Technology Strategy