The research paper titled “An analysis of supply chain activities in Nigeria Downstream Oil and Gas Industry” is aimed to study the supply chain development into the selected industry along with operational challenges and environmental risk concerns. This chapter presents the introduction of theoretical context, aims in addition to objectives of the study followed by research questions. In order to comprehend the research aim, objectives, the research background is provided on SCM of oil as well as gas industry. All the discussions of the selected topic are based on literature review, analysis of peer review articles on supply chain activities and online journals. The key significant outcome of this research is to view on SCM and disclose of challenges into the oil as well as gas industry in Nigeria.
The oil and gas industry of Nigeria is vigorous since the discovery of the crude oil in the year 1956 by Shell Group. Nigeria consists of natural resources such as hydrocarbon, it is 10st largest manufacturer of oil in the whole world and 3rd largest within Africa. The revenue of oil accounts for 95 percent of foreign exchange earnings within Nigeria. The oil production is fluctuated in response to supply of oil (Blog.kpmgafrica.com, 2014). The oil and gas industry involved into three steps: upstream, midstream as well as downstream. This particular thesis analyses the supply chain activities into the downstream sector. The key sections within the downstream sector are communication, transportation, refining and distribution (Raut, Narkhede and Gardas, 2017). Under communication and transportation, it involves with the transport of oil, gas to refinery next to with gas stations. There is pipeline network from wellhead to refinery in addition to for these point tankers are used. Nigeria consists of four refineries: two of them situated at Port Harcourt and other two each in Warri and Kaduna. The oil and gas products within Nigeria are being supplied throughout “Petroleum Product Marketing Company’s pipeline system” that links with refineries to 21 storage depots (Awogbade, Bamgbose and Izekor, 2017). There is import of refined products from outside of the Nigeria in order to meet with the customer’s demands.
The oil and gas industry is one of the majority important sectors of the economy which occupied into oil production, shipping, trade of the mineral resources in addition to storage. The downstream sector is based refining of the petroleum crude oil, processing of the natural gases and division of the products derived from the oil and natural gases. Supply chain system is used to supply of oil unpurified oil from production location for refining and distributing the products to the retailers. Ambituuni, Amezaga and Emeseh (2014) mentioned that supply chain within selected industry is required element for national economics plus international relationships in Nigeria. The industry has greater impact on the global finances tendency and show increasing demand in recent years.
Ngoasong et al., (2014) argued that SCM in oil as well as gas industry consists of a variety of challenges into the logistics area. Those challenges have major influences into selected industry. Into the area of logistics, opportunities for cost savings are still existed. Gulen (2016) mentioned that supply chain system benefited the oil and gas industry by improving their performance by 80 percent based on their supply chain needs. There are benefits of superior control over the quality of product, proper coordination of operations into value chain, contact to superior technologies along with intelligence of strategic importance. It also improves the product along with material flow by timely delivery of good to the customers. It enables to improve product flow by proper demand in addition to sales forecasting. The challenges of oil shortages are resulted to this study, to disclose the challenges which affect performance of supply chain system within selected industry in Nigeria (Ahmad et al., 2016). The purpose of the supply chain is to make of best customer values at lower operating cost; hence addition of supply chain flows to meet with consumer’s demands. The demands are from supply of war materials to deliverance of oil products to the trade.
Into the global supply chain, oil as well as gas industry includes of supply activities such as international transportation, ordering as well as inventory, handling of the materials, facilitation of import and export along with information technology. The industry is offering of classic models to implement of supply chain techniques. This selected topic is relevant as it investigates of role of SCM into the oil as well as gas industry. Improvement over the supply chain logistics into oil as well as gas can improve its efficiency along with bottom line.
With rising pace of the worldwide integration it is required that supply chain into oil and gas industry competes into the global markets. The purpose of this study is to focus on different supply chain issues of downstream oil industry in Nigeria. The oil and gas sector faces of challenges such as non-availability of the oil as well as gas resources, while put the reserves into production and delivery of final products. Supply chain management programs are used to enhance the organizational goal. Improvement over the quality of logistics system and reduction of cost results in improving the use of information technology results into providing solutions into supply chain sector.
The research aim is to investigate and analyze the supply chain activities of Nigeria downstream oil as well as gas sector. It also suggests over improvement into the supply chain management of oil and gas industry. The industry makes an importance contribution to the global demand of energy and economic growth. Due to varying prices of oil, it affects the operational activities of the industry which results into linkage of supply chain through the entire industry. The supply chain challenges which impact the performance of oil industry are identified. In context of selected industry, the managers are required strategic data along with integrated process management system in the supply chain for improving the performance. The research elaborates case studies of major players in oil and gas industry in respect to supply chain activities. The entire research study is focused on past along with current supply chain practices. This research study attempts to bridge gaps between the organizational theories and supply chain management field.
The research objectives which are formulated based on above research aims are:
Following are the research questions for this particular research study:
It is not difficulty to approach up with selected research topic, but the problem is to discover of efficient in addition to precise information of supply chain challenges into Nigerian oil as well as gas industry. Working with this challenge is well as highly trusted sources and articles provide with various information. None of the target company is chosen as case company, but few of major companies are representing as examples to offer detailed description on supply chain activities in downstream sector. As it is indicated that the study is based on peer reviewed, therefore some of the sources highlight lack of supply chain approaches into selected industry but it provides interest to develop supply chain activities. There is some wide literature which provides in-depth information on technical as well as economical aspects of downstream supply chain.
Following is the outline of the research study which the researcher follows to conduct this thesis paper:
Chapter 1: The first chapter provides introduction on the selected research topic. Research aims, objectives and questions of the research are presented. This chapter also provides with background of the research, research purpose and relevance of selected topic and summary are adopted.
Chapter 2: The second chapter is literature review provides background of oil and gas industry along with its significance into the global economy. It investigates why such supply chain context is chosen for this research study. Along with the background, it highlights the supply of proved oil and gas reserves in Nigeria downstream sector. The key downstream supply chain challenges are discussed in this chapter.
Chapter 3: The third chapter presents a discussion on the research methodology. The selected research methodology for this research is secondary data collection method. The data are collected from peer reviewed journal articles on oil and gas industry of Nigeria to identify their supply chain activities. There are number of scholarly articles for doing systematic review of this research study.
Chapter 4: The fourth chapter presents the result of the data analysis which is approved out below the research study. It includes of data collection and directed for the descriptive analysis. It also gives argument on validity of the data.
Chapter 5: The fifth chapter discusses the results, highlights the findings and theories used in the data analysis. It provides the outcomes of research analysis.
Chapter 6: The sixth chapter provides the research limitations along with recommendations towards direction for future study in selected research topic.
From this chapter, it is summarized that there are some supply chain challenges into selected industry which are required to be improved. This study also identifies of best supply chain practices and factors for successful operations of their oil and gas business. The entire study is based on past and existing practices of supply chain activities of mainly Nigerian some of the big oil as well as gas companies. The information and data are based on various literature sources. The study is developed based on the research objectives for progressing the current understanding of operational performance into supply chain. Improvements are also suggested based on identified challenges related to the supply chain in oil as well as gas industry of Nigeria.
This chapter discusses the role of supply chain management into the oil as well as gas industry with analyzing the challenges into the supply chain activities. After identification of the challenges, strategies are provided to overcome with the issues into supply chain. The systematic literature review identified theoretical approaches used to examine the supply chain activities. The supply concept into the oil and gas industry is a customer oriented approach (Inkpen and Ramaswamy, 2017). The data are gathered from the peer reviewed articles focused on the aspect of supply chain. Oil plays a key significant role into the development of Nigeria. Into this particular sector, supply chain is accounted for 70 percent of the overall cost. The goal of supply chain into the oil and gas industry is to reduce the purchase of materials, maximize the production of oil and meet with demand of sales number (Micheli et al., 2016). The aim of production units is to maximize the performance as well as margin.
This section represents the supply chain framework of this particular research study. The discussion is based on positioning of the framework with broader context of SCM. First, the researcher describes the oil and gas supply chain in Nigeria and then reviews the literature related to the selected industry. It is followed by discussion on theoretical framework. The supply chain theories are suggested that the chain is used to manage from end-to-end. Urciuoli et al., (2014) suggested that more studies are required to understand the contextual factors of the SCM relevant to the oil and gas industry. Due to global as well as strategic nature of the supply chain activities, it will influence the achievement of the sustainable future towards oil as well as gas industry. The factors which are categorized into the external factors are business environment along with internal factors consist of organizational as well as supply chain functions. This framework proposed from the existing theory of the supply chain into different aspects.
Yusuf et al., (2014) argued that the first aspect is to provide conceptualization of both internal as well as external factors determine the adoption of supply chain into the oil and gas industry. Various studies are conducted to examine the external drivers of SCM limited the understanding of impact of economic condition and regulatory environment into supply chain. Singh (2015) mentioned that the second aspect is that the oil as well as gas is such an industry faces of sustainability pressure from the external environment.
Various authors have defined SCM from various perspectives and point of views. Inkpen and Ramaswamy (2017) stated that SCM defined to provide of maximum customer services at lower cost. Within the supply chain, the industry links to the supplier’s upstream as well as distributor’s downstream to serve their customers. Okoroma et al., (2015) defined SCM as art and science which involves integrating and flowing of components into the supply chain such as financial assets, capital, technology and other resources. This section will represent the supply chain management into the oil as well as gas industry and downstream oil and gas sector of Nigeria. Gulen (2016) mentioned that SCM is focused on managing and examining of supply chain to gain of better cost savings and provide of better customer services.
Val et al., (2016) mentioned that oil as well as gas industry plays a key significant role into the economic development of Nigeria. Performance of its supply chain is considered as key importance of the industry. Nigeria consists of lowest cost crude oil producer along with the international price of oil fixed in US dollars. The economy of Nigeria faces a melt down with the drop into the price of oil. Transportation, warehousing in addition to border clearance cost form critical component of the price of commodities. Modarress, Ansari and Thies (2016) found that Nigeria oil as well as gas companies implement of SCM throughout use of energy saving devices such as equipment for consumption of lower energy, sensor, reducing of air pollution, health and safety standards and use of recycled materials.
Both upstream and downstream activities are important activities into the oil as well as gas industry. This section is analyzed the downstream sector processes which is defined as the operations to refine the petroleum crude oil as well as process and purify the raw natural gases along with distribution of the products derived from crude oil (Ambituuni, Amezaga and Emeseh, 2014). Into the refining process, the first stage is based on demand forecasting as well as trigger of procurement along with logistics activities to supply of crude oil to deliver the products and services to the customers. Agyemang, Zhu and Tian (2016) discussed that refining is a process involves with change of crude oil into a variety of types of derivatives focused on the demand forecasting. Logistics management provides of right products to be delivered to the right customers at right time in cost effective way.
The downstream sector of Nigeria handles of processing, marketing, production as well as distribution into the oil and gas market. Due to fall in the oil price in the year 2015, the buying power of the raw material is increased (Tob-Ogu, Kumar and Cullen, 2017). Accessibility of low price of crude oil has facilitated vast profits for the oil companies by selling of developed products to the industries. Eneh (2016) argued that when the price of oil continued to carry on beyond the period, because of oversupply, higher inventory and slow growth of demand from the other countries, it results into pressure on margin made by the downstream sector of oil as well as gas.
Ogunlowo, Bristow and Sohail (2017) described how the supply chain into oil as well as gas industry are become complex as compared to other industries. Production to refineries of crude oil is a long journey. The process of refinery is a complex process as part of the supply chain. In some of geographical areas of Nigeria, there is an increase in demand of fuel becomes low. Trade into the goods has increased due to potential lack of refining into the consumption areas. Ovadia (2014) stated that it creates pressure on the margin into the regions with deficit as the finished products are begun to arise from the regions with surplus. It also creates of new marketplace in additional countries for the local refiners to enlarge competence into the complete supply chain. Bridge and Bradshaw (2017) argued that quality is also an issue which requires of more complex investment into the processing equipments. The environmental regulations are severe, makes the operations of existing facilities costly and complex. Following are the challenges into the supply chain of oil as well as gas industry:
Logistics challenges: Into the oil as well as gas industry, logistics network is highly inflexible that arises from the production capabilities of the suppliers of crude oil, lead time of transportation an limitations of the transportation (Sumbal et al., 2017). Therefore, the logistics network becomes a challenge. Due to long distance between the supply chain partners and transportation, there is increase in transportation cost and in-transit inventory. Ogunlowo, Bristow and Sohail (2017) concluded that there is also an increase into inventory carrying cost based on safety stocks at final location of customer. The process of transportation is carried out either by means of ship, truck and others. Swaray and Salisu (2017) illustrated that there are some constraints into the transportation mode includes of long lead time from the point of shipping towards location of the customers.
Integrated process management challenge: The process from delivery of raw materials to delivery of final product is critical towards success of the company. The oil as well as gas industry are lagging behind the use of integrated planning across their supply chain (Amu and Ozuru, 2014). This challenge results into increase of cost to acquire of crude oil which affects the price of gas for the customers.
Information system challenge: Due to globalization into the supply chain network, it affects the use of information system to develop the production and distribution of products in the oil industry. This industry is lack behind the use of information technology for their supply chain operations. Bridge and Bradshaw (2017) demonstrated that due to security requirement, information system is needed into the industry. Oil companies are shipping of hazardous products and supply chain partners should aware of the location where the products are to be shipped. Wireless technology is used to track the shipments of the products.
In today’s time, oil as well as gas industry is looking for new supply chain strategies to reduce the operating cost and improve their efficiency along with industry’s profits. In some of the cases, technology allows to configure across the supply chain management (Agyemang, Zhu and Tian, 2016). As an improvement into the supply chain, the industry should review of the supply chain configuration as well as coordination system. As the oil field of Nigeria is maturing, the Nigerian government is focused on enhancing the output from the existing fields and offshore development of oil as well as gas industry. Ahmad et al., (2016) argued that the SCM into the industry needs the company to integrate of their decisions which are made in the customer’s chain as well as suppliers. Following are the strategies used to improve the supply chain into the selected industry:
Customer segmentation: In order to meet with the customer’s requirements, various approaches are required for the supply chain configuration. The foundation of this segmentation is data driven analysis provides the information required to tailor the supply chain policies to raise the profitability of the industry (Okoroma et al., 2015).
Customization of logistics network: Within the supply chain, logistics is most important part. Based on the customer’s demands, the goods and services are delivered to them to deliver of accurate quantities and on time. Improvement over the supply chain means customization of logistics network (Modarress, Ansari and Thies, 2016). The overall logistics network into oil and gas industry is strengthen when the driller, production engineer, financial analyst are to evaluate technical as well as economic feasibility of development of oil.
Form of partnerships: Oil as well as gas industry involved in the supply chain consists of domestics as well as international transportation, material handling, information technology and facilitation of import and export (Micheli et al., 2016). The partnership with other oil and gas company helps to deliver the required customer’s products and services easily. It helps the industry to perform their supply chain and transportation process effectively.
Outsourcing: The outsourced offshore of both finance as well as accounting processes is an aspect of the business which benefited the operating cost to the oil in addition to gas industries. The driving force of oil as well as gas industries into the offshore finance also accounting functions as a cost reduction (Yusuf et al., 2014). There is 30-50 reduction of cost is reported by the Nigerian oil companies to calculate of offshore gains. Technology implementation is being implemented by the oil as well as gas companies to allow for outsource provider to fulfill the tasks reduced the operating cost and allowed to maintain of high focus on the core competencies.
Most effective supply chain practices into the oil as well as gas industry represent of factors to maintain the suppliers of the crude oil, reduction of the lead time and lower the production along with distribution cost. Due to inflexibility involved into the oil as well as gas industry, logistics becomes a key challenge. Apart from the challenges of supply chain, there are opportunities to improve supply chain and cost savings. It leads to the logistics functions; therefore improvement over the logistics network makes the supply chain more efficient and effective. The oil industry takes outsourcing as their supply chain strategy to collaborate with the competitors and provide a supply chain solution. Collaboration among the competitors offers the companies with cost savings and introduce of new opportunities. It is analyzed that global demand of the oil provides to reach the customer’s demand and increase into industry’s market share. SCM is being focused to manage as well as examine of supply chain for gaining of cost savings to provide better services to the customers.
Mackey and Gass (2015) stated that research methodology is defined as systematic way to provide solutions to the research problems. It is a science to study how the research is being carried out. Taylor, Bogdan and DeVault (2015) argued that the research methods are different procedures by which the researchers carried out the research to describe, explain and predict phenomenon. Glesne (2015) defined it as the revise of methods by which the research information is gained and plan to provide work plan of the research. The researcher has tried to apply of detailed process of the research methodology which helps in better analysis of supply chain activities in Nigeria downstream oil and gas industry.
In this chapter, detailed research techniques are used to examine the supply chain activities and its consequence on the oil and gas industry. Selected philosophy of this research study is positivism which helps to gain of information based on selected research topic. Deductive approach is used to permit the researcher to carry out this study based on the secondary sources which assist in considering the supply chain activities in a better way. Descriptive research design is used to help the researcher define the applied concepts in detailed way to help in describing the impact of the study. Application of the secondary sources such as internet, journals, books help in providing detailed information of selected research topic along with providing better quality of research analysis. Qualitative data is used as data techniques help to record description form of data which include of better explanation of the selected topic.
Flick (2015) demonstrated that research philosophy is connected to expansion of the knowledge as well as scenery of the knowledge. Adoption of proper research philosophy helps to make assumptions which allow understanding of the selected research topic. Cleary, Horsfall and Hayter (2014) discussed that there are three types of research philosophy such as positivism, interpretivism and realism. Positivism helps in analyzing of the hidden information on the supply chain activities into oil as well as gas industry in methodical manner (Silverman, 2016). Interpretivism supports concept of the complex structure involved into the management activities. Vaioleti (2016) described that this research study aim to identify things with the ideas of natural law to positive degree rejects scientific approach. Finally, realism is mixed approach of positivism as well as interpretative which involves features with both the philosophies.
In this particular research study, positivism research philosophy is used to better analysis of hidden facts as well as information related to the supply chain activities into oil industry. Apart from all this, this study is very time limited; therefore realism study is discarded as chosen philosophy. Selection of the positivism philosophy limits the role of researcher to evaluate the data that leads to reduction of data errors.
The approach which is applicable to the research study is aimed to provide inputs into the supply chain activities into the oil as well as gas industry. The selected research topic is undertaken for the study using two approaches such as deductive and inductive. Panneerselvam (2014) discussed that inductive approach helps to study research topic when there is lack of availability of data. This approach uses of observation to gain of relevant data and builds the research path. Tarone, Gass and Cohen (2013) noted that this approach serves the purpose of use of new theory into the research study. On other hand, deductive approach is described as realistic application of theories to increase right to use to the contented of chosen research paper. It aims to construct of theory with comprehensive information in addition to ideas of the data analysis.
In this particular study, deductive research approach is selected as the research topic tries to study concepts of the supply chain activities into oil industry with help of different theoretical knowledge. Models of the supply chain are required to be selected which helps to better understand of the research into precise as well as clear manner. Inductive approach is failed to implement into the study as the researcher is not implementing of new concepts and theories of supply chain to conduct the study. Therefore, selected research approach is better to understand the concepts into descriptive way.
Matthews and Ross (2014) illustrated that research design helps to make clear framework of the selected research topic assists in better collection and analysis of collected data. At the time of collecting of data, research design is applied to provide better description of the research topic. There are three types of research design such as exploratory, explanatory and descriptive. Best and Kahn (2016) demonstrated that exploratory design helps to acknowledge of different kinds of ideas required to complete the study. Explanatory research design helps to understand occurrences of the events and effects of happening. Finally, descriptive research design aims to gain detailed analysis to state occurrence with proper description of the research topic.
In this particular study, descriptive research design is used to describe detailed process concerned into analyzing of supply chain activities into Nigeria oil and gas industry. The extent of the supply chain activities into selected industry is rightly analyzes with helps of this research design. Descriptive research is such as study designed to depict the participants into proper way. It is one of the study in which the information are collected without changing of the environment. Descriptive research refers to the type of the research questions, research design as well as data analysis which is applied to the provided research topic. Descriptive analysis generates of the data such as qualitative and quantitative which describe the condition of nature at the end into time. It is used to get information that is concerning the status of the research phenomenon with respect to the conditions of the situation.
Sekaran and Bougie (2016) mentioned that data collection procedures are helpful to derive proper results towards the research process along with facilitates standard plan of the research work. Under the data collection procedures, there are data sources and data techniques to collect of information helpful to study the selected research topic.
The sources of data are useful to penetrate the research topic and help to take out information focused on the research necessities. There are two types of data sources such as primary and secondary data sources. Zikmund et al., (2013) illustrated that primary sources are collect raw data based on selected research topic. The sources of primary research are survey, interview. On the other hand, secondary data sources provide with widen thought of the research topic which enables of improved study of selected research topic as it consists of more data furthermore detailed description (Bernard, 2017). The sources of secondary research are internet, journals and books. In this particular study, secondary sources are used and the data are collected from the journal articles based on the supply chain activities of Nigeria’s downstream oil as well as gas industry. The secondary data are collected from a variety of case studies of major players in oil and gas industry in respect to supply chain activities in Nigeria. The sources are second hand data that are already appeared into the primary documents.
There are two types of data techniques such as qualitative and quantitative. Quantitative data applies of the statistical data which helps to record of data with larger sample sizes. Smith (2015) described that qualitative research is emphasized the constructed nature of the reality, relationship among the researcher and what is being studied. This data technique is not focused on the prescribed methods as well as hypothesis that would guide the researcher to conduct the entire study (Hair, 2015). This technique involves direct come upon with the world. In this research study, qualitative data technique is used as common concepts into the process to gather information is grouped together and make a new phenomenon for further research studies.
While conducting and working into the research study, the researcher are required to follow code of conduct which help to identify wrong as well as right set of behaviors needed to adopt during the research process. The researcher analyzed the supply chain activities within the oil sector and tried to follow some ethical considerations which help to add standardization into the study.
Data application: Any type of commercial data application is avoided such that the findings can limit to the academic purposes.
Involvement of the participants: The researcher are tried to put in no exterior influences on pressure over the participants to get part into the process of feedback of the research topic. The participants are encouraged to participate into the research study.
Participant’s anonymity: The researcher ensured that no mental and physical harassment are given to the participants so that identities of them are hidden as per their requests.
Based on the mentioned ethical considerations, the researcher are tried to continue of investigation ethics in the study. When all the mentioned ethical considerations are followed, it results into successful completion of the research study within estimated time.
Blumberg, Cooper and Schindler (2014) commented that the limitations into the research topic are natural which defines the restricted area and scope of the research study. Following are the research limitations:
Reliability: The participants those are not involved into the study are not involved into any type of influences.
Time constraint: The researcher had limited instance to lead the study within a little time period. Detailed research and analysis is not conducted due to cross sectional study.
Budget constraint: In the limited budget, the researcher has lack of finance to do the analysis using SPSS software which could better enhance the quality of the data analysis and research outcomes.
The research study is cross sectional in nature, therefore there is limited time to study on the selected research topic. As this type of study is adopted has limited time, therefore Gantt chart is used as the best scheduling tool to identify the completion time with its respective research activities. The total duration of the entire research study is 7 weeks. The researcher is functioned of the Gantt chart at steady intervals such that the status per usual intervals is analyzed properly.
The chapter described different research methods which help the researcher to do of better data analysis on selected research topic. The researcher tried to side with of the nature of the research study along with research techniques so that most excellent research methodologies are being framed. The research methodology tools are used to evaluate the concepts of the supply chain activities into the downstream sector of oil as well as gas industry. Entire research study is based on secondary data collection and qualitative data analysis methods to understand the supply chain activities into oil industry. Positivism is selected as research philosophy, deductive as research approach, descriptive as research design to determine the supply chain framework of the study. Both times, budget as well as research scope is maintained properly to complete the research work on scheduled time.
The oil and gas industry in Nigeria is a major source of income into the country. Nigeria’s total earnings are 95 percent from their oil industry. Therefore, this industry is playing a significant role into the economy of Nigeria. Okoro and Chikuni (2017) stated that Nigeria is biggest exporter of the oil along with gas within Africa. According to “USA Energy Information Administration”, the oil reserves of Nigeria are between 17-22 billion barrels, while some of the sources claimed that this figure is approximately 35 billion.
|
Year |
Q1 |
Q2 |
Q3 |
Q4 |
|
2013 |
2.29 |
2.11 |
2.26 |
2.16 |
|
2014 |
2.24 |
2.21 |
2.12 |
2.19 |
|
2015 |
2.18 |
2.05 |
2.17 |
2.16 |
From the above chart, it is analyzed that in the first quarter of the year 2016, the production of crude oil is stood at 2.11 million barrels per day (mbpd), which is lower as compared to lower from the production in quarter4 of the year 2015. The production of oil is lower as relative to the quarter in the year 2015 by 0.07 mbpd when the output is recorded at 2.18mbpd. The result is that there is real growth of the oil sector is showed by 1.89% in Q1 in the year 2016. It represents that there is an improvement relative to growth which is recorded in 2015 (Q1) when there is increase in growth of 8.15% (Tradingeconomics.com, 2017). As share of the Nigeria’s economy, the oil sector is contributed to 10.29% of the real GDP, which is lower than the share which is recorded in period of the year 2015, higher from the share in Q4 of the year 2015 by 2.24% points.
|
Agriculture |
Industry |
Services |
|
|
2010 |
24% |
24.91% |
51.20% |
|
2011 |
22.29% |
27.84% |
49.87% |
|
2012 |
22.05% |
26.72% |
51.22% |
|
2013 |
21% |
26.04% |
52.97% |
|
2014 |
20.24% |
24.95% |
54.82% |
|
2015 |
20.86% |
20.38% |
58.76% |
|
2016 |
21.18% |
18.46% |
60.36% |
The above chart analyzed that there is a distribution of GDP across the economic sector of Nigeria from the year 2010-2016. In the year 2016, the agriculture is contributed around a percentage of 21.18% to the GDP of Nigeria. It is contributed to 18.46% from the industry along with approximately 60.36% from the service sector (Tradingeconomics.com, 2017).
|
Years |
Nigeria (in cubic meters) |
|
2001 |
15,680,000,000 |
|
2002 |
17,890,000,000 |
|
2003 |
19,200,000,000 |
|
2004 |
21,800,000,000 |
|
2005 |
25,400,000,000 |
|
2006 |
31,678,000,000 |
|
2007 |
34,100,000,000 |
|
2008 |
32,820,000,000 |
|
2009 |
23,210,000,000 |
|
2010 |
29,000,000,000 |
|
2011 |
31,360,000,000 |
From the above chart, it is analyzed that the production of natural gas is shown from the year 2001-2011. From the year 2001-2007, there is an increase into the gas production, but suddenly in the year 2008, there is a decrease into the production by 1,280,000,000 cubic meters. In the year 2010 and 2011, there is again an increase into the production of natural gas. The consumption of domestic gas is expanded as result of the ongoing power sector. The production of natural gas in Nigeria is low based on the larger amount of proved reserves of the natural gases (Nnpcgroup, 2017). Therefore, Nigeria is considered as the largest exporter of the natural gas via the LNG.
It is a global energy company which is operated in various regions including Nigeria. The downstream activities of the company is the chemical business, that is responsible towards refining, marketing, manufacturing of chemicals, achieving of utilization of refining in more than of 10 years. The company is anticipated that there is an increase of crude oil in the future as continued to growth into demand as well as slow of the growth of supply which brings the global markets into balance. In the downstream business of the company, the crude oil is largest cost component of the refined products. Chevron spends of $2.5 billion into the local content development of Nigeria’s oil as well as gas sector, which represents of 65% of the total goods along with services of Nigeria expenditures for the year (Guardian.ng, 2017). The company develops its supply chain by enhancement of the local suppliers and they have capability to meet with the industry standards. In the year 2016, the company spends of $39 billion into the goods as well as services. Chevron is second largest producer within Nigeria, which is engaged into building of the production to around 400,000 b/d from the past levels of 350,000b/d.
|
Oil fields |
5 (Abig-birodo, Belema, Idama, Inda, and Opuekeba) |
|
Average daily production of oil |
120,000 net barrels of oil per day |
|
Annual production of oil |
3.5 million barrels per day |
|
Natural gas |
1.1 billion cubic feet per day |
|
Average total daily sales of gas |
670 million cubic feet |
In Nigeria, the company is produced as well as explored of oil. The Agbami Field is produced of an average of 120,000 net barrels of the crude oil per day in the year 2016. Into the next development phases, there are final 15 wells- Agbami 2 as well as Agbami 3 (chevron, 2017).
Exxon Mobil is operated in Nigeria into exploration as well as production of the crude oil along with natural gas. The downstream business units of the company are focused on providing of the finished products as well as feedstock to the customers mainly throughout distribution as well as marketing organization. The refining process is done into 45 refineries with a distillation capacity of six million barrels per day. It is operated in Nigeria with $40 billion in annual profits as well as 5.3 million barrels into oil per day. In the year 2013, the company started to contribute with Wolverine pipeline system in order to improve over their logistics. The company’s downstream is varied business with largest refiner as well as distribution facilities. The company holds an ownership interest with the distillation capability of 5.3 million barrels per day into 31 refineries (Cdn.exxonmobil, 2016). The company is integrated of more than 75% of the refining operations with combined with the chemical productions.
|
Oil reserves and production |
Gas reserves and production |
||
|
Average daily production of oil |
5.3 million barrels |
Average daily production of gas |
11.8 million cubic feet |
|
Annual production of oil |
25.2 billion barrels |
Sales of natural gas |
14.3 million cubic feet |
|
Refinery throughout per day |
4.5 thousand barrels |
Annual production of gas |
7.1 trillion cubic feet |
|
Production of petroleum [per day] |
5.8 thousand barrels |
Gas plant liquids |
259 |
In Nigeria, Royal Dutch Shell’s operations are carried out into four of the subsidiaries- Shell Petroleum Development Company of Nigeria Limited. The joint venture is accounted for more than 21 percent of the total petroleum production of Nigeria. The total production of Nigeria’s oil production is 629,000 barrels per day from eight of their fields. Almost 14% of the production of Shell comes from Nigeria. The part of Niger Delta has yielded to approximately $30 billion into the oil revenues (Royal Dutch Shell plc annual report, 2016). As per the study conducted in Nigeria, there is total of 2.4 million of the barrels which are leaked into the Nigerian delta.
|
Oil fields |
8 |
|
Natural gas plants |
8 |
|
Wells |
More than 1000 |
|
Annual production of oil |
3.9 million barrels per day |
|
Average production of oil sales |
2.95 million barrels per day |
|
Annual production of gas |
364 billion cubic feet |
|
Average production of gas |
2954 thousand boe per day |
is summarized that the case oil as well as gas industries are coordinated and optimized with the supply of the crude as well as feedstock to the refineries, with the manufacturing of mixed products and inventory levels. The selected case organizations are managed to have a global logistics system which includes of high ownership interest. Among the three case organizations, Exxon Mobil oil and gas industry tries to meet with the marketing business portfolio to meet with the requirements of the local consumers by applying of business processes, programs related to marketing in addition to best practices. The oil as well as gas industry is serving diverse customer base in all over the world. The organization’s downstream activities are refining throughput along with sale of final products as well as goods. The global supply organizations are coordinated as well as optimized of the supply of both crude as well as feedstock to refineries in addition to working of the inventory levels.
The three of the companies into the oil as well as gas industry such as Royal Dutch Shell, Chevron Nigeria Limited and Exxon Mobil are chosen as the case examples. Three of the companies are being compared based on the revenues, profits, reserves of the oil as well as gas along with production of oil and natural gas. Annual reports of the organizations, famous business magazine as well as websites of the oil and gas industries are chosen as sources for gathering the data to analyze the selected research topic. While some of the differences between average as well as annual daily oil as well as gas production is evident for the research study. All the three selected companies are seeking more opportunities to expand as well as recover the international relationships with other foreign partners. Chevron is increased their sales of gas and then kept progressing into several oil and gas projects (Guardian.ng, 2017). Exxon Mobil is increased the capacity along with increased into production of diesel quantity. Year-by-year, the organizations are achieving improvements over some of the business aspects such as exploration, oil production, natural gas production, transportation as well as refining.
|
Oil production |
Gas production |
|||
|
Daily average |
Annually |
Daily average |
Annually |
|
|
Chevron Nigeria Limited |
120,000 net barrels of oil per day |
3.5 million barrels per day |
670 million cubic feet |
1.1 billion cubic feet per day |
|
Exxon Mobil |
5.3 million barrels |
25.2 billion barrels |
11.8 million cubic feet |
7.1 trillion cubic feet |
|
Royal Dutch Shell |
2.95 million barrels per day |
3.9 million barrels per day |
2954 thousand boe per day |
364 billion cubic feet |
From the above table, the researcher discussed that daily average production of oil is maximum in case of Exxon Mobile with 5.3 million barrels as compared to Royal Dutch Shell and Chevron Nigeria Limited. Therefore, the annual production of oil for Exxon Mobil is more with a value of 25.2 billion barrels as compared to Royal Dutch Shell (3.9 million barrels per day) and Chevron Nigeria Limited (3.5 million barrels per day). In the gas production, the daily average is 670 million cubic feet for Chevron Nigeria Limited, 11.8 million cubic feet for Exxon Mobil and 2954 thousand boe per day for Royal Dutch Shell. Therefore, it is seen that there is annual gas production is Chevron Nigeria Limited (1.1 billion cubic feet per day), Exxon Mobil (7.1 trillion cubic feet) and Royal Dutch Shell (364 billion cubic feet).
Royal Dutch Shell is considered as the second largest organization based on its revenue into oil as well as gas industry after Exxon Mobil. The supply chain management of Royal Dutch Shell is working efficiently in order to provide the quality services to the customers. The issues related to SCM are control of the cost, planning, managing of risks and suppliers relationship management (Ahmad et al., 2016). Due to increase into globalization of businesses, SCM becomes a critical issue into the oil as well as gas industry. SCM is used of freight mode to deliver products towards the organization. Extra costs are incurred by SCM to provide the best services to customers. Increase into the fuel price is huge as it is a threat for the SCM as it is created of extra costs for the selected oil industries (Ambituuni, Amezaga and Emeseh, 2014).
In order to overcome issues related to SCM, Royal Dutch Shell establishes of strategies to evaluate the products of oil along with gas. At the time of reducing the freight cost, Royal Dutch Shell uses of economical mode of freight to reduce the cost. In order to reduce the risk level, Royal Dutch Shell evaluates the market condition proficiently. The downstream supply chain of Shell offers opportunity to generate o value across the global supply chain and gain of various business areas (Val et al., 2016). It is competitive environment where its aim is to deliver of Shell products safely while it is maximizing the profits as well as competence. Royal Dutch Shell formed of strategies to resolve the issues that their business organization is facing such as decrease into the sales, decrease in brand image as well as its operations.
The approach of Chevron is to manage the supply chain focused on two of the elements which are critical to manage the commitment to become a good partner. The supply chain is a powerful tool to create prosperity among the communities where it is operated around the worldwide (Okoro and Chikuni, 2017). Chevron is recognized that there is a positive impact of the supply chain investments that is amplified by sourcing of the decisions of the suppliers. It is encouraged of major international suppliers of the goods as well as services in order to form of partnerships with the local businesses. It is done to maximize purchase of local goods as well as services. Joint venture creates of an opportunity for the local businesses in order to gain access to the new technology.
It brings of process up to the international standards and then trains people based on industry’s practice. Chevron is sought to build as well as maintain of supply chain which reflects deeply on the community values diversity. Chevron needs the key suppliers adhere to the domestic laws as well as encourage to align of the practices with “International Labor Organization” core principles (Global Finance Magazine, 2017). Chevron expects of the business partners for treating the employees and interacting with the communities into proper manner with the policy of human rights, labor rights in addition to the organizational principles.
In the year 2016, Exxon Mobil has made payments to approximately 90,000 suppliers of goods as well as services worldwide. The oil and gas industry is promoted a supply chain which respects the human rights along with organizational environment to generate opportunities for previously underrepresented groups. The suppliers of Exxon Mobil are encouraged to take actions for improving the performance of environment. The organization works with collaboration of the key suppliers for identification of opportunities for continuous improvement into the environmental performance (Cdn.exxonmobil 2016). It creates off shared value for the business and also the suppliers. Exxon Mobil is seeking of relationships with the suppliers for contributing of economic development into their business operations.
Some of the case studies are found into the literature on how to integrate of supply chain management program which are used by the oil as well as gas company for improving operational efficiency and resulting into lower the cost. Ngoasong (2014) described of two field of applications to integrate of process of supply chain management. The weather conditions which exist into the area made the delivery of supply as well as operations. By use of just-in-time, the provider can plan, order, and prepare logistics and install of the supply chain into the organization. Training as well as coordinating of the workforces and also activities of the local service providers, the manager of supply chain enables to accomplish of logistics requirements (Yusuf et al., 2014). It is analyzed that natural gas production is low into Nigeria focused on larger amount of reserves of natural gases. Therefore, Nigeria is to be considered as larger exporter of the natural gases such as LPG. Into the Nigeria, oil as well as gas sector are spending more money into its development.
The oil as well as gas industry develops of it supply chain by support from the local suppliers. The downstream sector of this industry is varied business with largest refiner as well as distribution facilities (Raut, Narkhede and Gardas, 2017). The oil as well as gas industry serves towards diverse customer base in all over the world. The downstream activities of oil as well as gas industry are refining in addition to the sale of final products, services as well as goods. Therefore, logistics is considered as the main part of the supply chain to produce and provide of goods along with services based on customer’s requirements.
Timely delivery is also considered as important factor of supply chain. Adapting of the supply chain wide technology strategies result into each user of the system along with the chain of seeing the single file system. It accesses of the computational servers with superior speed data access (Val et al. 2016). It connects to the real time higher speed visualization furthermore participates into reasonable collaborations. It is crucial to increase the benefits of collaboration among the oil as well as gas company in addition to the supplier organizations.
It is also analyzed that the companies those are recognized to improve the efficiencies of supply chain represents huge area for savings of the cost. Into the logistics area, it is estimated that there is average of revenue is between 10-20 percent. The selected oil as well as gas industries believes that the supply chain in which they are participating as the customers as well as suppliers which create of competition rather than the individual companies (Ahmad et al., 2016). Despite there is huge importance of the oil and gas in daily life along with the operational challenges it involves. The objectives of this research study are to light the challenges as well as opportunities into the supply chain management of oil industry. This discussion is focused on the practice which saves companies millions of dollars.
The logistics network into the oil as well as gas industry is inflexible that arises from the production abilities of the supply of crude oil, lead time for longer transportation along with limitations towards the mode of transportation (Ambituuni, Amezaga and Emeseh, 2014). Each of the point within the logistics network is a major challenge. Moreover, the mode of transportation process is to be carried out by the pipelines and trucks along with ships. Shipment is to be exploited various transportation modes before it reaches the final location of the customers. Very few industries are dealing with this type of complexity of shipping.
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