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SUPPLY CHAIN IN OIL & GAS INDUSTRY Supply chain opportunities in oil & petrochemical industry

Nov 11, 2020

Supply chains in most oil & gas industries previously have been extremely reliant on the physical arrangements across the systems. The advent of Industry 4.0 has created a grave impact on the functioning of the supply chains. Brahmaputra Cracker and Polymer, a petrochemical complex established with the motive of overall socio-economic development of Assam hosts four workstations and technologies like Cracker unit, LLDPE/HDPE Swing unit and Poly-Propylene plant. The article analyses how disparate the traditional delivery forms were from Industry 4.0-oriented supply chain systems, how increasing investments in digitalisation can help the industries further and more. - Dr Pranjal Kumar Phukan, Chief Manager, Brahmaputra Cracker and Polymer

The petroleum supply chain is a complicated assortment of infrastructures and a process whose mainstream begins with the explication of crude oil and finalises with the delivery of petroleum products to consumers. This industry moves huge quantities of products & value and is the backbone to almost all economic activities. As per a study made by Cigolini and Rossi (2010), the oil supply chain is distributed into three central steps viz., drilling, prime transport and refining. The upstream includes crude oil surveying, manufacturing and shipping. The downstream industry contains product refining, transportation, storage, distribution and merchandising. While a vast network of tankers, barges, pipelines, railways and trucks transport crude oil from the oil fields to the refineries, pipelines, trucks, vessels and trains transport refined products to distribution centres and finally, to retailers. The downstream petroleum supply chain network comprises refining, logistics and commercialisation of the petroleum products, whereas the upstream petroleum supply chain includes the activities that allow crude oil to be explored and transformed. In every section, there are petroleum establishments, which depend on physical arrangements across the system to advance these purposes.

Traditional delivery forms

Petroleum survey is at the utmost level of the chain and pronouncements concerning exploration contain design & planning of the oil field arrangement. Petroleum could also be delivered by transnational sources wherein oil tankers carrying petroleum to oil terminals are attached to refineries through a network of pipelines. Hence, choices at this level include transportation, which means supply planning and arrangement. Crude oil is transformed into products at the refineries, which can be associated with each other in order to proceed with the benefit of each refinery design. Products created at the refineries are then directed to delivery centres. Crude oil and products are frequently transported through pipelines and from this level on, products can be transported through either pipelines or lorries, subject to customer demands. In certain circumstances, products are also transported through vessels or by railways.

Industry 4.0 & its impact on supply chains

Digital technologies have a huge impact on the structure of supply chains. Factories are becoming smart by introducing new process technologies, often referred to as Industry 4.0 or Internet of Things (IoT). E-commerce is changing distribution channels. Automation and Augmented Reality are changing the processes in warehouses and transportation. Logistics facility providers are capitalising in end-to-end perceptibility across the supply chain and start-up companies are disrupting traditional logistics flows.

As in many other sectors, digitisation is taking place at a fast pace in the petrochemical sector with the introduction of established and innovative technologies on the shop floor, in warehouses, in shipping and also in numerous other logistic actions, thereby transforming the approach for companies to run their industrial unit and supply chain. A research study shows that managers in the petrochemical supply chain are well aware of the impact of digitisation, and they almost unanimously report that digitisation will have a significant impact on their internal processes and their supply chain. They expect that it will have an important impact on the information flow (ordering, planning and control) and the financial flow (accounting, invoicing, payment), less so on the physical flow of products, particularly.

Growing investments for technology augmentation

Investments are planned mainly in proven technologies. Big Data and progressive analytics, cloud computing, digital identifiers and low-cost sensor technologies will find their technique into the petrochemical supply chain, if not available now. There is a minute reluctance in the petrochemical industry on the impact of technologies with a medium to longer-term, which ‘possibly’ is the archetypal answer participants furnished when enquired about their plans for outlay in the next three years on IoT, control tower solutions, robotics & automation, social media and self-learning arrangements. Moreover, there is petite interest for investments in amplified reality, blockchain and self-driving vehicles, which is in line with the low influence that is anticipated from these technologies. Therefore, the total interest in 3D Printing, unmanned aerial vehicles and bionic augmentation is stumpy in the petrochemical supply chain. If and when investments in these technologies will be released, it will most likely be in niche applications for the supply chain.

At present, oil and gas companies are considering innovative ways of plummeting total operating costs and cultivating efficiency & profits. However, in many cases, it is conceivable for the perfect configuration to change over time due to variations in technology and consumer favourites. In some additional cases, technology may agree on numerous appliances for formation across the supply chain. Generally, oil and gas companies ought to assess their supply-chain arrangement & synchronisation systems as well-intentioned of development. A design-necessary upgrading over time allows the firm to achieve competitive advantages in the marketplace. Whenever a firm starts believing that its supply chain has been optimised, it can easily lose competitive advantages by being resilient to fluctuations that might lead to developments.

Accommodating the growing digitalisation

With modern information systems technologies, a piecemeal assembly of components will not create an optimal management experience. The oil and gas industry requires a fundamental work-process change in order to accommodate the growing virtualisation of a multinational business. Exploration and production will benefit from simplifying and streamlining data management & access, interlocking the experiences of regionally disparate workers, saturating investments and operational decisions. As the industry undergoes continued and accelerated consolidation, the need for a flexible, extensible, scalable and adaptable system is more important than ever along a firm’s supply chain.

Familiarising a supply chain-wide technology approach can also end up in every user’s system along the chain seeking a single file system and can access all computational servers with great speed data access, attach to real-time high-speed conception and can contribute in genuine partnership and be provided with immediate service, regardless of the user’s site or desktop device. This also permits the system managers to manage the enterprises from anywhere.

Moreover, such well-designed factors as business-process modelling, automated announcement, data access and partaking and conception should be accessible to the supplier just as it is to the employees and other concerned parties. This step is vital in order to make the most of the impending benefits of the teamwork between oil and gas corporation and its supplier organisations, which will have fallouts to the actual addition of the operating firm when it comes to planning and implementing multifaceted services.

Steps to kick-start investments

Established on in what ways digitisation makes its worth in the petrochemical industry and the precise initial position for petrochemical players, three explicit steps that petrochemical players should commence for its implementation are -

  1. Comprehend and measure the value creation potential for the explicit petrochemical company based on its individual preliminary position and produce a digital roadmap/approach to monitor the execution. The roadmap disposition could embrace two principle design preferences, either by function (e.g. manufacturing first then commercial, etc.) or by end-to-end value chain.

  2. Implement major lighthouses (e.g. high-impact use circumstances) and shape competences in parallel e.g. via a digital academy, concentrating on the proficiencies essential to provide the digital roadmap. After first lighthouses are realised, then the digitisation program should convert self-financing swiftly.

  3. Gauge the digital academy to shape competencies within a scale (in particular data engineering, data analytics, etc) and roll-out the lighthouses. After ascending the digital academy, in-house talent is adept for classifying and applying supplementary use cases across different occupations.

Image Gallery

  • The oil and gas industry requires a fundamental work-process change in order to accommodate the growing virtualisation of a multinational business

  • Digitisation is taking place at a fast pace in the petrochemical sector with the introduction of established and innovative technologies on the shop floor, in warehouses, in shipping and also in
    numerous other logistic actions, thereby transforming the approach for companies to run their industrial unit and supply chain

  • Dr Pranjal Kumar Phukan

    Chief Manager

    Brahmaputra Cracker & Polymer

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