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Shell Pakistan Ltd.

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Shell Pakistan Ltd.

  1. 1. Contents HISTORY.............................................................................................................................................2 STRATEGIC INTENTION........................................................................................................................2 NUMBER OF DEPOTS IN PAKISTAN.......................................................................................................3 SUPPLY CHAIN PROCESS OF OIL INDUSTRY:..........................................................................................4 SHELL SUPPLY CHAIN PROCESS OF SHELL PAKISTAN:.............................................................................4 Local Suppliers................................................................................................................................5 Foreign Suppliers............................................................................................................................5 SHELL PRODUCTS................................................................................................................................5 TYPES OF STREAMs in an OIL INDUSTRY...............................................................................................5 Mode of Oil Supply to the shell terminals.............................................................................................7 Major Consumers...............................................................................................................................8 Shell Complex Supply Chain.................................................................................................................8 Upstream Operations......................................................................................................................9 Shell Downstream Operations .......................................................................................................10 Terminal locations:...........................................................................................................................12 Demand planning:............................................................................................................................12 Inside the company.......................................................................................................................13 Transportation .................................................................................................................................13 Ports................................................................................................................................................13 HIERARCHY OF SHELL’s SUPPLY CHAIN...............................................................................................14 Inventory management:....................................................................................................................15 Channel offer management:..............................................................................................................15
  2. 2. HISTORY Shell isa multinational companyandinPakistanitisoperatingasa publiclimitedcompanybythe name “Shell PakistanLtd.Shell isa superiorbrandname witha100 yearhistoryinthisregion,infectthe companyisstill inpossessionof afuel storage tankfrom1899. However,the documentedhistoryof the Royal Dutch/shell groupthe Indo-Paksubcontinentdatesbackto1903 whena partnershipwasstruck betweenthe shell transportandtradingcompanyandthe Royal Dutch petroleumcompanytosupply petroleumproductsinAsia. STRATEGIC INTENTION COMPANY’S SLOGAN/MISSION “You can be sure of Shell.” COMPANY’S OBJECTIVE Shell isfocusingonretailing,providingbetterfacilitiestocustomers,cleanpetrolpumpsconstructing international standardpetrolfillingstations,goodadvertisingcampaignsandmini markets(select). VISION OF SHELL To Be The Top PerformerOf FirstChoice. AIM OF SHELL Creatinga secure businessenvironment,minimizingeconomiclosses,andbusinessdisruptions safeguardingthe group’sintegrityandreputations. GOAL OF SHELL The goal of the companyisto positionitself asthe preferredoil companyinPakistan,leadingthe fieldin itscommitmenttosafety,customerservice,qualityandenvironmental protection.
  3. 3. STRATEGIES OF SHELL A strategyof corporationformsa comprehensivemasterplanstatinghow the corporationwill achieve itsmissionandobjectives.Itmaximizescompetitiveadvantage andminimizescompetitive disadvantage. The strategyof Shell istogrow internallybyexpandingitsoperationsthroughacquisitionandstrategic alliances. Shell focusestodifferentiateitsproductsfromcompetitorsinthe areaof qualityandservices. ORGANIZATIONALRESOURCES Shell hasestablished1404 petrol filingstationindifferentareasof Pakistan.Butnow the companyis tryingto reduce the numberof petrol fillingstationbecausetheydonotneedthat fillingstation,whose monthlysalesare lessthan500000 liters.Up till now about50 pumpsare renovatedindeferentcitiesof Pakistan. MARKET LEADERSHIP DUE TO INNOVATION Shell isconsideredtobe the marketleaderininnovation.Itwasthe firstcompanytoget legal approval to operate Mini-Market.Itprovidessuggestive literaturestoitscustomerswhilelaunchinganew productsuch as Helix superandHelix Lubricantetc. It was alsothe firstcompanyto introduce the conceptof Mobile TrainingUnit (MTU) for the purpose of trainingthe workersandintroducingqualityandquantitycontrol units,whichcheckthe qualityand quantityof motorgasoline atvariousfillingstations. NUMBER OF DEPOTS IN PAKISTAN Shell hasgot14 depotsindifferentareas of Pakistan. Oil and petroleumindustrysupplychainistotallydifferentthanthe supplychainof FMCG insteadof lubricant.Shell Pakistanoroil marketingcompaniesfollowsdownstreamsupplychain.
  4. 4. SUPPLYCHAIN PROCESS OFOILINDUSTRY The supplychain model of oil andgas companiesstartswithraw materialssuchascopperand steel, drillingequipment,mudding,andspecializedtools.Itextendsthroughmanufacture of products necessarytoconstruct drillingrigs,off-shore platformsandahost of facilitiesinoftenveryremote parts of the world. The supplychainincludesmulti-tieredsuppliers,subcontractorsandoriginalequipmentmanufacturers, out-sourcedconstructionandfacilitiesoperations,andstate-of-the-artoperatingtechniques.Inthis environment,logisticsexcellence bringsanew,higherdimensiontothe opportunitieswhile lowering the risks it continuesthroughproduction,transport,andrefininguntil the productsare consumedbythe people or endusers.It certainlyincludesthe productsandservicesbroughttothe operatingsystemsbythose companiesrepresentingthe oil andgasfieldservicesbusinesses. SHELL SUPPLYCHAIN PROCESS OFSHELLPAKISTAN Step 1:Extraction of crude oil from underground. Step 2:Crude oil is sent to refineries to be refined. Step 3:During refining, extracts are taken out they include MOGAS, Diesel , furnace oil, kerosene oil, jet fuel all these are “grades” refinery produces petroleum, it refines petroleum. Step 4:After this the refinery sells these extracts/refined products to Oil marketing companies. Step 5:Oil manufacturers sell these refined products to their customers.
  5. 5. Shell purchasesproductsfromthe followingrefineries: Local Suppliers:  National Refineryltd  Pakistan refineryltd  Byco Refinery  Attock Refinery  PARCO Refinery Foreign Suppliers: Shell importsrefine oil fromall overthe worldbutmostlyfromGulf andFar East.  Oman Refinery  Qatar Refinery  Singapore Petroleum  Malaysia Petroleum  Kuwait Petroleum  ADNOC SHELL PRODUCTS  Motor Gasoline (MOGAS)  HighSpeedDiesel (HSD)  JetFuel  Furnace Oil  AviationGasoline(AVGAS) Shell purchases these products fromthe refineriesone mostprofitable productof shell isAviation oil. Thisoil isnot available inPakistansoShell isimporting thesegases tosupplytothe Militaryfortheir aircrafts. Refineriesgive producttothe companyby the pipe lines. TYPES OF STREAMs inan OILINDUSTRY The oil &gasindustry is usually divided into three major sectors: upstream, midstream and downstream The upstream oil sector isalsocommonlyknownasthe exploration and production (E&P) sector.The upstreamsectorincludesthe searchingforpotential undergroundorunderwater crude oil andnatural gas fields,drillingof exploratorywells,andsubsequentlydrillingandoperatingthe wellsthatrecover and bringthe crude oil and/or raw natural gas to the surface. The downstream sector commonlyreferstothe refiningof petroleumcrude oil andtheprocessingand purifyingof rawnatural gas, as well asthe marketinganddistributionof productsderivedfromcrude
  6. 6. oil and natural gas.The downstreamsectortouchesconsumersthroughproductssuchas gasoline or petrol,kerosene,jetfuel,diesel oil,heatingoil,fueloils,lubricants,waxes,asphalt,natural gas, and liquefied petroleumgas(LPG) aswell ashundredsofpetrochemicals. The midstream sector involvesthe transportation(by pipeline,rail,barge, ortruck),storage,and wholesalemarketingof crude orrefinedpetroleumproducts.Pipelinesandothertransportsystemscan be usedto move crude oil fromproductionsitesto refineries anddeliverthe variousrefinedproductsto downstreamdistributors. Upstream Exploration & Production Midstream Downstream Refining & Marketing Pakistan Oilfields Limited Orient Petroleum Inc. OMV Pakistan Inc. Pakistan Petroleum Limited (PPL) Shell Pakistan Ltd. Caltex Oil (Pakistan) Limited Pakistan State Oil Company Limited Pak Arab Refinery Complex National Refinery Limited Pakistan Refinery Limited
  7. 7. Mode ofOil Supply to the shell terminals  Tank Trucks  Tank Wagons (Pakistan Railway)  Pipelines. SPL has a 26% share inthe in the White Oil pipeline operatedbyPak-ArabPipeline Company (PAPCO),whichrunsfromKarachi toMehmoodKot.Shell hasa30% stake inPakistan Refinery Limited(PRL) inKarachi.
  8. 8. Major Consumers - Retail Customer: petrol pumps (also called dealers) - Commercial customer: big industries (textiles etc) - Big power plants - Aviation customers Shell Pakistan Limited (SPL) in numbers:  Shell has got 14 depots in different areas of Pakistan.SPL serves approximately 1,000,000 customers at its Retail stations in Pakistan  We have over 750 Retail stations across the country  Offering over 15 lubricants for different vehicles and industrial uses  A Shell fleet of over 300 oil tankers distributes our products nationwide  60 aircrafts served daily  Shell has a 39% brand share preference  SPL distributes from 8 oil depots (including JVs) Shell is present at 5 major airfields across Pakistan Shell Complex Supply Chain The whole supplychaininthisindustryasverycomplex comparedtootherindustries.The crude oil has to make a longjourneyfromthe pointof productionto the refineries.Longdistance resultsinalong leadtime of several weeksandinnumerousplayersinthe supplychain.The productionisconcentrated incertainareas but the productitself isdemandedall overthe world.The refineryprocessisacomplex and capital-intensivepartof the chain.The refinedproductsare distributedeitherbyroad,water,rail or pipeline. The oil supplychainisfundamentallybasedonatraditional model andthe differentstagesinthe chain alsoillustrate it.The oil companieshave theirclassicwaytoserve the customerswithproductsbeing 'manufactured',marketed,soldanddistributed.The maingoalsare the same like inotherindustries, deliverthe rightproducttothe usersin the righttime and at the rightprice.The oil supplychain essentiallycanbe dividedintotwocloselylinkedmajorsegments:upstreamanddownstreamsupply chain.The supplychainasa whole consistsof 6 mainstageswhere the middle refiningstage separates the up- and downstreampartsof the chain,althoughprocurementasavital functionhasto happen before refinerystage inordertoprovide the inputsforit.Figure illustratesthe beforementionedand givesa schematicviewaboutthe typical oil supplychain.
  9. 9. Upstream Operations: Upstreamof Shell Petroleumbasicallystartswiththe acquisition of crude oil andwiththe related operationsuchas explorationandproduction.Afterwardlogisticsmanagementhastobe involvedin orderto deliverthe crude oil fromthe exploitationpointtothe refinery. 1. Exploration: Thisstage involvesseismicand geological operations. 2. Production: These concernsaboutexploitationof the crude oil fromthereservoirbydrilling.Production needshighlyqualifiedengineeringworkanditalsolinkstoother activitiessuchasprocurement, transportation.The crude oil producedistransportedbypipelinesoroil tankerstothe terminals for storage.Fromhere itis eithertotransportdirectlytothe refineryorexportedtoother companies’refineries.
  10. 10. Shell Downstream Operations: The firststage of the downstreamsupplychainisthe refiningprocesswhichisbasedondemand forecastingandtriggersthe procurementandthe logisticsactivitiesinordertosupplycrude oil tothe refineryanddeliveritsderivativestothe customers. 3. Procurement: Thisis sourcingof and managingthe supply of the rawmaterial to the refinery in the right time and in the right quantity.
  11. 11. 4. Refining: Thisis a complex,well planned process which involves thetransformation of the crude oil into differenttypesof derivativesbasedondemandforecasting.Therefore,thishasatightlinkto the next stage, to the marketing activities and also involves inventory management. 5. Distribution: Logisticsmanagementassuresthatthe rightproductsgetdeliveredtothe right customersinthe righttime preferablyinacost efficientway
  12. 12. . 6. Marketing: Thisdealswithmarketingthe differentcrude oil derivativestothe rightcustomers.Marketing has to have an accurate knowledgeaboutthe currentinventorylevel andrefineryactivitiesin orderto manage its sale function. Terminal locations Kemarri in Karachi , Shikarpur,MehmoodKothin Balochistan,inLahore atMachike,InIslamabadat chaklala,inPeshawaratTaruChamba. Kemarri terminal isthe onlyplace inPakistanwhere Shell cantake deliveryof Oil/productsdirectlythroughShiptankertransports. Demand planning Outside the company(overall for the whole of Pakistan): Oil industryisa regulatedindustry,Companiescannotdecidethemselveshow muchOil toimportor produce,thatis setby Ministryof Petroleum.The ministrywill advisethe Oil marketingcompaniesto maintainstockso thatthere is noshortage inthe market.Oil marketingcompanieswill trytosource the Oil throughrefineriesorif thatis notpossible thenthroughimports.Ministryof commerce holdsa meetingeverymonthknown as“productreview meeting”.Here all marketingcompaniesand representativesfromthe refineriescome andreview the productioncapacitiesof differentrefineriesfor differentproducts;Combineddemandof all the oil marketingcompaniesisputforwardandthe shortfall has to be imported.
  13. 13. Inside the company: Whenthe monthends,the retail teamand the marketingteamtell the demandforthe nextmonth. if for example we knowaboutnextmonth’sdemandinIslamabad,thenthe demandplannerwillcheck and see howmuchof thisdemandcan be metby Attockrefinery.If there isashort fall,thenthe demandplannerwill checkandsee howmuchof the product isavailable inFaisalabad,isPARCO Refineryable tomeetthe demand? If sothenproductwill be purchasedfromPARCOloadedontoTank Lorriesand sentto Islamabad.If thatisnot the case thenthe plannerwill looktowardsKemarri,where the product isalwaysingreaterquantity.Productswill be shippedfromKemarri overlandviatanker transportor pipelinesincase Diesel product. Transportation 4 modesof transportation:  Land  Air  Sea  Pipeline Amongall, Pipeline is consideredtobe the cheapestmode of transportation. Ports There are 2 ports inPakistan that are utilizedbyShell PakistanLtd.:  KPT  Port Qasim “Wide oil pipeline”goesall the waytoLahore.It isusedto transportDiesel fromthe southernpartof PakistantoNorthernandmid countryparts of Pakistan.Due to thispipeline the carrying/transportcost for the customerbecomesvery low.The pipeline canbe usedbyall the oil marketingcompanies.Ship tankertransportscarrying Diesel usuallycome toPortQasim. Terminalsof Shell atMehmoodkothand machike are connectedtothispipelineandfortransportationof Diesel Shell doesnothave touse over landTankertransport as itis usingthispipeline.Astransportcostis low,automaticallythe costtoend consumerisalsolow.
  14. 14. Q:Whyis price of fuel constantthroughoutPakistaneven thoughcost oftransportingto consumers and customersin northern areas ofPakistanis expensivethen southernareas? Governmenthassubsidizedthe costof transportationtonorthernareas.Costof transportingproducts to Lahore is expensive byRs5/litercomparedtotransportingtosouthernareas.Technicallyspeaking cost of fuel shouldbe more expensiveinLahore comparedtosouthernareas.The governmenthas askedall the oil marketingcompaniesnottopasson thisprice to the customer,inreturnthat cost is compensatedbythe government. HIERARCHY OF SHELL’s SUPPLY CHAIN GM Supply& Distribution (4 countries) Facilities Terminal Manager Logistics Manager (ME& SA) South North Supply Contracts & Negotiations Supply Contracts & Negotiations Lead Supply Chain Analyst Supply Operations (ME & SA) Supply Operations Lead (PK) Supply Operations Analyst
  15. 15. Inventory management G-SAP(Global SAP)isusedtomanage inventory.Asperthe instructionof the government,Oilmarketing companieshave tomanage an inventoryof 20 to 21 days incase of Diesel andMotor Gasoline.Supply teamleadisresponsible forall the demandplanningandsupplyplanning.Since Oil marketing companies’role istodistribute Oil productstocustomers,nointernal demandplanningcantake place insteadChannel offermanagementisdone. Channel offer management Salesandoperationplanning:Channel offermanager,supplieroperationsleader,logisticsmanagerare the primaryparticipants.If foran example there isademandfor80 millionlitersfornextmonth,it isthe jobof supplyoperationsleaderto ensure that80 millionlitersisavailable.Logisticsmanagerhasto ensure thathe has enoughtanklorries/tankertransporttoshipthe Oil productsto customers.Channel offermanagerprovidesthe demandfigures(fromthe ordersreceived).Itisthe supplythathas to be planned,notthe demand.

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