Expanding Into Gas Processing, Transportation, Storage And Marketing In South Korea: A Critical Discussion With British Petroleum

Benefits of Expanding into Gas Processing, Transportation, Storage, and Marketing

This report will critically discuss the benefits of expanding into gas processing, transportation, storage and marketing.  Oil and natural gas industry face many challenges in their operations and such issues will be discussed. This will deal with areas such as quality management, project management, planning and control. British petroleum has been selected as the company of choice and the second part of the report will develop an appropriate supply chain design which is essential for expanding into South Korea. The final part of the report will depict the human machine interaction essential for providing the consumers with the product and the services along with identification of the negative impact due to this interaction.

BP plc is one of the multinational companies in the oil and natural gas sector which has its headquarters in London.  It is among the world’s top ten oil and natural companies and is among the top six companies in terms of market capitalization (bp.com 2018). The organization has implemented vertical integration into their business model and has been operating in all areas of the natural gas and oil industry consisting of production, exploration, distribution, refining, marketing, petrochemicals, trading and power distribution. Moreover, the organization also deals with wind power and bio fuels.

 British petroleum has been involved in large number of major safety and environmental incidents. The major incidents in this regard are the largest spill of oil on the Torrey Canyon and Prudhoe Bay. Moreover, the explosion in the Texas City Refinery led to the death of 15 workers. The largest Oil spill in the marine waters is the Deepwater Horizon oil spill which resulted in severe health, economic and environmental issues (bp.com 2018). The organization had been put under various charges for these incidents where they were forced to pay a heavy fine. British petroleum operates at both offshore and onshore fields and has expanded their business to 72 countries. The main business segments for British Petroleum are Oil refining and marketing, oil and natural gas and, alternative and low carbon energy.

Supply chain plays a key role in improving the chances of sustainability of the organization.  When crude oil is extracted it is always accompanied by natural gas which is mixed with the oil. The energy demand in the world is increasing at a rapid rate and the current trends in the market shows that there will be 1.6% increase in the energy trends all over the world (Mazyan et al. 2016). There has been drastic evolution in the role of natural gas in the global market as there is drastic rise in demand for natural gas in developing countries. Gas processing is used for refining the impure gas into refined gas products which is then transported through pipelines. The gas produced is stored in reservoirs for future demand and are sent through the pipelines when it is required. However, marketing of the products to the potential buyers and the target consumers is also another crucial aspect (Ríos-Mercado and Borraz-Sánchez 2015).  There is a competition between LNG and natural gas as both can fulfill the basic need of energy in the developing and develop countries. However, the recent trends in the market show that there will be shortage in the supply of Liquid natural gas.  The deficit in the global supply in the upcoming years will change the market significantly.  Therefore, there is huge scope in expanding into gas processing, transportation, storage and marketing as it can facilitate in gaining competitive advantage in the market. 

Challenges Faced by the Oil and Natural Gas Industry

Challenges faced in logistics and Operations

The operations in the oil and natural gas industry are divided into upstream, midstream and downstream operations. The scope in the downstream operations is broad and this will consist of processes such refining, trading, crude supply, product distribution, retailing and marketing.  The downstream is faced with many challenges in the oil and gas sector due to the constraints in the global refining process and there is a need of expansion in all these phases (Shuen, Feiler and Teece 2014). The regulations and rules in the production of oil and natural gas have increased significantly which has drastically changed the product specifications and the organizations have to adapt to these changes to meet the strict environmental legislation.   This factor has led to the decrease in the marketing margin due the competition from the new competition.

The first major problem faced by the organization is the business joint venture.  There is a lack of information knowledge management in the downstream processes of most of the organization so there is a need of alliances and joint forces between different industries so that this problem can be minimized.  Therefore, different companies will have to work together to develop better processes. Therefore, integrating different value chain processes of the oil and natural gas industry can result in better production and efficiency.  The next major issue is the global refining capacity. The significant economic growth in the different regions will result in global surplus in terms of structure.   There has been significant increase in the refining capacity in areas such as Asia and Middle East. There will be significant reduction in margins as the expected net growth is between 25-30% which is much higher the existing capacity (Campos et al. 2017). It is tough in the downstream sector of the oil and natural gas industry to mitigate the challenges in the field of refining incapability.  There are different factors that have significantly affected the refineries such as economic downturn, improvement in vehicle efficiency and higher prices. These factors have reduced the margin of profit drastically which had drastically reduced the number of refineries in most of the countries. Therefore, it is necessary to develop refineries that are more integrated, flexible and efficient.

 Distribution activities for the various products are also an issue for the global organizations. Distribution of the products is one of the crucial aspects of downstream and establishing effective avenues of trading is necessary for maintaining their sustainability in the market (Badiru and Osisanya 2016). Therefore, developing effective distribution channel will determine that steady price can be achieved.  Generally, distribution center increases the prices of the products in some countries which led to excess burden on the consumers. There is high level of pricing in many regions as they derive their products from different regions where it is difficult to extract oil. Therefore, within then operation cost in most of these regions there will be significant increase in the price of the products.

Developing an Appropriate Supply Chain Design for Expanding into South Korea with British Petroleum as Company of Choice

2.South Korea has been chosen as the country for expansion in the global. The energy demands in South Korea are increasing at a rapid rate but their supply is limited. Moreover, the disposable incomes of the individuals are high so expanding into that country is ideal for the company.

Recommending appropriate supply chain design

Figure 1: Natural gas supply chain process

(Source: Natural Gas Supply Chain 2018)

The increase in the global demand in the natural gas and imminent of refining processes it is advisable that British Petroleum expands their business in South Korea due to the expected increase in demand in the upcoming years. Collaborative planning is the basis of developing an effective process for setting up effective delivery process in the organization. The responsibility for mitigating the problems depends on both the sides. Even though the OFS companies tend to decrease the rigidness of their supply chain but there is no guaranteed success (Gao and You 2015). Therefore, in order to develop an effective supply chain relying on collaborative effort is the recent trend in the market.

The effective measures that should be taken by British Petroleum are deployment of cloud-based platforms that can develop collaborative bond between different companies. The cloud platform will be used for interchanging essential planning information which will able to develop and transmit data in real time.  This will lead to better forecasting of requirements of material and resource needs (Silvestre 2015). The organization will have to develop an analytical based forecast improvement program which will be used for analyzing the large amount of historical data to identify demand and supply trends and develop plans according to it.  By using these techniques the organization will be able to gather a detail picture of the production level and the market responses. This will enable in delivering an effective planning process for British petroleum. 

This supply chain process gives importance to gas processing, transportation, storage and marketing. The organization will have to use advanced inventory management tools for maintaining the standardized practice mentioned in the industry.  This will require the use of effective ERP management so that the data can be easily shared among the field operators and the materials management (Gao and You 2015). British Petroleum will have to identify suitable location for the setup of their plant so that they can effectively supply natural gas to all parts of the country. The organization will have to initially effective sources of oil and natural gas in the industry.  Therefore, before, the surrounding environment will have to be analyzed so that no harm is imposed on the geographical topography, marine and other life forms. The above chart shows the effective way of delivering natural gas to the consumers in South Korea. Therefore, the organization will have to make use of effective technological support to make sure that processes like drilling, extraction, recovery, processing, pipeline, regasification, storage and hubs are at maximum efficiency.   

The Negative Impacts of Human-Machine Interaction on Consumers

Table 1

(Source: Aitken et al. 2016)

There is constant demand for change in the market so human interaction with process technologies are essential for adapting to the changing nature of the organization. the primary resources for all the natural gas companies is knowledge and knowledge management are required for increasing the learning capacity of the employees within the organization. The advancement of technology has enabled the companies in the oil and natural gas industry to develop effective health and safety measures (Sumbal, Tsui and See-to 2017). British Petroleum has been responsible for major hazards over the past two decades and therefore, use if modern technologies along with human interaction is essential. The green completion is one such process technology which captures the leaked, wasted or vented natural gas from the wells during the execution of the extraction process. The second set of system is the plunger lift which can be used for removing the blockages form the older wells due to accumulation of liquids. 

This will stop the capturing of methane into these blockages. The next is the TEG dehydrator emission controls that reduces the leakage of methane from TEG dehydrator and removes moisture form the natural gas before transportation. Desiccant dehydrators have a similar function but it uses special absorbing oils. The Dry seal systems is used for removing methane emission from the centrifugal compressors effective during the processing and pipeline transportation. Improved compressor maintenance is another process technology which reduces emission of methane from the reciprocating compressors and other usages are similar to the Dry seal systems (Mannan et al. 2016). The Low-bleed or no-bleed pneumatic controllers use for limiting the leakage from the pneumatic controllers.  The leak monitoring and repair system is use for identification of methane emission that is colorless and odorless from different locations within the facility.  The vapor recovery unit is used for extracting methane leaked form crude oil and the last process technology is the pipeline maintenance and repair used for capturing methane in the pipeline along with conducting repairs in the pipeline.     

The interaction between process technologies and humans is essential for maintaining the stability of the processes. The effective use of knowledge management is required for developing a mutually exclusive approach that integrates both the approaches to gain competitive advantage in the market. 

Use of technology to ease Human Machine Interaction and mitigate negative impacts

The learning capacity of human being are limited and at the same time the flexibility of the machines is also limited. Therefore, developing an effective interaction between machines and human beings are essential. Technological advancement has a role to play in the modern business organization. The human beings are slow to respond to the changes so using advanced technology it is essential to help ease their adaptability to the changing needs of the global business environment. The change in the working environment of any business process creates a knowledge gap and it order to mitigate the negative impact of human machine interaction, technology is used (Mouloua 2018). The use of technologies such as Enterprise resource planning reduces the interaction of humans with machines and records data for every process of the supply chain in real time. Therefore, it is easier for the employees and management to make business decisions based on the real time data.  Change management is essential for surviving in the industry and therefore knowledge management systems are essential. Therefore, the negative impact of the human machine interactions can be easily solved by using technological superiority.

Conclusion 

Thus, the analysis of the report provides a few key findings. Expansion into gas processing, transportation, storage and marketing is crucial to mitigating the rising demand for energy resources in the developing countries. The report has been able to identify the appropriate supply chain process for expanding into South Korea which shows that effective use of technology for facilitating the human machine interaction is essential for gaining competitive advantage and sustainability in the market. Moreover, the health and safety of the employees and surrounding environment can be easily maintained by the organization. 

References 

Aitken, J., Childerhouse, P., Deakins, E. and Towill, D., 2016. A comparative study of manufacturing and service sector supply chain integration via the uncertainty circle model. The International Journal of Logistics Management, 27(1), pp.188-205.

Badiru, A.B. and Osisanya, S.O., 2016. Project management for the oil and gas industry: a world system approach. CRC Press.

bp.com 2018. [online] bp.com. Available at: https://www.bp.com/en/global/corporate/who-we-are/our-history.html [Accessed 27 Mar. 2018].

Campos, A.F., da Silva, N.F., Pereira, M.G. and Freitas, M.A.V., 2017. A Review of Brazilian natural gas industry: Challenges and strategies. Renewable and Sustainable Energy Reviews, 75, pp.1207-1216.

Gao, J. and You, F., 2015. Optimal design and operations of supply chain networks for water management in shale gas production: MILFP model and algorithms for the water?energy nexus. AIChE Journal, 61(4), pp.1184-1208.

Gao, J. and You, F., 2015. Shale gas supply chain design and operations toward better economic and life cycle environmental performance: MINLP model and global optimization algorithm. ACS Sustainable Chemistry & Engineering, 3(7), pp.1282-1291.

Mannan, M.S., Reyes-Valdes, O., Jain, P., Tamim, N. and Ahammad, M., 2016. The evolution of process safety: current status and future direction. Annual review of chemical and biomolecular engineering, 7, pp.135-162.

Mazyan, W., Ahmadi, A., Ahmed, H. and Hoorfar, M., 2016. Market and technology assessment of natural gas processing: A review. Journal of Natural Gas Science and Engineering, 30, pp.487-514.

Mouloua, M. ed., 2018. Automation and human performance: theory and applications. Routledge.

Natural Gas Supply Chain 2018. Natural Gas Supply Chain. [online] Home. Available at: https://www.energyinfrastructure.org/energy-101/natural-gas-supply-chain [Accessed 27 Mar. 2018].

Ríos-Mercado, R.Z. and Borraz-Sánchez, C., 2015. Optimization problems in natural gas transportation systems: A state-of-the-art review. Applied Energy, 147, pp.536-555.

Shuen, A., Feiler, P.F. and Teece, D.J., 2014. Dynamic capabilities in the upstream oil and gas sector: Managing next generation competition. Energy Strategy Reviews, 3, pp.5-13.

Silvestre, B.S., 2015. Sustainable supply chain management in emerging economies: Environmental turbulence, institutional voids and sustainability trajectories. International Journal of Production Economics, 167, pp.156-169.

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