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Bp Intro Relative Resource Manager

Oct 17, 2015

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Reza Mohagi

Introduction to BP case
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  • BPs Procurement and Supply Chain Management

  • 2Contents

    Overview of BP

    OCTG introduction

    Gulf of Mexico OCTG supply chain

    Typical OCTG ordering process

    Case study introduction

  • 3Overview of BP

    BP p.l.c. is one of the worlds largest energy providers of fuel for transportation, energy for heat and light and petrochemical products for everyday items. BP has interests in both upstream and downstream segments in over 100 countries worldwide making it a fully integrated energy company. Upstream refers to finding and extracting crude oil and natural gas from deep underground reservoirs. Downstream operations consist of refining and marketing oil and gas into usable consumer products.

    The United States subsidiary of BP p.l.c., BP America Inc., is the nation's largest producer of oil and gas. They own and operate oil and natural gas fields, refineries, chemical plants and lubricant processing facilities in 22 states that are worth over $40 billion in fixed

    assets. BP America has both onshore and offshore drilling operations in the

    United States.

  • 4What is OCTG?

    Oil Country Tubular Goods (OCTG)

    Casing

    large diameter steel pipe that is cemented into openhole

    to protect and/or isolate formations

    Tubing

    small diameter steel pipe used to complete the well and allow hydrocarbons to flow from reservoir to wellhead

    Conductor pipe

    Surface casing

    Intermediate casing

    Production casing

    Perforations

    Tubing

    Packer

  • 5BP domestic drilling regions

    Gulf of Mexico

    P110, Q125, C110, 13 Chrome

    Well Depth: 20,000ft

    30,000ft

    Water Depth: 4,000ft

    7,000ft

    Tuscaloosa

    P110, Q125, C110

    Well Depth: 20,000ft

    Western Oklahoma

    J55, K55, P110

    Well Depth: 10,000ft

    16,000ft

    Rockies

    San Juan, WY

    J55, K55, P110

    Well Depth: 8,000ft

    10,000ft

    West Texas

    J55, K55, P110

    Well Depth: 5,000ft

    12,000ft

    Alaska

    North Slope

    L80, 13 Chrome

    Well Depth: 10,000ft

  • 6Gulf of Mexico

    BP is one of the largest acreage holders in the deepwater Gulf, owning more than 400 gross blocks in water depths of 1,200 feet or greater.

    Between 2000-2010 BP has a $15 billion investment program in the Deepwater Gulf of Mexico.

    The company anticipates its total deepwater production to exceed

    450,000 barrels of oil equivalent per day by 2010 and remain at that level through the next decade.

    Gulf of Mexico Assets include Pompano, Marlin, Horn Mountain, NaKika, Holstein, Mad Dog, Atlantis, Thunder Horse and the Mardi Gras Transportation System that exports oil and gas to shore.

  • 7Gulf of Mexico assets

    circa 2006

    0 100

    Miles

    HoustonNew Orleans

    600

    2500

    5000

    7500 10000

    Fourchon

    Atlantis

    Holstein

    Mad Dog

    Thunder Horse

    Horn Mtn.

    Na Kika

    Marlin

    Pompano

    Production

    Development

    LEGEND

  • 8Gulf of Mexico PSCM

    Primary areas of accountability of the GoM PSCM team include the

    development and implementation of procurement and supply chain management policy, processes and procedures

    Procurement strategy development including supplier pre-

    qualification, RFQ development, bid evaluation, negotiations, contract drafting and award

    Development and implementation of Supplier Performance Management processes

    Consultancy advice with respect to materials management, QA/QC, the resolution of contractual disputes, and accountability for the ongoing support and maintenance of PSCM systems

  • 9GoM OCTG contracts

    Global framework agreement with foreign distributor/mill

    13 and 25 chrome only for United States

    Cannot import carbon/alloy pipe due to U.S. government restrictions on imports (antidumping tariffs)

    U.S. contract with domestic pipe distributor for alloy

    Qualified and selected most capable domestic and foreign steel mills

    Chose largest distributor that represented the BP qualified mills

    Five year contract length with six month pricing reviews

    Standard API spec pipe is based on consignment with the distributor

    Order is cancelable and returnable

    Custom pipe is owned by BP at the time of manufacture

    Order is non-cancelable and nonreturnable

    Materials Coordinators call-off

    from these agreements via Purchase Orders

  • 10

    Ordering/call-off process

    1.

    Casing specifications are defined by drilling engineer

    2.

    Engineer informs Material Coordinator of design through requisition

    3.

    Material Coordinator places order in distributor forecast

    4.

    Distributor places order will steel mill

    5.

    Steel mill rolls, threads, and inspects pipe

    6.

    Pipe is received into distributor/BP inventory and inspected if necessary

    7.

    Pipe is stored and maintained until needed

    8.

    Rig prepped and shipped to well site

  • 11

    OCTG specifications

    Casing

    size, weight, grades

    Based on pressure and corrosion requirements, and well depth

    Length

    R1, R2, R3

    Seamless vs. ERW

    Connection types

    API

    Premium

    Steel mill choices

    Domestic

    Foreign

    OD Size Weight Grade Connection

    16 109 ppf P-110 Hydril

    511

    14 112.49 ppf Q-125 Hydril

    513

    10 7/8 73.00 ppf C-110 SLIJ-II

    7 3/4 46.10 ppf C-110 Hydril

    523

    1. Specifications

    2. Requisition

    3. BP Purchase Order

    4. Distributor order

    5. Manufacture

    6. Goods receipt

    7. Storage

    8. Deployment

  • 12

    Internal requisition

    1. Specifications

    2. Requisition

    3. BP Purchase Order

    4. Distributor order

    5. Manufacture

    6. Goods receipt

    7. Storage

    8. Deployment

    Requestor contact info

    Budget identification

    Delivery information

    Material description

    Authorization sign-off

  • 13

    Purchase order

    1. Specifications

    2. Requisition

    3. BP Purchase Order

    4. Distributor order

    5. Manufacture

    6. Goods receipt

    7. Storage

    8. Deployment

  • 14

    Distributor order/forecasting

    Oil and gas wells are planned far in advance

    Long lead-times from steel mill (as long as 2 years)

    OCTG accounts for 1% of global steel market

    Dependence on mill schedule

    Distributor or operator must carry inventory

    BP Distributor Mill

    Order placement

    Inventory burden

    BP

    1. Specifications

    2. Requisition

    3. BP Purchase Order

    4. Distributor order

    5. Manufacture

    6. Goods receipt

    7. Storage

    8. Deployment

  • 15

    OCTG manufacturing

    Time of manufacture is determined by mill schedule

    Either seamless or electric resistance welded

    Threaded connection may be machined at mill or shipped plain-

    ended

    Inspection/QA check before shipment to customer

    1. Specifications

    2. Requisition

    3. BP Purchase Order

    4. Distributor order

    5. Manufacture

    6. Goods receipt

    7. Storage

    8. Deployment

  • 16

    OCTG receiving

    Pipe is packaged and shipped to storage yard from mill

    Rail car

    Ship/barge

    Truck

    Airfreight (only on rare occasions)

    Physical and electronic receipt into distributor/customer inventory

    Incoming pipe inspection if necessary

    Full-length drift and visual inspection

    Electronic inspection (EMI or FLUT)

    1. Specifications

    2. Requisition

    3. BP Purchase Order

    4. Distributor order

    5. Manufacture

    6. Goods receipt

    7. Storage

    8. Deployment

  • 17

    OCTG storage & maintenance

    Safety is number one priority

    Pipe is horizontally stacked

    18

    above the ground

    No more than 6 feet high (up to 10

    with safety system)

    Recycled plastic timbers

    Box and pin orientation and angle

    Thread protectors and storage compound

    Dedicated yard crew

    OCTG inventory management

    Distributors proprietary system

    Physical inventory counts

    Pipe rack, timbers, bumper rings, thread protectors

    1. Specifications

    2. Requisition

    3. BP Purchase Order

    4. Distributor order

    5. Manufacture

    6. Goods receipt

    7. Storage

    8. Deployment

  • 18

    Deployment to drilling rig

    Pipe is prepped for drilling rig

    Full-length drift, thread compound, addition of casing accessories

    Bolstering (offshore only)

    Trucking specifications

    How is it stacked? (stripped & strapped, 44,000# limit per truck)

    Trucked from storage yard to BP shore base

    Shipped on vessel to offshore drilling rig

    Lifted and stored on rig until it is run into the hole and cemented in place

    1. Specifications

    2. Requisition

    3. BP Purchase Order

    4. Distributor order

    5. Manufacture

    6. Goods receipt

    7. Storage

    8. Deployment

  • Case study

  • 20

    Case study introduction

    OCTG inspection and storage market experienced consolidation through 2002

    2004.

    As a result, only one service providers pipe yard is utilized in Houston.

    Provide inspection, storage, and maintenance services

    Inventory is kept on their proprietary system

    A 2004 study involving logistics and taxation suggested savings if pipe was stored in Louisiana instead of Texas.

    Study was limited only to transportation and taxes and additional information on the OCTG service industry in Louisiana was necessary to support pipe yard relocation.

    PSCM conducted a market analysis on inspection and storage companies as well as threading facilities located in the Gulf Coast Region.

  • 21

    Market analysis

    Market analysis included a Request for Information sent to Inspection/Storage companies and premium threading facilities in

    Houston and Louisiana

    Pipe inspection and storage facilities

    Storage capacity, access, racking

    Inspection capabilities and thru put

    Inventory management capabilities

    Health and Safety questionnaire

    Financial statements

    Premium threading companies

    Proximity to pipe yards

    Thread sizes, types, capacity

    Licensees

  • 22

    Considerations

    Availability of Substitutes

    Rivalry Among Firms

    Threat of New Entrants

    Bargaining Power of Suppliers

    Bargaining Power of Buyers

    Strengths

    Weaknesses

    Opportunities

    Threats

    Porters Five Forces

    SWOT Analysis

    Financial Health Analysis Market Characteristics

    PESTLE Analysis

  • 23

    Deliverables

    Inventory consolidation

    Breakdown of inventory carrying costs

    Strategy, reasoning, and justification of standardizing/consolidating pipe inventory

    Describe change management approach to engineering group and joint-interest partners

    Pipe yard relocation

    Develop an evaluation process and analyze the suppliers identified in the market study

    Identify the selected yard locations and justify your choice

    Identify switching costs and risks associated with changing suppliers

    How does inventory consolidation play into pipe yard relocation?

  • 24

    Questions?

    BPs Procurement and Supply Chain ManagementContentsOverview of BPWhat is OCTG?BP domestic drilling regionsGulf of MexicoGulf of Mexico assetscirca 2006Gulf of Mexico PSCMGoM OCTG contractsOrdering/call-off processOCTG specificationsInternal requisitionPurchase orderDistributor order/forecastingOCTG manufacturingOCTG receivingOCTG storage & maintenanceDeployment to drilling rigCase studyCase study introductionMarket analysisConsiderationsDeliverablesQuestions?