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Mode of Oil Supply to the shell terminals Tank Trucks
Tank Wagons (Pakistan Railway)
Pipelines.
SPL has a 26% share in the in the White Oil pipeline operated by Pak-Arab Pipeline Company
(PAPCO), which runs from Karachi to MehmoodKot. Shell has a 30% stake in Pakistan Refinery
Limited (PRL) in Karachi.
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 supply chain in this industry as very complex compared to other industries. The crude oil has to make a long journey from the point of production to the refineries. Long distance results in a long lead time of several weeks and in numerous players in the supply chain. The production is concentrated in certain areas but the product itself is demanded all over the world. The refinery process is a complex and capital-intensive part of the chain. The refined products are distributed either by road, water, rail or pipeline.
The oil supply chain is fundamentally based on a traditional model and the different stages in the chain also illustrate it. The oil companies have their classic way to serve the customers with products being 'manufactured', marketed, sold and distributed. The main goals are the same like in other industries, deliver the right product to the users in the right time and at the right price. The oil supply chain essentially can be divided into two closely linked major segments: upstream and downstream supply chain. The supply chain as a whole consists of 6 main stages where the middle refining stage separates the up- and downstream parts of the chain, although procurement as a vital function has to happen before refinery stage in order to provide the inputs for it. Figure illustrates the before mentioned and gives a schematic view about the typical oil supply chain.
Upstream Operations: Upstream of Shell Petroleum basically starts with the acquisition of crude oil and with the related operation such as exploration and production. Afterward logistics management has to be involved in order to deliver the crude oil from the exploitation point to the refinery.
1. Exploration: This stage involves seismic and geological operations.
2. Production: These concerns about exploitation of the crude oil from thereservoir by drilling. Production needs highly qualified engineering work and it also links to other activities such as procurement, transportation. The crude oil produced is transported by pipelines or oil tankers to the terminals for storage. From here it is either to transport directly to the refinery or exported to other companies’ refineries.
Shell Downstream Operations: The first stage of the downstream supply chain is the refining process which is based on demand forecasting and triggers the procurement and the logistics activities in order to supply crude oil to the refinery and deliver its derivatives to the customers.
3. Procurement: This is sourcing of and managing the supply of the rawmaterial to the refinery in the right time and in the right quantity.
4. Refining: This is a complex, well planned process which involves thetransformation of the crude oil into different types of derivatives based on demand forecasting. Therefore, this has a tight link to the next stage, to the marketing activities and also involves inventory management.
5. Distribution: Logistics management assures that the right products getdelivered to the right customers in the right time preferably in a cost efficient way
.
6. Marketing: This deals with marketing the different crude oil derivatives tothe right customers. Marketing has to have an accurate knowledge about the current inventory level and refinery activities in order to manage its sale function.
Terminal locations
Kemarri in Karachi , Shikarpur, MehmoodKoth in Balochistan, in Lahore at Machike, In Islamabad at
chaklala, in Peshawar at TaruChamba. Kemarri terminal is the only place in Pakistan where Shell can take
delivery of Oil/products directly through Ship tanker transports.
Demand planning
Outside the company(overall for the whole of Pakistan): Oil industry is a regulated industry, Companies cannot decide themselves how much Oil to import or
produce, that is set by Ministry of Petroleum. The ministry will advise the Oil marketing companies to
maintain stock so that there is no shortage in the market. Oil marketing companies will try to source the
Oil through refineries or if that is not possible then through imports. Ministry of commerce holds a
meeting every month known as “product review meeting”. Here all marketing companies and
representatives from the refineries come and review the production capacities of different refineries for
different products; Combined demand of all the oil marketing companies is put forward and the shortfall
has to be imported.
Inside the company: When the month ends, the retail team and the marketing team tell the demand for the next month.
if for example we know about next month’s demand in Islamabad, then the demand planner will check
and see how much of this demand can be met by Attock refinery. If there is a short fall, then the
demand planner will check and see how much of the product is available in Faisalabad, is PARCO
Refinery able to meet the demand? If so then product will be purchased from PARCO loaded onto Tank
Lorries and sent to Islamabad. If that is not the case then the planner will look towards Kemarri, where
the product is always in greater quantity. Products will be shipped from Kemarri over land via tanker
transport or pipelines in case Diesel product.
Transportation 4 modes of transportation:
Land
Air
Sea
Pipeline
Among all, Pipeline is considered to be the cheapest mode of transportation.
Ports There are 2 ports in Pakistan that are utilized by Shell Pakistan Ltd.:
KPT
Port Qasim
“Wide oil pipeline” goes all the way to Lahore. It is used to transport Diesel from the southern part of
Pakistan to Northern and mid country parts of Pakistan. Due to this pipeline the carrying/transport cost
for the customer becomes very low. The pipeline can be used by all the oil marketing companies. Ship
tanker transports carrying Diesel usually come to Port Qasim. Terminals of Shell at Mehmoodkoth and
machike are connected to this pipeline and for transportation of Diesel Shell does not have to use over
land Tanker transport as it is using this pipeline. As transport cost is low, automatically the cost to end
consumer is also low.
Q:Why is price of fuel constant throughout Pakistan even though cost of transporting to consumers
and customers in northern areas of Pakistan is expensive then southern areas?
Government has subsidized the cost of transportation to northern areas. Cost of transporting products
to Lahore is expensive by Rs 5/liter compared to transporting to southern areas. Technically speaking
cost of fuel should be more expensive in Lahore compared to southern areas. The government has
asked all the oil marketing companies not to pass on this price to the customer, in return that cost is
compensated by the government.
HIERARCHY OF SHELL’s SUPPLY CHAIN
GM Supply & Dis tribution (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
Inventory management
G-SAP(Global SAP) is used to manage inventory. As per the instruction of the government, Oil marketing
companies have to manage an inventory of 20 to 21 days in case of Diesel and Motor Gasoline. Supply
team lead is responsible for all the demand planning and supply planning. Since Oil marketing
companies’ role is to distribute Oil products to customers, no internal demand planning can take place
instead Channel offer management is done.
Channel offer management Sales and operation planning: Channel offer manager, supplier operations leader, logistics manager are
the primary participants. If for an example there is a demand for 80 million liters for next month, it is the
job of supply operations leader to ensure that 80 million liters is available. Logistics manager has to
ensure that he has enough tank lorries/tanker transport to ship the Oil products to customers. Channel
offer manager provides the demand figures (from the orders received). It is the supply that has to be