SWAP PRACTICE IN OILAND GAS INDUSTRYUSED IN SCM FOR CUTTING COST INVOLVED IN LOGISTICS.By, Vijay Thilak S.T. Nitin Kapil Sharma Pawan Preet Kaur

CONTENTS

SCM CHALLENGES FACED BY OIL AND GAS INDUSTRY IN SCM SWAP SWAP HISTORY PRESENT SCENERIO CLASSIFICATION CASE STUDIES MODEL

SUPPLY CHAIN MANAGEMENT (SCM)Supply Chain Management is about managing the flow of information, materials, services and money across any activity, in a way which maximizes the effectiveness of the process.

Source : http://aspentech.com/aspenOne

CHALLENGES FACED BY OIL AND GAS INDUSTRYS SCMProduced in limited region and demand is all over the world. Long transportation lead times. Limitations of modes of transportation. Very high transportation cost and in transit inventory. Anxiety regarding collaboration and information sharing between supply chain partners.

SWAP/Exchange

systematic cooperative reciprocal barter or exchange Outsourcing of logistics functions. Petroleum industry has found that one way of outsourcing is to ally and collaborate with competitors.

SWAP - A brief history

Systematic Exchanges - monopolizing petroleum commerce Illegal trade Federal Trade Commission cases includes.. includes.. International Oil Cartel case,1952 (Exxon,Mobil,Chevron,Texaco,Gulf) The Achnacarry Agreement Practice highly institutionalized, not much revealed to academicians Subject of exchanges remained arcane and mystery

SWAP Today

Legalized business Answer to the sky rocketing supply chain costs Bridges demand supply gap to some extent Optimizes the resource utilization (sharing) Brings countries together Avoids duplication of facilities

BROAD CLASSIFICATION OF SWAP1. 2. 3.

ASSET SWAPPING. SWAPPING SHIPMENT. SWAPPING BUSINESS.

ASSET SWAPPING

Two companies share or buy assets of each other.

Cost cutting. Both companies offload unwanted divisions in return for assets that fit more closely with their core businesses.

CONTD.

BP Realize full value of Ruhrgas. Important markets Germany. Valuable brands ARAL along with $1.4 billion (biggest petrol-retailing petrolbusiness).

E.ON GASGAS- an attractive growth market. Got $5.5 billion along with Ruhrgas. E.ON has strengths on downstream side but lacks backward integration in its import, storage & long distance delivery system.

BP

E.ON

Shipment swapping

Competing oil and petrochemical companies form supply chain alliances when delivering commodities to customers.1.

2.

Reduce transportation cost, inventory cost and lead times. Fast reaction to business opportunities across the world.

GAZPROM LNG Shipments Pipeline gas MED LNG & GAS

GAZ DE FRANCE

CONTD.GAZPROM

GAZ DE FRANCE

Foreign market for future growth (Europe). Getting business in LNG supply sector.

Optimal use of capacity. World wide recognition.

GazpromIn billions of USD

Gaz de FranceIn billions of euro

Business swapping

IOCIOC-TATA MOTORS TIE UP TASS(TATA Authorized Service Stations) in IOC outlets IOCIOC-Fuel management system designed for TATA motors Tata spare parts sold in IOC outlets In turn ..Tata motors recommend IOCs SERVO for their commercial vehicles

SWAP arrangements between countriesIran holds strategic position Much of the recent activity involving Iran and Caspian hydrocarbon exports has focused on swap arrangements between countries. swap arrangements provide economic alternatives to pipeline proposals such as the Baku-Ceyhan and TransCaspian routes. Baku

CONTD.

Eastern Turkmenistan is gas-rich and oilgasoilpoor, whereas Northeast Iran needs gas Turkmenistan has no easy access points Iran option offers a much lower cost as compared with existing routes to the Black Sea.

Conclusion & Recommendations:

In conclusion we would offer a brief caution to the uninitiated who would venture into the hybrid economic- legal domain of Exchanges: economicIt is a complicated, multifaceted domain which needs be approached with care. Our explorations have yielded special insights into this complexity. Similar awareness is essential for the analyst intent on serious work in this field.

Defining the SWAP ModelStrategic vs Tactical

Temporal vs Spatial LongLong-term vs Mid term vs Short term Local vs Regional vs Interregional Domestic vs International Crude oil vs Refined products Storage terminal vs Transportation terminal Bulk terminal vs Whole sale distribution terminal Simple vs Complex

Tools identified to implement the modelTools & Disciplines 1. Game theory 2. Regional economics 3. Spatial Competition 4. Location theory 5. Logistics 6. Econometrics 7. Operations research 8. Optimization Theory

Relevant Legal Areas

Joint venture Market sharing Market stabilization Division of territories/markets Oligopoly Exclusive dealing Tying agreements Requirement contracts Price discrimination Foreclosure Barriers to entry

References

http://www.bp.com http://www.egr.uh.edu/ Haberman, D.I., (2002, April 19) http://www.factsonfuel.org http://www.ogj.com Schwartz, B. (2000, August). Milmo, S. (2001, July 23). BP-Veba Oel asset swapping with 23). BPE.ON. Newsletters of Rigzone. Newspaper Articles( The Hindu, Economic Times ) Oil and gas journals.

THANK YOU