Sfi Assignment

1.
Oil Industry Value Chain
2. Impact of data on Downstream Oil

industry
Strategic Formulation and Implementation

Assignment
PGDHRM 2019-21
Submitted to Prof. Ashutosh Khanna
Shubham Tiwari 19PGDMHR50

1. Oil Industry Value Chain
The Oil and Gas value chain represents the sequence of activities that occur from the
availability sources to trading mechanisms, by which oil, oil products, and gas, are
sold within the wholesale markets. This process includes upstream (exploration and
production), midstream (transportation and storage) and downstream (refining and retail
markets).
The representation of the worth chain is how of expressing the rise in commercial

value that's created as crude is sold, at wholesale prices, from upstream production,
transported and stored (midstream), processed or refined downstream, into petroleum
products, and eventually sold at retail prices.
UPSTREAM Sector
The upstream sector, also referred to as “exploration and production (E&P)”,
includes checking out potential O&G reservoirs, drilling exploratory wells, and developing
facilities around those wells that produce commercial quantities of hydrocarbons. This is the
foremost high-risk segment of the O&G industry.
The upstream sector is that the introduce the worth chain where O&G is discovered,
developed and produced, in order that it are often sold within the wholesale market. It
represents the source of O&G supply and activities of the worth chain that are shown. This
sector is technologically advanced, and one among the foremost complex of the up, mid and
downstream sectors. It also involves high-risk economic activities, and likewise, the reward
potential is usually the most important of all.
Upstream sector profit margins are impacted substantially by outside forces, like political

instability, international conflicts and agreements on supply control by production countries.
However, some observers believe that, within the near future, volatility might decrease
somewhat, as operators are more flexible today, betting for short-term cycle
investments instead of mega-projects, which ends up in reduced lead times between
discovery and therefore the first year of production.
While within the past, lead times could be up to 10 years for giant projects, nowadays tight

US resources take a year at the most , and therefore the most complex existing play
extensions take up to 3 years. this suggests that an increasing share of supply reacts more
quickly to cost signals. One additional factor that explains why the unconventional
revolution may play a crucial role during this new dynamic, is that decline rates for these
wells are steeper than for conventional fields.
MIDSTREAM Sector
The midstream sector typically involves transporting and storing hydrocarbons, it consists of

transport via pipelines, maritime, rail and road transportation, depending on the product.
DOWNSTREAM Sector
This sector of the oil and gas industry—the final step within the production process—is
represented by refiners of petroleum petroleum and gas processors, who bring usable
products to finish users and consumers. They also engage within the marketing and
distribution of petroleum and gas products. Simply put, the downstream oil and gas market
is anything that has got to do with the post-production of petroleum and gas activities.
Many of the products that buyers use a day come directly from downstream production,

including diesel, gas , gasoline, fuel oil , lubricants, pesticides, pharmaceuticals, and
propane.
Companies engaged within the downstream process include oil refineries, petroleum

product distributors, petrochemical plants, gas distributors, and shops . Many major
downstream companies also are diversified and have interaction altogether levels of the
assembly process. samples of downstream companies include leading U.S. refiners
Marathon Petroleum (MPC) and Phillips 66 (PSX). Phillips 66 was initially a part of parent
company ConocoPhillips (COP) until the larger company opted to bear the downstream
business in 2012
2. Impact of Data on Businesses of Downstream Companies in
Oil Industry
“Data is the new oil. It’s valuable, but if unrefined it cannot really be used. It has to
be changed into gas, plastic, chemicals, etc to create a valuable entity that drives
profitable activity; so must data be broken down, analyzed for it to have value.”
— Clive Humby
Refinery margins have collapsed for several years, mostly thanks to low demand for
products, alongside refinery overcapacity. within the previous couple of years, margins have
rebounded, and therefore the sudden decrease in petroleum price was a key contributor to
the present state of equilibrium, followed by delayed product price movement, while many
refiners filled their inventories, provoking a clear higher demand.
Looking at the regulatory framework, is obvious the necessity for refiners to take a

position in cleaner processing structures, so as to supply less polluting products. this
suggests a high investment effort, which affects margins to a better or lower
extent, counting on the preparedness of every player.
Digitalization will still penetrate the industry within the future, but the speed at which

individual companies can profit will depend upon their willingness to take a position in,
test, and adapt to those new technologies. As digitalization remains relatively new the
industry, within the context of Industry 4.0, many of the technologies are still in their
nascent stages, and real-life results aren't readily available, which suggests that companies
must perform detailed analyses, and develop strategies regarding which technologies to
adopt, and the way to adapt their operations to maximise their benefits.
There are many advancement and innovations happened in petroleum industry up till now.
Technological advancement causes cost reduction in operations, increase in quality of
output product, and reduction in negative impact of environment. Elatab (2016) researched
that digitalization in oil field can cut the value in operations up to 10–25%. Mills (2013) has
researched that new hydraulic Fracturing technology helps to bring down the
value of oil production between $7 and $15 per barrel and efficiency and productivity of
US’s shale fields increased 200–300%. Bertocco and Padmanabhan (2014) have researched
that advancement in big data analytics helps to reinforce the boring by 6–8%.
There were many inventions happened in petroleum oil industry . Earlier an easy distillation

technique was used for the refining purpose. That process separates the crude in lighter
crude, naphtha, kerosene, and heavier crude. But because the need of lighter product
increased, for the profit purpose, they took new advancement in technology called thermal
cracking that was wont to convert the heavier crude into lighter one. That causes the
increasing profit and output product quality. After thermal cracking, catalytic cracking was
used for the refining purpose. then , thermal reforming technique replaces the catalytic
cracking. then , catalytic cracking method is replaced by the catalytic reforming method. As
per the study of Enos (1958), the profit per barrel of crude for thermal cracking, thermal
reforming, catalytic cracking, and catalytic reforming was $0.186, 0.038, 0.123, and 0.208
accordingly. So, we will see that the profit gradually increases because the innovation and
advancement happen . As there are notable impacts of technological advancement and
innovation in petroleum industry, during this paper, we are getting to review or discuss
about the impact of massive data analytics in petroleum downstream industry. Yin (1994)
developed a model called present value index to guage the economic advantage from radical
innovations and incremental improvements. He compares the profit between earlier radical
process of innovation and incremental improvements. They found that the incremental
improvements gave more profits than earlier radical process
Mobile Devices
Oil and gas companies have invested heavily in fully integrating mobile devices into
everyday operations. The major benefits of this integration include workflow improvements
from better group communication, increased worker productivity and better recording of
field data. Mobile technology also allows for real-time data monitoring via specialized
software on smartphones, and may have a positive impact on health, safety and therefore
the environment (HSE). Companies have improved employee safety by using smartphone
GPS coordinates to trace workers in hazardous situations. Deploying mobile applications in
combination with radio-frequency identification tags is making assets smart and their
movements visible.

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1.

Oil Industry Value Chain

2. Impact of data on Downstream Oil

Strategic Formulation and Implementation

Submitted to Prof. Ashutosh Khanna

Shubham Tiwari 19PGDMHR50

The representation of the worth chain is how of expressing the rise in commercial

Upstream sector profit margins are impacted substantially by outside forces, like political

While within the past, lead times could be up to 10 years for giant projects, nowadays tight

The midstream sector typically involves transporting and storing hydrocarbons, it consists of

Many of the products that buyers use a day come directly from downstream production,

Companies engaged within the downstream process include oil refineries, petroleum

Looking at the regulatory framework, is obvious the necessity for refiners to take a

Digitalization will still penetrate the industry within the future, but the speed at which

There were many inventions happened in petroleum oil industry . Earlier an easy distillation

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