Downstream Petroleum Industry Free Essays

string(67) " responsibility over specific territories referred to as branches\." Downstream – From Refinery to Customer The downstream sector encompasses the refining, storage, distribution and marketing of petroleum products: †¢Refining Process: Crude oil is processed and refined into more useful products; †¢Storage: The products from the refining process are stored at depots via pipeline, land (trucks rail) and sea (barge/vessel). These storage facilities are also called tank farms or terminals †¢Distribution and Marketing: Petroleum products are distributed from storage locations to the end-user directly or through retail outlets The major products produced by a refinery are, Kerosene, Premium Motor Spirit (â€Å"PMS† – Gasoline), Automotive Gas Oil (Diesel), Fuel Oils, Liquefied Petroleum Gas (LPG), Lubricating Oils, Naphtha and Tar Figure 1. – Schematic Representation of the Downstream Business ? The Nigerian Downstream Sector The Federal Government of Nigeria (â€Å"FGN†) participates in the activities of the oil industry (upstream and downstream) as well as actively supervising it due to its strategic importance to the economy. We will write a custom essay sample on Downstream Petroleum Industry or any similar topic only for you Order Now In the downstream industry, FGN regulates and participates through the following agencies / bodies: Nigerian National Petroleum Corporation (â€Å"NNPC†) –NNPC has powers and operational interest in refining, petrochemicals, product transportation and marketing. NNPC has nine wholly-owned subsidiaries, two partly owned subsidiaries and nineteen associated companies that manage the upstream and downstream activities. Those relevant to the downstream business are the Pipeline Products Marketing Company (â€Å"PPMC), Kaduna Refining Petrochemicals Company Limited (â€Å"KRPC†), Warri Refining Petrochemicals Limited (â€Å"WRPC†) and Port Harcourt Refining Petrochemicals Limited. Department of Petroleum Resources (â€Å"DPR†) – DPR is an arm of the Federal Ministry of Petroleum Resources and has responsibilities for the following: †¢Issuing of permits and licenses for all activities connected with petroleum exploration, production, refining, storage, marketing, transportation and distribution; Acting as an agency for the enforcement of the provisions of the petroleum Act, NNPC Art or any other enactment. Petroleum Products Pricing Regulatory Agency (PPPRA) – The PPPRA came to being from a Special Committee that was set up to review Petroleum Products Supply and Distribution (SCRPPSD) drawn from various stakeholders and other interest groups to look into t he problems of the downstream petroleum sector. The functions of PPPA are: †¢To determine the pricing policy of petroleum products; To regulate the supply and distribution of petroleum products †¢To create an information databank through liaison with all relevant agencies to facilitate the making of informed and realistic decisions on pricing policies †¢To moderate volatilities in petroleum products prices, while ensuring reasonable returns to operators †¢To establish parameters and codes of conduct for all operators in the downstream sector. Petroleum Equalisation Fund (PEF) – The PEF fund board was established to equalize the transport cost arising from the distribution of petroleum products to all parts of the country i. . the cost of transporting products from source to point of sales. This is to ensure that petroleum products are made available in all retail outlets at uniform prices in Nigeria, and to avoid shortage of petroleum products. Petroleum S ubsidy Fund (PSF) – is a pool of funds budgeted by FGN to stabilise the domestic prices of petroleum products against the volatility in international crude and products prices. CBN is the custodian of the fund, while PPPRA administers it. Claims from / payment into the fund is subjected to duly verified volume of products lifted out of the approved depot and sold in-line with recommended open market prices. ? Marketing Companies The Nigerian downstream industry is comprised of two groups of marketing companies: Major Marketers – The companies in this group include AP Plc, Conoil Plc, Mobil Oil Plc, OANDO Plc, Total Nigeria Plc and Chevron Oil Nigeria Plc and accounted for 71% of total petroleum products sold. They belong to trade association called Major Oil Marketers Association of Nigeria (MOMAN). Independent Marketers – The Independent marketers, comprises largely indigenous petroleum marketing companies. The FGN introduced the Independent Marketing Scheme in 1978 because of petroleum products shortage of the 1970s and the lack of sufficient investment by major marketing companies in the rural areas. This led to the establishment of the Independent Marketers Association of Nigeria (IPMAN) in 1982. Membership is open to every independent marketer duly licensed and authorised to operate by the NNPC or other appropriate organisation in charge of this function. The trade group of these companies is referred to as the independent Marketers Association of Nigeria (IPMAN). Examples of Independent marketers are Zenon Petroleum, Capital Oil Gas and Ascon Oil Gas. OANDO Marketing Limited (â€Å"OML†) Oando Marketing Limited one of the companies within the Oando Plc group, is a leading oil and gas marketing company with over 500 retail outlets and a commercial clientele base that cuts across all industry sectors such as manufacturing, construction, oil gas and telecommunications in Nigeria and the West Africa sub region. OML has been in the business of marketing and supply of petroleum products since 1956. OML markets a wide range of products including Premium Motor Spirit (PMS), Automotive Gas Oil (AGO also known as Diesel), Dual Purpose Kerosene (DPK), Aviation Turbine Kerosene(ATK), Low Pour Fuel Oil (LPFO), Lubricating Oils and Greases, Insecticides, Bitumen, Chemicals, Liquefied Petroleum Gas (LPG, also known as Cooking gas) and Oando insecticide Products and Uses AGO – fuel for some vehicles and marine vessels as well as for powering generators; PMS – fuel for most vehicles; DPK – fuel for cooking stove and used as a solvent to produce specialized products for road construction; ATK – fuel for aircraft; LPFO – fuel for power generation and for heating; Lubricants – lubricating oil for vehicles and equipments; Bitumen – used in the construction industry for paving roads; LPG – used as cooking and heating gas. Departments The departments in OML can be classified under the following: Core – Retail, Commercial, Marketing, Operations Logistics and Engineering Terminal. Support – Finance, Corporate Services (HR, HCM, Legal and Procurement Services), ICA, EHSQ, Service Standards and Corporate Marketing Communications. ? Retail Business Management and sales of Oando products to customers via sales outlets (over 500) nationwide is the function of the retail department. The sales focus is centred on the Total White Products (PMS, AGO and HHK), while Lubricants, Liquefied Petroleum Gas (LPG) and Insecticide sales provide a diversified revenue source for the team. Structure Sales is managed by Branch Managers located across the country, with each having responsibility over specific territories referred to as branches. You read "Downstream Petroleum Industry" in category "Essay examples" Their activities are coordinated by Branch Coordination Managers and the department is led by the Chief Sales Officer – Retail, with overall responsibility for all activities. Retail Outlets †¢Company Owned Service Station (â€Å"COSS†) – The stations under this category are owned by OML and dealers are appointed to operate the stations on OML’s behalf. †¢Third Party Owned – These are outlets owned by third parties, which carry OML’s colour and brand. OML’s main responsibility is to supply these outlets with petroleum products and on their part the owners of the outlets agree to operate in accordance to standards agreed by both parties. There are two types of third party outlets: oGallonage – The stations and equipment under this category are fully owned by the third parties, while OML brands the outlets and supply products to it. oLoan Delivery and Equipment (â€Å"LDE†) – Here, OML provides equipments such as pumps, generators and canopies, as well as branding and supply of products. The retail outlets also serve as business opportunities via Non-Fuel Revenue (NFR) activities (such as Quick Service Restaurants) that maximize the returns on shareholders investments, improve asset utilisation and maximize our medium-long term capital gains. Commercial Department The core function of the commercial department is the sale of products (AGO, PMS, DPK, ATK, LPFO, Lubricants, Bitumen and LPG) to large volume end users hinged on effective relationship management. Sales are usually made in bulk to clients most often on pre-determined trade terms basis. Structure Sales is managed by Branch Managers located across the country, with each having responsibility over specific territories referred to as branches. Their activities are coordinated by Commercial Service Managers, based in the head office in Lagos. The department is led by the Chief Sales Officer, with overall responsibility for the activities above as well as for the below-mentioned specialized units: †¢Marine Unit – sale of petroleum products to (and management of relationship) upstream oil gas companies as well as their service providers; Aviation Unit – sale of ATK and management of relationship with airlines. Services The commercial department offer a arrange of services in conjunction to the products it markets as it realized that customers want much more than just the products. Examples of such services include: Vendor Managed Inventory (â€Å"VMI†) Scheme – The Oando In-Support scheme (our in-house model of the VMI) is a means of opti mizing customers supply chain, whereby Oando becomes responsible for maintaining the inventory level of petroleum products at its customers’ location. The major benefit of this to the customer is that it can focus on its core function while Oando manages petroleum products inventory. For Oando, the VMI scheme allows it to secure Oando Sea Station – This is a Ship-to-Shore and Shore-to-Ship service station that provides fuels and lubricants for shipping companies, marine logistics companies operating in the Niger-Delta coastline as well as energy services organizations providing support to the upstream exploration and production companies operating in deep water coastal shores of Nigeria. Supply Contract – This service allows customers the opportunity to enjoy a fairly stable price regime at a committed volume over a period of time. It is a modified form of In-support suitable for customers whose operations cannot permit full inventory take over. Marketing The core function of the marketing department is to initiate business deals and provide platforms to enable the sales departments (retail commercial) effectively achieve their goals and objectives. Structure The department is led by the Head, Marketing with overall responsibility for the following units: Lubricants Unit: The Lubricants unit is responsible for marketing Oando’s lubricants by creating product awareness through marketing promotions and supporting sales drive of lubricants in line with Oando’s goals and objectives. The unit also develops a high calibre technical sales support function while ensuring product quality assurance, cost management and service delivery to customers. A core responsibility of this unit is constantly identifying and initiating new/additional product lines for various target consumer markets. LPG Unit: – The LPG Unit is primarily aimed at sourcing for product, providing support and devising innovative selling methods to the sales team to ensure they meet their volume and margin targets as well as satisfying their customers’ needs. The team also provides the sales team with market intelligence to ensure that they strategically positioned to make sales. The unit, in addition, serves as an interface between the sales team and other support units within the organization i. e. Logistics, CCU, Engineering and EHSQ. Non-Fuel Revenue (NFR) Unit: – The Non-Fuels Revenue (NFR) unit is a strategic initiative developed to complement the shrinking margins on sales of fuel products and tap into the emerging opportunities of Non-fuel business from Retail outlets. Non-fuel offerings in retail outlets can also serve as a customer pull to increase fuel sales. Some NFR offerings include: Quick Service Restaurants (â€Å"QSR†), Automatic Teller Machines, Rent contribution from dormant assets (warehouses and offices), Income from Telecom Mast sites, revamp and increase lube bay rentals lubes contribution to stations and car wash operation. Bulk Products Unit – The Bulk unit is responsible for developing and executing marketing plans to support the sales team in achieving their objectives in the sales of Bitumen and LPFO. The unit provides useful information about the construction sector of the economy, market trends, competitors’ activities and consumer preferences that helps in taking business decisions. It also provides back-end support for improving the quality of service delivery in our Vendor Managed Inventory (VMI) concept. ? Operations Logistics Department The Operations Logistics (â€Å"OL†) department is primarily responsible for product sourcing and distribution to customers. OL is also responsible for product storage via warehouses and LPG Plants, and Lubricants blending via the Kaduna Lubricants Plant (â€Å"KLP†). Management of products at the terminals is handled by Engineering Terminals department. Structure The department is structured into four units, each with a head responsible for activities in the unit. Overall departmental responsibility is with the General Manager, Operations Logistics. Logistics oInbound – supply planning and product receipt; oTrade Procurement Products – product sourcing; oOutbound – handles product received from NNPC depots; oFleet – Management of relationship with transporters. †¢Customer Care Unit oScheduling – handle delivery request and schedule the trucks; oDispatch – prepare the trucks for trips; oFleet – work with the tran sporters; oCall Center – handle inquiries and complaints. †¢Warehouse LPG Plant oWarehouse – storage locations for Lubricants and Oando Insecticide before final distribution to customers. Lubricants are received at the warehouses from KLP, while with Oando Insecticide (currently being imported), product is received into Apapa for distribution other warehouses. Currently, OML has 14 warehouses across the county. oLPG Filing Plants – storage locations for LPG. Currently OML has 7 plants across the country. †¢Kaduna Lube Plant – consists of two blending plants both located in Kaduna with combined capacity of 55 million litres per annum producing various range of lubricant products for commercial and retail customers. Terminals Engineering Department The Engineering Terminals department is responsible for managing infrastructural assets across board inclusive of the operations at storage terminals. Structure There are two main units: †¢Terminals – are storage locations (exclusive of warehouses and LPG Plants) where products are received, stored and eventually distributed. The following are the terminals owned by OML: oApapa Terminal 1; oApapa Terminal 2; oApapa Joint Venture (with Total Nigeria Plc); oOnne Terminal, Port Harcourt; oPort Harcourt Terminal. Each of these locations is headed by a Terminal Manager TM who reports to the Head of Terminals Engineering. OML also stores product at third party locations such as Lister. Currently, Oando Terminals has capacity for holding various products as follows: oPMS – 80 Million Litres; oAGO – 33 Million Litres; oLPFO – 5. 67 Million Litres; oHHK – 5 Million Litres; oBitumen – 10,000 Metric Tonnes. †¢Engineering – execution of capital projects and maintenance of equipments and facilities. The activities in this unit are grouped as shown below: oProject – oversees capital projects less than N100M oRetail Network Maintenance – oversees maintenance and deployment of retail outlet equipment Retail Facility Maintenance – oversees maintenance of retail outlet infrastructure oTerminal Depot Maintenance – oversees maintenance of facilities and equipments at terminals and depots Support Departments Environment, Health, Safety, Security and Quality Assurance (â€Å"EHSSQ†) – reduce operational and accident cost, elimin ate down time, ensure total compliance with regulatory and statutory requirements, deliver world class quality products and services to enhance customer satisfaction, while guarantying sustainable development in line with the Oando vision. Internal Control Audit (â€Å"ICA†) – safeguarding OML’s assets, ensuring operational efficiency, ensuring compliance with applicable laws and regulations and ensuring the accuracy and reliability of financial reporting. Service Standards – ensures and monitors service standards across various locations. Finance – provide OML with financial support for business and operational planning. OML Finance (head office) is divided into three main units namely: oTreasury; oManagement Information System; Financial Control. Corporate Services – supports OML business via the following services: oLegal – provide OML with cost-effective and efficient legal services support to and manage the inherent risks in OML’s businesses; oProcurement – assist OML in the acquisition of goods and services; oHuman Resource – provide OML with effective people management solutions. Marketing Communications – promote OML’s marketin g initiatives through strategic product promotion and sales promotion. How to cite Downstream Petroleum Industry, Essay examples