CASE DESCRIPTION

4.1.

Context of oil and gas upstream logistics

In this study, we explore flexibility achievement in upstream oil and gas supply chain. The upstream supply chain is comprised of all organizations, units and processes involved in provision of offshore exploration and production facilities with necessary supplies (Aas et al., 2008). The primary goal of the oil and gas upstream supply chain is to ensure continuous work of offshore exploration and production installations. The logistics system as a part of the upstream supply chain should provide continuous, reliable and flexible transport service to and from offshore units. The major focus of offshore logistics is to ensure that all supplies from onshore (and back-load from offshore) are served to the right installation (or back to the supply base) in requested quantity, quality and at the required time. This logistics system faces high requirements for flexibility and has to deal with a number of challenges and uncertainties.

Upstream oil and gas logistics system deals with transportation requests for heterogeneous cargo varying in size, volume, weight, value, safety requirements, etc. Moreover, the demand for this transportation services itself is a subject to uncertainty. In general, we can define two major types of customers with different types of demand; they are the demand of exploration units and the demand of fixed production units. The demand of fixed offshore production units is rather predictable, since it is associated with rather standard operations, where maintenance is preplanned and planning horizons are rather long. While on the contrary, the demand of exploration facilities faces multiple variations. Changes in their demand may arise due to some unforeseen circumstances in the exploration process. In general, oil and gas upstream logistics also has to adapt to weather uncertainties, which contribute to uncertainty in travelling times from onshore supply bases to offshore installations, or may even inhibit cargo receipt offshore due to safety restriction of offshore loading and unloading operations.

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The shortage of materials supplies from onshore may result in high expenses. These shortage costs have several dimensions. First, the expenses may arise due to activity interruption because of missing supplies. Taking into consideration the daily rate of rig rental, which varies from 400,000 to 600,000 USD (IHS, 2015), the activity stop has very high hosts. Second, the lack of some parts may lead to breakdowns with high repairing costs and, in some extreme cases, and even lead to catastrophic safety and environmental consequences. Moreover, scheduling and rescheduling of certain offshore operations may be rather costly, for instance, in case of missing parts and tools for the planned maintenance operations, these operations should be rescheduled.

The costs of such rescheduling are high and arise from many interdependent parts of complex maintenance operations. For instance, it may cause additional costs associated with personnel waiting for parts or idle time of costly rental equipment.

Due to the abovementioned reasons, oil and gas companies are continuously looking for the ways to increase the level of flexibility and responsiveness in their operations. However, in the ultimate years oil and gas companies are focusing not only on the flexibility but also on efficiency and costs reduction, which is especially relevant in the context of the current downturn in oil price. Therefore, oil and gas companies are searching for the ways of balancing the flexibility and responsiveness of the system and elimination of wastes and slack resources in the system.

In order to find intelligent ways of operation oil and gas industry has initiated Integrated Operations (IO) program. This program focuses on integration of people, organizations, work processes and information technology to achieve efficiency and effectiveness via smarter decisions (IO center; 2014). Under this program there were introduced several initiatives of so-called control rooms – collaborative environments, where operations are planned, coordinated and monitored. Introduction of such coordination unit for logistics operations management in Petrobras has triggered the current study.

4.2.

The case company Petrobras

Petrobras is a public-private joint-stock company. The major stockholder of the company is the government of Brazil. Petrobras was founded in 1953, and since then, it has become a leader in the Brazilian oil industry. Ultimately, Petrobras has expanded its operations aiming to become the top five integrated energy company in the world by 2030.

One of the key milestones in the recent history of Petrobras was the oil discovery in Pre-salt layer. This discovery created an exciting scenario for the company in multiple aspects. From one side, the contribution from Pre-salt area is expected to double the proven reserves of the company (Campos Lima and Tenorio Gomes, 2013). From the other side, the development of Pre-salt area means many challenges Petrobras has to deal with. Among them are logistics challenges as, e.g., the distances to onshore terminals increase. The logistics infrastructure and organization should be able to provide the necessary level of service in order to support this future expansion at a minimal level of expense.

4.3.

Upstream oil and gas logistics operations at Petrobras

The major process milestones of the physical flow of materials in upstream logistics operations are presented in Figure 4.1. We may determine two types of flows. The distinguishing feature is the structure of the flow to the supply base. In the first case, cargo is directly transported to the supply base from the suppliers or subcontractors. In the second case, the cargo is handled via Petrobras’ internal handling process. In the current research paper, we limited the scope of

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the study to the internal chain of activities, which includes the processes highlighted with grey background.

Figure 4.1. Upstream oil and gas logistics process of transportation request handling

Upstream logistics consists of multiple departments (in italic) performing various logistics tasks. The major physical process steps are preparation of materials for dispatch, consolidation, transportation of materials to a supply base, loading of cargo on a vessel, maritime transportation by the supply vessel, receipt of cargo offshore. In this research, we omit backload-handling operations. The physical flow operations are complemented with planning of the vessel load, which is conducted by maritime department. This department performs planning and allocation of supply vessel deck capacity to transportation requests. As we have discussed earlier the activities performed by logistics operations departments are interdependent and as a result require high level of coordination. A separate unit called Integrated Management of Operations Center (GIOp in Portuguese) performs this operational coordination. In the next section, we discuss the major activities performed by the above-mentioned coordination center.

4.4.

Logistics planning, coordination and control center in upstream oil and gas logistics at Petrobras

For the purposes of coordination of activities at an operational level, and provision of flexibility in the system, Petrobras has integrated its logistics planning and coordination functions into a single unit, referred to as GIOp. This unit consists of around 82 employees: whose roles are subdivided into: GIOp planners on the customer side, GIOp integrated view planners and regional logistics representatives (Figure 4.2).

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Figure 4.2. Management of logistics operations in Petrobras before and after the introduction of GIOp (Source: Pinho, 2015)

The functions performed by this unit may be subdivided into two levels: (i) logistics activities planning and prioritization, (ii) monitoring and control of logistics activities execution.

During logistics activities planning GIOp plays a role of integration and collaboration hub in the complex and iterative process of planning. First, GIOp planners from the customer side collect and correct the transportation requests according to the current needs of installations.

Then, this total demand is disaggregated by planned supply vessel departures and based on backward planning of logistical operations when the first variant of the operational plan is developed. Next, this first version of the operational plan is distributed to regional representatives of logistics operations departments, which based on their current knowledge of capacity restrictions and knowledge of workload for demand handling identify the demand workload that may be handled on each day. In other words, each logistics department states the part of proposed demand plan they may handle on daily basis. Applying this technique helps Petrobras to deal with variability in capacity requirements of heterogeneous cargo and the dynamics of available capacity. Next GIOp collects all the data on the part of the demand to be handled by each logistics operations department, and based on these data determines the bottleneck capacity of logistics operations. After identification of the bottleneck capacity, GIOp has to treat the demand, which exceeds it. At this step GIOp planners on customer side start the process of prioritization of transportation requests and negotiations with offshore installations.

The result of these planning activities is a new version of the daily operations plan for each logistics department.

The second function of GIOp is aimed at monitoring and control of execution of logistics operations. GIOp’s regional logistics representatives are continuously monitoring the progress of the transportation requests handling by the different parts of the logistics organizations. The progress is tracked on the latest request fulfillment time, which allows identifying the late jobs early in the transportation request’s handling. GIOp personnel continuously monitor the

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progress with the help of monitoring and visualization technology. In figure 4.3, you may see a picture of this visualization tool in in GIOp control room.

Figure 4.3. Process monitoring visualization tool (Source: Pinho, 2015)

If any delay or other kind of disruptive event occurs, GIOp personnel evaluate its criticality and consequences as well as potential event handling options, and then establish corrective actions.

Manager of GIOp highlights that collaborative environment as well as knowledge and expertise of GIOp are key elements in success of the monitoring and control environment of GIOp.