DOWNSTREAM CHALLENGES

Business Joint Ventures

It is important to ensure the following:

The various value chains of the oil industries should integrate and target at the same purposes.
- Joint and targeted investment should be made in the industry outside the host country.
- Risks should be shared and there should be diverse commercial terms.
- The workforce is very important and therefore should be developed. More so, state of the art
technologies should be transferred in order to aid efficiency at all levels and value chains of the
industry.
- The collaboration should also include a greater shared control.
 Global Refining Capacity
• There is an emergence of a structural global surplus with significant economic growth in various areas. This
is driven by increasing refining capacity in various regions such as Asia (China and India), the Middle East
(Saudi Arabia and the United Arab Emirates) and in Latin America (Brazil). The cumulative impact on a
global scale would be reduced margins. The net growth rate would be between 25 and 30 percent higher
than the existing capacity with a CAGR of 4% per year. Of course, the planned expansions may not all be
sanctioned or completed.

• However, the key factors of the growth are as follows:

-Much of the planned expansions were sponsored by national oil companies

-Most of the new capacity will capture economies of scale with greater degree of efficiency and sophistication.
-Old refineries will rather die than close and also environmental and social costs of closure can be very high in countries like Europe and
America.
 Corporate communication
• Corporate communication involves orchestrating and managing different internal and external
communications in order to create favorable point of view among stakeholders. This involves issuing
a message by an organization to its audiences which might include the employees, the media, partners
and so forth. With the aid of corporate communication, organizations will be able to explain their
missions and gear towards achieving their purposes and visions. It helps stakeholders to be linked to
the company in question.

• In the downstream oil and gas operation, corporate communication is very important in order to
determine efficiency in the various processes. The stakeholders should be able to know issues taking
place in the trading and refining of the oil. Information technology plays vital role in corporate
communication as it can be wielded to ensure that it is done effectively. Various measures can be
involved in order to essentially supervise and monitor activities taking place at real time in the rig.
 Distribution Activities for Oil Products
• Distribution and trading is a very vital aspect of the downstream sector of the oil industry.
Without establishing appropriate avenues for trading, the operation of the oil and gas
industry will be futile. Thus, the value chains should be properly examined in order to ensure
efficient trading and distribution of the products.
• More so, efficient avenues should be devised for ensuring that the products are maintained at
steady prices when it comes to distribution. In some parts of the world, the price of the
products is unnecessarily increased in their distribution centers leading to intense burdens on
the consumers.
• Like upstream industry Outbound Marketing to Inbound Marketing must be examined.
Building from the experiences selected up from doing company in the new Web 2.0 age,
businesses have in fact concerned recognized the overwhelming perks of attracting
consumers to their item, as opposed to steering their products towards their clients.
 Crude Supply Mechanism
• Various challenges are faced in the supply mechanism of crude oil. The performance of the supply
chain can be greatly affected by timely flow of accurate information. All hope lies on information
technology to ensure optimization in the process although it currently seems to be a huge challenge.
To ensure efficiency in this process, various processes and technicalities should be brought together.
These include modeling, designing and monitoring of engineering assets.

• With the use of reliable transport system and quick method of disseminating information, oil supply
can be mechanized and carrying cost can be reduced. Information technology should be
incorporated by oil firms to integrate suppliers and customers. This can be effectively achieved with
the appropriate use of ERP. An example of state of the art solution is mechanism such as GTL project
with Qatar Petroleum. Shell has also been playing vital role in this by perfecting the technology
behind Pearl and therefore it holds 3500 patents in the GTL project.
 HSE & Security

• The safety of the human environment as well as health protection should be

the number one priority or concerns in the oil and gas industry. Legislation
like implementation of ISO15926 has forced oil and gas companies to
comply it. Hydraulic fracturing, a common technique in extracting gas from
unconventional reservoirs have resulted to lots of environmental concerns
and issues with the water table. Therefore, oil firms should pay greater
attentions to health and safety issues with broader operation concerns
through the various stages of the value chains.
 HSE & Security
• In a gas and oil sector context, as matter of fact , the setup of conceptual descriptions is ISO
15926 ("Industrial automation devices and combination-- Integration of life-cycle information
for procedure plants consisting of oil and gas production facilities"), Several position papers
presented at the "W3C Oil & Gas" Workshop have actually proposed, as a matter of fact, some
kinds of combination in between ISO 15926 and the W3C languages.
• Requisite technologies can be employed in order to monitor and recognize gas leakage alarms
in a gas processing plant and therefore trigger various processes to activate a gas turbine.
Narrative Knowledge Representation Language (NKRL) can be utilized to reveal this sort of
details and to set up the data base. NKRL is a conceptual meta-model created to deal in an
intelligent and full way with complicated and content rich narrative information sources.
 Manpower and Economy
• A new study entitled “The Economic Impacts of the Oil and Natural Gas
Industry on the US” made by Price Waterhouse Coopers (PWC) discovered
that the US oil and natural gas industry supports over 9 million American
jobs and makes significant contribution to the economy which is under
immense pressure and has become a serious challenge.
• The industry contributes over $1 trillion to the economy which amounts to
7.5 percent of the US GDP. The studies also showed that oil and natural gas
play vital role in the US even beyond oil producing states and regions. Oil
and natural gas is the backbone of the US economy. It is a major source of
growth and job creation in the nation. It was a succor during recession time
and creates more jobs and employment than any other industry.
 Refinery incapability and the Need for
Expansion
• It has not really been easy in the downstream sector of the industry to meet the challenge of
refining incapability. Lots of factors such as economic downturn, higher oil prices and improving
vehicle efficiency has reduced demands in the downstream sectors. Refinery closures have also
been erupted by tightened margins.

• Automatic devices can be incorporated in refineries for the complying with functionality to
overcome as:
-Automatic tracking of all procedure specifications and tools status parameters,
-Automatic security of procedure devices in case kept track of criteria get to emergency situation,
-Upkeep of common procedure methods,
-Quit shutoffs control,
-Programmable control and security of pump systems,
-Procedure parameters control.
 Pricing
• Some major challenges in different regions of the world pose lots of
problems and results to increased pricing. For instance, the easily accessible
oil is trapped in some regions of the world and therefore is inaccessible.
Therefore supply oftentimes comes from challenging and remote regions of
the world and this result to high oil prices.
• If the production cost of crude is high then prices will also get high.
Because of the above mentioned factors, crude prices are relatively high in
the world. To solve the challenge, information technology can be brought
into the scenario to discover alternative sources of oil and gas. Cutting edge
technologies can be employed to leverage oil sources such as shale gas and
so forth. However, another challenge in the downstream is shifting demand
and increasing reliance on complex oils.
 The cost of Services
• Increased cost of services is another huge challenge facing oil and gas. This
increased cost cuts across the value chains from exploration to production as
well as refining and transportation. This simply results to higher commodity
prices and it has driven the industry activity to a point where the service
industry lacks the capacity to respond.
• Virtualization can maximize the usage of existing resources; simplifies
facilities and software application management, maintenance, and
deployment; and decreases hardware requirements, causing less power
consumption, and lesser cooling costs.