Introduction to management

PRESENTATION
Shell Petroleum
Pakistan Ltd
PRESENTED BY

Naseeb ullah qamar malik arslan khan sohail kamran

mohammad abbas khan

Contents
HISTORY.............................................................................................................................................2
STRATEGIC INTENTION........................................................................................................................2
NUMBER OF DEPOTS IN PAKISTAN.......................................................................................................3
SUPPLY CHAIN PROCESS OF OIL INDUSTRY: ..........................................................................................4
SHELL SUPPLY CHAIN PROCESS OF SHELL PAKISTAN: .............................................................................4
Local Suppliers................................................................................................................................5
Foreign Suppliers ............................................................................................................................5
SHELL PRODUCTS................................................................................................................................5
TYPES OF STREAMs in an OIL INDUSTRY ...............................................................................................5
Mode of Oil Supply to the shell terminals .............................................................................................7
Major Consumers ...............................................................................................................................8
Shell Complex Supply Chain.................................................................................................................8
Upstream Operations......................................................................................................................9
Shell Downstream Operations ....................................................................................................... 10
Terminal locations: ........................................................................................................................... 12
Demand planning: ............................................................................................................................ 12
Inside the company....................................................................................................................... 13
Transportation ................................................................................................................................. 13
Ports................................................................................................................................................ 13
HIERARCHY OF SHELL’s SUPPLY CHAIN ............................................................................................... 14
Inventory management:.................................................................................................................... 15
Channel offer management:.............................................................................................................. 15
HISTORY
Shell is a multinational company and in Pakistan it is operating as a public limited company by the name
“Shell Pakistan Ltd.Shell is a superior brand name with a 100 year history in this region, infect the
company is still in possession of a fuel storage tank from 1899. However, the documented history of the
Royal Dutch/shell group the Indo-Pak subcontinent dates back to 1903 when a partnership was struck
between the shell transport and trading company and the Royal Dutch petroleum company to supply
petroleum products in Asia.

STRATEGIC INTENTION

COMPANY’S SLOGAN/MISSION
“You can be sure of Shell.”

COMPANY’S OBJECTIVE
Shell is focusing on retailing, providing better facilities to customers, clean petrol pumps constructing
international standard petrol filling stations, good advertising campaigns and mini markets (select).

VISION OF SHELL
To Be The Top Performer Of First Choice.

AIM OF SHELL
Creating a secure business environment, minimizing economic losses, and business disruptions
safeguarding the group’s integrity and reputations.

GOAL OF SHELL
The goal of the company is to position itself as the preferred oil company in Pakistan, leading the field in
its commitment to safety, customer service, quality and environmental protection.
STRATEGIES OF SHELL
A strategy of corporation forms a comprehensive master plan stating how the corporation will achieve
its mission and objectives. It maximizes competitive advantage and minimizes competitive disadvantage.
The strategy of Shell is to grow internally by expanding its operations through acquisition and strategic
alliances.
Shell focuses to differentiate its products from competitors in the area of quality and services.

ORGANIZATIONAL RESOURCES

Shell has established 1404 petrol filing station in different areas of Pakistan. But now the company is
trying to reduce the number of petrol filling station because they do not need that filling station, whose
monthly sales are less than 500000 liters. Up till now about 50 pumps are renovated in deferent cities of
Pakistan.

MARKET LEADERSHIP DUE TO INNOVATION

Shell is considered to be the market leader in innovation. It was the first company to get legal approval
to operate Mini-Market. It provides suggestive literatures to its customers while launching a new
product such as Helix super and Helix Lubricant etc.
It was also the first company to introduce the concept of Mobile Training Unit (MTU) for the purpose of
training the workers and introducing quality and quantity control units, which check the quality and
quantity of motor gasoline at various filling stations.

NUMBER OF DEPOTS IN PAKISTAN

Shell has got 14 depots in different areas of Pakistan.

Oil and petroleum industry supply chain is totally different than the supply chain of FMCG instead of
lubricant. Shell Pakistan or oil marketing companies follows downstream supply chain.
SUPPLY CHAIN PROCESS OF OIL INDUSTRY
The supply chain model of oil and gas companies starts with raw materials such as copper and steel,
drilling equipment, mudding, and specialized tools. It extends through manufacture of products
necessary to construct drilling rigs, off-shore platforms and a host of facilities in often very remote parts
of the world.

The supply chain includes multi-tiered suppliers, subcontractors and original equipment manufacturers,
out-sourced construction and facilities operations, and state-of-the-art operating techniques. In this
environment, logistics excellence brings a new, higher dimension to the opportunities while lowering
the risks

it continues through production, transport, and refining until the products are consumed by the people
or end users. It certainly includes the products and services brought to the operating systems by those
companies representing the oil and gas field services businesses.

SHELL SUPPLY CHAIN PROCESS OF SHELL PAKISTAN

Step 1:Extraction of crude oil from underground.

Step 2:Crude oil is sent to refineries to be refined.

Step 3:During refining, extracts are taken out they include MOGAS, Diesel , furnace oil,
kerosene oil, jet fuel all these are “grades” refinery produces petroleum, it refines petroleum.

Step 4:After this the refinery sells these extracts/refined products to Oil marketing companies.

Step 5:Oil manufacturers sell these refined products to their customers.

Shell purchases products from the following refineries:

Local Suppliers:
 National Refinery ltd
 Pakistan refinery ltd
 Byco Refinery
 Attock Refinery
 PARCO Refinery

Foreign Suppliers:
Shell imports refine oil from all over the world but mostly from Gulf and Far East.

 Oman Refinery
 Qatar Refinery
 Singapore Petroleum
 Malaysia Petroleum
 Kuwait Petroleum
 ADNOC

SHELL PRODUCTS
 Motor Gasoline (MOGAS)
 High Speed Diesel (HSD)
 Jet Fuel
 Furnace Oil
 Aviation Gasoline (AVGAS)

Shell purchases these products from the refineries one most profitable product of shell is Aviation oil.
This oil is not available in Pakistan so Shell is importing these gases to supply to the Military for their
aircrafts. Refineries give product to the company by the pipe lines.

TYPES OF STREAMs in an OIL INDUSTRY

The oil &gasindustry is usually divided into three major

sectors: upstream, midstream and downstream

The upstream oil sector is also commonly known as the exploration and production (E&P) sector. The
upstream sector includes the searching for potential underground or underwater crude oil and natural
gas fields, drilling of exploratory wells, and subsequently drilling and operating the wells that recover
and bring the crude oil and/or raw natural gas to the surface.
The downstream sector commonly refers to the refining of petroleum crude oil and theprocessing and
purifying of raw natural gas, as well as the marketing and distribution of products derived from crude
 oil and natural gas. The downstream sector touches consumers through products such as gasoline or
petrol, kerosene, jet fuel, diesel oil, heating oil, fuel oils, lubricants, waxes, asphalt, natural gas,
and liquefied petroleum gas (LPG) as well as hundreds ofpetrochemicals.

The midstream sector involves the transportation (by pipeline, rail, barge, or truck), storage, and
wholesale marketing of crude or refined petroleum products. Pipelines and other transport systems can
be used to move crude oil from production sites to refineries and deliver the various refined products to
downstream distributors.

Upstream Downstream
Midstream
Refining & Marketing
Exploration & Production

Pak Arab Refinery Complex

OMV Pakistan Inc. Shell Pakistan Ltd.

National Refinery Limited

Pakistan State Oil
Pakistan Petroleum Company Limited
Limited (PPL) Pakistan Refinery Limited

Caltex Oil (Pakistan)

Limited
Pakistan Oilfields
Limited

Orient Petroleum Inc.

Mode of Oil Supply to the shell terminals
 Tank Trucks

 Tank Wagons (Pakistan Railway)

 Pipelines.

SPL has a 26% share in the in the White Oil pipeline operated by Pak-Arab Pipeline Company
(PAPCO), which runs from Karachi to MehmoodKot. Shell has a 30% stake in Pakistan Refinery
Limited (PRL) in Karachi.
Major Consumers
- Retail Customer: petrol pumps (also called dealers)
- Commercial customer: big industries (textiles etc)
- Big power plants
- Aviation customers

Shell Pakistan Limited (SPL) in numbers:

 Shell has got 14 depots in different areas of Pakistan.SPL serves approximately 1,000,000
customers at its Retail stations in Pakistan
 We have over 750 Retail stations across the country
 Offering over 15 lubricants for different vehicles and industrial uses
 A Shell fleet of over 300 oil tankers distributes our products nationwide
 60 aircrafts served daily
 Shell has a 39% brand share preference
 SPL distributes from 8 oil depots (including JVs)

Shell is present at 5 major airfields across Pakistan

Shell Complex Supply Chain

The whole supply chain in this industry as very complex compared to other industries. The crude oil has
to make a long journey from the point of production to the refineries. Long distance results in a long
lead time of several weeks and in numerous players in the supply chain. The production is concentrated
in certain areas but the product itself is demanded all over the world. The refinery process is a complex
and capital-intensive part of the chain. The refined products are distributed either by road, water, rail or
pipeline.

The oil supply chain is fundamentally based on a traditional model and the different stages in the chain
also illustrate it. The oil companies have their classic way to serve the customers with products being
'manufactured', marketed, sold and distributed. The main goals are the same like in other industries,
deliver the right product to the users in the right time and at the right price. The oil supply chain
essentially can be divided into two closely linked major segments: upstream and downstream supply
chain. The supply chain as a whole consists of 6 main stages where the middle refining stage separates
the up- and downstream parts of the chain, although procurement as a vital function has to happen
before refinery stage in order to provide the inputs for it. Figure illustrates the before mentioned and
gives a schematic view about the typical oil supply chain.
Upstream Operations:
Upstream of Shell Petroleum basically starts with the acquisition of crude oil and with the related
operation such as exploration and production. Afterward logistics management has to be involved in
order to deliver the crude oil from the exploitation point to the refinery.

1. Exploration:
This stage involves seismic and geological operations.

2. Production:
These concerns about exploitation of the crude oil from thereservoir by drilling. Production
needs highly qualified engineering work and it also links to other activities such as procurement,
transportation. The crude oil produced is transported by pipelines or oil tankers to the terminals
for storage. From here it is either to transport directly to the refinery or exported to other
companies’ refineries.
Shell Downstream Operations:
The first stage of the downstream supply chain is the refining process which is based on demand
forecasting and triggers the procurement and the logistics activities in order to supply crude oil to the
refinery and deliver its derivatives to the customers.

3. Procurement:
This is sourcing of and managing the supply of the rawmaterial to the refinery in the right time
and in the right quantity.
4. Refining:

This is a complex, well planned process which involves thetransformation of the crude oil into
different types of derivatives based on demand forecasting. Therefore, this has a tight link to the
next stage, to the marketing activities and also involves inventory management.

5. Distribution:
Logistics management assures that the right products getdelivered to the right customers in the
right time preferably in a cost efficient way
 .

6. Marketing:
This deals with marketing the different crude oil derivatives tothe right customers. Marketing
has to have an accurate knowledge about the current inventory level and refinery activities in
order to manage its sale function.

Terminal locations
Kemarri in Karachi , Shikarpur, MehmoodKoth in Balochistan, in Lahore at Machike, In Islamabad at
chaklala, in Peshawar at TaruChamba. Kemarri terminal is the only place in Pakistan where Shell can take
delivery of Oil/products directly through Ship tanker transports.

Demand planning

Outside the company(overall for the whole of Pakistan):

Oil industry is a regulated industry, Companies cannot decide themselves how much Oil to import or
produce, that is set by Ministry of Petroleum. The ministry will advise the Oil marketing companies to
maintain stock so that there is no shortage in the market. Oil marketing companies will try to source the
Oil through refineries or if that is not possible then through imports. Ministry of commerce holds a
meeting every month known as “product review meeting”. Here all marketing companies and
representatives from the refineries come and review the production capacities of different refineries for
different products; Combined demand of all the oil marketing companies is put forward and the shortfall
has to be imported.
Inside the company:
When the month ends, the retail team and the marketing team tell the demand for the next month.
if for example we know about next month’s demand in Islamabad, then the demand planner will check
and see how much of this demand can be met by Attock refinery. If there is a short fall, then the
demand planner will check and see how much of the product is available in Faisalabad, is PARCO
Refinery able to meet the demand? If so then product will be purchased from PARCO loaded onto Tank
Lorries and sent to Islamabad. If that is not the case then the planner will look towards Kemarri, where
the product is always in greater quantity. Products will be shipped from Kemarri over land via tanker
transport or pipelines in case Diesel product.

Transportation
4 modes of transportation:

 Land
 Air
 Sea
 Pipeline

Among all, Pipeline is considered to be the cheapest mode of transportation.

Ports
There are 2 ports in Pakistan that are utilized by Shell Pakistan Ltd.:

 KPT
 Port Qasim

“Wide oil pipeline” goes all the way to Lahore. It is used to transport Diesel from the southern part of
Pakistan to Northern and mid country parts of Pakistan. Due to this pipeline the carrying/transport cost
for the customer becomes very low. The pipeline can be used by all the oil marketing companies. Ship
tanker transports carrying Diesel usually come to Port Qasim. Terminals of Shell at Mehmoodkoth and
machike are connected to this pipeline and for transportation of Diesel Shell does n ot have to use over
land Tanker transport as it is using this pipeline. As transport cost is low, automatically the cost to end
consumer is also low.
Q:Why is price of fuel constant throughout Pakistan even though cost of transporting to consumers
and customers in northern areas of Pakistan is expensive then southern areas?

Government has subsidized the cost of transportation to northern areas. Cost of transporting products
to Lahore is expensive by Rs 5/liter compared to transporting to southern areas. Technically speaking
cost of fuel should be more expensive in Lahore compared to southern areas. The government has
asked all the oil marketing companies not to pass on this price to the customer, in return that cost is
compensated by the government.

HIERARCHY OF SHELL’s SUPPLY CHAIN

GM Supply &
Di s tribution (4
countri es)

Supply Contracts Supply

Facilities Operations (ME &
Logistics & Negotiations
SA)

Terminal Manager (ME & SA) Supply Chain Supply

Supply Contracts &
Manager Negotiations Lead Analyst Operations Supply
Lead (PK) Operations
Analyst

South North
Inventory management
G-SAP(Global SAP) is used to manage inventory. As per the instruction of the government, Oil marketing
companies have to manage an inventory of 20 to 21 days in case of Diesel and Motor Gasoline. Supply
team lead is responsible for all the demand planning and supply planning. Since Oil marketing
companies’ role is to distribute Oil products to customers, no internal demand planning can take place
instead Channel offer management is done.

Channel offer management

Sales and operation planning: Channel offer manager, supplier operations leader, logistics manager are
the primary participants. If for an example there is a demand for 80 million liters for next month, it is the
job of supply operations leader to ensure that 80 million liters is available. Logistics manager has to
ensure that he has enough tank lorries/tanker transport to ship the Oil products to customers. Channel
offer manager provides the demand figures (from the orders received). It is the supply that has to be
planned, not the demand.