Abu Dhabi National Oil Company's Strategic Management - Example

Adnoc Strategic Management (Name) (University) Contents 1.0 Introduction 3 2.0 ADNOC’s Vision and Mission 3 2.1 SWOT ANALYSIS 4 3.0 Strategic Operation Management 6 3.1 Design of Goods and Services 6 3.2 Process and Capacity 6 3.3 Quality Management 7 3.4 Supply Chain Management 8 3.5 Human Resource and Job Design 9 3.6 Scheduling 10 3.7 Inventory Management 11 3.8 Maintenance 11 3.9 Layout Strategy 12 3.10 Location Strategy 12 4.0 Substitution, Scale, and Restructure Effects in Operations Management in the Internet Age 13 References 15 ADNOC Strategic Management 1.0 Introduction Abu Dhabi National Oil Company (ADNOC) is a state owned UAE company that is managed by the Supreme Petroleum council. The company is tasked to exploit major oil and gas regions. As a leading Oil and Gas Company, it majors in the exploration of oil reserves, oil refining, gas processing, maritime transportation and the distribution of oil refined products. Its oil exploration capacity is supported by a system known as condensate recovery from producing fields thus improving the oil and gas transport system (ADNOC, 2015). The company has significantly met the oil demand of its local and international consumers. It success is supported by an effective strategic management in its entire operation. This approach has created a competitive advantage and the ability to maintain its productive capacity in the oil and gas industry. From a dedicated and competent workforce to a highly sophisticated technological approach, it has steadily strived to outperform competitors. In sustaining its competitive advantage, it extensively incorporates various HR initiatives that empower its workforce. This retrospect paper therefore seeks to outline ADNOC’s strategic management approach and supporting operational attributes in its business operations. 2.0 ADNOC’s Vision and Mission Vision To be respected as the primary contributor to Abu Dhabi’s sustainable future of oil and gas, through its stewardship of company resources. Mission i. It seeks to achieve the UAE’s employment objective of 75 per cent by 2017. ii. Operating at maximum efficiency at optimum cost with minimum hazardous effects to the environment. 2.1 SWOT ANALYSIS Strength The company has a competitive workforce. Through a robust strategic management approach to business, it effectively manages various processes and its approach to business. ADNOC’s signature strength lies with its competitive and skilled labor which enables it to efficiently and effectively produce quality products. A competitive workforce achieves the company’s strategic goals in all its functions. In support of this initiative, the company has created learning programs where it focuses on competitive programs for both the interns and employees (ADNOC, 2015). This equips the candidates with proffered professional skills, imperative in the oil and gas industry. At domestic and international level, the company is the leading producer of oil and gas. This has expanded its domestic market and subsidiary companies, hence dominating the regional and international market (ADNOC, 2015). Tentatively, the company receives tremendous support from the UAE government; hence it can operate under minimal pressure. It, therefore, has unlimited options of exploit potential oil and gas reserves. ADNOC has partnered with an Indian Oil Company. This strategic alliance has enabled it to exploit new opportunities in the industry effectively, as well as, improve its production capacity. Weaknesses Regulatory bodies affect ADNOC’s oil and gas exploitation. The Supreme Extraction Council regulates the extraction of oil and gas, thus limiting the freedom of concession under the law, which the state has majority shares. Some of its subsidiary companies are faced with production challenges in accessing oil and gas reserves. This limits the company’s exploitation capacity in affected regions, thus, limiting the company production level. Opportunities i. The Exploration of all oil reserves in the UAE regions will bolster its production capacity of oil and gas. An increase in production of this essentials increases revenues rates, which affects the working capital. ii. With an increased growth in globalization, an unprecedented increase in demand for oil is evident. Amidst such trends, ADNOC is expected to exploit additional reserves fully. iii. ADNOC is typified by a robust strategic management approach to business. Strengthening ADNOC’s strategic approach to business will improve its competitive advantage in the oil and gas industry. Threats The recent decline in oil prices threatens to cap its growth and production capacity (Winston, 2014). 3.0 Strategic Operation Management 3.1 Design of Goods and Services Crude oil as a universally used commodity has numerous uses in the diverse field. Crude oil is simply unprocessed oil found deep, beneath the earth’s surface. In order to obtain crude oil, ADNOC has stationed various drilling sites, both inland and offshore. The overall property of the product is dependent on the chemical structure and composition (Karpicz, Dementjev, Gulbinas, Kuprionis, Pakalnis, Westphal, 2005). ADNOC pumps the crude oil that is stored in barrels for refinement purposes. As such, the refinement process is essential in obtaining various products for usage. In this respect, ADNOC focuses on the refinement of crude oil to produce lubricants for vehicular and aviation and gas, to name a few. These products are refined as conventional fuel, lubricants, and household gas. The lubricants are refined and packaged in different containers that come in different sizes, depending on its usage. On the other hand, conventional fuel is distributed to various outlets in UAE and another region (ADNOC, 2015). 3.2 Process and Capacity Oil refining is a key aspect for ADNOC since it is important in the production of oil products under various properties. The goal of refining is twofold; production of raw material, and production of fuel and other lubricants. Therefore, oil refineries are complex facilities that the highly integrated. The refining process is a relatively complex process. After the crude is desalted and dehydrates, it is separated into fractions by a process known as distillation. This process is complicated given the difference in properties of crude oil and the relative needs of the market. The consumers can not directly use the distillates. Tentatively, environmental regulations stipulate the need to protect the environment through the production of cleaner fuels. This initiative drives the need to develop novel processes and process improvement (ASTM Standard D86-08a (2009). The refining process can be divided into five primary sections; i. Fractionation (distillation) which is simply the separation of the crude oil into hydrocarbon groups (ASTM Standard D86-08a (2009). ii. Conversion process is effective in changing the size and structure of hydrocarbon molecules which consolidates; a) Decomposition: b) Unification c) Alteration (ASTM Standard D86-08a (2009). iii. Treatment processes seek to prepare hydrocarbons for additional processing and preparation of the finished products. The process may include the removal of impurities, removal or separation of naphthenes and aromatics, as well as, undesirable contaminates (ASTM Standard D86-08a (2009). The successful completion of the above processes essentially produces the products for consumer consumption 3.3 Quality Management In order to maintain high levels of quality in its products, the company has adopted a TQM standard in its operations. In taking precautionary measures, it also benchmarks a few global players, with an aim of creating superior qualities in its products (Global Reporting Initiative, 2013). Service delivery to its customers is an important feature for any business. ADNOC strives to maintain high-quality service through a constant supply of its product (reliability). Quality at ADNOC is defined by the following key aspect; i. Appropriateness of use: All products or services have specific defined intended use. Hence, the manufacture’s products should be in line with the use defined by the consumer. ii. Value for Money: Price is an important aspect when selling products or services. Hence, the consumers expect a tentative value for the money paid. iii. Service for support: Quality of a product is not limited to product delivery, rather with the quality concerned when developing the products, environment and the workforce involved. Hence, in 2007, ADNOC launched the Air Quality Monitoring and Management system that consists of eight ambient monitoring stations-Habshan, Asab, Zirku Island, Ruwais and Sas-Al-Nakhl (Ahmad, 2008). The stations offer accurate information that pertains to air quality that may be affected by the company’s operations (Ahmad, 2008). 3.4 Supply Chain Management Managing a company’s supply chain is important in realizing proffered goods distribution to the consumers. In this respect, the company is presently allocating a gaming policy for distributing its products. From this approach, a reduced supply of the products will send the suppliers to place the goods on allocation. This implies that the supply will oversee an equal distribution of the product such that outlets have received the product. Moreover, the company has distributed services within the region. The company, however, operates almost 222 petrol stations, which includes 135 stations in Abu Dhabi – effectively distributes its services and products (Saadi, 2015).. In this respect, it seeks to make its supply chain more efficient, by supplementing its service and having a direct relationship with its consumers. It expects to increase this number by 43 by the end of 2016 (Saadi, 2015). Tentatively, it is involved with complementary services such as vehicle inspection and vehicle service among others (ADNOC, 2015). Household gas is distributed through Oasis 365 convenience stores throughout the UAE region. These services effectively utilise available recourses in improving its distribution capacity. 3.5 Human Resource and Job Design The company consists of a large number of administrations, technical and multinational teams. Human resource is a key aspect of any organization; notably in managing the workforce that sustains the company’s operations. In attuning its strategies towards emiritization, it has partnered with the UAE government in employing UAE nationals across the region. As such, it has a career development program that offers a valuable growth for the trainees from different educational backgrounds. These programs are designed using suitable standard Individual development Plan that uses the Competence Assurance Management System (ADNOC, 2015). The support of training and GETEX careers has significantly expanded its human resource approach to discovering new talent (Gulf New, 2008). The HR department is centred on a continuous recruitment approach that upholds manpower from various functions for the company. ADNOC continuously checks the availability of human resource in various sections, with respect to ongoing duties. In creating an effective manpower, it is important to employ a competent team through its hiring and recruitment strategy. Through Group National Recruitment Department GNRD, the company acquires new and competent workforce. Moreover, preference is given to candidates of UAE nationality (Canty, 2009). 3.6 Scheduling Scheduling at the company is significantly complicated given the nature of the business. The demand for oil is highly unpredictable. The supply of crude is easily realizable. In this respect, the company can effectively store millions of barrels in storage facilities. In some cases, it would hire storage facilities with an objective of storing the oil for future use. Such scheduling approach is aimed at ensuring that the supply of the product to the consumers is maintained amidst fluctuations in prices, demand and supply. Evidently, scheduling such practices is aimed at the production of an efficient approach to better dispensing its products for the consumers. Achieving effective production capacity is eminent for the oil company (Pitty, Adhitya, Srinivasan, Karimi, 2008). The main goal of crude oil scheduling is that it enables the reduction of operational cost, while meeting the target load. For scheduling, a fixed arrival schedule for the oil tanker is important. Various factors have to be considered such as quality and quantity of the crude oil, minimum settling time for the brine, and the crude oil mix, to name a few. As such, it important that ADNOC schedules its crude oil delivery, to help them determine the unloading schedule, inventory levels, transfer schedule and the charging the schedule. Tentatively, ADNOC’s scheduling systems enables it to set the crude distillation process that produces the end product. It is evident, therefore that the company depends on its scheduling systems to successfully manage resources at minimum cost. 3.7 Inventory Management In order to manage its inventory, ADNOC maintains an in-house stock in equal quantities for permanent and temporary employees. These stocks are maintained in advance; where it stores the inventory in hired warehouses. The company has four big distributors within UAE to help with the distribution of oil to the users. The distributor maintains a built stock inventory such that all consumers can access ADNOC’s quality products. Storage facilities are used in storing million of oil barrels that are essential in balancing the demand and supply of the products. Such inventory management systems are significant to ensure reliability of the product. 3.8 Maintenance Engineering control spans in various industrial complexes, notably in the oil business. As such, mechanical faults or breakdown is problematic to a company’s production capacity that may result in considerable loss for the oil company. In this respect, ADNOC does not take chances in its engineering capabilities. It has employed a competitive engineering workforce, top in their field, to maintain its production tasked at different stations. From drilling engineers to mechanical engineers, it has dedicated the team to ensure an efficient machinery functioning. For instance, its Lead Maintenance Engineer, Nauman Aslam has had seven years experience in the oil and gas offshore projects in various sections (ADNOC, 2015). As such, he has garnered experience in field instrumentation, commissioning, start-up and maintenance, to name a few. This showcase the professional approach used in employing a competent workforce. The machineries’ health is under constantly monitored to ensure adequate operation capabilities. As such, scheduled checkups are conducted at different intervals, with respect to the degree of functionality, working hours and complexity are involved. The consolidation of a proffered work teams and effective monitoring ensures adequate production capability. 3.9 Layout Strategy The operational layout for ADNOC is quite straightforward. It primarily consists of various key sections that include; drilling plant, pipelines, storage plants and distillation plant. The drilling plant can be either located offshore or onshore. The drilling plant is essential for the extraction of crude oil from oil wells. The crude oil is conventionally transported to storage tanks via oil pipelines. The pipelines transport the crude oil to the storage tanks where they can be exported or distilled. Tentatively, distillation facilities are used to refine the crude oil into various products that can be transported to different locations. 3.10 Location Strategy Like any other oil exploration company, location is paramount for ADNOC’s operations. A strategic location for the company’s plants is ideal to enhance exploration, transportation and storage. ADNOC stations various drilling locations at sea or inland. Positioning different drilling stations at sea has proven efficient both in exploring and drilling oil wells. Upon its extraction from the well, it can be transported through the pipeline – as the most efficient transportation means. Other pipeline includes the anticipated 400 km, 48 inch diameter pipeline that runs from Habshan oil field to the west of the Fujairah Port in the east (Pipeline International, 2010). This strategy not only reduces the cost of transportation but also reduces the risk of oil spills when using oil tankers. Its storage facilities are widespread in different areas. The storage facilities near the shores are an important asset since they receive and refine the oil obtained from the sea. Tentatively, a number of its storage facilities are adjacent to the port where they can be easily exported to other countries. Access to such commodities is imperative given the relative demand for the product. The completion of Hamriyah Port, will expand its storage capacity to 241,000 cubic meters of fuel, to meet the demand of the poor north (Reuters, 2012). 4.0 Substitution, Scale, and Restructure Effects in Operations Management in the Internet Age Companies have showcased their dissatisfaction with the substitution effect when incorporating internet on its supply chain management systems (Lee, 2015). Companies are encouraged to identify new opportunities in its structure of supply chain systems, where they can implement these new opportunities. The outcome of this approach will offer a collaborative impact, in which, new product lines will be realized. Substitution can introduce new forms of threats to the current products. It can be witnessed in cases when consumers attempt to satisfy their basic needs. The company’s effectiveness may reduce considerably in terms of relative quality services at the internet, switching costs to the substitute and the customer’s willingness to switch to a substitute; since they are attracted to their current image of provider. The current scale is focused on the reduction of costs through the increase of production. In this respect, UAE has achieved this by strong hospitality in manufacturing sectors, as well as, a robust tourist and industrial matrix since 2012. Amidst reducing oil prices, has fuelled this development. Consequently, though logistics and supply chain businesses remain important to the economic growth of the country. This approach has significantly benefited UAE, by improving its transport and technology systems sharing, as well as, having a skilled labor force. Restructuring its operation management has made information accessible at free or nominal costs. Given the relative accessibility of information, local opportunity for business has brought about increased competition. References ADNOC. (2015). ADNOC http://careers.adnocdistribution.ae/adnoc/Page.aspx?pageid=14716 Ahmad, H. (2008). ADNOC’s Air Quality Monitoring and Management System (AQMS). Retrieved from https://www.jccp.or.jp/international/conference/docs/mr-hazem-abuahmad-spc-adnoc.pdf ASTM Standard D86-08a. (2009). Standard Test Method for Distillation of Petroleum Products at Atmospheric Pressure. ASTM International, West Conshohocken, PA. Global Reporting Initiative. (2013). GRI welcomes new OS: Featuring Abu Dhabi National Oil Company. Retrieved from https://www.globalreporting.org/information/news-and-press- center/Pages/GRI-welcomes-new-OS-Featuring-Abu-Dhabi-National-Oil-Company.aspx Gulf new. (2008). 30k visit GETEX Dubai 2008. Retrieved from http://gulfnews.com/news/gulf/uae/general/30k-visit-getex-dubai-2008-1.452020 Karpicz,R., Dementjev, A., Gulbinas, V., Kuprionis, Z., Pakalnis, S., Westphal, R., Reuter, R. (2005). Laser fluorosensor for oil spot detection. Lithuanian Journal of Physics, 45, 213-218. Lee, H. (2015). Supply Chain Management in the Internet Age. How can you reap the most benefits out of the Internet? Pipeline International. (2010). Pipeline projects in the Middle East. Retrieved from http://pipelinesinternational.com/news/pipeline_projects_in_the_middle_east/040183/ Pitty, S., Li, W., Adhitya , A., Srinivasan, R., Karimi, A. (2008). Decision support for integrated refinery supply chains – part 1. Dynamic simulation. Computers and Chemical Engineering 32, 2767-2786. Reuters. (2012). ADNOC to build Sharjah fuel supply terminal from June. Retrieved from http://www.reuters.com/article/2012/04/19/uae-adnoc-newterminal-idUSL6E8FJ6HG20120419 Saadi, D. (2014). More ADNOC petrol stations to cut queues at the pumps. The National Business. Retrieved from http://www.thenational.ae/business/energy/more-adnoc-petrol- stations-to-cut-queues-at-the-pumps Winston. (2014). The drop in Oil Prices Might be bad for Business. Harvard Business review . Retrieved from https://hbr.org/2014/12/the-drop-in-oil-prices-might-be-bad-for-business Read More