bp intro relative resource manager
DESCRIPTION
Introduction to BP caseTRANSCRIPT
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BPs Procurement and Supply Chain Management
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2Contents
Overview of BP
OCTG introduction
Gulf of Mexico OCTG supply chain
Typical OCTG ordering process
Case study introduction
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3Overview of BP
BP p.l.c. is one of the worlds largest energy providers of fuel for transportation, energy for heat and light and petrochemical products for everyday items. BP has interests in both upstream and downstream segments in over 100 countries worldwide making it a fully integrated energy company. Upstream refers to finding and extracting crude oil and natural gas from deep underground reservoirs. Downstream operations consist of refining and marketing oil and gas into usable consumer products.
The United States subsidiary of BP p.l.c., BP America Inc., is the nation's largest producer of oil and gas. They own and operate oil and natural gas fields, refineries, chemical plants and lubricant processing facilities in 22 states that are worth over $40 billion in fixed
assets. BP America has both onshore and offshore drilling operations in the
United States.
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4What is OCTG?
Oil Country Tubular Goods (OCTG)
Casing
large diameter steel pipe that is cemented into openhole
to protect and/or isolate formations
Tubing
small diameter steel pipe used to complete the well and allow hydrocarbons to flow from reservoir to wellhead
Conductor pipe
Surface casing
Intermediate casing
Production casing
Perforations
Tubing
Packer
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5BP domestic drilling regions
Gulf of Mexico
P110, Q125, C110, 13 Chrome
Well Depth: 20,000ft
30,000ft
Water Depth: 4,000ft
7,000ft
Tuscaloosa
P110, Q125, C110
Well Depth: 20,000ft
Western Oklahoma
J55, K55, P110
Well Depth: 10,000ft
16,000ft
Rockies
San Juan, WY
J55, K55, P110
Well Depth: 8,000ft
10,000ft
West Texas
J55, K55, P110
Well Depth: 5,000ft
12,000ft
Alaska
North Slope
L80, 13 Chrome
Well Depth: 10,000ft
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6Gulf of Mexico
BP is one of the largest acreage holders in the deepwater Gulf, owning more than 400 gross blocks in water depths of 1,200 feet or greater.
Between 2000-2010 BP has a $15 billion investment program in the Deepwater Gulf of Mexico.
The company anticipates its total deepwater production to exceed
450,000 barrels of oil equivalent per day by 2010 and remain at that level through the next decade.
Gulf of Mexico Assets include Pompano, Marlin, Horn Mountain, NaKika, Holstein, Mad Dog, Atlantis, Thunder Horse and the Mardi Gras Transportation System that exports oil and gas to shore.
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7Gulf of Mexico assets
circa 2006
0 100
Miles
HoustonNew Orleans
600
2500
5000
7500 10000
Fourchon
Atlantis
Holstein
Mad Dog
Thunder Horse
Horn Mtn.
Na Kika
Marlin
Pompano
Production
Development
LEGEND
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8Gulf of Mexico PSCM
Primary areas of accountability of the GoM PSCM team include the
development and implementation of procurement and supply chain management policy, processes and procedures
Procurement strategy development including supplier pre-
qualification, RFQ development, bid evaluation, negotiations, contract drafting and award
Development and implementation of Supplier Performance Management processes
Consultancy advice with respect to materials management, QA/QC, the resolution of contractual disputes, and accountability for the ongoing support and maintenance of PSCM systems
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9GoM OCTG contracts
Global framework agreement with foreign distributor/mill
13 and 25 chrome only for United States
Cannot import carbon/alloy pipe due to U.S. government restrictions on imports (antidumping tariffs)
U.S. contract with domestic pipe distributor for alloy
Qualified and selected most capable domestic and foreign steel mills
Chose largest distributor that represented the BP qualified mills
Five year contract length with six month pricing reviews
Standard API spec pipe is based on consignment with the distributor
Order is cancelable and returnable
Custom pipe is owned by BP at the time of manufacture
Order is non-cancelable and nonreturnable
Materials Coordinators call-off
from these agreements via Purchase Orders
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Ordering/call-off process
1.
Casing specifications are defined by drilling engineer
2.
Engineer informs Material Coordinator of design through requisition
3.
Material Coordinator places order in distributor forecast
4.
Distributor places order will steel mill
5.
Steel mill rolls, threads, and inspects pipe
6.
Pipe is received into distributor/BP inventory and inspected if necessary
7.
Pipe is stored and maintained until needed
8.
Rig prepped and shipped to well site
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OCTG specifications
Casing
size, weight, grades
Based on pressure and corrosion requirements, and well depth
Length
R1, R2, R3
Seamless vs. ERW
Connection types
API
Premium
Steel mill choices
Domestic
Foreign
OD Size Weight Grade Connection
16 109 ppf P-110 Hydril
511
14 112.49 ppf Q-125 Hydril
513
10 7/8 73.00 ppf C-110 SLIJ-II
7 3/4 46.10 ppf C-110 Hydril
523
1. Specifications
2. Requisition
3. BP Purchase Order
4. Distributor order
5. Manufacture
6. Goods receipt
7. Storage
8. Deployment
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Internal requisition
1. Specifications
2. Requisition
3. BP Purchase Order
4. Distributor order
5. Manufacture
6. Goods receipt
7. Storage
8. Deployment
Requestor contact info
Budget identification
Delivery information
Material description
Authorization sign-off
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Purchase order
1. Specifications
2. Requisition
3. BP Purchase Order
4. Distributor order
5. Manufacture
6. Goods receipt
7. Storage
8. Deployment
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Distributor order/forecasting
Oil and gas wells are planned far in advance
Long lead-times from steel mill (as long as 2 years)
OCTG accounts for 1% of global steel market
Dependence on mill schedule
Distributor or operator must carry inventory
BP Distributor Mill
Order placement
Inventory burden
BP
1. Specifications
2. Requisition
3. BP Purchase Order
4. Distributor order
5. Manufacture
6. Goods receipt
7. Storage
8. Deployment
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OCTG manufacturing
Time of manufacture is determined by mill schedule
Either seamless or electric resistance welded
Threaded connection may be machined at mill or shipped plain-
ended
Inspection/QA check before shipment to customer
1. Specifications
2. Requisition
3. BP Purchase Order
4. Distributor order
5. Manufacture
6. Goods receipt
7. Storage
8. Deployment
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OCTG receiving
Pipe is packaged and shipped to storage yard from mill
Rail car
Ship/barge
Truck
Airfreight (only on rare occasions)
Physical and electronic receipt into distributor/customer inventory
Incoming pipe inspection if necessary
Full-length drift and visual inspection
Electronic inspection (EMI or FLUT)
1. Specifications
2. Requisition
3. BP Purchase Order
4. Distributor order
5. Manufacture
6. Goods receipt
7. Storage
8. Deployment
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OCTG storage & maintenance
Safety is number one priority
Pipe is horizontally stacked
18
above the ground
No more than 6 feet high (up to 10
with safety system)
Recycled plastic timbers
Box and pin orientation and angle
Thread protectors and storage compound
Dedicated yard crew
OCTG inventory management
Distributors proprietary system
Physical inventory counts
Pipe rack, timbers, bumper rings, thread protectors
1. Specifications
2. Requisition
3. BP Purchase Order
4. Distributor order
5. Manufacture
6. Goods receipt
7. Storage
8. Deployment
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Deployment to drilling rig
Pipe is prepped for drilling rig
Full-length drift, thread compound, addition of casing accessories
Bolstering (offshore only)
Trucking specifications
How is it stacked? (stripped & strapped, 44,000# limit per truck)
Trucked from storage yard to BP shore base
Shipped on vessel to offshore drilling rig
Lifted and stored on rig until it is run into the hole and cemented in place
1. Specifications
2. Requisition
3. BP Purchase Order
4. Distributor order
5. Manufacture
6. Goods receipt
7. Storage
8. Deployment
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Case study
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Case study introduction
OCTG inspection and storage market experienced consolidation through 2002
2004.
As a result, only one service providers pipe yard is utilized in Houston.
Provide inspection, storage, and maintenance services
Inventory is kept on their proprietary system
A 2004 study involving logistics and taxation suggested savings if pipe was stored in Louisiana instead of Texas.
Study was limited only to transportation and taxes and additional information on the OCTG service industry in Louisiana was necessary to support pipe yard relocation.
PSCM conducted a market analysis on inspection and storage companies as well as threading facilities located in the Gulf Coast Region.
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Market analysis
Market analysis included a Request for Information sent to Inspection/Storage companies and premium threading facilities in
Houston and Louisiana
Pipe inspection and storage facilities
Storage capacity, access, racking
Inspection capabilities and thru put
Inventory management capabilities
Health and Safety questionnaire
Financial statements
Premium threading companies
Proximity to pipe yards
Thread sizes, types, capacity
Licensees
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Considerations
Availability of Substitutes
Rivalry Among Firms
Threat of New Entrants
Bargaining Power of Suppliers
Bargaining Power of Buyers
Strengths
Weaknesses
Opportunities
Threats
Porters Five Forces
SWOT Analysis
Financial Health Analysis Market Characteristics
PESTLE Analysis
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Deliverables
Inventory consolidation
Breakdown of inventory carrying costs
Strategy, reasoning, and justification of standardizing/consolidating pipe inventory
Describe change management approach to engineering group and joint-interest partners
Pipe yard relocation
Develop an evaluation process and analyze the suppliers identified in the market study
Identify the selected yard locations and justify your choice
Identify switching costs and risks associated with changing suppliers
How does inventory consolidation play into pipe yard relocation?
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Questions?
BPs Procurement and Supply Chain ManagementContentsOverview of BPWhat is OCTG?BP domestic drilling regionsGulf of MexicoGulf of Mexico assetscirca 2006Gulf of Mexico PSCMGoM OCTG contractsOrdering/call-off processOCTG specificationsInternal requisitionPurchase orderDistributor order/forecastingOCTG manufacturingOCTG receivingOCTG storage & maintenanceDeployment to drilling rigCase studyCase study introductionMarket analysisConsiderationsDeliverablesQuestions?