Managing Operation: Abu Dhabi National Oil Company - Essay Example

Managing Operation Introduction The United Arab Emirates is one of the greatest producers and exporters of oil globally. The global demand for fuels such as oil is always on a constant rise enabling the UAE and oil companies in the country to rip massive profits. Abu Dhabi National Oil Company is the fourth largest oil company in the world domiciled in the emirate of Abu Dhabi in UAE. Abu Dhabi National Oil Company (ADNOC) is a state-owned organization that exploits Abu Dhabi’s vast gas and oil reserves. These oil reserves encompass approximately 137 billion barrels or 21.8 x 109 m3. ADNOC’s proved oil reserves currently hold the fourth place in the UAE’s national reserves behind Kuwait, Iraq and Saudi Arabia. On the other hand, ADNOC boosts of at least 6.1 trillion cu. ft. of natural gas. The organization, which was established in the year 1971, owns at least 90% of UAE’s gas and oil reserves. Abu Dhabi National Oil Company manages at least two oil refineries in the United Arab Emirates; these are Umm Al Nar and Ruwais (Giacomo 51). Currently, the oil exploring company produces at least 3.5 billion oil barrels per day annually. In addition, the organization produces at least 2 billion cubic feet of natural gas every day. To date, ADNOC boosts of at least 200 service stations across the UAE and around 19,300 employees (Moin 119). This paper will examine the Abu Dhabi National Oil Company, describing the nature of the company’s business, departments and operational departments and their inherent problems. ADNOC is a group of companies that deal primarily with oil and gas exploration and exportation. Nature of Business As earlier noted, ADNOC is a group of companies that deal with the exploration and sale of energy and petrochemical products. The company’s business centers on finding; producing and distributing natural resources on which modern organizations and countries require for their day to day operations. The company’s operations include the discovery and production of natural gas, as well as crude oil. ADNOC’s business also involves refining, supplying, marketing and transporting crude oil and natural gas to customers both within and without the UAE. In addition to its conventionally known business operations concerning the exploration and distribution of natural gas and crude oil, ADNOC also manufactures petrochemicals. The company conducts its integrated downstream and upstream business ventures through 14 distinct, specialist subsidiaries, as well as joint venture firms. Part of the organization’s upstream businesses include rigorous oil and gas exploration, seismic surveys using state of the art technology to acquire information for future exploration purposes. ADNOC’s upstream business also includes rig activities, oil and gas development, drilling, gas and oil production (Moin 211). The UAE-based oil producing company emphasizes integrity in all its upstream and downstream business operations. ADNOC does this by improving facility maintenance and enhancing production through the injection of additional facilities. Since the company’s primary focus is oil and gas operations, ADNOC’s continually increases the capacity of its oil and gas operation projects (Legge 53). Part of ADNOC’s downstream businesses includes oil refining, processing of petrochemical and gas and transportation of the organization’s products to customers within and without UAE. The organization’s downstream activities also include marketing and distribution of its gas and oil products. Major Departments In the late 20th century, ADNOC underwent radical restructuring resulting in the creation of a number of autonomous departments or divisions within the organization. These departments perform distinct functions and the departmental leaders report directly to the CEO of ADNOC. ADNOC’s departments include the following: 1. One of the most prominent departments of Abu Dhabi National Oil Company is the processing division, which is in charge of the management of the organization’s gas businesses. The division also manages ADNOC’s subsidiaries and joint ventures, for instance, ABU Dhabi Gas Industries Co., as well as other gas exporting joint ventures. The gas business offers immense services to both the organization and its subsidiaries (Haan 82). 2. The organization’s refining and marketing department is in charge of the management of crude oil products. Crude products are some of ADNOC’s most prominent products, which the organization focuses on for the conduct of its business. In essence, the division manages ADNOC’s oil refining subsidiaries, as well as all the subsidiaries’ distribution ventures. The department controls Abu Dhabi National Oil Company and Abu Dhabi Refining Company (Abdelkarim 34). 3. ADNOC’s production and exploration department is in charge of the organization’s upstream ventures such as exploration, oil development and production, seismic survey and rig initiatives and drilling exercises. The department manages ADNOC’s exploration and production (E & P) joint ventures, for instance, Abu Dhabi Company for Onshore (ADCO) onshore ventures. 4. ADNOC’s petrochemical and chemical division manages and controls the production and distribution of chemical products such as fertilizers. The department is controls the operations of ADNOC’s fertilizer-production joint ventures with organizations such as Fertil. 5. ADNOC’s departments also include the services department, which is responsible for the provision of procurement, project management and information technology services to ADNOC and its subsidiaries. The organization’s services division is responsible for the National Drilling Company (NDC) and National Marine Service Company (Ragaei El 261). 6. The organization’s finance department deals with the financial management of all ADNOC’s operations. 7. The human resource department helps in the execution of ADNOC’s policies while also providing vital support to the company’s human resource management endeavors. The department emerged from the amalgamation of the company’s personal and administrative department with the human resource and administration department (Ragaei El 266). 8. The organization’s distribution department is essentially the retail arm of the Abu Dhabi National Oil Company. In addition to offering distribution services for the entire organization, ADNOC’s distribution department is in charge of offering consultancy services for the management and operation of the company’s top business subsidiaries. In addition to offering consultancy services to ADNOC’s subsidiaries, the distribution department also offers such services to other oil companies in the UAE. For instance, ADNOC’s distribution division recently entered into an agreement with Al Olaibi, which is an oil company based in Saudi Arabia. The agreement requires the distribution department to offer management and operating services for service stations in Saudi Arabia. As part of the contract, ADNOC’s distribution division will provide Al Olaibi Company technological, engineering and technical consultancy services concerning operation and construction of petrol stations (Abdelkarim 36). Departments of Operations Departments of operation refer to divisions within an organization, which attend to the firm’s logistical, administrative, as well as other pertinent duties vital to the day to day functioning of an organization. Operations departments are in charge of a wide array of responsibilities. In ADNOC, the primary departments of operations include the legal department, human resource department, refining and marketing, distribution and conversions of energy to business department. Abu Dhabi National Oil Company’s refining and marketing department is essentially responsible for marketing, as well as refining the organization’s products. These products include condensate and crude, sulphur and gas. Another significant role of the department is managing the organization’s refined products, as well as product loading terminals. The department markets Abu Dhabi’s massive scope of resources such as Hydrocarbons, for instance crude, LPG, sulphur and other refined products. The department also manages the organization’s short term, medium term and long term business activities. The department is in charge of planning ADNOC’s long term strategies, which allow the organization to sustain its immensely privileged situation within the global oil and gas industry (GulfNews 1). Another significant department in ADNOC’s operations is the organization’s distribution department mandated with the distribution of the company’s petrochemical products. The department manages ADNOC’s 200 service stations, which are spread all over Abu Dhabi, and the entire UAE. ADNOC’s distribution department dedicates itself to the marketing of various products such as aircraft fuel, natural gas, kerosene, gasoline, vehicle fuel, diesel and LPG. The department also manages the sale and marketing of ADNOC’s range of greases, lubricants and oils. However, all the organization’s departments would not amount to much if ADNOC were unable to convert energy to business. The production and exploration department is perhaps ADNOC’s most vital department (Ulrich 43). The organization creates a wide variety of energy products, which different industries utilize to ensure effective operations. The company can, therefore, provide vital services for the marine and aviation industries. ADNOC achieves success by transforming energy offered by nature into commercially viable products, which individuals and organization can utilize. On the other hand, since Abu Dhabi National Oil Company is a massive organization, the company employs a massive number of employees. These employees encompass administrative and technical staff. The human resource department is one of ADNOC’s primary operations departments (Armstrong 12). However, since the organization encompasses an enormous number of multinational staff, ADNOC’s human resource depart is currently working towards the increment of the percentile of UAE nationals in the organization’s workforce. The human resource department ensures that ADNOC meets pertinent labor rules, which govern the treatment of employees in the UAE. As part of its core business functions, the human resource department in ADNOC is responsible for the maintenance of a sufficient number of employees and motivated workforce (Tippee 52). The human resource department is responsible for the pre-recruitment and staff recruitment processes, which ensure effective running of the organization. In the pre-recruitment process, the human resource department prepares a budget for the post for which the recruitment process is carried out. The department also scrutinizes the organization to determine its need for additional staff. During the recruitment process, the human resource department conducts interviews and prepares the necessary paperwork to facilitate the hiring of successful applicants. In addition, the human resource department performs necessary joining formalities the human resource department performs necessary joining formalities such as coordinating the receipt of employee ID cards for employees assigned to different departments within the organization. The human resource department also prepares job profiles in coordination with other departmental managers for new positions. The department ultimately hands over the new staff hired to the relevant departmental manager. The department also opens and manages employees’ personal files while also making regular audits of employees’ personal files. The department also ensures efficient running of the business by tracking changes in employee statistics through the management of knowledge management software. Overall, the human resource department ensures that the organization remains ISO compliant by ensuring ADNOC’s adherence to ISO requirements. The human resource department of ADNOC is also responsible for ensuring the organization regularly updates its ISO documentation and enforce standard operating procedures (SOP) and instituting correctional actions (Tippee 54). ADNOC’s human resource department ensures the organization’s compliance with statutory requirements such as handling apprentice training and submitting Regular returns to the organization’s Board of Directors (Armstrong 39). The department also submits other workforce-related returns to the labor department in adherence to statutory provisions. While the organization employs personnel with different professional and academic qualifications, ADNOC always needs to conduct employee training and development; hence ensuring all employees gain sufficient knowledge of ADNOC’s operations (Abdelkarim 37). Conversely, the department also coordinates internal and external training initiatives. For instance, since ADNOC provides consultative services to other organizations, ADNOC’s human resource department offers valuable external training services to its consulting clients and provides feedback for the training programs. However, the human resource department also performs other traditional roles such as appraising staff performance levels to ensure that the workforce meets the stipulated standards of performance thereby guaranteeing ADNOC of effective operations and growth. The department informs and educates other departmental heads regarding proper performance appraisal tools and ways of ensuring high performance within all business departments on a day to day basis. In addition, the human resource department also manages employee relations through the establishment of informal and formal employee counseling, managing corporate employees’ medical insurance and processing relevant letters for the workforce. Furthermore, the human resource department is responsible for the generation of relevant reports such as employee evaluation reports, monthly and annual recruitment reports, appraisal reports and remuneration reports (Armstrong 27). Ultimately, the human resource department also administers ADNOC’s employee exit formalities such as ensuring that employee firing procedures conform to statutory requirements. In massive organizations such as ADNOC, there is also a need for the injection of new blood in the workforce. Therefore, when the organization fires obsolete employees to make room for up to date personnel, the human resource department is responsible for processing final settlements. Problems Faced in the Operations Department Perhaps the greatest problem faced by ADNOC’s operations department faces a wide array of challenges or problems. These problems include technological problems in terms of acquiring sufficient technologies to ensure that the company locates and exploits all the available oil and gas reserves in the nation. Currently, the company exploits only small pockets of gas and oil reserves considered too small for commercial exploration (Ulrich 36). However, when combined, these reserves present immense opportunities for the enhancement of ADNOC’s operations (Haan 104). Current technologies available to ADNOC disallow its exploration of all small albeit lucrative oil and gas reserves. In addition, the cost of acquiring the latest technology, maintaining and running organizational operations using such technologies is quite inhibitive. The short lifespan of a large number of technological innovations further worsens this problem. ADNOC has to acquire the latest technologies to sustain its relevance in the industry. Taking into account today’s changing environment in which customer needs change rather constantly, ADNOC’s operation department also faces the challenge of shifting customer trends. The rapidly shifting nature of people’s likes, references, dislikes, lifestyles and opinions are considerable challenges to the organization. People and institutions are currently shifting away from oil fuel and petrol-based substances towards cleaner fuels such as ethanol. Customers are also shifting towards the minimization of their carbon footprint by consuming and using products with minimal carbon emissions. As a consequence, ADNOC will in the near future experience lower purchases than it boosts of presently (Legge 72). Moreover, ADNOC faces the common problem of unstable oil prices, which constantly affects oil producing companies. The prices of crude oil and natural gas are constantly changing placing ADNOC in a precarious situation since it cannot effectively plan its future operations. Solutions The aforementioned problems have the capacity to cripple ADNOC’s operations, either on the short run or long term. However, it is pertinent that the organization takes account of its present and future problems and establishes viable solutions. One of the most momentous challenges encountered by ADNOC is its technological challenge. Rather than constantly incurring the cost of purchasing and maintaining technologies, which prove relatively unstable, ADNOC should invest in an intensive innovation initiative aimed at the creation of a single technology capable of realizing diverse results. For instance, the organization should invest in technologies that allow its exploration and production of oil and natural gas products from small reserve pockets. The establishment of a well-organized innovative department is a viable solution to the organization’s serious problems regarding changing technologies. Although the initial cost of establishing the innovation department is relatively high, its benefits ultimately outweigh the costs (Trance 18). In the long term, the organization will enjoy immense benefits such as saving on costs of changing technologies. Although ADNOC does not have any control over the stability of economies across the globe, the organization can institute radical changes to its operations to ensure its ability to anticipate adverse shifts in oil prices. Anticipating changes in the global oil and gas prices will allow ADNOC to make proper adjustments to its prices thereby deter the incident of losses. Essentially the organization will enhance its risk management strategies. On the other hand, the organization should tailor its product offerings to changes in customer demands (Legge 109). Customers are becoming increasingly concerned about the environment and seek products that are environmentally friendly. ADNOC should redefine its product strategy to encompass environmentally friendly products such as ethanol fuel, as well as other clean fuels. Conclusion The UAE boosts of a massive expanse of oil and gas reserves that supply the country other nations with ample quantities of gas and oil products. Abu Dhabi National Oil Company is the UAE’s largest oil producing company and the fourth largest across the globe. The state-owned oil producing company conducts operations both within and without the UAE. This paper has examined the operations, departments and business of Abu Dhabi National Oil Company discussing the organization’s main operation departments (Giacomo 96). Notably, despite its impressive business capacity, Abu Dhabi National Oil Company still faces a number of challenges, which threaten to cripple its operations. One of the most prominent problems is the organization’s inability to forecast future changes owing to the constantly changing nature of the global economic environment. In addition, the organization has to change its technologies regularly owing to the ever changing nature of technologies relevant to the organization’s operations. ADNOC’s departments ensure its effective operations allowing the organization to remain relevant in the global oil production industry. ADNOC effectively captured a large proportion of the oil market thereby enhancing its revenue and profitability levels, which are vital for the sustenance of all its departments. The purpose behind most of the Abu Dhabi National Oil Company’s departments is to ensure effective investigation, production and supply of oil and gas products (Ulrich 61). Notably, the company’s segmentation strategy is quite effective since the different departments all for the effective functioning of the organization as a single, effective unit. Summary In summary, Abu Dhabi National Oil Company launched its business in the year 1971 with an intention to explore, produce and distribute oil and natural gas products to the UAE and other nations globally. The organization’s businesses comprise of upstream and downstream operations, which entail among other s exploration and production, refining, supplying, marketing and transporting the organization’s rich array of products, which include crude oil, natural gas, lubricants, greases and oils. ADNOC’s departments allow the effective conduct of the aforementioned operations. These departments include the gas processing department, marketing and refining department, production and exploration, chemical and petrochemical department, service, finance, human resource and distribution departments. However, all these departments operate under the management and operation of the organization’s operations department, which is in charge of ADNOC’s day to day business operations (GulfNews 1). The operations department is in charge of controlling a number of crucial departments that include human resources, distribution, marketing and exploration and production. The problems identified in this paper deter ADNOC from attaining its full potential. However, the mitigating solutions offered are effective in countering these problems. Works Cited Abdelkarim, A. U.A.E. Labor Market and Problems of Employment of Nationals, an Overview and Policy Agenda: Research Report 1. TANMIA: Center for Labor Market Research and Information, 2001. Print. Armstrong, M. A Handbook of Human Resource Management Practice. 10th ed. London: Kogan Page, 2006. Print. Giacomo, L. The Oil Companies and the Arab World. London: Croom Helm, 1984. Print. GulfNews. “ADNOC in deal with Saudi firm.” GulfNews. n.d. 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