The Key Suppliers of Lubricants Worldwide - Assignment Example

? ADNOC DISTRIBUTION Contents Company Preview 2 Prodcts and Services 2 ADNOC – Vision and Mission 3 ADNOC The Organization 4 Strategic Planning and External Factors 5 POLITICAL FACTOR- Nationalization 5 NATURAL DISASTER - Hurricane Katrina 6 ECONOMIC FACTOR – Internal Use Growth in producing countries 7 COMPETITIVE FACTOR – Electric Vehicles 7 ADNOC INITIATIVES 8 References 10 Company Preview ADNOC Distribution is an integrated energy company with 5,500 employees and revenue of more than US $3 billion. ADNOC Distribution was founded in October 1973 and distributes and markets petroleum products and services within the United Arab Emirates and internationally. It is one of the largest and innovative government-owned petroleum companies in the Arab Gulf. ADNOC Distribution is renowned for its exceptional service and its products boasts of exceptional quality. Prodcts and Services LUBRICANTS ADNOC Distribution is one of the key suppliers of lubricants worldwide. The lubricants manufactured, marketed and distributed by ADNOC varies from engine oils, industrial, marine and hydraulic lubricants, and highly specialized oils and greases. As with all products, ADNOC’s lubricants are formulated to meet the highest quality level as prescribed by the international bodies such as international institutions such as the American Petroleum Institute (API), the US Military Authorities, the British Defense Force (DEF/STAN) and the Committee of European Engine Manufacturers (CCMC). ADNOC Distribution has operated a state-of-the-art lubricants testing, blending and packaging plant since 1979. ADNOC Distribution’s lubricant operation is regarded as one of the best blending and packaging plants in the region. AVIATION SERVICES ADNOC Distribution supplies fuels and services, to the aviation industry. This service is facilitated by its access to an extensive network of production and refinery facilities.  This is further supported by ADNOC’s efficient and reliable network. ADNOC’s commitment to quality stands out in this service as it complies with International Aviation Operations Standards, as well as Aviation Equipment and Design Standards through a Technical Agreement between ADNOC Distribution and ExxonMobil. GASOLINE AND NATURAL GAS ADNOC Distribution offers number of top quality grades of gasoline, including Super Gasoline and Green Unleaded. Customers can choose from a full range of octane levels, through its service stations. ADNOC also offers other vehicle services in its service stations. In 2000, ADNOC added Oasis Convenience Stores facility in its service stations, to provide value-addition. ADNOC has also recognized growing consumer interest in cleaner and environmental friendly fuels such as natural gas. ADNOC is in the process of developing a comprehensive network of natural gas pipelines throughout the city of Abu Dhabi, which will ensure a reliable delivery method directly to consumer’s homes and offices. (ADNOC Distribution Website) ADNOC – Vision and Mission The falcon in the emblem of ADNOC represents its noble vision of confidence, leadership, reliability, pride, alertness, responsiveness, and dynamism. As stated in its Mission statement (ADNOC Distribution Company Profile 2007: pp27) – ADNOC Distribution’s mission is to become the region’s leader in the marketing and distribution of refined petroleum products and associated services through: • Respected earnings for our shareholders. • Service excellence to our customers. • Development and involvement of employees. • Operational excellence in our business processes. To achieve our mission, we will constantly seek growth opportunities while respecting our core values and business ethics. ADNOC The Organization ADNOC is organized under a General Manager, into three separate divisions of Commercial, Operations and Service Support, each headed by an Assistant General Manager. While the Commercial division includes Sales & Marketing, Public Relations and Call center, Operations include HSE (See later ADNOC initiatives), Service station and natural gas operations. The support division is especially important as it handles Human Resources (HR), Information Technology (IT), Finance, Strategic Planning and Internal Audit. Human resources are separated into two broad categories of – Manpower planning and Recruitment Employee relationship and compensation Training IT department provides all IT related requirements for the organization. It is divided in 3 groups – Application development Infrastructure and Data center management Network and support Finance department is responsible for financial control, financial data analysis and reporting, Accounting and payroll while internal audit is responsible for financial governance in the organization. Strategic Planning although is a small department, it is very much important in the organization, as this division is responsible for providing guidance to the business, based on its analysis of data, external factors which influence the business. (See ADNOC – Strategic Planning and External factors). As has been stated, all these support functions need to act in coordination, to support the organization’s business objectives and achieve goals set up by the organization. While strategic planning help forecast demand, supply, risks, this translates into manpower requirements, which is planned and procured through HR. Strategic planning also provides input to Finance, as regards market and its factors, this assists in financial forecasting and any safeguards need to minimize losses. IT acts as the enabler for smooth flow of information, and support in terms of infrastructure requirements. Any new direction, the company undertakes at a Strategy planning meeting, needs to be executed by the other support divisions. Strategic Planning and External Factors Like all industries Oil and natural gas industry is influenced by many external factors, which needs to be taken into account in strategic planning. The external factors can be broadly categorized into 5 which are – political, economic, social, technological and competitive. (Manalastas, 2009) In this section, we discuss some instances of these external factors and their influence in oil business. POLITICAL FACTOR- Nationalization One of the major political factor which has an impact in the oil and natural gas industry is nationalization following mismanagement of oil resources. Due to the overall instability of supply, oil became an instrument of foreign policy for oil-exporting countries (Morse, 1999). One of the best examples of the same is Nigeria. Nigerian oil production is managed by, the National Nigerian Supply Company (NNSC). While oil production proceeded, the region by the 1990s was one of the least developed and most poor. The local communities responded with protests and successful efforts to stop oil production in the area if they did not receive any benefit. By September 1999, about 50 Shell workers had been kidnapped and released. Not only are the people of Nigeria affected, but the environment in the area is also affected by deforestation and improper waste treatment. Nigerian oil production also faces problems with illegal trade of the refined product on the black market. This is undertaken by authorized marketers in collusion with smuggling syndicates.[ Activities such as these severely affect the oil industries of both the state and MNCs. Oil production deferments arising from community disturbances and sabotage was 45mm barrels in 2000 and 35mm barrels in 2001. The state has not been a very effective means of controlling incursions such as these. The illegal oil economy in such a circumstance may continue to exist for a long time, albeit in curtailed and small scales. (Ikelegbe 2005) NATURAL DISASTER - Hurricane Katrina In August 2005, Hurricane Katrina hit the Gulf Coast of Mexico which had a major impact in the oil production in US. At that point of time, one tenth of the country’s crude oil and almost 50% of gasoline used in US came from the refineries from the area hit. Also another 24% of natural gas is extracted from that region. Corresponding power outage also disrupted distribution. Due to fears that the production of oil in the United States will be cut by up to one-third of normal capacity, the price of oil fluctuated greatly. There were many reports to Louisiana authorities and elsewhere of price gouging, not only for gasoline, but also for other needed items such as bottled water. In some areas, gasoline was being sold for as much as $6 per gallon ($1.59 per liter). Just before the storm, average fuel prices were approximately $2.50 per US gallon ($0.66/L). International oil prices also rose. In the United Kingdom, pump prices for unleaded petrol (gas) hit ?1 per litre ($7 per U.S. gallon) for the first time in a significant number of places (averaging about 95p), a rise of about 3% from pre-Katrina prices. Wholesale prices were up 5% by September 6. (BBC 2005) ECONOMIC FACTOR – Internal Use Growth in producing countries In addition to high oil prices, from year 2000 volatility in the price of oil has increased notably and this volatility has been suggested to be a factor in the ongoing financial crisis which began in 2008 (65). Some analysts point out that major oil exporting countries are rapidly developing; and because they are using more oil domestically, less oil may be available on the international market. This effect, , could significantly reduce the oil available for trade and cause prices to continue to rise. Particularly significant are Indonesia (which is now a net importer of oil), Mexico and Iran (where demand is projected to exceed production in about 5 years), and Russia (whose domestic petroleum demand is growing rapidly). (Krauss, 2007) COMPETITIVE FACTOR – Electric Vehicles As there is an uncertainty in oil prices, due to other factors, there is growth in alternate energy vehicles, especially electric cars. This acts as a competitive factor for oil and gas related business. By 2020, more efficient and low-emissive light-duty vehicle technologies could offer a market potential of up to 325 billion euro for Germany, translating to an 29% annual growth of these segments compared to today. Especially hybrid-electric vehicles could, depending on the price of oil, reach a market share of 16-24%, or 27 billion euro. Electric vehicles and plug-in hybrids would also play a vital role in the long term. However, by 2020, the revenues from these two vehicle categories would still be relatively low, at levels of 1-9%, or 20-110 billion euro. The high margin indicated in McKinsey’s study “Competitive factor energy” is a result of unknown oil price scenarios and the rate of technical development. (McKinsey Study 2009) As ADNOC Distribution is in the downstream of the oil industry, any price change directly effects its business, in terms of production, sales and profitability. Most importantly natural disasters are unplanned for events and hence business strategic planning need to have contingency plan to mitigate any risks during such situation. Economic factors are more predictable and there are multiple models available for financial analysis of such situations. In that respect economic factors and its effects in a company like ADNOC is more predictable. Political factors , do not directly impact ADNOC Distributions operations, except it may effect the price of the finished product. ADNOC INITIATIVES ADNOC is committed to Health, safety and Environment (HSE)and as per ADNOC’s company profile, “At ADNOC Distribution, ensuring the health and safety of our staff, clients and facilities is of the utmost priority. We are never satisfied with the status quo when it comes to safety, and are constantly working to improve our existing procedures and security systems. Adnoc Distribution has taken great care to implement the very best international HSE standards throughout its operations, to safeguard our people and property.” (ADNOC Distribution Company Profile 2007: pp27:28). In order to fulfill this commitment, ADNOC assures – Safety at workplace for staff, contractors, clients or anyone associated in ADNOC business. Providing adequate training and seminars to ADNOC personnel on the importance of HSE. Investing in the communities in which it operates by supporting various community activities. ADNOC’s concern on HSE is very influential for its customer base. It sets a good example in making the society cleaner, healthier and better. Training of personnel in these issues also help build morale among employees and that ensures employees strive to make the customer’s happy and thus in turn the organization prosperous. ADNOC’s second initiative on social and cultural front is its recently declared recycling initiative. According to Borouge website - “In recognition of the United Nations Environment Programme’s (UNEP) World Environment Day (June 5), ADNOC-Distribution and Borouge have signed an agreement to provide consumer waste segregation and collection facilities for the purpose of recycling at ADNOC service stations throughout the United Arab Emirates (UAE). “ (Borouge 2010). The programme will also create awareness and highlight the role of society in eliminating litter and handling waste. Borouge is a joint venture between Borealis, a leading provider of chemical and innovative plastics solutions, and the Abu Dhabi National Oil Company (ADNOC), one of the world’s largest oil and gas companies and owner of ADNOC-Distribution. These two initiatives shows concern towards culture and wellness of society, and its commitment to a better environment. References ADNOC Distribution Website, http://www.adnoc-dist.co.ae [Accessed 16-05-2011] ADNOC Distribution Company Profile, Oil & Gas Directory Middle East 2007: pp27-29. Borouge and ADNOC-Distribution initiate a waste collection for recycling programme June 2010, http://www.borouge.com/MediaCentre/Lists/News/DispformCustom.aspx?id=148 [Accessed 16-05-2011] Ikelegbe, Augustine (2005). "The Economy of Conflict in the Oil Rich Niger Delta Region of Nigeria". Nordic Journal of African Studies 14 (2): 208–234. http://www.sweetcrudemovie.com/pdf/njas2005.pdf [Accessed 16-05-2011] Krauss, Clifford (2007-12-09). "Oil-Rich Nations Use More Energy, Cutting Exports". The New York Times. http://www.nytimes.com/2007/12/09/business/worldbusiness/09oil.html. [Accessed 16-05-2011] Manalastas C. Ronald, External Forces that Affect Success, September 2009, http://www.associatedcontent.com/article/2155491/external_factors_in_business_affecting.html?cat=3 [Accessed 16-05-2011] McKinsey study: EVs/PHEVs can help German car industry strive 2009 http://www.cars21.com/content/articles/5120090421.php [ Accessed 16-05-2011] Morse, Edward (1999). "A New Political Economy of Oil?". Journal of International Affairs (The Trustees of Columbia University) 53 (1). https://woc.uc.pt/feuc/course/MRI/2007-2008/Morse - A new political economy of oil.pdf. [Accessed 16-05-2011] Staff Writer. "UK petrol prices continue to rise." BBC News. September 5, 2005 Read More