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A PROJECT ON

“COMPENSATION MANAGEMENT”: “AN ANALYSIS IN RESPECT OF


SALARY WITH 9TH PAY REVISION IN IOCL, GUWAHATI REFINERY”

(Submitted in partial fulfillment of the requirement of Master of Business


Administration, Distance Education, Guru Jambheshwar University of
Science and Technology, Hisar)

RESEARCH SUPERVISOR SUBMITTED BY

Name: Prof. Tushar Kanti Goon Name Of The Student: Debalina Bose

Designation: Professor (H.R) Enrollment No: 08061148171

Specialization:H.R.

Session:2008-10

Directorate of Distance Education

Guru Jambheshwar University of Science & Technology Hisar (India)

1
CERTIFICATE
This is to certify that Ms. Debalina Bose Enrolment No.08061148171 has
proceeded under by supervision on her Research Project Report on
“COMPENSATION MANAGEMENT”: “AN ANALYSIS IN RESPECT OF
SALARY WITH 9TH PAY REVISION IN IOCL, GUWAHATI REFINERY”
in the Specialization area “HR”.

The work embodied in this report is original and is of the Standard expected
of an MBA Student and has not been submitted in part or full to this or any
other university for the award of any degree or diploma. She has completed
all requirements of guidelines for research Project Report and the work is fit
for evaluation.

Signature of Supervisor/Guide (with SEAL)


NAME Prof Tushar Kanti Goon
DESIGNATION Professor
ORGANIZATION NSB SCHOOL OF BUSINESS, New
Delhi
Forwarded by Head/Director of
Study Centre
(With Signature, Name & SEAL)

2
DIRECTORATE OF DISTANCE EDUCATION

GURU JAMBESHWAR UNIVERSITY OF SC & TECH. HISAR

FORMATE FOR RESUME OF SUPERVISOR/GUIDE

1) NAME: Prof. Tushar Kanti Goon

2) DESIGNATION: Professor

3) QUALIFICATION: B.Sc(Hons), MA(Sociology), LLB (Professional) PGD IR & PM,


Qualified UGC Net

4) AREA OF SPECIALIZATION: Human Capital Management, Organization


Behavior, Organization Development, Employee Relations, Cross Cultural & Global
Management, Strategic HRD Assessment Center etc.

5) EXPERIENCE: More than 34 years of Corporate experience with companies like


GAIL (India) limited, New Delhi as GM(HRD) and GM(Mktg); Garden Reach
Shipbuilders & Engineers Limited, Calcutta; Hindustan Fertilizer Corporation Ltd,
Calcutta/New Delhi

6) OFFICIAL ADDRESS: NSB School of Business, B-II/1,MCIE,Delhi Mathura Road,


New Delhi-110044

7) E-MAIL: tushar.goon@nsb.in

I am willing to Supervise Ms DEBALINA BOSE

ENROLLMENT NO: 08061148171

On the Topic: “COMPENSATION MANAGEMENT: “AN ANALYSIS IN RESPECT OF


SALARY WITH 9TH PAY REVISION IN IOCL, GUWAHATI REFINERY”

(SIGNATURE)

With Seal

Countersigned by the Employer with Seal

3
Countersigned by the Director of Study Centre with Seal

DECLARATION
This is to certify that the Project Report entitled “ Compensation
Management”: “AN ANALYSIS IN RESPECT OF SALARY WITH 9TH PAY
REVISION IN IOCL, GUWAHATI REFINERY” is an original work and has
not been submitted in part or full to this or any other university /institution
the award of any degree or diploma.

Signature of the candidate

NAME: DEBALINA BOSE

ENROLLMENT NO: 08061148171

SPECIALIZATION: HR

SESSION: 2008-10

4
ACKNOWLEDGEMENT

I would like to express my vote of thanks to Prof Tushar Kanti

Goon, HR Professor, NSB School of Business, New Delhi, for giving

me this great opportunity of doing a wonderful project on

“Compensation Management”: “AN ANALYSIS IN RESPECT OF

SALARY WITH 9TH PAY REVISION IN IOCL, GUWAHATI

REFINERY” His timely guidance and suggestion has helped me a

lot during the course of my project. Due to his helping hands I was

able to complete my project report.

I would also like to express my vote of thanks to my colic’s and

seniors who has also helped and guided me out to the full extent in

regards to the data collection for my project report.

DEBALINA BOSE

TABLE OF CONTENTS
5
PAGE NO
1) COMPENSATION MANAGEMENT 7-24
2) EXECUTIVE SUMMARY 25
3) REVIEW LITRETURE AND PROBLEM STATEMENT 26
4) INTRODUCTION TO THE COMPANY 27-30
5) HISTORY OF THE COMPANY 31-41
6) OBJECTIVE OF THE PROPOSED STUDY 42
7) RESEARCH METHODOLGY 43
8) SCOPE/RELEVANCE OF PROPOSED STUDY 44
9) GLOBAL SCENERIO 45-109
10) INDIAN OIL CORPORATION LTD IN NORTH EAST
REGION, GUWAHATI REFINERY 110-115
11) DATA INTERPRETATION AND ANALYSIS 116-124
12) FINDINGS OF THE SURVEY 125-128
a) CONCLUSION
b) RECOMMENDATION & SUGGESTION
13) REFERENCE 129
14) APPENDIX 130-132
QUESTIONNAIRE

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TITLE OF THE PROJECT

COMPENSATION MANAGEMENT: “AN ANALYSIS IN RESPECT OF


SALARY WITH 9TH PAY REVISION IN IOCL, GUWAHATI REFINERY”

7
WHAT IS COMPENSATION MANAGEMENT?

Compensation is payment in the form of hourly wages or annual salary combined with benefits
such as insurance, vacation, stock options, etc. that can positively or negatively affect an
employee's work performance.

An ideal compensation management system will help you significantly boost the performance of
your employees and create a more engaged workforce that’s willing to go the extra mile for your
organization. Such a system should be well-defined and uniform and should apply to all levels of
the organization as a general system.. Plus you’ll enjoy clearer visibility into individual
employee performance when it comes time to make critical compensation planning decisions.

With effective compensation management you’ll also enjoy clearer visibility into individual
employee performance when it comes time to make critical compensation planning decisions.
These performance appraisals assist in determining compensation and benefits, but they are also
instrumental in identifying ways to help individuals improve their current positions and prepare
for future opportunities.

Definition

Compensation is a systematic approach to providing monetary value to employees in exchange


for work performed. Compensation may achieve several purposes assisting in recruitment, job
performance, and job satisfaction.

PREFCAE
What is COMPENSATION MANAGEMENT ??????
Human Resource is the most vital resource for any organization. It is responsible for
each and every decision taken, each and every work done and each and every

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result. Employees should be managed properly and motivated by providing best
remuneration and compensation as per the industry standards. The lucrative
compensation will also serve the need for attracting and retaining the best
employees.

Compensation is the remuneration received by an employee in return for his/her


contribution to the organization. It is an organized practice that involves balancing
the work-employee relation by providing monetary and non-monetary benefits to
employees.

Compensation is an integral part of human resource management which helps in


motivating the employees and improving organizational effectiveness.

Components of Compensation System

Compensation systems are designed keeping in minds the strategic goals and
business objectives. Compensation system is designed on the basis of certain
factors after analyzing the job work and responsibilities. Components of a
compensation system are as follows:

Types of Compensation
Compensation provided to employees can direct in the form of monetary benefits
and/or indirect in the form of non-monetary benefits known as perks, time off, etc.

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Compensation does not include only salary but it is the sum total of all rewards and
allowances provided to the employees in return for their services. If the
compensation offered is effectively managed, it contributes to high organizational
productivity.

Direct Compensation

Indirect Compensation
Need of Compensation Management

 A good compensation package is important to motivate the employees to


increase the organizational productivity.
 Unless compensation is provided no one will come and work for the
organization. Thus, compensation helps in running an organization effectively
and accomplishing its goals.
 Salary is just a part of the compensation system, the employees have other
psychological and self-actualization needs to fulfill. Thus, compensation
serves the purpose.
 The most competitive compensation will help the organization to attract and
sustain the best talent. The compensation package should be as per industry
standards.

Strategic Compensation
Strategic compensation is determining and providing the compensation packages to the
employees that are aligned with the business goals and objectives. In today’s competitive
scenario organizations have to take special measures regarding compensation of the employees
so that the organizations retain the valuable employees. The compensation systems have changed
from traditional ones to strategic compensation systems.

What is COMPENSATION MANAGEMENT?????

10
Compensation is payment in the form of hourly wages or annual salary combined with benefits
such as insurance, vacation, stock options, etc. that can positively or negatively affect an
employee's work performance.

An ideal compensation management system will help you significantly boost the performance of
your employees and create a more engaged workforce that’s willing to go the extra mile for your
organization. Such a system should be well-defined and uniform and should apply to all levels of
the organization as a general system.. Plus you’ll enjoy clearer visibility into individual
employee performance when it comes time to make critical compensation planning decisions.

With effective compensation management you’ll also enjoy clearer visibility into individual
employee performance when it comes time to make critical compensation planning decisions.
These performance appraisals assist in determining compensation and benefits, but they are also
instrumental in identifying ways to help individuals improve their current positions and prepare
for future opportunities.

Definition

Compensation is a systematic approach to providing monetary value to employees in exchange


for work performed. Compensation may achieve several purposes assisting in recruitment, job
performance, and job satisfaction.

Types of Compensation Management


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Direct Compensation:
Direct compensation refers to monetary benefits offered and provided to employees in return
of the services they provide to the organization. The monetary benefits include basic salary,
house rent allowance, conveyance, leave travel allowance, medical reimbursements, special
allowances, bonus, Pf/Gratuity, etc. They are given at a regular interval at a definite time.

Basic Salary

Salary is the amount received by the employee in lieu of the work done by him/her for a
certain period say a day, a week, a month, etc. It is the money an employee receives from
his/her employer by rendering his/her services.

House Rent Allowance

Organizations either provide accommodations to its employees who are from different state
or country or they provide house rent allowances to its employees. This is done to provide
them social security and motivate them to work.

Conveyance

Organizations provide for cab facilities to their employees. Few organizations also provide
vehicles and petrol allowances to their employees to motivate them.

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Leave Travel Allowance

These allowances are provided to retain the best talent in the organization. The employees
are given allowances to visit any place they wish with their families. The allowances are
scaled as per the position of employee in the organization.

Medical Reimbursement

Organizations also look after the health conditions of their employees. The employees are
provided with medi-claims for them and their family members. These medi-claims include
health-insurances and treatment bills reimbursements.

Bonus

Bonus is paid to the employees during festive seasons to motivate them and provide them the
social security. The bonus amount usually amounts to one month’s salary of the employee.

Special Allowance

Special allowance such as overtime, mobile allowances, meals, commissions, travel


expenses, reduced interest loans; insurance, club memberships, etc are provided to
employees to provide them social security and motivate them which improve the
organizational productivity.

INDIRECT COMPENSATION

ndirect compensation refers to non-monetary benefits offered and provided to employees in lieu
of the services provided by them to the organization. They include Leave Policy, Overtime
Policy, Car policy, Hospitalization, Insurance, Leave travel Assistance Limits, Retirement
Benefits, Holiday Homes.

Leave Policy

It is the right of employee to get adequate number of leave while working with the organization.
The organizations provide for paid leaves such as, casual leaves, medical leaves (sick leave), and
maternity leaves, statutory pay, etc.

Overtime Policy

Employees should be provided with the adequate allowances and facilities during their overtime,
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if they happened to do so, such as transport facilities, overtime pay, etc.

Hospitalization

The employees should be provided allowances to get their regular check-ups, say at an interval of
one year. Even their dependents should be eligible for the medi-claims that provide them
emotional and social security.

Insurance

Organizations also provide for accidental insurance and life insurance for employees. This gives
them the emotional security and they feel themselves valued in the organization.

Leave Travel

The employees are provided with leaves and travel allowances to go for holiday with their
families. Some organizations arrange for a tour for the employees of the organization. This is
usually done to make the employees stress free.

Retirement Benefits

Organizations provide for pension plans and other benefits for their employees which benefits

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them after they retire from the organization at the prescribed age.

Holiday Homes

Organizations provide for holiday homes and guest house for their employees at different
locations. These holiday homes are usually located in hill station and other most wanted holiday
spots. The organizations make sure that the employees do not face any kind of difficulties during
their stay in the guest house.

Flexible Timings

Organizations provide for flexible timings to the employees who cannot come to work during
normal shifts due to their personal problems and valid reasons.

IMPORTANCE OF COMPENSATION

Compensation and Reward system plays vital role in a business organization. Since, among
four Ms, i.e. Men, Material, Machine and Money, Men has been most important factor, it is
impossible to imagine a business process without Men. Every factor contributes to the
process of production/business. It expects return from the business process such as rent is the
return expected by the landlord, capitalist expects interest and organizer i.e. entrepreneur
expects profits. Similarly the labour expects wages from the process.

Labour plays vital role in bringing about the process of production/business in motion. The
other factors being human, has expectations, emotions, ambitions and egos.

Labour therefore expects to have fair share in the business/production process. Therefore a
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fair compensation system is a must for every business organization. The fair compensation
system will help in the following:

o An ideal compensation system will have positive impact on the efficiency and results
produced by employees. It will encourage the employees to perform better and
achieve the standards fixed.

o It will enhance the process of job evaluation. It will also help in setting up an ideal
job evaluation and the set standards would be more realistic and achievable.

o Such a system should be well defined and uniform. It will be apply to all the levels of
the organization as a general system.

o The system should be simple and flexible so that every employee would be able to
compute his own compensation receivable.

o It should be easy to implement, should not result in exploitation of workers.

o It will raise the morale, efficiency and cooperation among the workers. It, being just
and fair would provide satisfaction to the workers.

o Such system would help management in complying with the various labor acts.

o Such system should also solve disputes between the employee union and
management.

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o The system should follow the management principle of equal pay.

o It should motivate and encouragement those who perform better and should provide
opportunities for those who wish to excel.

o Sound Compensation/Reward System brings peace in the relationship of employer


and employees.

o It aims at creating a healthy competition among them and encourages employees to


work hard and efficiently.

o The system provides growth and advancement opportunities to the deserving


employees.

o The perfect compensation system provides platform for happy and satisfied
workforce. This minimizes the labour turnover. The organization enjoys the stability.

o The organization is able to retain the best talent by providing them adequate
compensation thereby stopping them from switching over to another job.

o The business organization can think of expansion and growth if it has the support of

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skillful, talented and happy workforce.

o The sound compensation system is hallmark of organization’s success and prosperity.


The success and stability of organization is measured with pay-package it provides to
its employees.

COMPENSATION MANAGEMENT: SUCCESS FACTORS


Many of today's senior executives name pay-for-performance as the most critical
tool in achieving the greatest financial results at their companies. But,
implementing real, pay-for-performance is easier said than done. SuccessFactors
makes it easy for you to quickly and easily implement a powerful pay-for-
performance strategy. By rewarding great execution, you will better retain your top
talent and drive organizational performance that exceeds all expectations. Plus,
you'll enjoy clearer visibility into individual employee performance when it comes
time to make critical compensation planning decisions.
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• True pay-for-performance culture improves retention.
Employees who outperform their peers will be rewarded
appropriately, feel valued and happy—and more likely to
stay with your company.
• Ongoing compliance. Design your compensation strategy
with objective data and communicate it to managers to stay
within allocated budgets and to employees to show the clear
link between compensation and performance expectations.
• Budget optimization. Run "what-if" scenarios and instantly
see how increasing merit pay to your best employees would
impact your budget.
• Cost savings. Eliminate thousands of dollars from your
expense column each year by making sure you're not
overpaying low performers. Also, the easy-to-use automated
system will save compensation managers time and money.
• Zero error system. Manage your compensation in a secure
environment with streamlined workflows where your data is
determined via calculation and eligibility engines—
eliminating privacy breaches and human calculation errors.

Human Resources Management - Benefits & Compensation


In a sluggish economy, compensation system gets a new focus by rewarding star performers
more than the rest of the pack 3-P Compensation: Pay for Performance In this
article we look at how an organization develops a motivating and rewarding incentive plan. An
executive perspective on employee benefits Executives say employee benefits
help companies compete but have an incomplete understanding of benefits and how they
perform. Results of a McKinsey Survey. pdf-file. 2006. Article starts at page 12 An
Overview of Recent Trends in Incentive Pay Programs This article
examines recent trends and developments in an increasingly popular HR practice--incentive pay
programs. Pdf-file Analyzing Compensation Data Guide describes three approaches
that Federal contractors may use to analyze their compensation systems; analyses may be useful

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in determining if there are patterns of discrimination in the workforce; focus is on analyses of
salaries or wages, procedures can be used to analyze other forms of compensation as well. TOP
Are Higher Pay Increases Necessarily Better? This study investigated the
relationship between pay increase percentages and pay satisfaction among 118 MBA students
and found that pay satisfaction had the largest increase between three percent and seven percent
and appeared to level off between seven percent and eleven percent, suggesting that there may be
a point at which high pay increases may not necessarily lead to more satisfaction. In addition, it
was found that pay increases between six and eight percent are the minimum amounts needed for
pay increase satisfaction. Finally, we suggest that employees may not need as high of a pay
increase to experience satisfaction with their pay increase when providing those employees with
a signal, such as an average pay increase. pdf Building a Better 401(k) 401(k) plan
sponsors are taking steps to make their plans more attractive to employees in 2003. January 2003
Compensation Planning: The Key to Profitability This book can help brokers
create effective individual company compensation plans by giving them a better understanding of
how changes to existing compensation schedules affect the company finances as a whole. Pdf-
file 3.6 MB Compensation Plans An overview, article provided by Salary Source
Explaining Executive Compensation Managerial Power vs. the Perceived Cost of
Stock Options. Working Paper. Pdf-file Glossary Of Employee Benefit Terms Is Your
Long-Term Incentive Plan Really Performance-Based? Long-term incentive
plans (LTIPs) typically provide the largest component of senior executives’ compensation, most
often through one or more of three equity-based types: stock options, restricted stock, and what
are often called performance shares.

This article focuses on performance shares, an increasingly common form of performance-based


LTIPs, and their importance as a major component of executive pay. We believe that
performance shares establish the strongest link in tying compensation to performance. The article
also presents data on the increasing prevalence of these types of plans. pdf

Labor Statistics Extensive compilation of statistics and data Misc. Issues Overview
on some compensation- and benefits-related issues: pay equity, variable pay systems, stock
plans, retirement plans, health and welfare plans, paid time off, government mandated benefits
Offer a Choice of Compensation Plans to Gain a Competitive
Advantage pdf-file 2003 Organizational Pay Mix The Implications of Various
Theoretical Perspectives for the Conceptualization and Measurement of Individual Pay
Components. Pdf-file Organization-wide Broad-based Incentives: Rational
Theory and Evidence Despite the widespread use ofincentive pay, there is limited

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evidence about what factors influence its organization-wide, broad-based application. Pdf-file
Paying for Performance: An Overlooked Opportunity Sales force
deployment and compensation are among the most powerful means a company has to improve
growth, market share, and profitability. Yet few companies take the time to align their payout
systems with current strategy. The author explains how to design a successful compensation plan
that is precise, fair, and simple. pdf-file Performance based Pay The Value of
Performance-Based Pay in the War for Talent, pdf-download version Performance
Standards in Incentive Contracts Research in incentives has focused on
performance measures and pay-performance sensitivities but has largely ignored the
“performance standard,” which generates important incentives whenever plan participants can
influence the standard-setting process. Working paper. pdf-file Promise and Peril in
Implementing Pay for Performance: A Report on Thirteen Natural
Experiments Despite the popularity of pay for performance programs, very little research
has examined the dynamics and dilemmas associated with implementing these programs. We
studied the implementation of thirteen experiments in pay for performance that were initiated by
local management in a high-commitment company (Hewlett Packard). We examined Hewlett
Packard documents and interviewed managers to understand their experience with implementing
these programs. Managers reported a relatively unfavorable cost-benefit assessment of programs
and difficulty in designing and maintaining them, especially in a fast changing business
environment. Managers at each site eventually concluded that they could attain greater
performance benefits through alternative managerial tools like effective leadership, clear
objectives, coaching or training, and therefore discontinued their pay for performance programs.
Finally, we discuss implications for management and for future research.

COMPENSATION MANAGEMENT : SALARY NEGOTIATION

Compensation management chapter contain wage and salary aspect. The word salary applies to
compensation that is uniform from one period to the next and does not depend upon the number
of hours worked.

Compensation Management Objectives:

Wage, Compensation and their administration

Job Satisfaction

Labour and Wage Theories

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Classification of Wages

Machinery for fixing wages

Job Evaluation

Objectives of job evaluation and methods of evaluation

Promotions and transfers

Wage and Salary Administration:

The term compensation management is the alternative of wage and salary administration. Wage
word is commonly used for those employees whose pay is calculated according to the number of
hours worked. The concept of wage came from capitalist before it in the Jamindari system the
concept of wage was in the slaves form. Salary applies to compensation that is uniform from one
period to the next and does not depend upon the number of hours worked. When we got for job
definition we found that job is defined as a collection or aggregation of tasks, duties, and
responsibilities that, as a whole, is regarded as the reasonable assignment to an individual
employee. Job is known as impersonal however position is known as personal. Job always
contains a position which defines some set of works.

Job Satisfaction

Job satisfaction depends on the situations and environment of work atmosphere. According to the
MBA Book MB 0027, “Job satisfaction is determined by a set of personal and job factors,
personal factors relate to worker’s age, length of service, intelligence, skill, and other personality
or temperamental factors.

About the Job Evaluation British Institute of Management has defined “job evaluation as the
process of analysis and assessment of jobs to ascertain reliably their relative worth, using the
assessment as a basis for a balanced wage structure.”

“Job analysis is the process of getting information about jobs; specifically, what the worker does;
how he gets it done; why he does it; skill, education and training required; relationships to other

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jobs; physical demands and environmental conditions”.

On the job evolution methods we can include some aspects:

Ranking methods

Grade Description Method

Point Method

Factor-Comparison Method

Time-Span Method

Guide-Chart Profile Method

Pigors & Meyers give a unique definition of promotion which is, “the advancement of an
employee to a better job – better in terms of greater respect of pay and salary. Better houses of
work or better location or better working conditions-also may characterize the better location or
better working conditions-also may characterize the better job to which an employee seeks
promotions, but if the job does not involve greater skill or responsibilities and higher pay, it
should not be considered a promotions.”

On the Subject of Transfer Pigors and Mayers also writes, “the movement of an employee from
one job to another on the same occupational level and at about the same level of wages or
salary.”

In the end of the chapter we can say that Compensation Management deals not only salary and
wages but also job analysis and job satisfaction.

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EXECUTIVE SUMMARY

In the scenario of competitive business environment, it has become


important for a management student to equip himself/herself with the practical
exposure of the corporate world. It was great privilege for me to understand the
practical HR aspects learnt in our college classroom at Indian Oil Corporation,
Guwahati.

In regards to this project I was asked to analyse the compensation package in an


Oil Industry in respect to 9th pay revision. It was analyzed that the employees were
fully satisfied in respect to their increment in their salary package.
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An online interview and telephonic interview was being conducted and
questionnaire was being distributed accordingly.

The feedback of the respondents was being up to mark and a positive response was
being carried out.

Review of literature and Problem Statement


If anyone of you used compensation management in SAP HR version 4.7 extension one or
earlier, you will know in the old version, the compensation statement is called “Total
Compensation Statement”. In the new Enterprise Compensation Management, it is now called
“Compensation Review Statement”.

To configure the SAP Enterprise Compensation Review Statement, you would need to access it
in the configuration IMG @ SPRO -> Personnel Management -> Enterprise Compensation
Management -> Compensation Statement.

You first have to define what to include in the Compensation Review Statement for calculation.
You will do this at the “Determine Structure for Total Compensation Statement”. The next piece
is to determine what wage types contain the values you tell it to include in the “Select Wage
Type for Pay Category”.

At the “Create Form For Total Compensation Statement”, you will be working with Smartform
to design the layout of the form used when printing the statement. Enterprise Compensation

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Statement uses the form “HR_ECM_CRS”, no to be confused with “HR_CMP_TCS” used by
the old Compensation Management.

After you completed the first 3 steps outlined above, the 4th step is where the confusion begins. In
the old Compensation Management, you could determine what form to used by the “Total
Compensation Statement” report through an entry in T77S0. If you are access it via the IMG, it is
called “Determine Standard Form For Total Compensation Statement”. The problem is, this
exact structure is available in both the Enterprise Compensation Management and the old
Compensation Management. It is pointing to the exact same entry.

In the Compensation Review Statement (Program: RHECM_PRINT_CRS, Transaction:


PECM_PRINT_CRS), used by Enterprise Compensation Management, SAP hardcode in what
form to use, which is HR_ECM_CRS in their code. So you CAN NOT select what form to use if
you happen to design your own form.

Due to this, you are stuck between a rock and a hard place. If you are implementing SAP, you
will hear numerous times not to change standard SAP code and always make a “Z” copy of what
you want to change and use the “Z” version. In this case, you would have to modify one of the
two standard codes. You have to either modify the include statement in the
RHECM_PRINT_CRS code to remove “NO-DISPLAY” in the selection parameter to allow the
selection screen to show what form it is defaulting and have the user select the right form.
Another option is to change the default form from HR_ECM_CRS to whatever “Z” form you
created.

The second method is to not change the standard program code, but go ahead and modify the
HR_ECM_CRS form. Make a copy of it to “Z” to be used as backup, but use the main
HR_ECM_CRS as being the main form you’ve modified.

INTRODUCTION TO THE COMPANY :

INDIAN OIL CORPORATION LIMITED


==================================================
=======

Incorporated in 1959, Indian Oil Corporation Limited is a wholly


Government-owned company registered under the Companies Act,
1956. It came into existence on 1st September, 1964 as a result of
amalgamation of the erstwhile Indian Refineries Ltd, and Indian Oil
Company and has its registered office at Mumbai.

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The Corporation is managed by Board of Directors appointed by the
President of India. Besides the Chairman, the board has the following
whole time Directors:

1. Director (Refineries)

2. Director ( Pipelines)

3. Director (Marketing)

4. Director (Finance)

5. Director (HR)

6. Director (R & D)

7. Director (P&BD)

The working of Corporation's five Divisions, namely

(i)Refineries Division,

(ii) Marketing Division

(iii) Pipelines Division

(iv) R&D Centre and

(v) Assam Oil Division are co-coordinated by a full-time Chairman.

These four Divisions are headed by

Director (Refineries),

Director (Marketing),

Director (Pipelines) and

Director (R&D) respectively.

Director (Refineries) is also the Director In charge of Assam Oil Division.

REFINERIES DIVISION
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With the Head Office at New Delhi, the Refineries Division is the
successor to the erstwhile Indian Refineries Limited which was
incorporated on 22.8.1958 as Private Limited Company and
subsequently amalgamated with the Indian Oil Company Ltd. on
1.9.1964 to form the Indian Oil Corporation Limited having two
Divisions, i.e. Refineries and Pipelines Division and Marketing Division.

The Refineries Division is mainly concerned with the setting up and


operation of Refineries and Petrochemicals in India.

It owns and operates seven Refineries at :

Guwahati (Assam),

Barauni (Bihar),

Vadodara (Gujarat),

Haldia (West Bengal),

Mathura (Uttar Pradesh), and

Panipat (Haryana).

The Assam Oil Division has one Refinery at Digboi and has a network of
marketing set-up. There are two liaison Offices, one each at Kolkata and
Mumbai.

Each Refinery unit is headed by ED/GM who reports directly to Director


(Refineries) and the liaison office at Kolkata and Mumbai is headed by
DGM, who reports to ED (HR).

PERSONNEL & ADMN. DEPARTMENT


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The Personnel, Administration, Management Services, HRD & Training
and Corporate Communication Department at Refineries HQ are headed
by ED (HR) with the following functions under his charge:

 Personnel

 Administration, Welfare & Hindi Implementation

 Training and Development

 Management Services

 Corporate Communication

ED(HR) is assisted in his above functions by GM(A&W),


DGM(Training & Development), DGM(HR), DGM(HRD), CMSM, and
CM(CC) respectively.

The P&A Department at each refinery unit is headed by DGM(HR)/CHRM


who reports to the respective ED/GM.

VISION, MISSION & VALUES

Vision
A major diversified, transnational, integrated energy company, with national
leadership and a strong environment conscience, playing a national role in oil
security& public distribution.

Mission
To achieve international standards of excellence in all aspects of energy and
diversified business with focus on customer
delight through value of products and services, and cost reduction.
To maximize creation of wealth, value and satisfaction for the stakeholders.
To attain leadership in developing, adopting and assimilating state-of- the-
art technology for competitive advantage.
29
To provide technology and services through sustained Research and
Development.
To foster a culture of participation and innovation for employee growth and
contribution.
To cultivate high standards of business ethics and Total Quality Management
for a strong corporate identity and brand equity.
To help enrich the quality of life of the community and preserve ecological
balance and heritage through a strong environment conscience.

Values
Care
Innovation
Passion
Trust
IndianOilPeople...
towards Excellence...

HISTORY OF THE COMPANY

1958
Indian Refineries Ltd. was formed with Mr. Feroze Gandhi as Chairman.

1959
Indian Oil Company Ltd. was established on 30th June 1959 with Mr. S.
Nijalingappa as the first Chairman.

1960
Agreement for supply of SKO and HSD was signed with the then USSR. M.V:
30
"Uzhgorod" carrying the first parcel of 11,390 tonnes of HSD docked at Pir
Pau Jetty in Mumbai on 17th August 1960.

1962
Guwahati Refinery was inaugurated by Pt. Jawaharlal Nehru.

Construction of Barauni Refinery commenced.

1963
Foundation was laid for Gujarat Refinery

Indian Oil Blending Ltd. (a 50:50 Joint Venture between Indian Oil and Mobil)
was formed.

1964
Indian Oil Corporation Ltd. was born on 1st September, 1964 with the
merger of Indian Refineries Ltd. with Indian Oil Company Ltd.

Barauni Refinery was commissioned.

The first petroleum product pipeline from Guwahati to Siliguri (GSPL) was
commissioned.

1965
Gujarat Refinery was inaugurated by Dr. S.Radhakrishnan, the then
President of India.

Barauni-Kanpur Pipeline (BKPL) and Koyali- Ahmedabad product Pipeline


(KAPL) commissioned.

Indian Oil People maintained the vital supply of Petroleum products to


Defense in 1965 War.

1966
The first long-term agreement was signed for harmonious employee
relations.

1967
Haldia Baraurii Pipeline (HBPL) was commissioned.

Bitumen and Marine Bunker business began.

1968
Techno-economic studies for Haldia-Calcutta, Bombay-Pune and Bombay-
Manmad Pipelines submitted to the Government.

31
1969
Indian Oil undertook the marketing of Madras Refinery products.

1970
Indian Oil acquired 60% majority shares of IBP.

The same was offloaded in favor of the President of India under a Directive
in 1972.

1971
Dealership/reservation was extended to war widows, disabled Defense
personnel, Freedom Fighters, etc. after 1971 War.

1972
R&D Centre was established at Faridabad.

SERVO, the first indigenous lubricant was launched.

1973
Foundation-stone of Mathura Refinery was laid by Mrs. Indira Gandhi, the
then Prime Minister of India.

1974
Indian Oil Blending Ltd. (IOBL) became the wholly owned subsidiary of Indian
Oil.

Marketing Division attained a new watershed with a market participation of


64.2%.

1975
Haldia Refinery was commissioned.

Multipurpose Distribution Centers were introduced at 132 Retail Outlets


pioneering rural convenience.

1976
Private petroleum companies nationalized.

Burmah Shell became BPC.

1977
R&D Centre launched Nutan wick stove.

32
1978
Phase-wise commissioning of Salaya-Mathura Crude Oil Pipeline (SMPL)
began.

1979
Barauni Refinery and Bongaigaon Refinery and Petrochemicals Ltd. (BRPL)
affected by Assam agitation.

1980
The second Oil Shock was witnessed as a result of Iranian Revolution. Crude
Oil price flared to a new high of $32 per barrel.

1981
Digboi Refmery and Assam Oil Company's (AOC) marketing operations were
vested in IndianOil. It became Assam Oil Division (AOD) of Indian Oil.

1982
Mathura Refinery was commissioned.

Mathura-Jalandhar Pipeline (MJPL) was commissioned.

1983
Massive augmentation of LPG storage and distribution facilities was
undertaken.

Proposal for the 6 MMTPA Refinery at Karnal was submitted at an estimated


cost of Rs l, 181 Crore.

1984
Taluka Kerosene Depots (TKOs) were commissioned for improved availability
of kerosene in rural and hilly areas in addition to Multipurpose Distribution
Centers.

Foreshore terminal at Kandla Port was commissioned.

Integrated Corporate Planning -ten year Perspective Plan and five year LRP
initiated.

1985
The new office complex for the Registered Office of the Corporation and
33
Head Office of Marketing Division with a total area of 23,110 square meters
was completed.

Additional Coking Unit at Barauni Refinery commissioned.

1986
A new Foreshore Terminal at Madras commissioned.

1987
Test marketing of 5 kg. LPG cylinders began in 1986-87 in Garo Hills and
Kumaon.

1988
DFR of Karnal (Panipat) Refinery was submitted to the Government of India.

1989
Salaya-Mathura Pipeline (SMPL) was suitably modified for handling Bombay
High Crude during winter.

1990
Kandla-Bhatinda Pipeline (KBPL) project was approved.

The first LPG Bottling Plant of Assam Oil DiVision (AOD) at Silcher was
commissioned.

1991
Digboi Refinery Modernization project was initiated.

Bunkering facility at Para dip was completed.

1992
Revamp of Vacuum Distillation Unit at Mathura Refinery was completed.

Two of the Indian Oil Table Tennis players represented the nation at
Barcelona Olympic Games.
1993
New era of Micro-processor based Distributed Digital Control System (DDCS)
replacing the pneumatic instrumentations began in Refineries, in phased
34
manner.
1994
India's First Hydro cracker Unit was commissioned at Gujarat Refinery.

Vision-2000, the Retail Visual Identity programme was launched to upgrade


facilities at Retail Outlets.

1995
1,443 km. long Kandla-Bhatinda Pipeline (KBPL) was commissioned at
Sanganer.

The lndane Home Shoppe was launched.

1996
State-of-the-art LPG Import Terminal at Kandla with a capacity of 6, 00,000
tonnes per annum was commissioned.

1 million metric tonne per annum (MMTPA) new CDU at Haldia Refinery was
executed with in-house supervision.

The first batch of one year International MBA (iambi) programme was
successfully conducted by Indian oil Institute of Petroleum Management
(IIPM).

1997
Commercial production of SERVOIII Titex Grease commenced at the world's
first Titex Plant at Vashi, Bombay.

Business Development received new thrust.

Indian Oil entered into LNG business through Petronet LNG -a JV company.

1998
Panipat Refinery was commissioned.

Haldia, Barauni Crude Oil Pipeline (HBCPL) was completed.

35
The Administrative Pricing Mechanism (APM) was withdrawn from the
Refining Sector effective 1" April 1998. Phase-wise dismantling of APM
began.

Indian Oil Board was reconstituted under the Navaratna concept, with the
induction of five part-time non-official independent Directors.
1999
Indian Hydrocarbon Vision -2025" was announced at PETROTECH-99,
organized by Indian Oil on behalf of the oil Industry.

India attained self-sufficiency in Refining.

Diesel Hydro-desulphurization Units commissioned at Gujarat, Panipat,


Mathura and Haldia Refineries.

Man than -- the IT re-engineering project was launched.

2000
Indian Oil crossed the turnover of the magical mark of Rs l, 00,000 Crore --
the first Corporate in India to do so.

The Indian Oil Foundation -- a non-profit trust -- the first of its kind in
Corporate India, was unveiled to protect, preserve and promote the country's
heritage.

Y2K compatibility achieved.

JNPT Terminal was commissioned.

The Lube Blending Plant at Asotin and the Once through Hydro cracker Unit
at Mathura refinery were commissioned.

Indian Oil entered into Exploration & Production (E&P) with the award of two
exploration blocks to Indian Oil and ONGC consortium under NELP-I.

2001
Digboi Refinery completed 100 years of continuous operation.

Chennai Petroleum Corporation Ltd. (CPCL) and Bongaigaon Refinery and


Petrochemicals Ltd. (BRPL) were acquired.
36
Fluidized Catalytic Cracker Unit at Haldia Refinery was commissioned.

Augmentation of Kandla-Bhatinda Pipeline (KBPL) to 8.8 MMTPA completed.

Eight Exploration blocks awarded to the IndianOilled consortium under NELP-


II.

Two Coal Bed Methane (CBM) blocks awarded to the consortium of Indian Oil
and ONGC under CBM-I.

The investment proposal for Integrated PX/PfA project at Panipat was


approved.

2002
APM dismantled. Pricing of Petroleum products decontrolled.

IBP Co. Ltd. was acquired with management control.

Barauni Refinery expansion project completed.

New generation auto fuels IOC Premium and Diesel Super introduced.

2003
Lanka IOC Pvt. Ltd. (LIOC) launched in Sri Lanka.

Retail operations began in Sri Lanka. Indian Oil became the first Indian
Petroleum Company to begin downstream marketing operations in overseas
market. Lanka IOC became an independent oil company in Sri Lanka

Gasohol, 5% ethanol blended petrol, was introduced in select states.

INDMAX unit at Guwahati Refinery commissioned.

Indian Oil Technologies Ltd. for marketing intellectual properties of R&D


centre was launched.

Foundation Stone of Panipat Refinery Expansion and PX/PTA projects laid.

Maiden LPG supplies to Port Blair

KVSPL (Product) Pipeline commissioned

Concept of XTRA, covering Retail Outlets and customer service, launched


37
SERVO became a Super Brand

Indian Oil named as nodal agency by MoP&NG to undertake research in


the areas of production, storage, distribution and utilization of hydrogen
gas as an alternative fuel.

The foundation stone of Indian Oil’s Panipat Refinery expansion (6 to 12


MMTPA) project and PX/PTA plant (553 TMTPA) project laid at Panipat.

2004
Indian Oil turned a Gas marketer by sale of degasified LNG

Indian Oil Mauritius Ltd.’s 18 TMT state-of-the-arts Oil Storage Terminal at


Mer Rouge commissioned

2004
Lanka IOC Pvt. Ltd. (LIOC) launched in Sri Lanka.

Retail operations began in Sri Lanka. Indian Oil became the first Indian
Petroleum Company to begin downstream marketing operations in overseas
market. Lanka IOC became an independent oil company in Sri Lanka.

Gasohol, 5% ethanol blended petrol, was introduced in select states.

INDMAX unit at Guwahati Refinery commissioned.

Indian Oil Technologies Ltd. for marketing intellectual properties of R&D


centre was launched.

Foundation Stone of Panipat Refinery Expansion and PX/PTA projects laid.


Maiden LPG supplies to Port Blair.

KVSPL (Product) Pipeline commissioned.

38
Concept of XTRA, covering Retail Outlets and customer service, launched.

SERVO became a Super Brand.

Indian Oil Board approves merger of subsidiary IBP with parent company
IndianOil in May.

Indian Oil Mauritius (IOML) terminal inaugurated.

Indian Oil became the only oil PSU in the country to adopt instruments of
risk management in international trading and commerce, derivatives trading
to protect refining margins.

Indian Oil pays the highest-ever dividend of 20% (for fiscal 2003), amounting
to Rs 2453 crore, to shareholders.

Indian Oil signs MoU with IIM (Ahmedabad) to offer one-year Post Graduate
Programmes in Management (Energy) to be conducted at IIPM, Gurgaon.

Indian Oil signs MoU with Haryana government to set up the Rs 6300 crore
Naphtha Cracker & Polymer Complex at Panipat.

R & D Centre bags the prestigious National Technology Award for successful
commercialization of INDMAX technology for conversion of low value heavy
petroleum residues into high value LPG.
Indian Oil moves up by two places to the 189th position in the Fortune
'Global 500' ranking based on fiscal 2003 performance.

Indian Oil’s Rs 1248 crore LAB (Linear Alkyl Benzene) plant, the world's
largest single train kerosene-to-LAB unit, was commissioned at Gujarat,
thus signaling Indian Oil’s entry into petrochemicals business.

Indian Oil signs Memorandum of Collaboration (MoC) with Mahindra &


Mahindra to roll out the country's first hydrogen vehicle in the next two
39
years.

Indian Oil’s 60 km-long Rs 76 crore Panipat Rewari Product Pipeline


commissioned.

Indian Oil signs MoU with Nepal Oil Corporation Limited to lay a product
pipeline between Raxaul (India) and Amlekhganj (Nepal).

The year marked Indian Oil’s entry into gas business. As co-promoter of
Petronet LNG Limited, complete quantity of gas (2.52 MMSCMD) allotted
to Indian Oil was sold out and commercial supplies commenced April 2004
onwards.

Indian Oil was voted as the most trusted petrol pump brand in the
country in a survey of India's most trusted brands conducted by the
Economic Times Brand Equity.

LIOC (Lanka IOC), Indian Oil’s subsidiary, created history on the Colombo
stock exchange as the biggest ever equity issue. LIOC's IPO offering 25%
stake was oversubscribed 11.6 times on the first day itself.

2005

The year marked Indian Oil’s big ticket entry into the high stakes
business of E&P. The Indian Oil and Oil India consortium signed its
Exploration and Production Sharing Agreement (EPSA) with the National
Oil Corporation of Libya for Block No. 86, in the Sirte basin of Libya.

Indian Oil’s Mathura Refinery was the first refinery in India to attain the
capability of producing entire quantity of Euro-III compliant diesel by
commissioning the Rs 1046 crore DHDT (Diesel hydro treating unit). Mathura
Refineries also commissioned India's first MS quantity up gradation unit to
produce Euro-III compliant petrol.

Indian Oil becomes the top oil trading company amongst national oil
companies in the Asia Pacific region for the second consecutive year.

Indian Oil signs a Supply Purchase Agreement (SPA) to procure 1.75 MMTPA
LNG to be received by the last quarter of 2009 at Petronet LNG Limited Dahej
40
terminal.

Indian Oil breached the Rs 150, 000 crore mark in sales turnover by clocking
Rs 150, 677 in turnover in fiscal 2004.

Indian Oil signed a JV agreement with GAIL to enter the city gas distribution
projects in Agra and Lucknow.

Indian Oil allowed by Government of India to charter crude oil ships on its
own instead of going through Tran chart, the chartering wing of the Ministry
of Shipping.

41
Objectives of the proposed study

The main objective of the proposed study was to find out how far the employee has
been satisfied and how far their performance has been improved after the
commencement of 9th pay revision in Indian Oil Corporation Ltd, Guwahati
Refinery. It was necessary to analyze this scenario in Guwahati Refinery as
because prior to the commencement of 9th pay commission in the Indian Oil Sector
the employees were not fully satisfied with their working condition along with the
matching of their payroll. Hindrances and disputes were arising out between the
employers and employees working in this organization.

So it was necessary for a rise in the compensation package in this sector so that the
employees would be satisfied with their performance along with their
compensation package in this organization. So the commencement of 9th pay
commission was implemented in this organization to attain the satisfaction of the
employees in this organization.

Research Methodology
42
In order to know the satisfaction of the employees working in this organization after the
commencement of 9th pay commission one set of Questionnaire was administered to the
employees ( both officers and non officers) working in this organization on the online basis.

I.RESEARCH DESIGN: In order to understand the satisfaction of the Employees after the
commencement of 9th pay commission a brief conversation was done with the employers through
online and a survey was done through online basis.

II. Data Collection through Questionnaire:- Primary data have been collected personally from
the respondents through questionnaire through online survey . The respondent includes both the
officers as well as the non officers of every department working in this organization and analysis
on the basis of their working period that is more than 20 years and less than 20 years. The
respondents have been asked to fill up the questionnaire and more over data collection process
also includes oral interview through online.

III. Sampling Design & Sampling Size: - The elements of research of population or universe of
interest are the peoples both the officers and non officers of every department working in this
organization. The sample size of the study consists of samples, which include a study of 70
respondents out of which 5% are officers and 15% are non officers from every department
working in this organization. In this regards out of 70 samples 40 of the respondants were taken
telephonic interview, 20 were given online questionnaire for the survey and for the rest were
conducted an oral interview.

Scope/Relevance of Proposed Study


43
 RELEVANT AND WIDER SCOPE

 IMPORTANT FOR BOTH EMPLOYERS AND EMPLOYEES TO


KNOW THEIR POSITION IN THE ORGANIZATION

 HELPS IN DISCRIMINATING THE GRADES OF THE


EMPLOYEES

 BUILDS UP A HOSPITALITY BETWEEN THE EMPLOYERS AND


EMPLOYEES

 HELPS IN STOPPING THE DISPUTES ARISING IN THE


ORGANIZATION

 HELPS IN GIVING JOB SATISFACTION TO THE EMPLOYEES

 HELPS THE EMPLOYEES IN MAKING UNDERSTAND THE


IMPORTANCE OF THEIR JOB ROLE

GLOBAL SCENERIO
44
==========================
Introduction to Oil Companies According to the Global
Scenario Context

The effects of global climate change affect every country, but not all are
responsible in the same way of its causes. The response, nonetheless, should
be global, involving as many countries as possible, but taking into account
their development degrees and their priorities and needs. Recognizing that
no individual nation can effectively address a problem of this scope,
governments within the UNFCCC have decided to address this challenge
collectively, fostering collective initiatives to control the enhanced
greenhouse effect, particularly emissions of CO2 from fossil fuel combustion.

Indeed, the problem is very different for the less favored countries with enormous
needs as compared to those who have reached high development levels. The latter
have recently undergone important changes in economic structure, technology and
energy efficiency that make them relatively cleaner countries. However, because of
historic reasons they have contributed to the current environmental problems; so
they bear specific responsibilities. It is not possible to adopt one common standard.

In countries like Mexico, for which international commitments haven´t been set, the
need to take on international commitments, not yet included in the UNFCCC, is
discussed. International political pressure for such commitments will surely occur
considering Mexico's growing involvement in the productive and financial
globalization. In the American continent the most rapid growth in carbon emissions
between 1970 and 1997 was in Mexico (235%) followed by Brazil (220%) and
Argentina (147%).

45
On what basis can cooperation against global warming be implemented? Which role
can international or local actors play, taking into consideration their influence on the
global environment? How can international institutions influence individual choices
in order to make international cooperation less problematic? How to make an
objective differentiation and different countries´ efforts compatible with the search
for equity considering relative development degrees and historic responsibilities?
Those are some of the questions frequently posed in the scientific literature and in
international meetings.

True, global environment protection has been institutionalized step by step


through the establishment of an international regime which began to take
form since the awareness of the impact of global warming and climate
change over natural systems and the humanity increased. The Rio de Janeiro
conference in 1992 and the Kyoto protocol have been important steps
towards that institutionalization, but the path ahead is still long and the
enforcement difficulties abundant.

Last years´ events show that barriers exist to fully integrate the DES
(Development, Equity, Sustainability) and climate change issues into the
sustainable development agenda, but they show opportunities as well. Sorting out
opportunities from challenges is indispensable for the advancement of dialogue,
negotiations and international cooperation. One of the fields where there is no
consensus is in the emphasis that environmental policies must have: command and
control measures or more flexible instruments which give more options and
responsibilities to economic agents.

There is a recent shift, indeed, towards giving a more important place to market
instruments and agent decisions in order to reach environmental objectives and
implement climate change policies. This is the case of the Kyoto Protocol's
international trading system, which has been proposed as a key element of
flexibility, but raises many doubts and criticism, including its relation with equity
issues.

46
The purpose of this paper is to put this shift to market oriented policies and the role
of some important agents as the international oil companies in a broader
perspective.

Oil Companies, Petroleum Companies


Petroleum companies, also known as Oil companies or Oil & Gas companies, have
formed a key part of the global economy for the last decade, since petroleum or
crude oil has become our main fuel source.

Not only have these petroleum companies become amongst the biggest companies
in the world, but thanks to the fundamental importance of this limited resource,
they have also become embroiled in a complex political world of government and
national objectives, international relations - and all too often, outright war.

Oil companies, among the largest employers in the world, cater to the global
energy demand. Their areas of functioning can be grouped into the following:

• Production: This involves the extraction of crude oil from reserves, followed
by its refinement in processing plants.
• Distribution: The daily distribution quota is delivered to various sectors (e.g.
automobiles, agriculture, residential). This is followed by the commercialization of
oil products.

Moreover, administrating their employees who have to work in extreme


temperatures in extended shifts is an important part of the operations of an oil
company.

47
Major Oil Companies of the World

The leading oil companies of the world are:

• The Exxon Mobil Corporation: This American oil and gas corporation is the
progeny of John D. Rockefeller's Standard Oil Company, formed by the merger of
Exxon and Mobil on November 30, 1999. The world's biggest publicly traded
company has its headquarters in Irving, Texas. Its reserves at the end of 2007
were around 72 billion barrels of oil-equivalents (BBOE), which are expected to
last for the next 14 years.
• Royal Dutch Shell plc: It was formed in 1907 when Royal Dutch Petroleum
Company merged with Shell Transport and Trading Company Ltd, UK. The initial
establishment included 60 % Dutch and 40% British shares.
• BP plc: Having its headquarters in London, this company was discovered by
William Knox D'Arcy in May 1908 in the Middle East. It was called the Anglo-
Iranian Oil Company (AIOC) before it became the British Petroleum in 1954. In
1998, it became BP Amoco after merging with Amoco of Indiana. In 2000, it was
renamed BP and adopted the tagline "Beyond Petroleum.”
• Chevron/Texaco Corporation: It was formed after the split of John D.
Rockefeller's Standard Oil Company in 1911 and named SoCal. It was one of the
Seven Sisters that dominated the world oil industry in the early 20th century.
• Conoco Phillips Corporation: Based in Houston, Texas, it was formed by the
merger of Conoco Inc and Phillips Petroleum Company on August 30, 2002. Its
fuel stations are named Phillips 66, Conoco and 76. It is the second-largest
refiner in the US and the fifth-largest in the world, with a processing capacity of
2,208,000 and 2,901,000 bbl/day.

48
The Seven Sisters (the major oil companies of the west that divided world oil among
themselves after WW-II) now control a minor proportion of world reserves. State
monopolies and emerging partially-privatized oil companies hold the major share.

We have listed here the main world, international or global petroleum companies,
by country. The country normally indicates the headquarters location of that
company, although some have multiple headquarters (for example Royal Dutch
Shell is headquartered in both the UK and the Netherlands).

List of Oil Companies

Listed below are the various petroleum companies of the world:

• Assam Oil Company Ltd. (ACL), India


• Abu Dhabi National Oil Company (ADNOC), United Arab Emirates
• Alon USA, United States
• Amerada Hess Corporation, United States
• Anadarko Petroleum Corporation, United States
• Apache Corporation, United States
• Arbusto Energy, United States
• Atlantic Petroleum, Faroe Islands
• BG Group, United Kingdom
• Bharat Petroleum Corporation Limited, India
• BHP Billiton, Australia
• Buzachi Petroleum Operating, Kazakhstan
• BP, United Kingdom
• Cairn Energy, India
• Canadian Natural Resources, Canada
• Chevron Corporation, United States
• Chief Oil and Gas, United States
• Citgo, Venezuela

49
• CNOOC Ltd., China
• ConocoPhillips, United States
• Cosmo Oil Company, Japan
• Crown Central Petroleum, United States
• Cupet, Cuba
• Devon Energy, United States
• Ecopetrol, Colombia
• Enbridge, Canada

• EnCana, Canada
• ENSCO International, United States
• Eni, Italy
• Essar oil ltd., India
• Entreprise Tunisienne d'Activites Petroliere (ETAP), Tunisia
• ExxonMobil, United States
• First Texas Energy Corporation, United States
• Galp Energia, Portugal
• GeoPardazesh - Petroleum Exploration Services Co. Ltd., Iran
• Petronet LNG Limited, India
• Gujarat Gas Co. Ltd., India
• Gujarat State Petroleum Corporation, India
• Gulf Oil, Luxembourg
• Grupa LOTOS, Poland
• Hargeisa Minerals & Resources Company Ltd, Somaliland
• Hellenic Petroleum, Greece
• Hess Corporation, United States
• Hindustan Petroleum Corporation Ltd, India
• Husky Energy, Canada
• IB Daiwa, Japan
• Imperial Oil, Canada

50
• INA - Industrija Nafte, Croatia
• Indian Oil Corporation, India
• Inpex, Japan
• Irving Oil, Canada
• Japan Energy, Japan
• Kaz-Munay Gaz, Kazakhstan
• Karazhanbas Munay, Kazakhstan
• Kerr-McGee, United States

• Koch Industries, United States


• Kuwait German Petroleum Company, Canada
• Kuwait Gulf Oil Company, Kuwait
• Kuwait National Petroleum Company Kuwait
• Kuwait Oil Company, Kuwait
• Kuwait Petroleum Corporation, Kuwait
• LUKoil, Russia
• Marathon Oil Corporation, United States
• Maurel & Prom, France
• Maxol Group, Republic of Ireland
• MedcoEnergi, Indonesia
• Mol Group, Hungary
• Naftna Industrija Srbije, Serbia
• Naftogas of Ukraine, Ukraine
• National Iranian Oil Company (NIOC), Iran
• National Oil Corporation, Libya
• Neste Oil, Finland
• Nexen, Canada
• Nippon Oil, Japan
• NNPC, Nigeria
• Oil Planet International Corp, United States

51
• Northern Resources, Canada
• Oil and Gas Development Company Limited, Pakistan
• Occidental Petroleum, United States
• Oil India Limited, India
• Oman Oil Company (OOC), Oman
• OMV, Austria
• ONGC, India

• PKN Orlen S.A., Poland


• PSO, Pakistan
• Petróleos de Venezuela, Venezuela
• Petroleos Mexicanos, Mexico
• Petroleum Development Oman, (PDO)
• Perenco, France, United Kingdom
• Petro-Canada, Canada
• Petrobras, Brazil
• PetroChina, China
• PetroKazakhstan, Kazakhstan
• Petrom, Romania
• Petron Corporation, Philippines
• PETRONAS, Malaysia
• PETROTRIN, Trinidad and Tobago
• PetroVietnam, Vietnam
• Pertamina, Indonesia
• Polish Oil and Gas Company, Poland
• Plains Exploration & Production Company (PXP), United States
• PTT Public Company Limited, Thailand
• Qatar Petroleum, Qatar
• Reliance Industries Limited, India
• Repsol YPF, Spain

52
• Rompetrol Group N.V., Romania
• Royal Dutch Shell, Netherlands, United Kingdom
• Sagiz Petroleum, Kazakhstan
• San-Ai Oil, Japan
• Santos Limited, Australia
• Sasol, South Africa

• Saudi Aramco, Saudi Arabia (the largest in the world)


• Shell Canada, Canada (subsidiary of Royal Dutch Shell)
• Shell Oil Company, United States (subsidiary of Royal Dutch Shell)
• Sinclair Oil, United States
• Sinopec, China
• Snpc, Congo-Brazzaville
• Sonangol, Angola
• Sonatrach, Algeria
• SPC, Singapore
• StatoilHydro, Norway
• State Oil Company of Azerbaijan, SOCAR Azerbaijan
• Somerset Refinery, United States
• State Oil Company of Suriname, Suriname
• Sunoco, United States
• Suncor Energy, Canada
• Surgutneftegaz, Russia
• Syncrude, Canada
• Talisman Energy, Canada
• Todd Energy, New Zealand
• Total, France
• Tullow Oil, United Kingdom
• United Refining Company, United States
• Vaalco Energy Inc., United States

53
• Wintershall, Germany
• Woodside Petroleum, Australia
• XTO Energy, United States
• YPF, Argentina
• YPFB, Bolivia

A Double Oil Shock Scenario

As far as oil prices are concerned, many scenarios are possible. A jump to
$300 per barrel or more in the near future may be the result of a geopolitical
crisis in Iran, Venezuela, Saudi Arabia or elsewhere. Low price scenarios
seem unlikely today but cannot be completely excluded. Another one which
we consider of interest is a “dual-crisis” or “double-shock”. It would present a
number of similarities with the development observed between 1973 and the
end of the eighties.

It has often been said that the recent rise in prices is not comparable to that
of 1973, the first oil crisis having been triggered by a reduction in supply
whilst the present oil price increase could be attributed to runaway demand.
Note, however, that during the 1960s, worldwide consumption of petroleum
products increased by 7 to 8% annually, but production capacities did not
increase at the same rate. The events associated with the Israeli-Arab
conflict (i.e., the Yom Kippur war) accelerated the rise in prices, but that rise
would most likely have occurred anyway, although spread out over time as it
has been the case since 2000.

In short, the rise in prices over the past few years, as in 1973, reveals the
need for consuming countries to make decisions to promote energy savings
and the development of alternative energy technologies. As in the seventies
54
with the French nuclear program, several steps have already been taken, in
favour of bio-fuels for instance. In spite of growing nationalism and a lack of
opportunities for international oil companies, investment in exploration and
production is increasing. Note, however, that the major part of this increase
in investment is due to the inflation of costs, only a small part corresponds to
an increase in activity.

In the absence of geopolitical events, it is possible that production capacities


will be restored if all development projects are realized as planned. We might
then see a stabilization or an erosion of prices for a few, or several, years.
However, if demand continues to grow, these recent measures may prove to
be not sufficient. Then, even if the “oil peak,” strictly speaking, only occurs
around 2030, it is likely that the production of natural hydrocarbons will be
unable to follow demand as early as the beginning of the next decade.
Before prices return to a new long-term equilibrium which could be about
$100 to $ 150 a barrel (in constant dollars), it is highly likely that an
additional “crisis” will occur, similar to the 1979-80 crisis, with price levels of
$200, $300 per barrel or more for several years.

These high prices will probably be necessary to promote an inevitable energy


transition, for investments to be made both on the supply side as well as on
the demand side in order to develop renewable energy sources without
major subsidies, to stimulate the production of synthetic fuels, to renew
nuclear programs, etc.

55
Last but not least, we should bear in mind the role played by expectations
and how forecasts can be self-destructive in the oil industry. One especially
relevant example relates to the 1985 price drop. Political and industrial
decisions resulting in energy efficiency, substitution, exploration and
production of “difficult” oil in non OPEC regions occurred not simply because
the price of crude was high but because it was considered unlikely that
prices would not continue to rise.

Consequently, the most effective factor for avoiding the coming crisis of a
dual shock scenario would be a consensus about its arrival. In this context,
the fact that the 5-6 year forward price of oil is at present reaching a
hundred dollars is probably to some extent rather good news.

RUSSIA

OIL COMPANIES IN RUSSIA

Oil

Reserves

According to the Oil and Gas Journal’s 2008 survey, Russia has proven oil reserves
of 60 billion barrels, most of which are located in Western Siberia, between the Ural
Mountains and the Central Siberian Plateau. Eastern Siberia is one area where little
exploration has taken place. The Russian Ministry of Natural Resources estimated in
2005 that A+B+C1 reserves (roughly equivalent to Proven + Probable reserves) in
E. Siberian provinces totaled 4.7 billion barrels.

56
Russia's Oil Balance

With production of 9.8 million bbl/d of liquids (not including oil products), and
consumption of roughly 2.8 million bbl/d, Russia exported (in net) around 7 million
bbl/d. According to official Russian statistics, roughly 4.4 million bbl/d of this total is
crude oil. Over 70 percent of Russian crude oil production is exported, while the
remaining 30 percent is refined locally. Crude oil exports via pipeline fall under the
exclusive jurisdiction of Russia's state-owned pipeline monopoly.

Production

In the 1980s, the Western Siberia region, also known as the “Russian Core,” made
the Soviet Union a major world oil producer, allowing for peak production of 12.5
million barrels per day in total liquids in 1988. Following the collapse of the Soviet
Union in 1991, Russia’s oil production fell precipitously, reaching a low of roughly 6
million bbl/d, or around one-half of the Soviet-era peak (see Fig. 1). According to
observers, several other factors are thought to have caused the decline, including
the depletion of the country's largest fields due to state-mandated production
surges and the lack of investment in field maintenance.

A turnaround in Russian oil output began in 1999. Many analysts attribute the
rebound in production to the privatization of the industry following the collapse of
the Soviet Union. The privatization clarified incentives and increased less expensive
57
production. Higher world oil prices beginning in 2002, the use of technology that
was standard practice in the West, and the rejuvenation of old oil fields also helped
raise production levels. Other experts partially attribute the increase to after-effects
of the 1998 financial crisis, the fall in oil prices, and the subsequent devaluation of
the ruble.

In 2007 Russian total liquids production averaged over 9.8 million bbl/d, including
9.4 million bbl/d of crude oil, a 200,000 bbl/d increase over 2006. This growth rate
was down from annual growth of roughly 700,000 bbl/d annually between 2002-
2004.

Short-Term Outlook

Growth in output from the Sakhalin projects, (see EIA’s Sakhalin Fact Sheet) will be
a main contributor to overall Russian oil output growth. In the upcoming decade, a
few major oil fields (listed in Table 1 below) will contribute to most of Russia’s
supply growth and others will offset decreasing production from mature fields. In
the short term, however, there are only a few large new fields that are planned.
They include Gazprom’s 100,000 bbl/d Prirazlomnoye field (2010), Lukoil's 150,000
58
bbl/d South Khylchuyu field (mid-2008), and year-round production from the
Sakhalin II field. Lukoil/ConocoPhillips's TimanPechora project, and Rosneft's
Vankorskoye (300,000 bbl/d) and Komsomolskoye fields will also help stem
production losses at older fields. Lukoil also expects around 30,000 bbl/d of
production from its North Caspian fields after 2010.

In 2006, around 24 percent (or 2.3 million bbl/d) of Russia’s oil production came
from fields that had already produced 60 percent of their total recoverable reserves.
Achieving continued growth at post-peak fields will become more problematic as oil
companies run out of easy and less costly opportunities to manage the rate of
decline.

Updated assessments of EIA’s short-term outlook for Russian oil supply growth are
available each month from Table 3b of the Short Term Energy Outlook.

59
Oil Sector Taxation

Government taxation of production and export revenues along with the continued
lack of clarity concerning the ownership of subsoil resources contributed to lower
output for 2007 and could possibly contribute to stagnating or even negative output
growth during 2008. Export duties on crude oil are directly linked to the global
pricing environment. The tariff schedule for export duty for crude oil at $25/bbl and
higher is 65 percent of the market price minus $21/ barrel. Using this formula, the
government is receiving around $47 per barrel from export taxes at current prices.
Therefore, absent changes to the tax structure itself, Russian oil companies are only
very modestly affected by changes in global crude prices.

60
At current oil prices, the government is also receiving an additional $20 per barrel in
extraction taxes. The government plans to introduce preferential treatment for
those producers that extract resources at fields exceeding 80 percent depletion,
which they hope will encourage oil companies (mostly in the Volga-Urals region) to
bring some idle wells back into production.

Several proposals are currently being discussed to reduce the tax burden. One is a
proposal to raise the non-taxable threshold level from $9 to $15 per barrel. Prime
Minister Putin has also proposed a seven-year mineral extraction tax holiday for oil
companies that develop fields in Timan-Pechora, Yamal, or on the continental shelf
beginning in 2009. A second proposal would provide tax holidays for firms carrying
out offshore exploration or granting them mineral extraction tax breaks. Another
proposal by the Finance Ministry seeks to reduce annual oil company taxes by $4.2
billion from 2009. According to analysts, this is only a fraction of the $40 billion in
extraction taxes and $45 billion in export duties that the government collected from
oil companies in 2007.

Refinery Sector

Russia has 41 oil refineries with a total crude oil processing capacity of 5.4 million
bbl/d, but many of the refineries are inefficient, aging, and in need of
modernization. According to Energy Intelligence, refinery throughput at Russian
refineries increased by roughly 4 percent to around 4.6 million bbl/d in 2007. This
total includes some crude oil exports from neighboring countries. Russian refineries
produced around 1.2 million bbl/d of Mazut (heavy fuel oil), 1.3 million bbl/d of
middle distillates, and 815,000 bbl/d of gasoline.

The draft proposals mentioned above for the oil sector are also geared to provide
incentives for refiners to produce more high-quality and environmentally cleaner

61
fuels. Currently oil companies pay around $21/barrel ($154/tonne) for high-octane
gasoline, $15/barrel for low-octane gasoline, and $6/barrel of diesel.

List of Subsea Oil and Gas Companies in


Russia

Aquatic Company - specialists in the fields of design engineering, analysis, and a


variety of research and development efforts

Chernomorneftegaz - seismic surveys; processing and complex interpretation of


seismic data

Gazflot - russian exploration and ship owning company

Gazprombank - services to enterprises and employees of other sectors (chemical,


engineering, defence, nuclear etc.)

Geobyte ltd - geological exploring of resources of potential regions of oil and gas
resources and condensate

JSC Gazprom Neft - is one of the largest oil and gas producing companies in Russia

Lukoil - is Russia's leading oil company

MNP Group incorporates - engaged in shipbuilding, offshore units design and


62
construction.

Morneftegazproekt - provide integrated development of project documentation for


offshore field development

Murmansk Shipping Company - crude oil transshipment and icebreaking services in


Russian frozen ports and along the Northern Sea Route in Arctic waters

Polar Marine Geosurvey Expedition - complex geological and geophysical research


in Arctic, the world ocean and Antarctica, in inland reservoirs

Rosneft - russian oil and gas exploration company

Sakhalin Energy - commercially develop, operate and market the hydrocarbon


resources

Sea Soft Packages and Tehcnologies Ltd - developing software for realtime video
integration with heterogeneous digital data

Sevmorgeo - Marine geological, geophysical and geoecological research of Russian


offshore and the world ocean

Sevmorneftegaz, CJSC - Development of oil and gas fields on Russia’s Arctic


continental shelf

Sibneft - petroleum exploration, production, refining, and marketing

63
Has Russia's Oil production Peaked?

Has Russia's oil production peaked? The answer might as well be yes in so
far as their smallish medium-term growth possibilities are well-delineated
and longer term growth will require levels of investment that are not likely to
to be forthcoming in time to remedy the situation.

What we need to know about Russia's future oil production is as easy as 1-2-
3.

1. The slowdown in Russia's output growth since 2003 is crystal clear (graph
below left, Wall Street Journal).
2. The small set of large (≥ 50,000 b/d) new fields coming on-stream by 2012 is
precisely known. Mature depleted Russian oil basins (Western Siberia,
Tartarstan) and tough new fields (Eastern Siberia, Far East) require huge
investments in infrastructure, new wells, enhanced oil recovery, etc. to
maintain or add to production.
3. Government policy does not cap oil output but rather impedes exploration &
production activity with burdensome tax rates on Russian oil companies. The
Federation—Vladimir Putin and his sidekick Dmitry Medvedev—also hassles
and seeks to eject foreign operators (and their capital) after they have
exhausted their usefulness, e.g. Shell at Sakhalin-2.

64
There is no compelling reason to believe that Russia will break out of the
current plateau—permanent decline?—of oil production as it did after 1999.
Even if Russia changes policies that currently stifle investment to promote
future production, that money will work, increasingly in vain, to maintain, not
grow, oil output.

And even if a modest medium-term gain of 2-3% over current production


levels should somehow be achieved by 2012, that will very likely be the end
of the line for Russia production growth.

The fact that the skittish oil markets have finally noticed that Russia's output
growth is flagging doesn't add much to what anyone who has looked at the
situation and can interpret a graph already knows. As for optimistic
expectations, those are usually the product of standard bureaucratic dogma
that "all will be well," ignorance following from an inability to subtract, or our
typically human emotional investment in a happy future—not the data and
its reasonable interpretation.

65
Fuzzy Data and Expectations

This update is prompted by the news that Russia's production fell 1-2% in the
first quarter of 2008, depending on the type of data examined. The Wall
Street Journal's Russian Oil Slump Stirs Supply Jitters cited the IEA's
calculation that production of 10 million barrels per day (b/d, crude oil +
condensate + gas liquids) was down 1% in the 1st quarter compared with
2007, noting that "industry watchers and Russian officials generally blame
the country's production slowdown on a combination of weather and tight
electricity supplies in some parts of the country." Electricity? That's another
subject.

Reuters cited Russian Energy Ministry data indicating that "oil production
[crude + condensate] edged down to 9.76 million barrels per day from 9.79
million b/d in February, and well below the post Soviet high of 9.93 million
b/d reached in October last year." The preliminary EIA data is slightly higher
than the Russian official data, but shows the same winter trend.

Despite the discouraging results in the 1st quarter, the IEA's March, 2008 Oil
Market Report (graph left) was still forecasting that Russia crude output
would grow this year by as much as 250,000 barrels per day. They have now
revised that forecast down to an all liquids addition of only 0.8% while taking
a "cautious approach" according to IEA analyst David Fife.
66
The IEA's sudden wariness, which has never been apparent before, has
caused them to withhold their future Russian forecast "pending [the] spring
results, which could eliminate weather-related distortions typical of winter
months" (AP, April 15, 2008). Their hesitancy is absurdly shortsighted—
Russia's fate does not depend on any winter's weather conditions or what
happens in the Spring quarter of this year. The agency is now, like Napoleon
during the harsh Russian winter of 1812/13, in retreat.

Optimism still abounds in some quarters. The Wall Street Journal cites some
hopeful sources—

Many Russian oil officials say the industry could still resume growth. Some Western
analysts point to more optimistic data and forecasts. Citigroup said in a report late
last month that it expects Russian oil volumes to increase by 1.5 million barrels a
day between now and 2012, largely thanks to new projects in eastern Siberia. Still,
it cautioned: "Russian oil production growth is no longer to be taken for granted."
Russia's energy ministry expects a rise of 1.8%...

Pressure on Investment in the Russian Oil Sector

The IEA's February Oil Market Report gives us the basic facts about Russian
taxes on operators. "Russian oil companies pay three separate taxes on their
activities," including—
67
1. A royalty on crude production; taxed at 22% after certain allowances
2. An export tax; based on the market price of Urals crude in the preceding two
months. Light products attract a 30% discount on the tax charged and fuel
exports benefit from a 60% discount.
3. A corporate profit tax of 24%, charged on net income, in common with other
industries.

This added up to $65/barrel as of last February and the net profit for Russian
oil companies was only about $10/barrel at that time. This staggering tax
burden cuts significantly into the amount Russian operators have left over for
exploration & production. It thus comes as no surprise that Rosneft is
borrowing money, secured by crude oil export contracts, to finance its short-
term debt (from Moscow journalist Sergei Blagov in Jamestown Foundation's
Eurasia Daily Monitor, February 28, 2008). Can Rosneft can carry out its
investment plans in Eastern Siberia?

In December 2005, Rosneft paid some $260 million for a license to develop the East
Sugdin oil and gas field, with reserves of some 200 million tons of oil and more than
40 billion cubic meters of gas...

In order to achieve significant production growth, Rosneft plans to invest 50


billion rubles ($2.04 billion) in Eastern Siberia this year, and up to 600 billion
rubles ($24.5 billion) through 2020, [Rosneft CEO Sergei] Bogdanchikov said.
Rosneft expansion plans for Eastern Siberia largely rely on the Vankor oil
deposit, which has estimated reserves of 500 million tons, he said. However,
Bogdanchikov complained that the company's investment resources were
limited, as it faced a tax burden of some 60%, while oil companies outside
Russia pay about half that amount...

68
... Rosneft may still acquire new licenses, but developing new oil and gas
fields in Eastern Siberia would require billions of dollars in investments.
Therefore, it remains to be seen whether Rosneft's expansion could prove
economically viable in the longer term.

Deutche Bank oil and gas analyst Leonid Mirzoyan states that "Rosneft is still
unlikely ... capable of footing the expensive bill for developing the Vankor
field on its own" (Moscow Times, April 3, 2007). Rosneft has been snapping
up development licenses and shares, but they are overextended. How will
Rosneft finance future development at Sakhalin-III, Vankor, North Vankor,
Yurubcheno-Takhomskoye, East Sugdinsky, Verkhnechonsk and all the rest
while continuing to drill more and more wells to get expanded production
from older (former Yukos) properties like top Western Siberian subsidiary
Yuganskneftegaz? And still pay their taxes? Rosneft's CEO Bogdanchikov
doesn't know, and neither does anybody else.

Although plans have been announced to cut taxes by an estimated $4.2


billion in 2009, Leonid Fedun, vice president of OAO Lukoil, remains
unimpressed. The Wall Street Journal quotes Fedun as saying that "Russia's
oil industry needs $1 trillion of investment during the next 20 years just to
maintain production of 10 million barrels a day." Lukoil will see a savings of
about $1 billion after 2010, which will speed up development of the
Filanovsky field in the Russian sector of the North Caspian. In line with
69
Fedun's pessimistic view, Lukoil recently cut its 2008 growth forecast from
5% to 1.8-2.0%.

Various optimistic estimates—including Citigroup's overly cheerful private


report, one presumes—have used Russian oil company growth targets to
justify their forecasts. Forward-looking statements from TNK-BP, Rosneft or
Lukoil are becoming increasingly worthless as a guide to future activity in
light of the lack of capital available for exploration & production. Russia also
has a paucity of large new fields coming on-stream and must fight off
declines stemming from depletion in their mature oil basins.

Continuing Depletion and New Oil Fields

Lukoil's Fedun believes Russia has peaked now (Yahoo! News, April 14,
2008). Here is what he told the Wall Street Journal about the short and longer
term prospects—

In an interview, Leonid Fedun, vice president of OAO Lukoil, one of Russia's biggest
oil companies, said a mild winter and higher temperatures mean Siberia's icy
ground is less stable, making it harder to move drilling rigs between oil wells.

He acknowledged that the fall also reflects a longer-term trend -- the


depletion of Siberia's older fields. "Western Siberia is repeating the fate of
Prudhoe Bay, with a time lag of five to six years," he said. "When the well's
productivity falls, you have to keep drilling more and more. You've seen it in
Alaska and the Gulf of Mexico, and now you're seeing it in Siberia."

It will come as no surprise1 to veteran peak oil observers that Western


Siberia is going the way of Alaska or the North Sea. Putting this in context,
much of Russia's production growth in the last few years came from the
70
offshore Sakhalin-I Chayvo field in the Far East, which peaked at 250,000
barrels per day in February, 2007. Rosneft now expects Sakhalin-I output to
fall to about 160,000 barrels per day in 2008. Exxon Neftegas was drilling
record-setting new wells at Chayvo back in April, 2007 but production will
never return to peak levels at Sakhalin-1.

Declines at Sakhalin-1 must be offset by the implementation of year-round


production of 70,000 b/d at Sakhalin-II, the Yuzhno-Khylchuyuskoye ("YK")
field in Timan-Pechora, which will likely produce 150,000 b/d sometime in
2009, and an unknown contribution from Rosneft's Vankor in East Siberia
starting this year. Rosneft has set its sights on 500,000 barrels per day from
Vankor by 2015. (See These Are the Good Years for an update on factors
affecting Vankor, ASPO-USA, February 20, 2008.) A few other large (≥ 50,000
b/d) projects are listed at 2008 Megaprojects page at Wikipedia, including
the Salym field expansion which will likely add another 62,000 b/d in 2010.

Scheduled new projects delimit Russia's ability to expand oil production in


the medium term. If one makes the conservative assumption that Russian
output outside of the projects mentioned here will decline in the 2-3% range
each year from now on, it is easy to see that Russia's post-Soviet growth is
coming to an end. New project delays would only make the situation worse.
Managing decline rates in the existing production base (in the medium term)
depends directly on how much investment is available for new wells, new
drilling technology (e.g. laterals) and enhanced oil recovery. There are tax
discounts on some of these activities.

71
An End to Growth is Still In Sight

Everyone will have to wait & see how Russia fares in the next few
years, but the only surprises will be on the downside—the limited
upside possibilities are already mapped out. The Federation's
growth is constrained by lack of investment, too few new large
projects coming on-stream, and the geological facts of life.

It appears that Putin's policy is to intentionally restrain


development through onerous tax burdens on Russia's oil
companies. The Urals Blend is selling at $109.66 today. Perhaps
Putin truly understands, like the Saudis apparently do, that
keeping some of Russia's oil in the ground is a better longer term
strategy than producing it in an unfettered way now and accruing
future rate of interest returns on the unburdened revenues. All
things considered, Russia is the largest crude + condensate
producer in the world, and Vladimir Putin is no dummy.

72
Russia’s Oil Mine Industry Faces
Problems

When the price of oil reached another record, at more than $126 a barrel,
analysts pointed to attacks on pipelines in Nigeria and turmoil in Venezuela
and Iraq as the immediate causes.

Even small disruptions to supplies from such places can cause the price to
jump, because only Saudi Arabia has the capacity to replace the lost
production and it is disinclined to do so.

But to understand how supplies became so scarce in the first place, one must
look at the state of the oil industry in Russia, the world’s second biggest
producer.

Over the past seven years, according to Citibank, Russia accounted for 80
percent of the growth in oil production outside the Organization of Petroleum
Exporting Countries. The increase in the early part of the decade matched
the growth in demand from China and India almost barrel for barrel.

Yet in April, Russian production fell for the fourth month in a row. It now is
more than 2 percent below the peak of 9.9 million barrels a day reached last
October. Before that, growth in Russia’s output had steadily slowed,
suggesting that the drop is not a blip.

Leonid Fedun, a vice president of Lukoil, a local oil firm, said Russia’s
production never will top 10 million barrels daily. The discovery that Russia
no longer can be relied upon to cater to the world’s ever-increasing appetite
for oil is naturally helping to propel prices to record levels.

73
Oil and gas have been the foundation of the regime of Vladimir Putin,
Russia’s outgoing president, and are also a preoccupation of his successor,
Dmitry Medvedev, who was chairman of Gazprom, the state-controlled gas
giant.

The flow of petrodollars has created a sense of stability, masked economic


woes and given Russia more clout on the world stage. Yet the malaise
afflicting its most important industry is almost entirely man-made.

74
Rising To Challenges

I am glad to say that I regard much of this gloom and doom as vastly overdone. But
we should admit that, in the first decade of the 21st Century, those of us who work
in the energy industry are at the very centre of the challenges which the world
faces. It is not a comfortable position. Yet we should rise to those challenges wisely,
confidently and rationally.

We should remember what our purpose is, and has always been: to ensure the
efficient development of the world’s oil and gas resources and, through that, to
ensure that the demands of consumers – the people of the world – are met. And we
have a moral duty to act in sustainable manner. We must fulfil our purpose in ways
that minimize the environmental impact, not only of our own operations, but of the
customers who use our products.

It is worth examining some of the origins of this insecurity. Only then can we be
clear about what actions are required. I think there are four sources:

1. The Oil Price

As the price has quadrupled in the last seven years, so people have come to suspect
that there is a global shortage of oil and gas.

75
In the industry we tend to dismiss that concern since most of us believe strongly
that there are very large oil and gas resources remaining in the world. We know,
from our own experience and own observations – and I speak as a geologist as well
as someone who was, for nearly five years, head of exploration and production at
BP - that there are major basins as yet unexplored; we know that we have, or can
develop, the technology to double the average oil recovery rates from existing
fields; we know that there are enormous resources of so-called unconventional oil
and gas in heavy oil accumulations, in shale oil, in tight gas, in coal bed methane –
the list goes on.

But, for the consumer concerned with high energy bills, the price of oil is a powerful,
everyday symbol.

The reality, of course, is that in the oil market, what goes on above ground is as
important as what goes on underground. The oil price is an economic function of
supply and demand and, for the most part, it is driven by the current available
production capacity and not complicated projections of future resources.

Today’s high price is caused by the inability of the industry to easily supply rising
demand. This is not because of a lack of available resources, but because of
inadequate investment in both production and complex refining capacity. That lack
of investment happened gradually over many years, not least during the euphoria of
the new Millennium. We just did not predict how fast demand would take off.

2. Source Of Insecurity Is Political Instability In The Producing Nations

The absence of excess capacity in the global supply system stems from
underinvestment forcing more reliance on suppliers in countries which are
frequently politically unstable. Instability in Iraq, Venezuela and Nigeria, and the
apparent use of oil as a lever of political influence in Russia and the Middle East all

76
contribute to a feeling of imminent threat. Will the lights suddenly go out? I don’t
believe so.

But the feeling is there. Many consumer countries have consequently turned
inwards in an attempt to counter these threats by exploiting internal resources.
Others, such as China, have embarked on a process of buying up resources
overseas. The world seems to be forgetting Churchill’s adage that, in energy, the
best security comes from diversity of supply and a well-functioning, competitive
market, rather than a scramble for unilateral deals between countries.

3. Energy Industry Has Failed To Live Up To Its Promises.

For many years, we have, as an industry, over-promised and under-delivered in


terms of production. We have made predictions of production growth from the non-
OPEC world that have not come to fruition as quickly as hoped. We can all list many
reasons for this, such as project complexity, or the extreme technological
challenges of operating in deep water, to name two. Many of these problems are
political, caused by bureaucracy and corruption, civil strife and war, or changing
fiscal and regulatory regimes creating uncertainty.

We also told our customers not to worry about future supply and in so doing
inadvertently discouraged OPEC to invest in new capacity by predicting strong
growth outside of OPEC.

4. Growing Concern For The Environment

Fears about climate change and its consequences are, in my view both well-founded
and are contributing to perhaps the fastest growing international political
movements in my lifetime on a par with the civil rights movement in the US in the
1960s. Many people throughout the world fear that there is an insoluble conflict

77
between the need for energy for the basic things of life – such as heat, light and
mobility – and the threat of climate change. They believe they are faced with the
choice between two equally unpalatable outcomes – limiting economic growth and
prosperity, or ruining the planet. This is a daunting list of issues and concerns. It is
particularly daunting for the energy industry because we find ourselves caught in
the eye of the storm.

Promoting Energy Efficiency

We must also lead the way towards the gradual substitution of oil-based fuels in an
orderly and planned fashion. We must work closely with the great emerging
economies, by allowing them to make the most of their indigenous resources,
building their confidence that the global market can fulfil their needs and
encouraging the adoption of new technology. And we must continue to lead by
example in promoting energy efficiency and the transition to reduced carbon
emissions throughout the world.

In summary, when it comes to dealing in a timely and practical manner with the
great insecurities of the early 21st century, the energy industry is not just part of
the solution, it is the solution. In that respect, we are providing a great service to
the world. Through the development of technology, through long term investment
and risk taking, through the application of knowledge and by acting as a catalyst for
cooperation between producers and consumers, we are making enormous
contributions to human progress. I believe that is something to be proud of.

78
DUBAI HISTORY

The modern emirate of Dubai was created with the formation of the United Arab
Emirates in 1971. However, written accounts documenting the existence of the city
have existed at least 150 years prior to the formation of the UAE. Dubai shares
legal, political, military and economic functions with the other emirates within a
federal framework, although each emirate has jurisdiction over some functions such
as civic law enforcement and provision and upkeep of local facilities. Dubai has the
largest population and is the second largest emirate by area, after Abu Dhabi.[4]
With Abu Dhabi, it is one of only two emirates to possess veto power over critical
matters of national importance in the UAE.[5] Dubai has been ruled by the Al
Maktoum dynasty since 1833. The emirates' current ruler, Mohammed bin Rashid Al
Maktoum, is also the Prime Minister and Vice President of the UAE.

Revenues from petroleum and natural gas contribute less than 6% (2006)[6] of

79
Dubai's US$ 37 billion economy (2005).[7] A majority of the emirate's revenues are
from the Jebel Ali free zone authority (JAFZA)[8] and, increasingly, from tourism and
other service-oriented businesses. Dubai has attracted world-wide attention through
innovative real estate projects [9] and sports events. This increased attention,
coinciding with its emergence as a world business hub, has also highlighted human
rights issues concerning its largely foreign workforce.

80
Introduction to Oil Companies In UAE
The oil and gas sector provides around a third of the UAE's Gross National
Product, thanks to a successful programme in recent years of diversification
of the economy, but remains the dominant contributor of Government
revenues. The Abu Dhabi National Oil Company, ADNOC, supervises policy in
Abu Dhabi, under the guidance of the Supreme Petroleum Council.
Production is handled through joint ventures with consortia of international
companies,. ADNOC also owns, on behalf of Government, all of Abu Dhabi's
gas reserves. Oil production is around 2 million barrels a day. Gas is
increasingly important, both for export, and for meeting local demand, from
domestic and industrial consumers and from power generation and water
desalination plants. Dubai produces around 240,000 barrels a day of oil and
substantial quantities of gas from offshore fields, with a major condensate
field onshore, while Saharjah has smaller oil and gas fields. On the East
Coast, Fujairah is the third largest bunkering port in the world, although all of
the fuel is imported. Downstream development of refineries, petrochemical
81
plants and other related industries is increasingly creating an integrated oil
and gas sector, equivalent to that of industrialized nations.

Oil and gas production has been the mainstay of the economy in the UAE and
will remain a major revenue earner long into the future, due to the vast
hydrocarbon reserves at the country’s disposal. Proven recoverable oil
reserves are currently put at 98.2 billion barrels or 9.5 percent of the global
crude oil proven reserves.

As for natural gas, the proven recoverable reserves are estimated currently
at 5.8 billion cubic meters or 4 percent of the world total. This means that
the UAE possesses the third largest natural gas reserves in the region and
the fourth largest in the world. At the current rate of utilization, and
excluding any new discoveries, these reserves will last for over 150 years.
The UA E ’s oil production is limited by quotas agreed within the framework
of OPE C to 2 million barrels per day (mbd). Production capacity, however,
will rise to around 3 mbd in the year 2000. There are plans to boost that level
to 3.6 mbd in the year 2005 and 4 mbd in the year 2010. Gas production is
being expanded to meet a forecast doubling of demand to 3.7 billion cubic
feet per day (bn cfd) by the year 2000. Domestic demand is expected to
increase from 813 million cubic feet per day (mn cfd) in 1996 to 1.137 bn cfd
by the year 2000, while gas used for reinjection is projected to double to 1.8
bn cfd. The value of oil exports dropped from Dh 49.1 billion in 1997 to Dh
35.7 billion in 1998 (-27.3 per cent) due to the deterioration in oil prices
which fell by 34 per cent during 1998 compared with 1997 levels, to reach
US $12.4 a barrel. The value of liquefied gas exports also dropped from Dh
8.5 billion in 1997 to Dh 6.5 billion in 1998, due to the fall in its prices which
are closely linked with oil prices and owing to the fact that the value of gas
exports in 1997 included a one-time payment of Dh 1.5 billion made to
ADGAS by its main importer Tokyo Electricity Power Company. The UAE
exports 62 per cent of its crude oil to Japan making it the UAE’s largest

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customer. Gas exports are almost entirely to Japan, the world's largest buyer
of liquefied gas, with the UAE supplying almost one-eighth of Japan's entire
requirements.

International Markets

The UAE plays a vital role in achieving stability in international oil markets
through its positive and balanced attitude within OPEC. The UAE participated
in two production cuts in 1998 and also played an important role in the
agreement adopted by OPEC member states in March 1999 to reduce
production by 1.7 mbd. The UAE agreed to reduce its production by 157,000
bd to a low of 2 mbd. By early September 1999 international benchmark
Brent crude oil was trading at a new high of US $21.03 per barrel. Oil prices
were expected to continue rising in the fourth quarter of 1999 when winter
weather in the western hemisphere is expected to increase demand. The
UAE welcomed a proposal to hold an OPEC summit meeting in Venezuela in
late 1999 or the year 2000 in order to reinforce rationalization of the world
supply of oil.

Abu Dhabi

Abu Dhabi is by far the biggest oil producer in the UAE, controlling more than
85 percent of the UAE’s total oil output capacity and over 90 percent of its
crude reserves. Principal offshore oil fields are Umm Shaif, Lower Zakum,
Upper Zakum, Al Bunduq and Abu al-Bukhoosh. The main onshore fields are

83
Asab, Bab, Bu Hasa, Sahil and Shah. Almost 92 per cent of the country's gas
reserves are also located in Abu Dhabi and the Khuff reservoir beneath the
oil fields of Umm Shaif and Abu al-Bukhoosh ranks among the largest single
gas reservoirs in the world.

Abu Dhabi National Oil Company (ADNOC)

Oil companies from Japan, France, Britain and


other countries own up to 40 percent of the
energy sector in Abu Dhabi, the only Gulf oil
producer to have retained foreign partners on a
production-sharing basis. More than half of Abu
Dhabi’s oil production is generated by the Abu
Dhabi Company for Onshore Operations (ADCO), one of the 10 largest oil
companies worldwide and the largest crude oil producer in the southern
Arabian Gulf. The second main producer is Abu Dhabi Marine Operating
Company (ADMA-OPCO). The output of oil and gas from ADMA-OPCO fields is
transported to its center of operations on Das Island for processing, storage
and export. Both ADCO and ADMA-OPCO are part of the Abu Dhabi National
Oil Company (ADNOC) group of companies. ADNOC, established in 1971, is a
fully owned government company controlled and supervised by the Supreme
Petroleum Council (SPC), which is responsible for formulating Abu Dhabi
petroleum policy and overseeing the emirate’s oil and gas operations and
related industry.

ADNOC Group of Companies

In addition to its own concession areas and operations ADNOC has major
shareholdings in 15 ventures forming the ADNOC group. These include the
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three main oil and gas operating companies (ADCO, ADMA-OPCO and
ZADCO), five support companies providing services to the oil and gas
industry, two natural gas processing companies (GASCO, ADGAS), two
maritime transport companies for crude oil, refined products and LNG
(ADNATCO, NGSCO), a refined product distribution company (ADNOC-FOD)
and two chemical and petrochemical companies (FERTIL, BOROUGE). ADNOC
also owns and operates two refineries at Umm al-Nar and Ruwais, the gas
treatment plants at Habshan, gas pipeline distribution network and the
chlorine industries at Umm al-Nar.

ADNOC Restructuring

ADNOC announced a major management restructuring plan in November


1998 shifting the firm's refinery and gas operations to two new wholly-owned
subsidiaries and bringing the number of subsidiaries up to 17. The two new
ADNOC companies, Abu Dhabi Oil Refining Company (TAKREER) and the Abu
Dhabi Gas Company (ATHEER), were formally established on 19 June 1999.
Along with the creation of refinery and gas subsidiaries the company has set
up five business line directorates (BLDs) to carry out upstream and down
stream activities. Another three directorates will provide support services for
various operations. The new management structure also creates an
executive committee, chaired by a chief executive officer, to oversee the
company's businesses.

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Dolphin Project

The Dolphin project was launched in March 1999 following an announcement


by the UAE and Qatar of plans for a joint venture aimed at transporting gas
from Qatar's huge reserves to industrial consumers in the UAE, Oman and
other countries. Dolphin, which is being developed under the auspices of the
UAE Offset Group (UOG), is intended to provide a framework to stimulate
investment in a variety of related industries throughout the value-added gas
chain. (For more information see section on Business Environment).
Economic forecasters predict that the UAE's demand for gas will double over
the next decade.

Dubai Joins Dolphin

The Dubai Government also joined the multi-billion dollar Dolphin initiative
with the signing of a memorandum with the UOG where by the Dubai Supply
Authority (DSA) agreed to purchase its requirements for Qatari gas from
Dolphin. Under the terms of the agreement, Dubai plans to purchase gas in
the amount of 200–700 mn cfd. The Dubai Government and the UOG also
agreed to cooperate in identifying and maximizing opportunities for
investment arising out of the supply of gas. The Dolphin gas will bridge the
gap between energy supply and demand which will develop over the next
five years as Dubai’s economy expands.

86
Dubai

Dubai’s oil reserves have reduced over the past decade and are now
expected to be exhausted within 20 years. The main fields are offshore:
Fateh, Southwest Fateh and two smaller fields, Falah and Rashid. The only
onshore deposit is the Margham field. Dubai Petroleum Company (DPC) is the
main operator. Dubai has a 2 per cent share of the UAE's gas reserves.
Dubai’s Margham gas/condensate field can deliver up to 140 mn cfd for
domestic use and offshore fields can provide another 100 mn cfd. Sharjah
also supplies Dubai with 430 mn cfd through a pipeline installed in 1992. The
state-owned Dubai Natural Gas Company (DUGAS) is responsible for
processing natural gas produced in Dubai’s offshore oil fields as well as the
gas piped from Sharjah.

Sharjah

Sharjah owns 5 percent of the UAE's gas reserves, mostly non-associated gas
which is being utilised domestically. The emirate’s most important gas
deposits are at the offshore Mubarak field and the onshore Saja’a, Move yeid
and Kahaif fields. Gas reserves are estimated at 10,000 billion cubic meters
and around 800 mn cfd of gas are produced. Sharjah’s offshore Mubarak
field, operated by the local Crescent Petroleum Company, produces around
30,000 bd of condensate. In July 1999 Crescent Petroleum began drilling
Sharjah-2 some 30 kilometers offshore of Sharjah where gas has already
been discovered. The site is located 800 meters from the Sharjah-1 well. Any
gas finds are expected to contain valuable liquid condensates. Crescent
operates the concession area along with London-based Atlantis. Crescent –
Atlantis also announced in July that they were about to begin major seismic

87
work in the gas-proven areas of Sharjah's interior desert and this would be
followed by drilling. The onshore Sajaa and Moveyeid fields, operated by BP–
AMOCO, produce 35,000 bd of condensate in addition to natural gas.

Sharjah Natural Gas Project

The Sharjah Liquefied Gas Company (SHALCO) was formed to increase


exports of liquefied natural gas (LNG). The first phase of a Dh 300 million
project to supply natural gas to residences, commercial and industrial
premises in Sharjah was officially inaugurated in March 1999. Natural gas
was supplied to buildings in Abu Shaghara in Sharjah marking the beginning
of Phase I which is due for completion in May 2000. A 172 - kilometers
network of pipes, three pumping stations and the internal connections for a
total of 25,000 domestic, commercial and industrial consumers will be
completed in the first phase. Phase II is due to supply the remainder of the
city of Sharjah.

Ras Al-Khaimah

Ras al-Khaimah's reserves are estimated at 400 million barrels of oil and
condensate and 1,200 bn cfd of natural gas. In September 1997, Ras al-
Khaimah awarded Norway’s Atlantis Technology Services and Petroleum Geo
Services a permit to explore the offshore Baih field. The Ras al-Khaimah Oil
and Gas Company, set up in 1996, has exclusive hydrocarbon rights to the
rest of the emirate.

Refineries

In the UAE there are six refineries operational at present and the existing
refining capacity in the region is estimated to be around 800,000 tones.
Development of downstream industries such as refineries and petrochemical
88
plants is a central part of UAE efforts to move away from crude oil exports.
Major plans are under way to construct new refineries and increase the
capacity of existing ones in order to attain production of 180,000 bd by the
year 2000. Abu Dhabi is presently in the middle of a five - year (1997–2002)
development project aimed at boosting refining capacity. ADNOC’s US $600
million Ruwais refinery upgrading project is just one of the many down
stream projects that are included in the programme. Others include a 35,000
bd refinery plant in Fujairah and the Dh 600 million Sharjah re finery at
Hamriyyah Free Zone, which commenced operations in mid-1999.

List of Oil and Gas Companies in Dubai

Dragon Oil - is an independent oil development and


production company

Lamprell Energy Ltd - development of the offshore


industry in the Arabian Gulf

Likpin LLC - turnkey offshore pipelay, marine


construction, services, vessel and project management
for the offshore oil and gas industry

RTE Group - Drilling Fluids bentonite barite lime mica


starch sodium chloride

Specialist Services - one of the foremost engineering and


fabrication companies in the United Arab Emirates

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Major Oil Companies operating in UAE:

State Companies:

Abu Dhabi National Oil Company (ADNOC) has controlling interest in 21


domestic oil and natural gas companies.

Joint Ventures:

Abu Dhabi Co. for Onshore Oil Operations (ADCO) is held by ADNOC (60%)
and a consortium comprising British Petroleum (BP) (9.5%), Shell (9.5%),
Total (9.5%), Exxon (4.75%), Mobil (4.75%), and Partex (2%).

Abu Dhabi Marine Operating Company (ADMAOPCO) is held by ADNOC (60%)


and a consortium comprising BP (14.7%), Total (13.3%), and Japan's Jodco
(12%).

Zakum Development Company (ZADCO) is operated by ADNOC (88%) and a


consortium (12%) comprising BP, Jodco, and Total

Original Concession Holders:

Union Oil Co., venture of Union Oil Co. and Southern Natural Gas Co.

Abu Dhabi Marine Areas Ltd., BP, CFP, Continental

Dubai Marine Areas Ltd., Continental Oil, BP, CFP, Deutche Erdol AG, Sun Oil
Co.

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Phillips-AGIP-Aminoil, joint venture of Phillips, AGIP, and Aminoil

Major Foreign Oil Company Involvement:

BP

Caltex Petroleum Corp.,

Miutsui & Co. Ltd.

Parrex

Pennzoil

Petroleum Crude Oil & Fuel in UAE

1 Abu Dhabi National Oil Company (ADNOC)

State-owned oil company with subsidiaries in exploration and production, support


services to oil and gas industry, oil refining and gas processing, chemicals and
petrochemicals, maritime transportation and refined products and distribution

Petroleum

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2 Abu Dhabi Oil Refining Company (Takreer)

Abu Dhabi-based company engaged in the refining of crude oil and condensate,
supply of petroleum products and production of granulated sulphur; runs the Ruwais
and Umm al Nar refineries

Petroleum

3 Adnoc Distribution Home Page

Company engaged in the marketing and distribution of petroleum products in the


emirate of Abu Dhabi; also produces and markets specialised lubricants such as
engine oils, gear oils, transmission fluids, brake fluids, etc

Petroleum Lubricants

4 Emirates National Oil Company ( ENOC )

Company in Dubai engaged in refining and marketing of oil, supply of jet fuel and
aviation fuelling services, manufacture of chemicals and lubricants, LPG, etc.
Petroleum Gas Chemicals Lubricants

5 Emirates Petroleum Products Company ( EPPCO )

Business group with interests in lubricants, supply of marine bunker fuels, supply of
jet fuel, commercial sales, procurement, storage of refined petroleum products, and
retail sales through petrol service stations

Petroleum .

6 FAL Group of Companies

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Business group based in Sharjah engaged in the trading of oil products (marine gas
oil, marine diesel oil, blending products, etc), shipping, supply of lubricants; a
refinery is also under construction in Sharjah

Petroleum Shipping Companies Lubricants

7 Ghayasiban Group

Business group based in Dubai & Lucknow (India); activities include software
development, industrial measurement & control instrumentation, petroleum trading,
a college in Lucknow, & a bank

Business Groups Instrumentation Petroleum Software Firms

8 Gulf Oil & Gas

Portal and e-marketplace for the Middle East and Africa oil and gas marketplace;
site contains a wealth of detail about companies providing products and services for
the oil and gas industry, searchable by country and product category

Petroleum

9 Gulf Oilfield Directory

Annual publication of companies in the oil and gas industries; online searchable
version available; published by Arabian Publications, a company incorporated in the
British Virgin Islands

Petroleum

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10 Pipeline Magazine

Magazine on the oil and energy industry; circulated across the Arab world; web site
has samples of articles from the magazine and subscription details

Oil companies struggling to keep on top of emerging


Threats

Less than 10 percent of national oil company (NOC) leaders surveyed by


Marsh Inc. strongly feel they have a full understanding of the risks they face
– and how to effectively manage them.

This finding was contained in a new study released recently by Marsh


examining risks and operational challenges among state-owned oil
enterprises. Marsh gathered much of the data from a recent groundbreaking
global risk advisory meeting held in Dubai and attended by approximately
250 leaders from NOCs, government and academia.

‘The Impact of Risk on National Oil Companies’ also reveals a strong desire
by NOC leaders to understand risk better and find better ways to share
related best practices. More than 90 percent of the NOC leaders Marsh polled
agreed that more discussion forums were needed.

“The spectrum of risk that business leaders face today is far more complex
than ever before,” said Brian Storms, chairman and CEO of Marsh. “Not too
long ago, the top concern for an NOC might have been a fire at a refinery.
But the study we conducted at the Marsh National Oil Companies Conference

94
in Dubai shows that newer risks – such as the impact of climate change – are
moving near the top of the list.”

Insurer warns oil companies about Renewable


Energy

Renewable energy sources were called "a growing risk" at a gathering of oil
executives today in Dubai.

As renewable energy rises in importance, it poses a threat to oil companies.

“The world’s desire for environmentally-friendly energy sources appears to


be rising faster than global temperatures. This is a growing risk to all energy
producers – one that goes well beyond a fire at a plant, or a tanker that runs
aground. What’s important for you as large producers of hydrocarbons is to
view this risk honestly and address it strategically," said Brian Storms,
Chairman and CEO of Marsh Inc., at the opening of the Marsh National Oil
Company conference in Dubai.

“The normal tendency would be a bias for action, where you might jump to a
tactical, defensive position. But there is a ‘new world’ view of risk –
specifically, how to find opportunity in the kind of global changes we’re
seeing… where risks and potential liabilities can be turned into a competitive
advantage over those companies that don’t move to address them.”

With many facilities situated either on areas of permafrost or in proximity to


the arctic ice shelf, a potential thawing induced by climate change would
95
present significant risk. Understanding this risk and prioritizing its potential
impact allowed the client to take measures to address it.

Storms also cited other potential risks faced by national oil companies,
including terrorist acts, the effects of a major natural disaster on production,
the concentration of supply chains – especially due to the threat of avian flu
and other risks.

"The world is beginning to become more concerned about climate change. It


would be prudent for all energy producers, not just oil companies, to
understand their footprints in the world, and that there will be more
constituent groups that will produce more challenges than the past."

Price Of Oil - Drawing The Line


Last summer, when the price of oil was bouncing off the rev limiter and a
gallon of regular was putting $4-plus holes in our wallets, we wondered if it
would continue, and what we would do if it did. The slide in oil prices has
been the best news that consumers have gotten all year. But will low fuel
prices continue?

Just a few months after the near-$150 high, the price of a barrel of crude oil
plummeted 70 percent, to about $40. It turns out that this upside has more
than a little downside, and it may mean bad news in the future. Last
summer's high prices were a result of a complex series of events-a "perfect
storm" involving speculation in the oil markets, high demand for oil products,
the peaking or near-peaking of production volumes, the incipient financial
crisis, etc. But at least we now have a pretty good explanation for what went
on in the price increase.

The problem is that no oil producer is making money at $40 per barrel.
We've heard estimates that the break-even point is now $60 to $80 per
barrel, so producers are hurting. Why doesn't a producer simply stop
producing if it loses money on every barrel? That question is answered when
you realize that most of our oil now comes from national entities (Saudi
Arabia, Venezuela, Iran, etc.) rather than companies like Exxon or Shell.
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These countries do indeed work with companies, but the basic decisions
there are governmental. These governments are dependent on oil revenue
for infrastructure, social programs, military spending and all the rest. For
them, if revenue stops, the government stops.

The OPEC nations want the oil price to climb to at least $70 per barrel, and to
help make that happen they've agreed to cut production by about 4.3 million
barrels per day. Total world production is now about 85 million barrels per
day, so the OPEC cuts represent about 5 percent of the total. The result
should be a boost in oil prices, but it hasn't worked-at least not yet. Part of
the problem is that while the nations may agree, they may not cut as much
as promised to avoid a drop in revenue.

More drastic cuts in production might do the trick, but no one knows the
"tipping point" at which a large reduction in supply might lead to a rapid
price increase like last summer, and those kinds of prices might hurt
everyone by making the worldwide recession worse.

The $40-per-barrel price is hurting oil companies and oil nations around the
world. You heard the mantra "drill, drill, drill" last summer, but something
like $100 billion in new oil-industry projects have been cancelled since the
fall in prices, and oil rigs, infrastructure and equipment are idle or not being
maintained. Alternative energy projects have also taken a hit, as their worth
is compared to the price of oil, and if oil is cheap, why seek alternatives?

Some of the most negative voices are coming from old hands in the oil patch,
and it's not just because of the current price. The industry's infrastructure is
made predominantly of steel, and many of the rigs, platforms, pipelines and
refineries that were new 40 or 50 years ago are rusting and not being
renewed. The industry also has depended on a generation of workers who
are not only aging, but are too often not being replaced.
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If demand for oil increases once again as economic recovery begins, where
will the necessary increase in supply come from? Are we, as many analysts
believe, at or beyond the all-time peak of production? Oil at $40 per barrel-
and the financial crisis-has left us a weaker oil industry. And, ironically, a
weaker alternative-energy industry, at a time when we need both to stabilize
future energy resources. If we see serious shortages, prices will spike. Let's
hope it's not the making of another perfect storm.

Rising Oil Keeps Companies on Their


Toes

98
Just when companies were getting used to cheap oil, crude prices have recently
started climbing again, keeping businesses jittery and alert in case last year's
record levels are repeated or prices spiral out of control.

Nouriel Roubini, the well-known New York University professor who predicted the
financial crisis, thinks that crude, which currently hovers above $70 a barrel, may
rise to $100 next year.

A Seoul financier predicts a rise, partly because of the weakening trend of the
greenback and the financial constraints oil producers have found themselves in.

The three-digit-mark may seem like a long way off, but the International Energy
Agency's newly revised forecast adds support to the outlook that prices won't go
back to figures seen earlier this year.
99
Crude traded as low as $30 a barrel earlier, a steep crash after it neared $150 a
barrel in the summer of 2008.

The agency projected Thursday that 2009 oil demand would go up on signs the
recession is bottoming out, which fueled trading to spike to a seven-month high on
the same day.

West Texas Intermediate crude for July delivery broke the $70 threshold to nearly
$73 on the New York Mercantile Exchange, while benchmark Dubai crude, Korea's
main import, hit a new high for the first time since last October.

What does all this mean for companies? Anxiety and a rush of worry ― no matter
the industry.

``Oil prices affect everything, from manufacturing and packaging to transporting,


no industry is insulated,'' said Lee Dal-suk, a senior analyst at the Korea Energy
Economics Institute, a state-run think tank.

100
Indian Oil Corporation Ltd in India
===========================
====
Oil & Gas Industry in India
The origin of oil & gas industry in India can be traced back to 1867 when oil was
struck at Makum near Margherita in Assam. At the time of Independence in 1947,
the Oil & Gas industry was controlled by international companies. India's domestic
oil production was just 250,000 tonnes per annum and the entire production was
from one state Assam.

The foundation of the Oil & Gas Industry in India was laid by the Industrial Policy
Resolution, 1954, when the government announced that petroleum would be the
core sector industry. In pursuance of the Industrial Policy Resolution, 1954,
Government-owned National Oil Companies ONGC (Oil & Natural Gas Commission),
IOC (Indian Oil Corporation), and OIL (Oil India Ltd.) were formed. ONGC was formed
as a Directorate in 1955, and became a Commission in 1956. In 1958, Indian
Refineries Ltd, a government company was set up. In 1959, for marketing of
petroleum products, the government set up another company called Indian
Refineries Ltd. In 1964, Indian Refineries Ltd was merged with Indian Oil Company
Ltd. to form Indian Oil CorporationLtd.

During 1960s, a number of oil and gas-bearing structures were discovered by ONGC
in Gujarat and Assam. Discovery of oil in significant quantities in Bombay High in
February, 1974 opened up new avenues of oil exploration in offshore areas. During
1970s and till mid 1980s exploratory efforts by ONGC and OIL India yielded
discoveries of oil and gas in a number of structures in Bassein, Tapti, Krishna-
Godavari-Cauvery basins, Cachar (Assam), Nagaland, and Tripura. In 1984-85, India
achieved a self-sufficiency level of 70% in petroleum products.

In 1984, Gas Authority of India Ltd. (GAIL) was set up to look after transportation,
processing and marketing of natural gas and natural gas liquids. GAIL has been
instrumental in the laying of a 1700 km-long gas pipeline (HBJ pipeline) from Hazira
in Gujarat to Jagdishpur in Uttar Pradesh,

passing through Rajasthan and Madhya Pradesh.

101
After Independence, India also made significant additions to its refining capacity. In
the first decade after independence, three coastal refineries were established by
multinational oil companies operating in India at that time. These included refineries
by Burma Shell, and Esso Stanvac at Mumbai, and by Caltex at Visakhapatnam.
Today, there are a total of 18 refineries in the country comprising 17 in the Public
Sector, one in the private sector. The 17 Public sector refineries are located at
Guwahati, Barauni, Koyali, Haldia, Mathura, Digboi, Panipat, Vishakapatnam,
Chennai, Nagapatinam, Kochi, Bongaigaon, Numaligarh, Mangalore, Tatipaka, and
two refineries in Mumbai. The private sector refinery built by Reliance Petroleum Ltd
is in Jamnagar. It is the biggest oil refinery in Asia.

By the end of 1980s, the petroleum sector was in the doldrums. Oil production had
begun to decline whereas there was a steady increase in consumption and domestic
oil production was able to meet only about 35% of the domestic requirement. The
situation was further compounded by the resource crunch in early 1990s. The
Government had no money for the development of some of the then newly
discovered fields (Gandhar, Heera Phase-II and III, Neelam, Ravva, Panna, Mukta,
Tapti, Lakwa Phase-II, Geleki, Bombay High Final Development schemes etc. This
forced the Government to go for the petroleum sector reforms which had become
inevitable if India had to attract funds and technology from abroad into the
petroleum sector. The government in order to increase exploration activity,
approved the New Exploration Licensing Policy (NELP) in March 1997 to ensure level
playing field in the upstream sector between private and public sector companies in
all fiscal, financial and contractual matters.

To meet its growing petroleum demand, India is investing heavily in oil fields
abroad. India's state-owned oil firms already have stakes in oil and gas fields in
Russia, Sudan, Iraq, Libya, Egypt, Qatar, Ivory Coast, Australia, Vietnam and
Myanmar. Oil and Gas Industry has a vital role to play in India's energy security and
if India has to sustain its high economic growth rate.

102
Oil Companies In India

Bharat Petroleum Corporation Limited


Bharat Petroleum Corporation Limited continues to meet the challenges of
rapidly changing technology in the Indian Petroleum Industry.

IBP
IBP was established in the year 1909 in Rangoon. IBP is now part of the
prestegious Indian Oil Corporation Group. Indian Oil is India's flagship Oil
Company with nine refineries, over 6500 kms of cross country pipelines and
186 bulk storage depots and terminals.

Indian Oil Corporation Limited


Indian Oil Corporation Ltd. (IndianOil) was formed in 1964 through the merger
of Indian Oil Company Ltd. (Estd. 1959) and Indian Refineries Ltd. (Estd.
1958). It is also the 19th largest petroleum company in the world. IndianOil
has also been adjudged No.1 in petroleum trading among the national oil
companies in the Asia-Pacific region.

Oil and Natural Gas Corporation Ltd.


ONGC ended the sectoral regime in the Indian hydrocarbon industry and
benchmarked the globally- established integrated business model; it took up
71.6 per cent equity in the Mangalore Refinery & Petrochemicals Limited.

Shell in India

Shell businesses exist to meet the energy needs of society in ways that are
economically, socially and environmentally viable, now and in future. All of
our businesses are united by common goals; to make the most of our existing
business; to gain new business and to break new ground.

103
List of Subsea Oil and Gas Companies in India

Aban Offshore Limited - a leading name in offshore drilling services

Aeromarine - offshore supplier,ship chandler,ship repairs,dealers @ exporters of


ship spares & aids to marine navigation

Alfa Pumps & Systems - offers heavy-duty gear pumps

Bharat Petroleum - Refining, Storing, Marketing and distributing petroleum products

Cairn India - largest producing oil field in the Indian private sector

Essar Oil - operates a fully integrated oil company of international size and scale in
India.

Great Offshore - integrated offshore oilfield services provider

GSPC Gujarat State Petroleum Corporation - vertically integrated energy company


across India and overseas

Gumpro Chem Drilling Fluids - offers a complete range of drilling fluid additives like
Specialized Lubricants, Stuck Breakers, loss Circulation material Dispersants,

Guru Industrial Valves Pvt. Ltd. - one of the pioneers in the world of Valves and Pipe
fittings

Hindustan Petroleum - major integrated oil refining and marketing companies in

104
India

Indian Oil Corp - major diversified, transnational, integrated energy company

Indiana Gratings Pvt. Ltd. - design, manufacture, supply and erection of gratings all
over the world.

Jagson International Limited (JIL) - offshore drilling in the Indian waters

Jindal Drilling & Industries ltd - deep ocean well drilling engineering and more

Kavin Engineering and Services Private Ltd - Process, mechanical, instrumentation,


piping and structural engineering for oil and gas production and processing
facilities.

M/S Kunj Forgings P LTD - manufacturer of pipeline accesories such as forged &
casted valves & forged flanges

Orion Instruments - manufacturers of pressure switches

Parveen Industries Pvt. Ltd - manufacture metallic conduits of electric cables

Petrodril - providing professional services, technical and corporate, to the petroleum


and other energy related business.

105
HALDIA
INTRODUCTION OF OIL COMPANIES IN HALDIA

Haldia Refinery (Near Kolkata, West


Bengal)
Haldia Refinery, one of the seven operating refineries of IndianOil, was
commissioned in January 1975. It is situated 136 km downstream of
Kolkata in the district of Purba Medinipur, West Bengal, near the
confluence of river Hoogly and Haldi. From an original crude oil
processing capacity of 2.5 MMTPA, the refinery is operating at a capacity
of 5.8 MMTPA at present. Capacity of the refinery was increased to 2.75
MMTPA through de-bottlenecking in 1989-90. Refining capacity was
further increased to 3.75 MMTPA in 1997 with the
installation/commissioning of second Crude Distillation Unit of 1.0 MMTPA
capacity. Petroleum products from this refinery are supplied mainly to
eastern India through two product pipelines as well as through barges,
tank wagons and tank trucks. Products like MS, HSD and Bitumen are
exported from this refinery. Haldia Refinery is the only coastal refinery of
the corporation and the lone lube flagship, apart from being the sole
producer of Jute Batching Oil. Diesel Hydro Desulphurisation (DHDS) Unit
106
was commissioned in 1999, for production of low Sulphur content (0.25%
wt) High Speed Diesel (HSD). With augmentation of this unit, refinery is
producing BS-II and Euro-III equivalent HSD (part quantity) at present.
Resid Fluidised Catalytic Cracking Unit (RFCCU) was commissioned in
2001 in order to increase the distillate yield of the refinery as well as to
meet the growing demand of LPG, MS and HSD. Refinery also produces
eco friendly Bitumen emulsion and Microcrystalline Wax. A Catalytic
Dewaxing Unit (CIDWU) was installed and commissioned in the year 2003
for production of high quality Lube Oil Base Stocks (LOBS), meeting the
API Gr-II standard of LOBS.
In order to meet the Euro-III fuel quality standards, the MS Quality
Improvement Project has been commissioned in 2005 for production of
Euro-III equivalent MS. The refinery expansion to 7.5 MMTPA as well as a
Hydrocracker project has been approved, commissioning of which shall
enable Haldia Refinery to supply Euro-IV and Euro – III HSD to the eastern
region of India.

IOC puts on hold its Haldia Refinery Plan

Indian Oil Corporation (IOC), the country’s largest oil marketing company, has put
on hold its plan to set up a 15-million tonne refinery at Haldia due to the economic
downturn. IOC was supposed to rope in an international partner for the project.

“The project has been put on hold because of the financial turmoil and no progress
has been made,” said an IOC executive.

Now, it may be difficult for IOC to find an international company for such a large
complex, said an industry expert.

IOC and the West Bengal government were to jointly explore the possibility of
roping in an internationally-reputed multinational company as a partner. IOC along
with this international partner was supposed to carry out a techno-economic

107
feasibility study for the project. The study has not yet been conducted in the
absence of such a partner.

In September 2006, IOC had signed a memorandum of agreement (MoA) with the
West Bengal government to develop Haldia as a Petroleum, Chemicals and
Petrochemicals Investment Region (PCPIR). The agreement envisaged setting up of
a refinery of 15-million tonne capacity with downstream petrochemical facilities. IOC
already operates a 6-million tonne refinery at Haldia, which is being expanded to
7.5 million tonnes.

IOC is not the only company that has put on hold its expansion plan. Last week,
Mangalore Refinery and Petrochemicals, a subsidiary of Oil and Natural Gas
Corporation (ONGC) said it has shelved its plan to build a 15-million tonne refinery.

Analysts say the economic downturn is not the only reason behind putting such
plans on hold. Such decisions are also being influenced by the increasing surplus
refining capacity in the country. India has surplus refining capacity of nearly 45
million tonnes, which is set to increase further.

IOC stops supplies as Haldia Cheque


Bounces

The crisis being faced by haldia petrochemicals ltd deepened further with indian oil
deciding to stop naphtha supplies after a rs 21 crore cheque issued by the former
bounced on friday. this is the second time that cheques to the oil major issued by
the rs 5,300 crore joint venture between the west bengal government, the tatas and
the purnendu chatterjee group have bounced. "some consignments are on way so
we can't do anything about them. but after that we are stopping supplies till

108
payments are cleared," a top ioc official said. the official also expressed
unhappiness over the post-dated cheque payment system in the commercial pact
with hpl. two of hpl's cheques issued to ioc for rs 17.33 crore and rs 20.38 crore had
bounced last month. subsequently, hpl revalidated them but requested ioc to delay
encashment siting poor sales. hpl also has a 60-day breather for payments. the
company doesn't have to pay interest for the first 30 days. hpl has been facing
problems for sometime now, with the tatas seeking an exit. the latest incident may
put off ioc which has shown willingness to take up to 26 per cent equity provided it
gets the management control. it also envisages restructuring the existing equity
share capital of the company and significant reduction in the stakes of the existing
promoters. ioc has also been willing to contribute fresh equity share capital of rs
468 crore to acquire a 26 per cent stake in hpl, proposed to be made at par.

Paradip-Haldia Crude Pipeline to be


ready Soon
After a delay of more than a year, Indian Oil Corporation (IOC) is now poised
to complete the Paradip-Haldia crude pipeline, hopefully in a month or two.

109
The project will reduce the transportation cost of crude to both Haldia and
Barauni refineries in West Bengal and Bihar respectively.

The Rs 1,178-crore project - including single-point mooring and storage


facility at sea port at Paradip in Orissa - had run into rough weather following
a series of problems involving project design, environmental clearance and
differences with the Iranian contractor deployed to complete the SPM and the
connecting offshore pipeline.

SPM project contractor

According to sources, to hasten the process, the company recently replaced


the SPM project contractor - Iranian Offshore Engineering and Construction
Company (IOEC) - with Oil and Gas Engineering Systems of Australia.

IOEC was charged with inordinately delaying completion of the project.

Escalation

Though the decision may lead to legal complications between IOC and IOEC,
IOC is now hopeful of completing the project shortly. There are, however,
chances of escalation in project cost depending upon the legal
developments.

"The Australian company has just set foot on the project. There is 30-35 days
residual work left in regard to the offshore pipeline connecting the SPM to
onshore storage facility. However, considering the heavy monsoon in the
East coast, which is about to arrive, there may be some minor delay. Overall
we are now hopeful to complete the project in next two months," a senior
company official said.

Sub-surface pipeline

110
Meanwhile, IOC sources said Punj Llyod has helped overcome technical
problems in laying the 330 km sub-surface pipeline from Paradip to Haldia
crossing a number of river estuaries, including the largest and most difficult
of them all - the estuary of the Mahanadi.

"There were serious problems in laying the pipeline under the Mahanadi
leading even to a change in design. However, the project contractor struck to
work at the agreed cost," the official said, adding that the pipeline project
has been completed.

It is of interest to note that Iranian Offshore Engineering and Construction


Company has previously faced similar charges from ONGC for a pipeline-
cum-platform modification project.

Indian Oil’s Pipeline Network nears 10 K Ian

IndianOil, the state-owned oil marketing company will cross a pipeline network of 10,000
km before the end of calendar 2008. The company has a pipeline network of 9,700 km
now and is about to operationalise its 330-km Paradip-Haldia pipeline.

Requesting anonymity a source close to the development said, "We hope to reach the
10,000 mark soon considering the Paradip-Haldia crude pipeline will be commissioned
before December 31." Once the company reaches this mark, its total throughput
capacity will hit ,70 million tonne per annum (mtpa).

IndianOil is setting up the Paradip to Haldia pipeline to bring down the cost of
transportation of crude oil to both Haldia and Barauni refineries. Currently, the crude oil
111
is being supplied from the Haldia port in small consignments. At Rs 1,420 crore, the
pipeline is one of IndianOil's most ambitious projects as it is expected to facilitate further
expansion of refinery capacities in the eastern region.

The source said although the project was initiated in 2004, it faced delay due to initial
hurdles. Later, the offshore single point mooring system faced problems. "It is now
ready and the pipeline is almost in place," he said, adding that the pipeline will have a
capacity of 11 mtpa.

The company which had a pipeline network of 9,273 km at the start of this fiscal year,
plans to add 4,000 km before the end of the current Five-Year Plan, which ends in
March 2012. "We are currently working on 13 different projects with a total investment of
Rs 2,500-2,600 crore. The pipelines are an integral part of these 3 projects," the source
said.

The first of the projects was a small Bangalore ATF line pipeline which was
commissioned in October 2008. The second was IndianOil's first LPG pipeline from
Panipat to Jalandhar Spanning 275 km, it was commissioned in November. The third is
the Panipat Haldia pipeline.

Indian Oil To Gain From Haldia-Paradip Pipeline


Indian Oil Corporation (IOC) has decided to lay a crude pipeline between
Haldia and Paradip with an annual throughput capacity of 11 million tonne
(mt) at a cost of Rs 1,154 crore.

112
The move will enable the oil major to save Rs 400 crore, when compared to
the cost involved for setting up a floating storage offtake (FSO) at the mouth
of the Hooghly, proposed by the Kolkata Port Trust (KoPT). KoPT’s river port
Haldia will, however, will lose considerable petroleum cargo.

This pipeline will connect Paradip port in Orissa with IOC’s refinery at Haldia in West
Bengal and further with the help of existing Haldia-Barauni pipeline, which carries
crude to IOC’s Barauni refinery in Bihar.

The Haldia-Paradip pipeline project is now awaiting statutory clearances of


the Union government and the governments of Orissa and West Bengal. “It
will take three years to complete the pipeline project,” IOC’s chairman MS
Ramachandran said here Tuesday.

He was talking to reporters on the sidelines of an interactive session on ‘Oil


and Gas Scenario of India with Particular Reference to Eastern India and West
Bengal’ organised by the Bengal Chamber of Commerce and Industry.

“The new pipeline will be the lifeline for IOC, as Haldia and Barauni refineries
are incurring huge losses because of the additional cost of transporting crude
through Haldia port where larger vessels cannot call in,” Mr Ramachandran
said.

IOC will set up a single-buoy mooring (SBM) facility off the Paradip coast to
enable VLCCs or very large crude carriers to discharge their cargo. The crude
will then be piped on to the Haldia and Barauni refineries.

GUJARAT

113
Introduction To Gujarat Refinery

More than 25 years ago, the Government of Gujarat conceived of the formation of a
petrochemical company, that has today metamorphosed into a large-scale Rs. 3900
crore energy organization, excelling in a wide gamut of hydrocarbon activities.
Notwithstanding its limited role and the low key infrastructure, the organization
drew inspiration from the exciting opportunities that the hydrocarbon sector offered
in the wake of liberalization of Indian economy. It gradually began to expand its
vision, widened the scope of its activities and rechristened itself as Gujarat State

GSPC has grown from operator ship of small fields in Gujarat into an expansive oil
and gas exploration and production company across India and overseas within just a
decade. The company has recently drilled its 50th onshore well, which is a landmark
considering the fact that GSPC has been an Operator only since Aprill 2000. Its rise
in the hydrocarbon sector was helped in no small measure by the Central
Government's opening of the sector to private participation in the early 1990s.

Indian Oil Corporation Ltd in North East Region

114
(Guwahati Refinery)

PROFILE OF GUWAHATI REFINERY (ASSAM)

The Guwahati Refinery in North East India -- the first Public Sector
refinery of the country -- was commissioned in 1962 with a
capacity of 0.75 MMTPA which was subsequently increased to 1.0
MMTPA through debottlenecking projects. The refinery processes
only indigenous crude oil from the Assam oil fields. With its main
secondary unit, a coking unit, it produces middle distillates from
heavy ends and supplies petroleum products to North-Eastern
India, and surplus products onward to Siliguri in West Bengal in
2003. Hydrotreater Unit for improving the quality of diesel has
been commissioned in 2002. In 2003, the refinery installed an
Indmax Unit, a novel technology developed by Indian oil’s R&D
Centre for upgrading heavy ends into LPG, Motor Spirit and Diesel
oil.

115
INTRODUCTION TO HUMAN RESOURCE
DEPARTMENT

GUWAHATI REFINERY
===========================
====
The Human Resource Department The Personnel, Administration,
Management Services, HRD & Training and Corporate Communication
Department at Refineries are headed by ED (HR) with the following functions
under his charge:
1
2 Personnel
3 Administration and Welfare
4 Training and Development
5 Management Services
6 Corporate Communication

The role of the personnel department is to promote and develop cooperative


attitude amongst employees and to inculcate in them a sense of
belongingness to the organization culture, evolve progressive personnel
policies and practices which ensures employee satisfaction, to ensure that
employees can undertake skill up-gradation through appropriate training so
that they feel themselves equipped to face new challenges and technologies,
enhance employee participation in management and act as change agent to
new interventions.
Personnel management essentially being a staff functions, Personnel
Department's role will be that of a staff department with emphasis on its
advisory character in all matters connected with personnel activities except
116
in respect of the promotion of welfare measures which will be the executive
responsibility of this Department.
Personnel Department shall also be responsible for ensuring compliance with
the provision of various labor laws and other statutes.

In Guwahati refinery the functions are divided amongst two senior human
resource managers (SHRM). Each SHRM appoints deputy manager to
subdivide their functions. SHRM also appoints Senior Administrative officers
(SAO) to take care of the administrative functions.

The organogram of Guwahati refinery’s HR department is given in the next


page.

Functions of SHRM: They have to look after employee relations which


includes looking after facilities like medical facilities, wages, incentives that
are being provided to the employees or not. They mainly direct their Deputy
Managers to look after these aspects. SHRM is also in charge of looking after
the contract labor related issues. They do this by giving approval to the entry
and exit of contract labor during the contract period after the initial
verification is done by employee relations officer.
The SHRM also has to look after various legal activities like land and estate
matters as and when arise. SHRM looks after the time office matters like
entry and exit of employees and also a very important function that is wage
administration.

Functions of Deputy Managers: They perform the functions of approving


land and estate matters, and then development of surrounding community,
looks into the matters of certain educational undertakings financed by
Guwahati refinery, forwards the requests for loans and advances by
117
employees to the finance department. They scrutinize the reports of senior
administrative officials regarding various matters. They also monitor
employee performances and identify cases where training is required. The
maintenance of administrative building like looking after water filters, chairs,
computers, tables etc. is also one of the functions of deputy manager.

Functions of Senior Administrative officer (SAO): They look into the


matters of land, carry out time to time inspection of the lands acquired by
Refinery, they look into the matters of community development, genuineness
of their requirements and fund allocation, they perform the function of
staffing employees by placing them in those jobs in accordance to their skill
set. They look after the wage administration and they are responsible for
formulating the wages to be allocated. They also have to look after medical
benefits, promotion, probation and recruitment and performance appraisals.

Functions of Employee Relations Officer (ERO): They keep track of


contract labourer’s right from their entry passes to their days of work,
payment and provident funds. They perform the function of approving loan
and advances and forwarding them to the finance dept. They also have to
keep a track of uniform and safety shoes supplied to employees working in
the plant. Canteen and pantry is also taken care of by the employee relations
officer.
DEPUTY MANAGER (ER)

118
HUMAN RESOURCE FUNCTIONS IN GUWAHATI
REFINERY

==================================================
=======

STAFFING

o Manpower planning

o Determine the organizational structure and optimize manpower


to effectively meet Company’s objective

o Job description

o Recruitment

o Personnel records

o Promotion

o Transfer

PERSONNEL MAINTENANCE

o Motivation

119
o Performance Appraisal

o Recreation

o Communication

o Employee amenities - canteen , clubs etc.

o Safety

o Medical Services

o Security

DEVELOPING THE HUMAN RESOURCE

o Induction and apprentice training

o Training & development of employees.

INDUSTRIAL RELATIONS

o Productivity Bargaining

o Grievance Handling

o Discipline Administration

o Providing joint consultative machinery-Joint Management


Councils

COMPENSATION

o Wage & Salary surveys & controls

o Negotiations
120
o Incentives/bonus

PERSONNEL POLICY & PLANNING

o Defining Organizational goals, Policy guidelines and strategies

o Formulating & implementing Personnel policies

DATA INTERPRETATION AND ANALYSIS

1) For how many years have you been working in this organization?

Analysis: It was analysed that maximum of the employees years


of service is in between 10 years to 20 years.

2) What is your grade in this organization?

a) A ( ) (b) B ( ) ( c) C ( ) (d) D ( ) (e) E ( )

INTERPRETATION:

28.57
GRADE A %

121
14.29
GRADE B %
28.58
GRADEC %
14.29
GRADE D %
14.29
GRADE E %

Analysis: It was analyzed that in this organization maximum of the

Employees worked in Grade C level

3) What was your Compensation Package before the commencement of 9th Pay
Commission?

a) Below 10,000( ) (b)10,000-20,0000( ) (c)20,000-30,000( )

122
d) 30,0000-40,000( ) (e) More than 40,000( )

Interpretation:

14.29
Below 10 000 %
42.86
10000-20000 %
28.58
20000-30000 %
30000-40000 7.14%
More than 40 000 7.14%

ANALYSIS: It was analyzed that before the commencement of 9th Pay Revision
maximum of the employees compensation package was between 10 000 to 20 000
respectively.

4) Are you satisfied with your working condition in this organization?


123
a) Yes ( ) (b) No ( )

INTERPRETATION

85.71
Yes %
14.29
No %

ANALYSIS: It was analyzed that maximum of the employees were satisfied with
their working condition prevailing in this organization.

5) Are you satisfied with your payroll along with your working condition?

a) Yes ( ) ( b) No ( )
124
Interpretation:

71.42
Yes %
28.57
No %

Analysis: It was analyzed that maximum of the employees were satisfied with their
payroll along with their working condition in this organization. The ratio of their
Payroll in respect to their Working Condition was beneficial to them.

6) Do you think there should be a rise in salary package in this organization?

a) Yes ( ) ( b) No ( )
125
INTERPRETATION:

57.14
Yes %
42.85
No %

Analysis : Maximum of the respondants stated that there should be a rise in the
salary package in respect to this organization.

7) Do you think there should be implementation of 9th pay commission in this


organization?

a) Yes ( ) ( b) No ( )

INTERPRETATION

71.42
Yes %
28.57
No %

126
ANALYSIS: It was analyzed that maximum of the respondants stated that the 9th
Pay Revision should be implemented in this organization.

8) What was the reimbursement in your salary package after the commencement
of 9th pay revision?

a) 10% ( ) (b) 20%( ) (c) 30% ( ) ( d) 40% ( ) (e) 50% ( )

INTERPRETATION:

28.58
10% %
14.29
20% %
28.58
30% %
14.29
40% %
14.29
50% %
Here , 1=10%, 2=20%, 3=30%, 4=40% and 5=50% as indicated in the graph below.

127
ANALYSIS: It was analyzed that at an average maximum of the respondants
reimbursement was to a rise of 10% & 30% after the commencement of 9th pay
revision in this organization.

9) Now are you satisfied with the payroll along with your working condition after
the commencement of 9th Pay Revision?

a) Strongly Dissatisfy ( ) (b) Dissatisfy ( )

(c) Neither Satisfy Nor Dissatisfy ( )

(d) Satisfy ( ) (e) Strongly Satisfy ( )

128
INTERPRETATION

14.29
Strongly Dissatisfy %
14.29
Dissatisfy %
14.29
Neither Satisfy Nor Dissatisfy %
28.58
Satisfy %
28.58
Strongly Satisfy %

ANALYSIS: It was analyzed that after the commencement of


9th Pay Revision the employees were satisfied working in this
organization

129
130
CONCLUSION

Taking into consideration the 5 Rating Scale i.e strongly satisfied,


satisfied, neither satisfied nor dissatisfied, dissatisfied and
strongly dissatisfied it was found out that after the
commencement of 9th Pay Revision in Indian Oil Corporation Ltd,
Guwahati Refinery the employees were strongly satisfied by the
payroll enhanced to them.

This was because of the reason that there was a strong rise in the
increment given to employees working in this public sector unit.
There was a tremendous rise in the increment i.e 50%. This made
the employees achieve their job satisfaction in respect to the
point of view in regards to the compensation package in this
particular unit.

A brief graph has been enumerated below showing the


satisfaction of the working condition of the employees after the
commencement of 9th Pay Revision in this particular unit.

Strongly Dissatisfy:14.29% Neither Satisfy Nor


Dissatisfy:14.29%

Dissatisfy:14.29% , Satisfy:28.58%, Strongly Satisfy:28.58%

131
132
RECOMMENDATION AND SUGGESTION

Although it was found that the employees were fully satisfied with their payroll
after the commencement of 9th pay revision in Indian Oil Corporation, Guwahati
Refinery it was still advised to recommend that there should be a slight rise in the
compensation package in the group of A Grade and B Grade employees. This is
because of the reason that since this two categories comes under the designation of
officer in this reputed organization.

No doubt Indian Oil Corporation Ltd is one of the most reputed organization all
over India so to keep its position mandatory in respect to the payroll scheme a
slight rise increment will give a strong reflection in the virtue and vice in respect to
this category.

So it is strongly recommended that a slight increase in the payroll scheme in


respect to grade A and grade B employees will make their position more
respectable in this organization.

REFERENCE
133
Websites Referred:

www.iocl.in

www.monetarycontrol.com

www.quickmba.com

www.netmba.com

www.investorwords.com

www.answers.yahoo.com

www.motorcyclist.com

www.businessmirror.com

www.adnoc.ae.com

www.iloveindia.com

www.valuenotes.com

INTRANET REFERRED

Intranet of Indian Oil Corporation Ltd, Guwahati Refinery.

134
Questionnaire
ON

135
COMPENSATION MANAGEMENT: “AN ANALYSIS IN RESPECT
OF SALARY WITH 9TH PAY REVISION IN IOCL, GUWAHATI
REFINERY”

1) For how many years have you been working in this organization?

2) What is your grade in this organization?

a) A ( ) (b) B ( ) ( c) C ( ) (d) D ( ) (e) E ( )

3) What was your Compensation Package before the commencement of 9th Pay
Commission?

a) Below 10,000( ) (b)10,000-20,0000( ) (c)20,000-30,000( )

d) 30,0000-40,000( ) (e) More than 40,000( )

4) Are you satisfied with your working condition in this organization?

a) Yes ( ) (b) No ( )

5) Are you satisfied with your payroll along with your working condition?

a) Yes ( ) (b) No ( )

136
6) Do you think there should be a rise in salary package in this organization?

a) Yes ( ) ( b) No ( )

7) Do you think there should be implementation of 9th pay commission in this


organization?

a) Yes ( ) ( b) No ( )

8) What was the reimbursement in your salary package after the commencement
of 9th pay revision?

a) 10% ( ) (b) 20%( ) (c) 30% ( ) ( d) 40% ( ) (e) 50% ( )

9) Now are you satisfied with the payroll along with your working condition after
the commencement of 9th Pay Revision?

a) Strongly Dissatisfy ( ) (b) Dissatisfy ( )

(c) Neither Satisfy Nor Dissatisfy ( )

(d) Satisfy ( ) (e) Strongly Satisfy ( )

137
138
139
140