The Extended Oil & Gas Supply Chain

SAP Business Forum 05 Series

Houston, Texas
March 22, 2005
Mickey McBroom, Industry Principal Downstream
Dirk Williams, Manager, Field Services, IBU Oil & Gas

Introduction & SCM Business Overview

SAP Solution Overview
Extending the SAP SCM Solution
Next Steps

The Ecosystem and the Oil & Gas Supply Chain

Upstream

Midstream
Supply

Refining

Producer
Producer
Producer
Producer

Distributor
Distributor

Refiner
Refiner
Refiner
Refiner

Primary
Supply

Crude
Refined Products
NGL / LPG
Lubricants
Natural Gas
SAP AG 2005, Shell SCM Overview, Speaker Name 3

Secondary
Distribution

Distributor
Distributor
Distributor
Distributor

Service
Station &
Convenience
Retailing

Retailer
Retailer

What is Downstream Oil & Gas Supply Chain Management?

What is Supply Chain Management? A few definitions
Integrated Supply Chain Management (ISCM) is a process-oriented, integrated

approach to procuring, producing, and delivering products and services to

customers. [M.I.T]
Supply chain management involves coordinating, integrating and executing these

flows both within and between companies.

SCMs aim is to optimize the activities occurring along the supply chain to maximize

asset usage, minimize costs and drive maximum revenue from the activity.
Within the Oil and Gas Industry, we typically describe SCM stages of planning,

scheduling and execution as taking place, with constant and ongoing tracking
parallel to these.

Key Characteristics in Oil & Gas

Large quantities of products managed on a global basis
Typically long lead times for transportation
Highly fungible market, both in terms of products and partners
Long term contracts the normal basis for business

SAP AG 2005, Shell SCM Overview, Speaker Name 4

Key Issues for Supply Chain Management

Observations

Key Issues
Rationalizing Supply Chain network

Lack

of visibility and lack of integration of supply

chain

Lack of global industry wide standards

Lack

Lack of ability to rapidly respond to

real world scenarios

Need

Lack of collaboration between supply

chain partners

Creates

of central source of mission critical data

for real time data visibility and ability to

perform what if scenarios to quickly adjust
operating plans
imbalances and inefficiencies along supply

chain

High occurrence of M&A

Creates

disruptions to company operations and

management

Lack of Risk Management

Creates

SAP AG 2005, Shell SCM Overview, Speaker Name 5

possibility of distress spot contracts

A Fully Integrated, Closed-Loop Process

All Steps of the Process are Integrated and Seamless
1. Planning & Optimization
Demand

Planning
Refinery planning
Upstream planning
Crude supply planning
Product supply planning
Trading Plan

2. Operations & Scheduling

Schedule

Building
Schedule Balancing
Schedule updates
Inventory Management
Trading Operations

4. Evaluation & Analysis

Profit

Loss Analysis
Optimization of Inventory
Risk Management
Performance Monitoring

SAP AG 2005, Shell SCM Overview, Speaker Name 6

3. Execution & Settlement

Custody

Transfer
Event management
Back Office Updates
Invoicing / Payments

SAP Oil & Gas SCM Solution Release Timeline

A Collaborative Approach to Solution Development

SAP APO
started

Network
Planning
Event Manager

mySAP SCM
Components

Demand
Planning

Production
Planning

Inventory Hubs

Oil & Gas

Components

SCM
Integration

1st release

Gas
TSW
started

Major 4.6c

Global Industry
Advisory Council

Pilot case
CITGO live

Industry
TSW Focus
Group
Time / Releases

SAP AG 2005, Shell SCM Overview, Speaker Name 7

Industry Experience

Equiva

Saudi Aramco

Pemex Gas
+++
BHPBilliton /
TOTAL

Introduction & SCM Business Overview

SAP Solution Overview
Extending the SAP SCM Solution
Next Steps

Supply Network Scenario - Geographical

Colonial
Products
Pipeline

Sugarland
Crude
Pipeline

Baton
Rouge
Refinery /
Terminal

Marine
Supply

St. James
Terminal

O/G
Off-/Onshore
Wells

SAP AG 2005, Shell SCM Overview, Speaker Name 9

Major Roles in the Supply Chain - Pipeline

Marine
Carrier
Partner
Trader

Greensboro
Pipeline
Operator
Products
Trader

Partners

Doraville
Colonial
Pipeline
Scheduler

Supply Network
Manager

Demand
Manager
Exchange
Manager

Supply
Manager

Refinery
Manager
Crude Pipe
Scheduler

Baton Rouge

St. James
Terminal
Manager

Onshore /
Offshore Wells
SAP AG 2005, Shell SCM Overview, Speaker Name 10

Crude
Trader

Crude Marine
Scheduler

Off
Galveston

NWE
Rotterdam

Whats happening? Supply Chain Management

Bulk
transfers

Greensboro

Bulk contract
sales

Rack sales
Partner
Own

Rack exchanges
Bulk transfers

Rack sales
Partner
Own

Doraville

Bulk contract sales

Bulk transfers

Rack exchange
Rack sales
Partner
Own

Baton Rouge

Own Scheduling
and Nomination
Customer
Nomination
SAP AG 2005, Shell SCM Overview, Speaker Name 11

Own
statistical
Forecast

Rack
exchange

Partner
Supplied
forecast

SAP for Oil & Gas Solution Map:

Supply, Transmission and Trading
Primary
Suppliers & Partners Exploration & Development Hydrocarbon Refining &
Appraisal
& Production Supply & Gas Manufacturing Distribution
Transmission

Terminal
Management

Secondary
Distribution

Commercial
Sales &
Retailing

Upstream
Exploration and Appraisal
E&P Contract Management
Field Development
Liquid and Gas Production
Allocation and Settlement
Oil Field Service and Repair Operations
Supply, Transmission & Trading
Bulk Supply Chain Planning and Optimization
Bulk Supply Chain Operations and Scheduling
Bulk Supply Chain Execution and Settlement
Bulk Supply Chain Reporting and Analytics
Physical Oil and Gas Commodity Trading
Oil and Gas Paper Trading and Risk Management
Refining &
Manufacturing
Refining Operations
Lubes Manufacturing Operations
Downstream Marketing & Retailing
Marketing Planning and Execution
Sales Planning and Account Management
Opportunity to Cash
Customer Service
Terminal Management
Hydrocarbon Products Transportation
Service Station Fuel Management
Convenience Retailing
Asset Management
Enterprise Asset Management

Enterprise Management & Support

SAP AG 2005, Shell SCM Overview, Speaker Name 12

Analytics
Financials
Human Capital Management
Corporate Services
Operations Support

Customers &
Channels

Mapping the SAP Solution

Supply, Transmission & Trading
Bulk Supply Chain Planning and Optimization

1. Planning & Optimization

Demand

Planning
Refinery planning
Upstream planning
Crude supply planning
Product supply planning
Trading Plan

Supply, Transmission & Trading

Bulk Supply Chain Operations and Scheduling

2. Operations & Scheduling

Schedule

Building
Schedule Balancing
Schedule updates
Inventory Management
Trading Operations

SAP AG 2005, Shell SCM Overview, Speaker Name 13

SAP Solution
SAP Advanced Planning & Optimization (SAP APO)
Demand & Supply Planning & Forecasting
Collaborative Planning
Supply Network Planning & System Balancing
Global Available to Promise
See also overlapping area below

SAP Solution
SAP Traders & Schedulers Workbench (SAP TSW)
Planning to Operations and Scheduling Cycle
Nomination Management
Inventory Planning
Custody Transfer Handling
SAP Event Management (SAP EM)
Integration into Real World events
Monitoring & Alerting

Mapping the SAP Solution

Supply, Transmission & Trading
Bulk Supply Chain Execution and Settlement

3. Execution & Settlement

Custody

Transfer
Event management
Back Office Updates
Invoicing / Payments

Supply, Transmission & Trading

Bulk Supply Chain Reporting and Analytics

4. Evaluation & Analysis

Profit

Loss Analysis
Optimization of Inventory
Risk Management
Performance Monitoring

SAP AG 2005, Shell SCM Overview, Speaker Name 14

SAP Solution
SAP IS-Oil Downstream (IS-Oil) including
Exchanges
Commodity Pricing (formula / average
pricing)
Quantity Conversion handling
Tax and Duty Handling
Silo Management
TAS Interfacing
Transportation Execution & Settlement
SAP Event Management (SAP EM)

SAP Solution
SAP Business Information Warehouse (SAP BW)
Standard Reporting
Flexible definition reporting
Supports KPI analyses
Strategic Enterprise Management (SAP SEM)
Linking in data from the overall solution set and
external data sources

Reservoir to Terminal The Solution(s)

Marine

Greensboro
Prod. Terminal
APO

Crude Pipeline

APO
APOAdvanced
AdvancedPlanner
Planner&&Optimizer
Optimizer
TSW
TSWTraders
Traders&&Schedulers
SchedulersWorkbench
Workbench

Product Pipeline

EM
EMEvent
EventManager
Manager

Doraville
Prod. Terminal

IS-OIL Industry Solution Oil

IS-OIL Industry Solution Oil

APO
TSW
Baton Rouge
Refinery
APO
TSW

TSW

St. James
Crude Terminal

TSW
NWE
Rotterdam

TSW
TSW
Onshore /
Offshore Wells
SAP AG 2005, Shell SCM Overview, Speaker Name 15

Off
Galveston

Introduction & SCM Business Overview

SAP Solution Overview
Extending the SAP SCM Solution
Next Steps

Introducing Trading for Oil & Gas

Supply, Transmission & Trading
Physical Oil and Gas Commodity Trading

SAP Solution
SAP Global Trade Management (SAP GTM)
Trading Contract
Contract Management
Trade Expense Management
Position Reporting

Supply, Transmission & Trading

Oil and Gas Paper Trading and Risk Management

SAP Solution
SAP Treasury & Risk Management (SAP TRM)
Paper Deal Capture
Risk Management
Hedging
Reporting

SAP AG 2005, Shell SCM Overview, Speaker Name 17

NetWeaver for Integrated Trading & Operations

Trading
office

NetWeaver

Portal

Position
Planning

MDM

Trading
(external)

Trading
(internal)

SAP AG 2005, Shell SCM Overview, Speaker Name 18

Accounting

Operations
Office

BI

Collaboration
Deal
Capture

Nomination

Shipment

Settlement

Process Integration
NetWeaver

ERP

Inventory

Supply /
Demand
Planning

XI

Scheduling

Terminal
(external)

Trading & Operations Business Landscape

Market Tracking & Analysis
Deal Capture
Trading Decision Support & Optimization
Paper Trade and
Risk Management
Physical Trade
Management

Complex Risk
Management and
Modeling

Logistics Operations Management

Financial Execution and Management

Enterprise Reporting and Analysis

SAP AG 2005, Shell SCM Overview, Speaker Name 19

SAP Oil & Gas Integrated Trading, Risk Mgmt & Operations Initiative

Market/ Tracking
& Analysis
SAP BW
3rd Party
Solution
Capture
SAP Deal
Deal
Capture
Trading Decision
Support
& Optimization
SAP BW
Basis
Paper Trade and
Risk Management
Physical Trade
SAP
GTM
Management

SAP
TRM
Complex Risk
Management and
Modeling

Logistics Operations Management

Integration

TSW and IS-Oil / mySAP ERP

Financial Execution and Management
EnterpriseBI
Reporting
mySAP
(BW and
andAnalysis
SEM)

SAP AG 2005, Shell SCM Overview, Speaker Name 20

SAP Oil & Gas Integrated Trading, Risk Mgmt & Operations Initiative

Market/ Tracking
& Analysis
SAP BW
3rd Party
Solution
Capture
SAP Deal
Deal
Capture
Trading Decision
Support
& Optimization
SAP BW
Basis

xITRO

Paper Trade and

Risk Management

Physical Trade
SAP
GTM
Management

SAP
TRM
Complex Risk
Management and
Modeling

Logistics Operations Management

Integration

TSW and IS-Oil / mySAP ERP

Financial Execution and Management
EnterpriseBI
Reporting
mySAP
(BW and
andAnalysis
SEM)

SAP AG 2005, Shell SCM Overview, Speaker Name 21

Introduction & SCM Business Overview

SAP Solution Overview
Extending the SAP SCM Solution
Next Steps

Next Steps

Industry

Workshops to Gather Requirements

Develop

Industry Momentum

Quantify

Industry Support

Finalize

Development Business Case (SAP)

Develop

Collaborative Buildout/Rollout Plan

SAP AG 2005, Shell SCM Overview, Speaker Name 23