-67%
Solution
Executive Summary
In this assessment, by identifying a service as a category of spend, its importance and impact to ADNOC stakeholders has been outlined. Also, through a brief market analysis, the extent in which procurement function produce value for money outcomes has also been put into account. This is with current approaches for managing prices and costs for the services with impacts of markets in securing cost savings to ADNOC demonstrated. A service has been identified which is Logging Services Sourced by ADNOC. Through the use of desk research, illustration of the data has been provided with different tools including SWOT, Porters 5 Forces, STEEPLED, and Mendelow Matrix analysis have been used.
This assessment findings evidence that logging services category lead to ADNOC achieving value for money outcomes successfully. Through this, the organisation is well positioned in holistically leveraging on oil and gas industry in United Arab Emirates (UAE) competitive advantage. Further, through a priority on the different stakeholders analysis and different Key Performance Indicators (KPIs), ADNOC is well positioned to guarantee success in achieving value for money outcomes sustainably and future oriented.
In line with the findings of the report and eventual conclusions made, different gaps and weak areas have been noted. The different recommendations are;
- Explore on expansion of best practice of embracing contemporary technology in sourcing process with stakeholders inclusion being elaborate
- Apart from involving external stakeholders, they can initiate systems customised to increase value for money outcomes
- Transitioning to an increased involvement of local suppliers for obtaining discounted costs for value for money outcomes
- Current economic recession and encountered issues having financial capacity to affect ADNOC with evaluation based on cash-based management and prioritising on management of entire uncertainties
- Improved necessity for consistency in achieving a high-level value for money outcomes, fairness, embracing innovativeness and honest-based practice
Table of Contents
1.1 ADNOC Onshore Background. 4
2.0 Service/Category Analysis. 5
2.1 Importance and Impact on Organisation Stakeholders. 5
2.2 Stakeholders Management Strategies and Adoption. 7
3.3 Market Size and Trends Analysis. 12
3.4 Competition in the Market Analysis 13
4.0 Procurement Creating Value for Money. 14
4.1 Supplier Preferencing Matrix. 15
5.0 Managing prices and costs for Logging Services Procurement. 16
6.0 Conclusion and Recommendations. 19
Table 1:Summary of SWOT Analysis. 10
Table 2:STEEPLED Analysis Summary. 11
Table 3:Logging Services Value for money outcomes. 14
Table 4:Aggregation/Consolidation as a value strategy would be used. 18
Figure 1:7-Step Strategic Approach. 5
Figure 2:5 Rights of Procurement Model 6
Figure 3:Stakeholders categories 7
Figure 4:ADNOC Onshore Mendelow Stakeholders Analysis. 8
Figure 5:Stakeholders Management 9
Figure 6:Category Management Cycle. 10
Figure 7:Market Structures in Competition. 13
Figure 8:3P’s Model Components. 15
Figure 9:Suppliers Preferencing Matrix. 16
Figure 10:Improved, Achieved and Reduced concept 17
Figure 11:Kraljic Matrix Analysis. 18
1.0 Introduction
1.1 ADNOC Onshore Background
Abu Dhabi National Oil Company (ADNOC) Onshore is an organisation which has been in active operations in United Arab Emirates (UAE) since 1971 (ADNOC, 2023). The organisation is involved as a leading onshore within ADNOC Group. The organisation concession area is approximately 12,000KM squared and is found operating more than 11 oil and gas fields in their 4 assets. These assets include Bab, North East Bab (NEB), Bu Hasa and South East (SE). Further, the organisation operates two different export terminals in Jebel Dhanna and Fujairah and vast pipeline network where the oils is transported form the oil fields.
The size of ADNOC spend is approximately $150 billion in next 5 years as a strategy for advancing their 5 million barrels daily in oil and gas production targeting to 2027 on back of improved market fundamentals (Upstream, 2022). Further, MEED (2022) note that their categories of spend cumulatively includer $5.3 billion in 2022. Their main categories of spend are pipeline equipment and installation, furniture and fixtures, motor vehicles, plant-based machinery, research and technologies, IT services, admin services and logistics. As evidenced in ADNOC iSourcing platform, they adopts multiple suppliers including Vallourec, Tenaris, Sumitomo, Tianjin Pipe, Hengyang, TMK, JFE and Voestalpine (Reach UAE, 2023).
ADNOC Onshore adopts the 7-step strategic sourcing approach (CIPS, 2011). As illustrated in figure 1, through the adoption of the tool, ADNOC manages to identify the categories required to be promptly addressed, which to be delayed to the point of internal and external conditions improved.
Figure 1:7-Step Strategic Approach
2.0 Service/Category Analysis
Category of spend is identified as the type of the sourced services (CIPS, 2023). An appropriate identification of categories of spend support market classification and reflect on suppliers market and what is being sourced. By implementing category management, it is possible to split direct and indirect services linked in terms of their value, suppliers engaged, types and volume (CIPS, 2022). Hence, Logging Services have been identified as the service of spend. Logging services are identified in ADNOC Onshore (2023) as a strategy adopted through the use of specialised instrumentation inserted to boreholes for determining properties of geological formations which surround the bore.
2.1 Importance and Impact on Organisation Stakeholders
In line with the Logging Services which have been identified, it is possible explaining priorities for ADNOC Onshore in its operations. This can be explained through the application of the 5-Rights of Procurement model (Oxford, 2023) as illustrated in figure 2;
Figure 2:5 Rights of Procurement Model
Quality– For the logging services, they are supposed to be of accurate specification based on overall requirements and quality standards. For ADNOC Onshore, this is in the different stakeholders (supplier and buyer-side quality management) quality management level (Muñoz-Pizza et al., 2022). Failure of addressing the quality aspect would mean the refinery process is affected, oil and gas output failing to be appropriately used with the organisation incurring immense costs.
Quantity– Cumulatively, the logging services are used in assisting drilling of thousands of new wells for expansion of their production capacity to 5 million barriers daily by year 2030 (Oedigital, 2022). The outcome of this is ADNOC Onshore assisting UAE in gaining status of gas self-sufficiency and maintaining leadership on low costs and low carbon. Lacking sufficient logging services in ADNOC Onshore lead to bottlenecks or shutdowns in production, idle time costs, lateness in customers relations, reduced credibility and reduced overall performance.
Place– By ensuring that the logging services is delivered in the right place, any potential delay is managed. This ensures that the ADNOC onshore administration and all employees are effectively managed and operating within the required standards. Since logging services include the use of systems, the networks used and their profile is appropriate to avoid any instances of crashing or system damage.
Time– For ADNOC Onshore, they operate 218 oil and gas wells and 36 platforms in the entire fields in the Emirates of Abu Dhabi (ADNOC, 2023a). For all their areas of operations, the logging services must be provided on time and integrated as part of their operations. This is appropriate for ensuring different stakeholders are involved in managing the demand and also managing suppliers relations. The undue risks are mitigated with any potential cost of holding inventory managed.
Price– ADNOC logging services are categorised in the more than AED40.37 Billion investment in top-tier contractors for entire wellheads and linked components, downhole completion equipment, wireline logging and directional drilling (Oedigital, 2022). The suppliers must hence appreciate the budgetary allocation for the spend category, the administration approving the budget in collaboration with finance teams. This is through a holistic price analysis, supplier costs analysis and competitive pricing and negotiation.
2.2 Stakeholders Management Strategies and Adoption
Stakeholders are identified as the individuals, groups or organisations with a particular interest in organisation decision making and organisation operations (CIPS, 2022a). The stakeholders can be categorised to internal, connected and external stakeholders as illustrated in figure 3;
Figure 3:Stakeholders categories
Hence, in regard to ADNOC onshore, for Logging Services sourcing, stakeholders are also categorised in the identified groups. For evaluation of the stakeholders interest and power, Mendelow Matrix is appropriate (see figure 4);
Figure 4:ADNOC Onshore Mendelow Stakeholders Analysis
High-Power; Low-Interest- This category include ADNOC Onshore management, directors and the different Emirates society where the organisation operate. These stakeholders groups hold a lot of power influencing capacity to achieve value for money in the sourcing process. Their primary interest is ADNOC Onshore success in logging their oil and gas wells.
Low-Power; High-Influence- For the oil and gas institutions, suppliers of logging services and the UAE government is categorised in this group. They have an impact and influence the entire stakeholders relations to achieve their expected targets.
High-Power; High-Influence- Considering suppliers, PS&M teams in ADNOC Onshore, they have a high power and influence the effectiveness of their relations. They hence influence teamwork practices, consultation and exchanging knowledge and information.
Low-Power; Low-Interest– The Board of Management and Legal teams they capitalise on less power and interest in the sourcing of logging services. Their importance is promoting passing of laws, policies development and alignment of their operations with short and long-term organisation goals and objectives.
For a successful management of the identified stakeholders, the CIPS (2022b) guidance on stakeholders management can be used (see figure 5);
Figure 5:Stakeholders Management
The stakeholders groups can be identified to include the internal (influencing ADNOC internal operations), external (externally in ADNOC Onshore business environment) and connected (contractual relations with ADNOC Onshore). Further, through mapping, the stakeholder management strategies are identified informing and assisting in grouping them based on their importance to the sourcing of logging services. The end users of the oil and gas products, PS&M, suppliers and organisation administration are critical stakeholders influencing the success of the sourcing strategy. Hence, the different stakeholders goals is ensuring sourcing of high quality logging services with most appropriate value for money outcomes achieved. In this regard, ADNOC Onshore PS&M play an instrumental role in ensuring that the various goals and expectations of stakeholders in the sourcing lifecycle achieved (CIPS, 2023a).
