Oil Value Chain

1625 Words 7 Pages
Oil market is a global market. Developing countries like China and India require a large quantity of oil. So the oil market has great potentialities in the future. However, obstacles such as increasing price of raw materials and complex production techniques of oil make the oil company necessary to build a high level supply chain to survive in the fierce market competition (Adelman, 2014, p. 3).
Value activities of oil enterprises can be divided into basic activities and support activities. Basic activities (oilfield construction and exploitation, refining and petrochemical, oil, gas storage and transportation, sales and service) are direct activities of value creation, and support activities (procurement and materials management, research
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Therefore, an ideal conceptual value chain of an oil enterprise should meet the following conditions.

Oilfield construction and exploitation
As the most upstream of oil industry, oilfield construction provides the necessary precondition for the normal production of oil products. It is the internal logistic of the oil enterprises. Oilfield construction includes oilfield exploration, mining decision, site layout and engineering equipment purchasing, etc. Through adequate preparation in oilfield construction period, support the next phase of full production. In order to improve the accuracy and breadth of exploration, oil enterprises should increase the cost of exploration, develop more sophisticated equipment and hire high-tech talent. Petroleum product differs from the usual production; raw materials required for its production --- Crude oil is a natural resource. Therefore, resources limit oilfield layout. In addition, the oil industry is a capital-intensive industry; the production tools have the characteristics of expensive and high-tech. The performance of the production tools affects the products quality, type, cost, highly related to the formation of the value in this stage and the value that the user finally
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The value of crude oil as a product is formed. Underground oil through wells pumped out to become crude oil, the crude oil is transported into oil refineries and chemical plants then through refining converted into a variety of oil derivatives (gasoline, diesel, lubricating oil and chemical raw materials, etc.). This stage is the key to the formation of the value of petroleum products, accounting for a large proportion. In ensuring production capacity, the oil companies should improve the quality of refining, and integrate the refining capacity on a small number of refineries to reduce the number of refineries. Meanwhile, the oil enterprises should reduce the distance between the refinery and oil field. This phase can further save crude oil transportation

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