The future of oil and gas

The increasing price of crude oil are having a significant impact on the economic situation of developing countries

October 26, 2011

Crude oil tops the list of most traded commodities. Even the slightest variation in crude oil prices can have both direct and indirect impacts on countries’ economies. Accordingly, prices are regularly and closely monitored by economists.

Demand for oil is growing rapidly in BRICS nations, and so fluctuating prices have a significant impact on the economic situation of these emerging economies. Crude oil is one of the most valuable products of the world – but only after its refinement into petroleum products. Refining crude oil is a basic transformation step in the value chain of oil and gas: it significantly adds value to the oil by transforming it into various marketable products.

In the short term, the price of crude oil is influenced by many factors, like social and political events, and the financial markets; whereas in the medium to long term it is influenced by the fundamentals of demand and supply.

Confidence and order
Petrixo Group, which has a focus on trading crude oil, oil products and petrochemicals, alongside an interest in downstream energy projects, is aiming to join the intense international competition of the oil marketplace. The group’s CEO, Dr Eid Al Olayyan, utilises his 35 years of experience to control the direction of its trading and investment activity. Dr Olayyan has maintained the same position since 2001, calling for a disciplined investment strategy: his stance reflects the confidence, order, and level-headed professionalism he displays in all his dealings as leader of Petrixo Group.

Petrixo Group, through its Dubai-affiliated company Petrixo Oil and Gas,  has come a long way on its path to be a strong pioneer in oil trading and energy projects. Based on the current market scenario, Petrixo Group stands firm in terms of procuring business and securing future programmes until 2020.

Petrixo was created to be able to invest by both purchasing existing oil projects and establishing new ones. Since its inception, the group has built strong business relationships with refineries, oil traders, refinery’s suppliers and other financial houses in order to move crude oil to the group’s operations and processing activities on spot as well as contract basis.

With logistic operations spread across the Baltic States, the Russian Federation, CIS and the Middle East, Petrixo Group is always looking for opportunities to broaden its reach.

Petrixo Group has a commitment to build a strong and credible network of cooperation with distinguished global oil companies, adding value to energy markets and environmental protection. The company’s most prominent industrial activities include:

•   operations in the complete cycle of purchasing and refining crude oil;
•   trading with semi-final and final petroleum, petrochemical and chemical products;
•   investing in oil field development and oil production sharing;
•   investing in building refineries, storages and oil product carriers (tankers of medium and long range sizes).
integrated planning

The planning and implementation of a sound strategy is critical for an oil and gas company, as the market is highly competitive and extremely volatile. Effective and efficient strategic management is the key to aligning the expectations of stakeholders with corporate performance, capabilities and market conditions. Every successful oil and gas company consistently reviews, evaluates and benchmarks the performance of their current strategies, with the aime of optimising the performance of their asset portfolios over long, medium and short planning horizons.

Petrixo Group’s management and operational control systems, unlike those of most energy companies, are built around more than financial measures and targets which have little to do with long term strategic objectives. Petrixo has instead left no gap between strategy development and its effective implementation.

According to Dr Olayyan, the long term planning process is prone to failure because companies have separate procedures for budgeting, resource allocation and strategic planning. For Petrixo Group’s strategic plan, however, the CEO and other executives developed an approach to integrate the strategic planning and budgeting processes, ensuring that the company budget supports its strategies.

The company has adopted a more balanced set of KPIs and does not rely simply on short term financial measures to give a complete picture of company performance. Petrixo Group has introduced process that help to link long term strategic objectives with short term action. The whole process, adopted by Petrixo Group’s management is as follows:

Translation of Vision. The process helps the management of Petrixo Group to build a consensus around the vision and strategy of the company. Statements of intent such as “to become the number one oil and gas supplier,” or “to be the best in class,” are translated and expressed as an integrated set of objectives and measures, agreed upon by all company executives.

Communication and Linkage. The process lets managers effectively communicate the strategy up and down the whole organisation and link it to various departments and individual objectives. The CEO has ensured that all levels of the organisation understand the long term strategy and objectives of departments, and individuals are aligned with the process.

Business Planning. The process enables the group to integrate its financial and business plans. Most organisations have a number of plans ongoing at any one time, each with their own consultants and champions, and each competing for the energy, time and resources of senior executives. It becomes difficult for managers to integrate the diverse initiatives for the achievement of strategic goals. However, Petrixo Group’s CEO uses an ambitious goal-set as the basis of setting priorities for resource allocation. Consequently, only those activities and initiatives which lead to a more successful future for the company are undertaken.

Feedback and Learning. The process gives organisations the capacity for strategic learning. Petrixo Group monitors short term results from the perspectives of its customers, analyses internal business processes, and evaluates strategy in the light of performances. The group can therefore easily modify its strategies to reflect the process of real team learning.

Green targets
Environmental concerns are a key part of Petrixo Group’s strategic management. The world community relies increasingly on oil and gas supplies, but using oil and gas reserves has never been free of ecological and social side-effects. Oil and gas companies are increasingly expected to help address the resultant problems, such as climate change and poverty.

Petrixo Group’s prime concern and priority towards the planet is to preserve the environment, keeping it safe and clean for future generations. Accordingly, the group’s operations are strictly controlled to match the best parameters of environmental protection regulations. These endeavours are not limited to the commercial side of crude oil and refined petroleum products sales, but also include safety precautions at the port of the delivery point – a precondition for the group when finalising any sales deal.

Dr Olayyan has put these commitments into action by ensuring there are adequate financial resources to effectively incorporate environmental protection measures in the company’s routine delivery operations. The management is particularly concerned to create a company culture that is conducive to better environmental performance and to foster the active participation of contractors and employees.

Safety first
One of the group’s objectives is to engage its staff as a driving force to develop a culture of safety at the point of delivery. Seeking to control any possible pollution, Petrixo Group has carefully chosen a number of experienced international shipping companies to handle the transportation of its crude oil and oil products – using double-hull and double-bottom tankers to provide an additional safeguard against the risk of oil spills.
Petrixo’s shipping and transportation division is responsible for supplying crude oil, refined petroleum products, LNG, LPG, bitumen, bunkering fuels, lubricants, chemical and petrochemical products to the group’s customers, as well as to all of Petrixo’s facilities.

The group is in the process of building up its own fleet of variously sized tankers for crude and petroleum products, allowing it to transport its own products worldwide.

Ambitious Plans
Petrixo Group is in the process to building a grass-roots oil refinery in the Arabian gulf region with a refining capacity of 240,000 barrels per stream day of Arabian crude oils and condensate. The group plans to own and operate the plant itself, converting the crude oils and condensate – to be secured from GCC producers on long term supply – into high-value fuels and petrochemicals feedstock.

The Petrixo refinery is designed to utilise the latest technology available in the refining processes and integrated with a petrochemical complex. Because petroleum refining plants are such large scale operations, they are typically operated constantly rather than in batches and may be in operation for months or even years. The investment needed to construct and operate such a plant makes it imperative that it will be operational for a very long period of time. Health and safety issues have been a major concern in the petroleum refining industry recently, to the point that no new plants have been built – Petrixo’s project could break this trend.

Petrixo can be optimistic about maintaining constructive relationships among producing countries, consuming nations and energy companions: this has been proven throughout the group’s history. The group has an excellent record, and none of the potential challenges it faces are likely to become a serious threat to the business over an extended period. Petrixo Group has continued to establish new organisational structures and develop new technologies to meet the challenges it faces: responding to change has been and will continue to be the greatest strength of the group.

For more information