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

Primary Supply

Secondary Distribution

Service Station & Convenience Retailing

Producer Producer Producer Producer

Distributor Distributor

Refiner Refiner Refiner Refiner

Distributor Distributor Distributor Distributor

Retailer Retailer

Crude Refined Products NGL / LPG Lubricants Natural Gas

SAP AG 2005, Shell SCM Overview, Speaker Name 3

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

Key Issues
Rationalizing Supply Chain network
Lack

Observations
of visibility and lack of integration of supply chain of central source of mission critical data

Lack of global industry wide standards

Lack

Lack of ability to rapidly respond to real world scenarios Lack of collaboration between supply chain partners High occurrence of M&A Lack of Risk Management

Need

for real time data visibility and ability to perform what if scenarios to quickly adjust operating plans imbalances and inefficiencies along supply

Creates

chain disruptions to company operations and management

Creates Creates

possibility of distress spot contracts

SAP AG 2005, Shell SCM Overview, Speaker Name 5

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

3. Execution & Settlement

Custody

Transfer Event management Back Office Updates Invoicing / Payments

SAP AG 2005, Shell SCM Overview, Speaker Name 6

SAP Oil & Gas SCM Solution Release Timeline

A Collaborative Approach to Solution Development

SAP APO started

Network Planning Event Manager

Demand Planning

mySAP SCM Components

Production Planning Inventory Hubs SCM Integration Gas Major 4.6c Equiva

1st release TSW started Pilot case CITGO live

Oil & Gas Components

Industry Experience
Pemex Gas +++ BHPBilliton / TOTAL

Global Industry Advisory Council

Industry
TSW Focus Group Time / Releases

Saudi Aramco

SAP AG 2005, Shell SCM Overview, Speaker Name 7

Introduction & SCM Business Overview SAP Solution Overview Extending the SAP SCM Solution Next Steps

Supply Network Scenario - Geographical

Colonial Products Pipeline

Baton Rouge Refinery / Terminal

Sugarland Crude Pipeline

St. James Terminal Off-/Onshore Wells

SAP AG 2005, Shell SCM Overview, Speaker Name 9

Marine Supply O/G

Major Roles in the Supply Chain - Pipeline

Marine Carrier Partner Trader

Greensboro
Pipeline Operator Partners Products Trader

Doraville
Colonial Pipeline Scheduler Refinery Manager

Demand Manager Exchange Manager Crude Trader

Supply Network Manager Supply Manager

Baton Rouge

Crude Pipe Scheduler

St. James
Terminal Manager

Crude Marine Scheduler

NWE Rotterdam

Onshore / Offshore Wells

SAP AG 2005, Shell SCM Overview, Speaker Name 10

Off Galveston

Whats happening? Supply Chain Management

Bulk transfers Bulk contract sales Rack exchanges Rack sales Partner Own Bulk transfers

Greensboro

Rack exchange Rack sales Partner Own

Doraville

Rack exchange Rack sales Partner Own

Bulk contract sales Bulk transfers

Baton Rouge

Own Scheduling and Nomination Customer Nomination

SAP AG 2005, Shell SCM Overview, Speaker Name 11

Own statistical Forecast

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
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

Terminal Management

Secondary Distribution

Commercial Sales & Retailing

Customers & Channels

Enterprise Management & Support

Analytics Financials Human Capital Management Corporate Services Operations Support

SAP AG 2005, Shell SCM Overview, Speaker Name 12

Mapping the SAP Solution

Supply, Transmission & Trading Bulk Supply Chain Planning and Optimization

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

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

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

2. Operations & Scheduling

Schedule

Building Schedule Balancing Schedule updates Inventory Management Trading Operations

SAP AG 2005, Shell SCM Overview, Speaker Name 13

Mapping the SAP Solution

Supply, Transmission & Trading Bulk Supply Chain Execution and Settlement

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)

3. Execution & Settlement

Custody

Transfer Event management Back Office Updates Invoicing / Payments

Supply, Transmission & Trading Bulk Supply Chain Reporting and Analytics

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

4. Evaluation & Analysis

Profit

Loss Analysis Optimization of Inventory Risk Management Performance Monitoring

SAP AG 2005, Shell SCM Overview, Speaker Name 14

Reservoir to Terminal The Solution(s)

Marine Crude Pipeline Product Pipeline

Greensboro Prod. Terminal APO Doraville Prod. Terminal APO TSW

APO Advanced Planner & Optimizer APO Advanced Planner & Optimizer TSW Traders & Schedulers Workbench TSW Traders & Schedulers Workbench EM Event Manager EM Event Manager IS-OIL Industry Solution Oil IS-OIL Industry Solution Oil

Baton Rouge Refinery APO TSW St. James Crude Terminal TSW TSW Onshore / Offshore Wells
SAP AG 2005, Shell SCM Overview, Speaker Name 15

TSW TSW NWE Rotterdam

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 Operations Office Accounting

Portal

NetWeaver

Collaboration
Deal Capture Nomination Shipment

BI

Position Planning

Settlement

MDM

Process Integration
NetWeaver

XI

Trading (external)

Trading (internal)

ERP

Inventory

Supply / Demand Planning

Scheduling

Terminal (external)

SAP AG 2005, Shell SCM Overview, Speaker Name 18

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

SAP GTM Management

Physical Trade

SAP TRM Complex Risk

Management and Modeling

Logistics Operations Management Integration

TSW and IS-Oil / mySAP ERP

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

SAP AG 2005, Shell SCM Overview, Speaker Name 20

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

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

SAP GTM Management

Physical Trade

xITRO

Paper Trade and Risk Management

SAP TRM Complex Risk

Management and Modeling

Logistics Operations Management Integration

TSW and IS-Oil / mySAP ERP

Financial Execution and Management EnterpriseBI Reporting Analysis mySAP (BW and and 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 Develop Quantify Finalize Develop

Workshops to Gather Requirements Industry Momentum Industry Support

Development Business Case (SAP) Collaborative Buildout/Rollout Plan

SAP AG 2005, Shell SCM Overview, Speaker Name 23