Pdo - the Oil and Gas Sector in the Sultanate of Oman

INTRODUCTION

PDO is at the forefront of technological innovation in the oil and gas sector in the Sultanate of Oman. It operates in some of the most complex and challenging oil and gas fields – and is among the world leaders in Enhanced Oil Recovery (EOR) techniques, pioneering the use of polymer, steam and miscible gas injection on a full-field scale. Gas fields and processing plants are operated by PDO exclusively on behalf of the Government. It accounts for around 3/4th of the country’s crude oil production and nearly all its natural gas supply. The Company is owned by the Government of Oman, the Shell Group, Total, and Partex of 60%, 34%, 4% and 2% respectively. PDO finds oil fields and develops them into productive assets by drilling wells and constructing and operating various hydrocarbon treatment and transport facilities. The oil that is produced from the fields is not sold by the Company but rather delivered to a storage facility at Mina al Fahal, where it is loaded onto seagoing tankers at the discretion of the Company's shareholders. As such, the Company does not earn any money from the sale of oil; its shareholders do.

Today, there are more opportunities for coordinating activities across a supply-chain even in such complex operations as oil and gas, because of improving information systems and communication technologies. Integrating operations management with other functions of the operation allows all functions to be involved in the supply-chain management decisions. In recent times, there have been concerns and many have argued that the oil and gas industry may have entered an era of very scarce resources. In reality however, the resources are not the cause of supply constraints, given the enormous potential still available including, currently known and booked reserves, the increasing scope for recovery from existing fields with new technologies, further potential discoveries, and the new frontier of vast oil sands and oil shale reserves that are in the money at today’s prices.

SUPPLY-CHAIN LINK IN THE OIL AND GAS INDUSTRY

Exploration → Production → Refining → Marketing → Consumer

There is a need to ensure that each company or operator along the supply-chain can respond quickly to the exact material needs of its customers, protect itself from problems with suppliers and buffer its operations from the demand and supply uncertainty it faces. For oil and gas companies, the profit margin can be greatly enhanced if the companies manage their purchasing dollars throughout the entire supply-chain. One of the weaknesses of a supply-chain is that each company is likely to act in its best interests to optimize its profit. The goal of satisfying the ultimate customer is easily lost and opportunities that could arise from some coordination of decisions across stages of the supply-chain could also be lost. If suppliers could be made more reliable, there would be less need for inventories of raw materials, quality inspection systems, rework, and other nonviable adding activities, resulting in lean production.

FRAMEWORK AGREEMENT

A framework is an agreement with suppliers to establish terms governing contracts that may be awarded during the life of the agreement. In other words, it is a general term for agreements that set out terms and conditions for making specific purchases (call-offs). Therefore, difference between framework contracts and framework agreements may be summarized by saying that - the former is an arrangement between two parties which commits one to buying at least a certain volume of particular goods or services from the other over a specified period; the latter is an agreement between two parties for the supply of an unspecified amount of a product over a specified period. In this document, for points that apply equally to a framework contract or framework agreement, the generic term 'framework arrangement' is used to include both.

In most cases a framework agreement can help suppliers to actively participate in national and large collaborative contracts where the framework is often divided into lots split by either specialist requirements or covering geographical areas.

The value of the framework is the estimated value of all the planned awarded contracts combined throughout the duration of the contract, and come in two forms a single supplier framework or multi-supplier framework.

The main advantage to a buyer for using a framework agreement is that they do not have to go through the full tender process every time they require a product or service during the agreement. Having to go through the tender procedure once rather than several times, will obviously reduce tendering costs.

The main disadvantage of a framework agreement for a buyer is that they are relatively unresponsive to change and new products and services hitting the market place.

The main disadvantage for suppliers is that the framework agreement does not guarantee that suppliers will get steady work from the agreement, especially in multi-supplier frameworks. Therefore having spent a considerable amount of time, effort, and resources getting included on a framework agreement; don’t take the business for granted and continue to market your products or services to the buyer.

PROCEDURES INVOLVING SINGLE AND MULTIPLE – SUPPLIER FRAMEWORKS

 In some instances a conventional tendering process (specifying a need, inviting tenders, evaluating tenders and awarding contracts to the best renderer in accordance with the award criteria) may be suitable for establishing a single supplier or multi - supplier framework.

• Single supplier:

This would involve publishing a tender notice indicating the intention to set up a single supplier framework, inviting tenders and awarding all contracts under the framework to the most suitable renderer selected on the basis of the published award criteria. The terms and criteria for award of contracts would be precisely formulated and published in the contract notice or tender documentation. The contracting authority may draw down requirements in accordance with the agreed terms as needs arise for the duration of the framework. Under this arrangement there is no scope to supplement or amend the initial tender. The price, delivery times, and other terms are likely to be settled but some terms, such as the quantity, may not. The price need not be fixed in absolute terms; it may be possible to set it by reference, for example, to a price index provided the mechanism chosen makes it possible to price specific orders in an objective and transparent manner.