Report On Compensation Management p6i1u

A PROJECT ON “COMPENSATION MANAGEMENT”: “AN ANALYSIS IN RESPECT OF SALARY WITH 9TH PAY REVISION IN IOCL, GUWAHATI REFINERY” (Submitted in partial fulfillment of the requirement of Master of Business istration, Distance Education, Guru Jambheshwar University of Science and Technology, Hisar)

RESEARCH SUPERVISOR

SUBMITTED BY

Name: Prof. Tushar Kanti Goon

Name Of The Student: Debalina Bose

Designation: Professor (H.R)

Enrollment No: 08061148171 Specialization:H.R.

Session:2008-10 Directorate of Distance Education Guru Jambheshwar University of Science & Technology Hisar (India)

1

CERTIFICATE This is to certify that Ms. Debalina Bose Enrolment No.08061148171 has proceeded under by supervision on her Research Project Report on “COMPENSATION MANAGEMENT”: “AN ANALYSIS IN RESPECT OF SALARY WITH 9TH PAY REVISION IN IOCL, GUWAHATI REFINERY” in the Specialization area “HR”. The work embodied in this report is original and is of the Standard expected of an MBA Student and has not been submitted in part or full to this or any other university for the award of any degree or diploma. She has completed all requirements of guidelines for research Project Report and the work is fit for evaluation.

Signature of Supervisor/Guide (with SEAL) NAME

Prof Tushar Kanti Goon

DESIGNATION ORGANIZATION Delhi

Professor NSB SCHOOL OF BUSINESS, New Forwarded by Head/Director of

Study Centre (With Signature, Name & SEAL)

2

DIRECTORATE OF DISTANCE EDUCATION GURU JAMBESHWAR UNIVERSITY OF SC & TECH. HISAR FORMATE FOR RESUME OF SUPERVISOR/GUIDE 1) NAME: Prof. Tushar Kanti Goon 2) DESIGNATION: Professor 3) QUALIFICATION: B.Sc(Hons), MA(Sociology), LLB (Professional) PGD IR & PM,

Qualified UGC Net 4) AREA OF SPECIALIZATION: Human Capital Management, Organization

Behavior, Organization Development, Employee Relations, Cross Cultural & Global Management, Strategic HRD Assessment Center etc. 5) EXPERIENCE: More than 34 years of Corporate experience with companies like

GAIL (India) limited, New Delhi as GM(HRD) and GM(Mktg); Garden Reach Shipbuilders & Engineers Limited, Calcutta; Hindustan Fertilizer Corporation Ltd, Calcutta/New Delhi 6) OFFICIAL ADDRESS: NSB School of Business, B-II/1,MCIE,Delhi Mathura Road,

New Delhi-110044 7) E-MAIL: [email protected]

I am willing to Supervise

Ms DEBALINA BOSE ENROLLMENT NO: 08061148171

On the Topic: “COMPENSATION MANAGEMENT: “AN ANALYSIS IN RESPECT OF SALARY WITH 9TH PAY REVISION IN IOCL, GUWAHATI REFINERY”

(SIGNATURE) With Seal Countersigned by the Employer with Seal 3

Countersigned by the Director of Study Centre with Seal

DECLARATION This is to certify that the Project Report entitled “ Compensation Management”: “AN ANALYSIS IN RESPECT OF SALARY WITH 9TH PAY REVISION IN IOCL, GUWAHATI REFINERY” is an original work and has not been submitted in part or full to this or any other university /institution the award of any degree or diploma.

Signature of the candidate NAME: DEBALINA BOSE ENROLLMENT NO: 08061148171 SPECIALIZATION: HR SESSION: 2008-10

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ACKNOWLEDGEMENT I would like to express my vote of thanks to Prof Tushar Kanti Goon, HR Professor, NSB School of Business, New Delhi, for giving me this great opportunity of doing a wonderful project on “Compensation Management”: “AN ANALYSIS IN RESPECT OF SALARY WITH 9TH PAY REVISION IN IOCL, GUWAHATI REFINERY” His timely guidance and suggestion has helped me a lot during the course of my project. Due to his helping hands I was able to complete my project report. I would also like to express my vote of thanks to my colic’s and seniors who has also helped and guided me out to the full extent in regards to the data collection for my project report.

DEBALINA BOSE

TABLE OF CONTENTS 5

PAGE NO 1) COMPENSATION MANAGEMENT

7-24

2) EXECUTIVE SUMMARY

25

3) REVIEW LITRETURE AND PROBLEM STATEMENT

26

4) INTRODUCTION TO THE COMPANY

27-30

5) HISTORY OF THE COMPANY

31-41

6) OBJECTIVE OF THE PROPOSED STUDY

42

7) RESEARCH METHODOLGY

43

8) SCOPE/RELEVANCE OF PROPOSED STUDY 9) GLOBAL SCENERIO

44 45-109

10) INDIAN OIL CORPORATION LTD IN NORTH EAST REGION, GUWAHATI REFINERY

110-115

11) DATA INTERPRETATION AND ANALYSIS 12) FINDINGS OF THE SURVEY

116-124 125-128

a) CONCLUSION b) RECOMMENDATION & SUGGESTION 13) REFERENCE

129

14) APPENDIX

130-132

QUESTIONNAIRE

6

TITLE OF THE PROJECT COMPENSATION MANAGEMENT: “AN ANALYSIS IN RESPECT OF SALARY WITH 9TH PAY REVISION IN IOCL, GUWAHATI REFINERY” 7

WHAT IS COMPENSATION MANAGEMENT? Compensation is payment in the form of hourly wages or annual salary combined with benefits such as insurance, vacation, stock options, etc. that can positively or negatively affect an employee's work performance. An ideal compensation management system will help you significantly boost the performance of your employees and create a more engaged workforce that’s willing to go the extra mile for your organization. Such a system should be well-defined and uniform and should apply to all levels of the organization as a general system.. Plus you’ll enjoy clearer visibility into individual employee performance when it comes time to make critical compensation planning decisions. With effective compensation management you’ll also enjoy clearer visibility into individual employee performance when it comes time to make critical compensation planning decisions. These performance appraisals assist in determining compensation and benefits, but they are also instrumental in identifying ways to help individuals improve their current positions and prepare for future opportunities. Definition Compensation is a systematic approach to providing monetary value to employees in exchange for work performed. Compensation may achieve several purposes assisting in recruitment, job performance, and job satisfaction.

PREFCAE What is COMPENSATION MANAGEMENT ?????? Human Resource is the most vital resource for any organization. It is responsible for each and every decision taken, each and every work done and each and every 8

result. Employees should be managed properly and motivated by providing best remuneration and compensation as per the industry standards. The lucrative compensation will also serve the need for attracting and retaining the best employees. Compensation is the remuneration received by an employee in return for his/her contribution to the organization. It is an organized practice that involves balancing the work-employee relation by providing monetary and non-monetary benefits to employees. Compensation is an integral part of human resource management which helps in motivating the employees and improving organizational effectiveness. Components of Compensation System Compensation systems are designed keeping in minds the strategic goals and business objectives. Compensation system is designed on the basis of certain factors after analyzing the job work and responsibilities. Components of a compensation system are as follows:

Types of Compensation Compensation provided to employees can direct in the form of monetary benefits and/or indirect in the form of non-monetary benefits known as perks, time off, etc. 9

Compensation does not include only salary but it is the sum total of all rewards and allowances provided to the employees in return for their services. If the compensation offered is effectively managed, it contributes to high organizational productivity. Direct Compensation Indirect Compensation Need of Compensation Management  





A good compensation package is important to motivate the employees to increase the organizational productivity. Unless compensation is provided no one will come and work for the organization. Thus, compensation helps in running an organization effectively and accomplishing its goals. Salary is just a part of the compensation system, the employees have other psychological and self-actualization needs to fulfill. Thus, compensation serves the purpose. The most competitive compensation will help the organization to attract and sustain the best talent. The compensation package should be as per industry standards.

Strategic Compensation Strategic compensation is determining and providing the compensation packages to the employees that are aligned with the business goals and objectives. In today’s competitive scenario organizations have to take special measures regarding compensation of the employees so that the organizations retain the valuable employees. The compensation systems have changed from traditional ones to strategic compensation systems.

What is COMPENSATION MANAGEMENT????? 10

Compensation is payment in the form of hourly wages or annual salary combined with benefits such as insurance, vacation, stock options, etc. that can positively or negatively affect an employee's work performance. An ideal compensation management system will help you significantly boost the performance of your employees and create a more engaged workforce that’s willing to go the extra mile for your organization. Such a system should be well-defined and uniform and should apply to all levels of the organization as a general system.. Plus you’ll enjoy clearer visibility into individual employee performance when it comes time to make critical compensation planning decisions. With effective compensation management you’ll also enjoy clearer visibility into individual employee performance when it comes time to make critical compensation planning decisions. These performance appraisals assist in determining compensation and benefits, but they are also instrumental in identifying ways to help individuals improve their current positions and prepare for future opportunities. Definition Compensation is a systematic approach to providing monetary value to employees in exchange for work performed. Compensation may achieve several purposes assisting in recruitment, job performance, and job satisfaction.

Types of Compensation Management 11

Direct Compensation: Direct compensation refers to monetary benefits offered and provided to employees in return of the services they provide to the organization. The monetary benefits include basic salary, house rent allowance, conveyance, leave travel allowance, medical reimbursements, special allowances, bonus, Pf/Gratuity, etc. They are given at a regular interval at a definite time. Basic Salary Salary is the amount received by the employee in lieu of the work done by him/her for a certain period say a day, a week, a month, etc. It is the money an employee receives from his/her employer by rendering his/her services.

House Rent Allowance Organizations either provide accommodations to its employees who are from different state or country or they provide house rent allowances to its employees. This is done to provide them social security and motivate them to work. Conveyance Organizations provide for cab facilities to their employees. Few organizations also provide vehicles and petrol allowances to their employees to motivate them.

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Leave Travel Allowance These allowances are provided to retain the best talent in the organization. The employees are given allowances to visit any place they wish with their families. The allowances are scaled as per the position of employee in the organization. Medical Reimbursement Organizations also look after the health conditions of their employees. The employees are provided with medi-claims for them and their family . These medi-claims include health-insurances and treatment bills reimbursements. Bonus Bonus is paid to the employees during festive seasons to motivate them and provide them the social security. The bonus amount usually amounts to one month’s salary of the employee. Special Allowance Special allowance such as overtime, mobile allowances, meals, commissions, travel expenses, reduced interest loans; insurance, club hips, etc are provided to employees to provide them social security and motivate them which improve the organizational productivity.

INDIRECT COMPENSATION ndirect compensation refers to non-monetary benefits offered and provided to employees in lieu of the services provided by them to the organization. They include Leave Policy, Overtime Policy, Car policy, Hospitalization, Insurance, Leave travel Assistance Limits, Retirement Benefits, Holiday Homes. Leave Policy It is the right of employee to get adequate number of leave while working with the organization. The organizations provide for paid leaves such as, casual leaves, medical leaves (sick leave), and maternity leaves, statutory pay, etc. Overtime Policy Employees should be provided with the adequate allowances and facilities during their overtime, 13

if they happened to do so, such as transport facilities, overtime pay, etc. Hospitalization The employees should be provided allowances to get their regular check-ups, say at an interval of one year. Even their dependents should be eligible for the medi-claims that provide them emotional and social security.

Insurance Organizations also provide for accidental insurance and life insurance for employees. This gives them the emotional security and they feel themselves valued in the organization. Leave Travel The employees are provided with leaves and travel allowances to go for holiday with their families. Some organizations arrange for a tour for the employees of the organization. This is usually done to make the employees stress free. Retirement Benefits Organizations provide for pension plans and other benefits for their employees which benefits 14

them after they retire from the organization at the prescribed age. Holiday Homes Organizations provide for holiday homes and guest house for their employees at different locations. These holiday homes are usually located in hill station and other most wanted holiday spots. The organizations make sure that the employees do not face any kind of difficulties during their stay in the guest house. Flexible Timings Organizations provide for flexible timings to the employees who cannot come to work during normal shifts due to their personal problems and valid reasons.

IMPORTANCE OF COMPENSATION Compensation and Reward system plays vital role in a business organization. Since, among four Ms, i.e. Men, Material, Machine and Money, Men has been most important factor, it is impossible to imagine a business process without Men. Every factor contributes to the process of production/business. It expects return from the business process such as rent is the return expected by the landlord, capitalist expects interest and organizer i.e. entrepreneur expects profits. Similarly the labour expects wages from the process. Labour plays vital role in bringing about the process of production/business in motion. The other factors being human, has expectations, emotions, ambitions and egos.

Labour therefore expects to have fair share in the business/production process. Therefore a 15

fair compensation system is a must for every business organization. The fair compensation system will help in the following: o

An ideal compensation system will have positive impact on the efficiency and results produced by employees. It will encourage the employees to perform better and achieve the standards fixed.

o

It will enhance the process of job evaluation. It will also help in setting up an ideal job evaluation and the set standards would be more realistic and achievable.

o

Such a system should be well defined and uniform. It will be apply to all the levels of the organization as a general system.

o

The system should be simple and flexible so that every employee would be able to compute his own compensation receivable.

o

It should be easy to implement, should not result in exploitation of workers.

o

It will raise the morale, efficiency and cooperation among the workers. It, being just and fair would provide satisfaction to the workers.

o

Such system would help management in complying with the various labor acts.

o

Such system should also solve disputes between the employee union and management.

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o

The system should follow the management principle of equal pay.

o

It should motivate and encouragement those who perform better and should provide opportunities for those who wish to excel.

o

Sound Compensation/Reward System brings peace in the relationship of employer and employees.

o

It aims at creating a healthy competition among them and encourages employees to work hard and efficiently.

o

The system provides growth and advancement opportunities to the deserving employees.

o

The perfect compensation system provides platform for happy and satisfied workforce. This minimizes the labour turnover. The organization enjoys the stability.

o

The organization is able to retain the best talent by providing them adequate compensation thereby stopping them from switching over to another job.

o

The business organization can think of expansion and growth if it has the of 17

skillful, talented and happy workforce.

o

The sound compensation system is hallmark of organization’s success and prosperity. The success and stability of organization is measured with pay-package it provides to its employees.

COMPENSATION MANAGEMENT: SUCCESS FACTORS Many of today's senior executives name pay-for-performance as the most critical tool in achieving the greatest financial results at their companies. But, implementing real, pay-for-performance is easier said than done. SuccessFactors makes it easy for you to quickly and easily implement a powerful pay-forperformance strategy. By rewarding great execution, you will better retain your top talent and drive organizational performance that exceeds all expectations. Plus, you'll enjoy clearer visibility into individual employee performance when it comes time to make critical compensation planning decisions. 18

•

•

•

•

•

True pay-for-performance culture improves retention. Employees who outperform their peers will be rewarded appropriately, feel valued and happy—and more likely to stay with your company. Ongoing compliance. Design your compensation strategy with objective data and communicate it to managers to stay within allocated budgets and to employees to show the clear link between compensation and performance expectations. Budget optimization. Run "what-if" scenarios and instantly see how increasing merit pay to your best employees would impact your budget. Cost savings. Eliminate thousands of dollars from your expense column each year by making sure you're not overpaying low performers. Also, the easy-to-use automated system will save compensation managers time and money. Zero error system. Manage your compensation in a secure environment with streamlined workflows where your data is determined via calculation and eligibility engines— eliminating privacy breaches and human calculation errors.

Human Resources Management - Benefits & Compensation In a sluggish economy, compensation system gets a new focus by rewarding star performers more than the rest of the pack 3-P Compensation: Pay for Performance In this article we look at how an organization develops a motivating and rewarding incentive plan. An executive perspective on employee benefits Executives say employee benefits help companies compete but have an incomplete understanding of benefits and how they perform. Results of a McKinsey Survey. pdf-file. 2006. Article starts at page 12 An Overview of Recent Trends in Incentive Pay Programs This article examines recent trends and developments in an increasingly popular HR practice--incentive pay programs. Pdf-file Analyzing Compensation Data Guide describes three approaches that Federal contractors may use to analyze their compensation systems; analyses may be useful 19

in determining if there are patterns of discrimination in the workforce; focus is on analyses of salaries or wages, procedures can be used to analyze other forms of compensation as well. TOP Are Higher Pay Increases Necessarily Better? This study investigated the relationship between pay increase percentages and pay satisfaction among 118 MBA students and found that pay satisfaction had the largest increase between three percent and seven percent and appeared to level off between seven percent and eleven percent, suggesting that there may be a point at which high pay increases may not necessarily lead to more satisfaction. In addition, it was found that pay increases between six and eight percent are the minimum amounts needed for pay increase satisfaction. Finally, we suggest that employees may not need as high of a pay increase to experience satisfaction with their pay increase when providing those employees with a signal, such as an average pay increase. pdf Building a Better 401(k) 401(k) plan sponsors are taking steps to make their plans more attractive to employees in 2003. January 2003 Compensation Planning: The Key to Profitability This book can help brokers create effective individual company compensation plans by giving them a better understanding of how changes to existing compensation schedules affect the company finances as a whole. Pdffile 3.6 MB Compensation Plans An overview, article provided by Salary Source Explaining Executive Compensation Managerial Power vs. the Perceived Cost of Stock Options. Working Paper. Pdf-file Glossary Of Employee Benefit Is Your Long-Term Incentive Plan Really Performance-Based? Long-term incentive plans (LTIPs) typically provide the largest component of senior executives’ compensation, most often through one or more of three equity-based types: stock options, restricted stock, and what are often called performance shares.

This article focuses on performance shares, an increasingly common form of performance-based LTIPs, and their importance as a major component of executive pay. We believe that performance shares establish the strongest link in tying compensation to performance. The article also presents data on the increasing prevalence of these types of plans. pdf Labor Statistics Extensive compilation of statistics and data Misc. Issues Overview on some compensation- and benefits-related issues: pay equity, variable pay systems, stock plans, retirement plans, health and welfare plans, paid time off, government mandated benefits Offer a Choice of Compensation Plans to Gain a Competitive Advantage pdf-file 2003 Organizational Pay Mix The Implications of Various Theoretical Perspectives for the Conceptualization and Measurement of Individual Pay Components. Pdf-file Organization-wide Broad-based Incentives: Rational Theory and Evidence Despite the widespread use ofincentive pay, there is limited 20

evidence about what factors influence its organization-wide, broad-based application. Pdf-file Paying for Performance: An Overlooked Opportunity Sales force deployment and compensation are among the most powerful means a company has to improve growth, market share, and profitability. Yet few companies take the time to align their payout systems with current strategy. The author explains how to design a successful compensation plan that is precise, fair, and simple. pdf-file Performance based Pay The Value of Performance-Based Pay in the War for Talent, pdf- version Performance Standards in Incentive Contracts Research in incentives has focused on performance measures and pay-performance sensitivities but has largely ignored the “performance standard,” which generates important incentives whenever plan participants can influence the standard-setting process. Working paper. pdf-file Promise and Peril in Implementing Pay for Performance: A Report on Thirteen Natural Experiments Despite the popularity of pay for performance programs, very little research has examined the dynamics and dilemmas associated with implementing these programs. We studied the implementation of thirteen experiments in pay for performance that were initiated by local management in a high-commitment company (Hewlett Packard). We examined Hewlett Packard documents and interviewed managers to understand their experience with implementing these programs. Managers reported a relatively unfavorable cost-benefit assessment of programs and difficulty in deg and maintaining them, especially in a fast changing business environment. Managers at each site eventually concluded that they could attain greater performance benefits through alternative managerial tools like effective leadership, clear objectives, coaching or training, and therefore discontinued their pay for performance programs. Finally, we discuss implications for management and for future research.

COMPENSATION MANAGEMENT : SALARY NEGOTIATION Compensation management chapter contain wage and salary aspect. The word salary applies to compensation that is uniform from one period to the next and does not depend upon the number of hours worked. Compensation Management Objectives: Wage, Compensation and their istration Job Satisfaction Labour and Wage Theories

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Classification of Wages Machinery for fixing wages Job Evaluation Objectives of job evaluation and methods of evaluation Promotions and transfers Wage and Salary istration: The term compensation management is the alternative of wage and salary istration. Wage word is commonly used for those employees whose pay is calculated according to the number of hours worked. The concept of wage came from capitalist before it in the Jamindari system the concept of wage was in the slaves form. Salary applies to compensation that is uniform from one period to the next and does not depend upon the number of hours worked. When we got for job definition we found that job is defined as a collection or aggregation of tasks, duties, and responsibilities that, as a whole, is regarded as the reasonable assignment to an individual employee. Job is known as impersonal however position is known as personal. Job always contains a position which defines some set of works.

Job Satisfaction Job satisfaction depends on the situations and environment of work atmosphere. According to the MBA Book MB 0027, “Job satisfaction is determined by a set of personal and job factors, personal factors relate to worker’s age, length of service, intelligence, skill, and other personality or temperamental factors.

About the Job Evaluation British Institute of Management has defined “job evaluation as the process of analysis and assessment of jobs to ascertain reliably their relative worth, using the assessment as a basis for a balanced wage structure.” “Job analysis is the process of getting information about jobs; specifically, what the worker does; how he gets it done; why he does it; skill, education and training required; relationships to other 22

jobs; physical demands and environmental conditions”.

On the job evolution methods we can include some aspects: Ranking methods Grade Description Method Point Method Factor-Comparison Method Time-Span Method Guide-Chart Profile Method

Pigors & Meyers give a unique definition of promotion which is, “the advancement of an employee to a better job – better in of greater respect of pay and salary. Better houses of work or better location or better working conditions-also may characterize the better location or better working conditions-also may characterize the better job to which an employee seeks promotions, but if the job does not involve greater skill or responsibilities and higher pay, it should not be considered a promotions.” On the Subject of Transfer Pigors and Mayers also writes, “the movement of an employee from one job to another on the same occupational level and at about the same level of wages or salary.” In the end of the chapter we can say that Compensation Management deals not only salary and wages but also job analysis and job satisfaction.

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EXECUTIVE SUMMARY

In the scenario of competitive business environment, it has become important for a management student to equip himself/herself with the practical exposure of the corporate world. It was great privilege for me to understand the practical HR aspects learnt in our college classroom at Indian Oil Corporation, Guwahati. In regards to this project I was asked to analyse the compensation package in an Oil Industry in respect to 9th pay revision. It was analyzed that the employees were fully satisfied in respect to their increment in their salary package. 24

An online interview and telephonic interview was being conducted and questionnaire was being distributed accordingly.

The of the respondents was being up to mark and a positive response was being carried out.

Review of literature and Problem Statement If anyone of you used compensation management in SAP HR version 4.7 extension one or earlier, you will know in the old version, the compensation statement is called “Total Compensation Statement”. In the new Enterprise Compensation Management, it is now called “Compensation Review Statement”. To configure the SAP Enterprise Compensation Review Statement, you would need to access it in the configuration IMG @ SPRO -> Personnel Management -> Enterprise Compensation Management -> Compensation Statement. You first have to define what to include in the Compensation Review Statement for calculation. You will do this at the “Determine Structure for Total Compensation Statement”. The next piece is to determine what wage types contain the values you tell it to include in the “Select Wage Type for Pay Category”. At the “Create Form For Total Compensation Statement”, you will be working with Smartform to design the layout of the form used when printing the statement. Enterprise Compensation 25

Statement uses the form “HR_ECM_CRS”, no to be confused with “HR_CMP_TCS” used by the old Compensation Management. After you completed the first 3 steps outlined above, the 4th step is where the confusion begins. In the old Compensation Management, you could determine what form to used by the “Total Compensation Statement” report through an entry in T77S0. If you are access it via the IMG, it is called “Determine Standard Form For Total Compensation Statement”. The problem is, this exact structure is available in both the Enterprise Compensation Management and the old Compensation Management. It is pointing to the exact same entry. In the Compensation Review Statement (Program: RHECM_PRINT_CRS, Transaction: PECM_PRINT_CRS), used by Enterprise Compensation Management, SAP hardcode in what form to use, which is HR_ECM_CRS in their code. So you CAN NOT select what form to use if you happen to design your own form. Due to this, you are stuck between a rock and a hard place. If you are implementing SAP, you will hear numerous times not to change standard SAP code and always make a “Z” copy of what you want to change and use the “Z” version. In this case, you would have to modify one of the two standard codes. You have to either modify the include statement in the RHECM_PRINT_CRS code to remove “NO-DISPLAY” in the selection parameter to allow the selection screen to show what form it is defaulting and have the select the right form. Another option is to change the default form from HR_ECM_CRS to whatever “Z” form you created. The second method is to not change the standard program code, but go ahead and modify the HR_ECM_CRS form. Make a copy of it to “Z” to be used as backup, but use the main HR_ECM_CRS as being the main form you’ve modified.

INTRODUCTION TO THE COMPANY : INDIAN OIL CORPORATION LIMITED ================================================== ======= Incorporated in 1959, Indian Oil Corporation Limited is a wholly Government-owned company ed under the Companies Act, 1956. It came into existence on 1st September, 1964 as a result of amalgamation of the erstwhile Indian Refineries Ltd, and Indian Oil Company and has its ed office at Mumbai.

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The Corporation is managed by Board of Directors appointed by the President of India. Besides the Chairman, the board has the following whole time Directors: 1.

Director (Refineries)

2.

Director ( Pipelines)

3.

Director (Marketing)

4.

Director (Finance)

5.

Director (HR)

6.

Director (R & D)

7.

Director (P&BD)

The working of Corporation's five Divisions, namely (i)Refineries Division, (ii) Marketing Division (iii) Pipelines Division (iv) R&D Centre and (v) Assam Oil Division are co-coordinated by a full-time Chairman. These four Divisions are headed by Director (Refineries), Director (Marketing), Director (Pipelines) and Director (R&D) respectively. Director (Refineries) is also the Director In charge of Assam Oil Division. REFINERIES DIVISION 27

With the Head Office at New Delhi, the Refineries Division is the successor

to

incorporated

the erstwhile Indian Refineries on

22.8.1958 as Private

Limited

Limited

subsequently amalgamated with the Indian 1.9.1964 to form the Indian Oil Corporation

which

was

Company

and

Oil Company Ltd. on Limited

having

two

Divisions, i.e. Refineries and Pipelines Division and Marketing Division.

The Refineries Division is mainly concerned with the setting up and operation of Refineries and Petrochemicals in India.

It owns and operates seven Refineries at : Guwahati (Assam), Barauni (Bihar), Vadodara (Gujarat), Haldia (West Bengal), Mathura (Uttar Pradesh), and Panipat (Haryana). The Assam Oil Division has one Refinery at Digboi and has a network of marketing set-up. There are two liaison Offices, one each at Kolkata and Mumbai.

Each Refinery unit is headed by ED/GM who reports directly to Director (Refineries) and the liaison office at Kolkata and Mumbai is headed by DGM, who reports to ED (HR).

PERSONNEL & N. DEPARTMENT 28

The Personnel, istration, Management Services, HRD & Training and Corporate Communication Department at Refineries HQ are headed by ED (HR) with the following functions under his charge: 

Personnel



istration, Welfare & Hindi Implementation



Training and Development



Management Services



Corporate Communication

ED(HR)

is

DGM(Training

assisted &

in

his

Development),

above

functions

by

DGM(HR), DGM(HRD),

GM(A&W), CMSM,

and

CM(CC) respectively.

The P&A Department at each refinery unit is headed by DGM(HR)/CHRM who reports to the respective ED/GM.

VISION, MISSION & VALUES Vision A major diversified, transnational, integrated energy company, with national leadership and a strong environment conscience, playing a national role in oil security& public distribution. Mission To achieve international standards of excellence in all aspects of energy and diversified business with focus on customer delight through value of products and services, and cost reduction. To maximize creation of wealth, value and satisfaction for the stakeholders. To attain leadership in developing, adopting and assimilating state-of- theart technology for competitive advantage. 29

To provide technology and services through sustained Research and Development. To foster a culture of participation and innovation for employee growth and contribution. To cultivate high standards of business ethics and Total Quality Management for a strong corporate identity and brand equity. To help enrich the quality of life of the community and preserve ecological balance and heritage through a strong environment conscience. Values Care Innovation ion Trust IndianOilPeople... towards Excellence...

HISTORY OF THE COMPANY 1958 Indian Refineries Ltd. was formed with Mr. Feroze Gandhi as Chairman. 1959 Indian Oil Company Ltd. was established on 30th June 1959 with Mr. S. Nijalingappa as the first Chairman. 1960 Agreement for supply of SKO and HSD was signed with the then USSR. M.V: 30

"Uzhgorod" carrying the first parcel of 11,390 tonnes of HSD docked at Pir Pau Jetty in Mumbai on 17th August 1960. 1962 Guwahati Refinery was inaugurated by Pt. Jawaharlal Nehru. Construction of Barauni Refinery commenced. 1963 Foundation was laid for Gujarat Refinery Indian Oil Blending Ltd. (a 50:50 t Venture between Indian Oil and Mobil) was formed. 1964 Indian Oil Corporation Ltd. was born on 1st September, 1964 with the merger of Indian Refineries Ltd. with Indian Oil Company Ltd. Barauni Refinery was commissioned. The first petroleum product pipeline from Guwahati to Siliguri (GSPL) was commissioned. 1965 Gujarat Refinery was inaugurated by Dr. S.Radhakrishnan, the then President of India. Barauni-Kanpur Pipeline (BKPL) and Koyali- Ahmedabad product Pipeline (KAPL) commissioned. Indian Oil People maintained the vital supply of Petroleum products to Defense in 1965 War. 1966 The first long-term agreement was signed for harmonious employee relations. 1967 Haldia Baraurii Pipeline (HBPL) was commissioned. Bitumen and Marine Bunker business began. 1968 Techno-economic studies for Haldia-Calcutta, Bombay-Pune and BombayManmad Pipelines submitted to the Government. 31

1969 Indian Oil undertook the marketing of Madras Refinery products. 1970 Indian Oil acquired 60% majority shares of IBP. The same was offloaded in favor of the President of India under a Directive in 1972. 1971 Dealership/reservation was extended to war widows, disabled Defense personnel, Freedom Fighters, etc. after 1971 War. 1972 R&D Centre was established at Faridabad. SERVO, the first indigenous lubricant was launched. 1973 Foundation-stone of Mathura Refinery was laid by Mrs. Indira Gandhi, the then Prime Minister of India.

1974 Indian Oil Blending Ltd. (IOBL) became the wholly owned subsidiary of Indian Oil. Marketing Division attained a new watershed with a market participation of 64.2%. 1975 Haldia Refinery was commissioned. Multipurpose Distribution Centers were introduced at 132 Retail Outlets pioneering rural convenience. 1976 Private petroleum companies nationalized. Burmah Shell became BPC. 1977 R&D Centre launched Nutan wick stove. 32

1978 Phase-wise commissioning of Salaya-Mathura Crude Oil Pipeline (SMPL) began. 1979 Barauni Refinery and Bongaigaon Refinery and Petrochemicals Ltd. (BRPL) affected by Assam agitation. 1980 The second Oil Shock was witnessed as a result of Iranian Revolution. Crude Oil price flared to a new high of $32 per barrel. 1981 Digboi Refmery and Assam Oil Company's (AOC) marketing operations were vested in IndianOil. It became Assam Oil Division (AOD) of Indian Oil. 1982 Mathura Refinery was commissioned. Mathura-Jalandhar Pipeline (MJPL) was commissioned. 1983 Massive augmentation of LPG storage and distribution facilities was undertaken. Proposal for the 6 MMTPA Refinery at Karnal was submitted at an estimated cost of Rs l, 181 Crore.

1984 Taluka Kerosene Depots (TKOs) were commissioned for improved availability of kerosene in rural and hilly areas in addition to Multipurpose Distribution Centers. Foreshore terminal at Kandla Port was commissioned. Integrated Corporate Planning -ten year Perspective Plan and five year LRP initiated. 1985 The new office complex for the ed Office of the Corporation and 33

Head Office of Marketing Division with a total area of 23,110 square meters was completed. Additional Coking Unit at Barauni Refinery commissioned. 1986 A new Foreshore Terminal at Madras commissioned. 1987 Test marketing of 5 kg. LPG cylinders began in 1986-87 in Garo Hills and Kumaon. 1988 DFR of Karnal (Panipat) Refinery was submitted to the Government of India.

1989 Salaya-Mathura Pipeline (SMPL) was suitably modified for handling Bombay High Crude during winter. 1990 Kandla-Bhatinda Pipeline (KBPL) project was approved. The first LPG Bottling Plant of Assam Oil DiVision (AOD) at Silcher was commissioned. 1991 Digboi Refinery Modernization project was initiated. Bunkering facility at Para dip was completed.

1992 Revamp of Vacuum Distillation Unit at Mathura Refinery was completed. Two of the Indian Oil Table Tennis players represented the nation at Barcelona Olympic Games. 1993 New era of Micro-processor based Distributed Digital Control System (DDCS) replacing the pneumatic instrumentations began in Refineries, in phased 34

manner. 1994 India's First Hydro cracker Unit was commissioned at Gujarat Refinery. Vision-2000, the Retail Visual Identity programme was launched to upgrade facilities at Retail Outlets. 1995 1,443 km. long Kandla-Bhatinda Pipeline (KBPL) was commissioned at Sanganer. The lndane Home Shoppe was launched. 1996 State-of-the-art LPG Import Terminal at Kandla with a capacity of 6, 00,000 tonnes per annum was commissioned. 1 million metric tonne per annum (MMTPA) new CDU at Haldia Refinery was executed with in-house supervision. The first batch of one year International MBA (iambi) programme was successfully conducted by Indian oil Institute of Petroleum Management (IIPM). 1997 Commercial production of SERVOIII Titex Grease commenced at the world's first Titex Plant at Vashi, Bombay. Business Development received new thrust. Indian Oil entered into LNG business through Petronet LNG -a JV company.

1998 Panipat Refinery was commissioned. Haldia, Barauni Crude Oil Pipeline (HBL) was completed.

35

The istrative Pricing Mechanism (APM) was withdrawn from the Refining Sector effective 1" April 1998. Phase-wise dismantling of APM began. Indian Oil Board was reconstituted under the Navaratna concept, with the induction of five part-time non-official independent Directors. 1999 Indian Hydrocarbon Vision -2025" was announced at PETROTECH-99, organized by Indian Oil on behalf of the oil Industry. India attained self-sufficiency in Refining. Diesel Hydro-desulphurization Units commissioned at Gujarat, Panipat, Mathura and Haldia Refineries. Man than -- the IT re-engineering project was launched. 2000 Indian Oil crossed the turnover of the magical mark of Rs l, 00,000 Crore -the first Corporate in India to do so. The Indian Oil Foundation -- a non-profit trust -- the first of its kind in Corporate India, was unveiled to protect, preserve and promote the country's heritage. Y2K compatibility achieved. JNPT Terminal was commissioned. The Lube Blending Plant at Asotin and the Once through Hydro cracker Unit at Mathura refinery were commissioned. Indian Oil entered into Exploration & Production (E&P) with the award of two exploration blocks to Indian Oil and ONGC consortium under NELP-I.

2001 Digboi Refinery completed 100 years of continuous operation. Chennai Petroleum Corporation Ltd. (CL) and Bongaigaon Refinery and Petrochemicals Ltd. (BRPL) were acquired. 36

Fluidized Catalytic Cracker Unit at Haldia Refinery was commissioned. Augmentation of Kandla-Bhatinda Pipeline (KBPL) to 8.8 MMTPA completed. Eight Exploration blocks awarded to the IndianOilled consortium under NELPII. Two Coal Bed Methane (CBM) blocks awarded to the consortium of Indian Oil and ONGC under CBM-I. The investment proposal for Integrated PX/PfA project at Panipat was approved. 2002 APM dismantled. Pricing of Petroleum products decontrolled. IBP Co. Ltd. was acquired with management control. Barauni Refinery expansion project completed. New generation auto fuels IOC and Diesel Super introduced.

2003 Lanka IOC Pvt. Ltd. (LIOC) launched in Sri Lanka. Retail operations began in Sri Lanka. Indian Oil became the first Indian Petroleum Company to begin downstream marketing operations in overseas market. Lanka IOC became an independent oil company in Sri Lanka Gasohol, 5% ethanol blended petrol, was introduced in select states. INDMAX unit at Guwahati Refinery commissioned. Indian Oil Technologies Ltd. for marketing intellectual properties of R&D centre was launched. Foundation Stone of Panipat Refinery Expansion and PX/PTA projects laid. Maiden LPG supplies to Port Blair KVSPL (Product) Pipeline commissioned Concept of XTRA, covering Retail Outlets and customer service, launched 37

SERVO became a Super Brand Indian Oil named as nodal agency by MoP&NG to undertake research in the areas of production, storage, distribution and utilization of hydrogen gas as an alternative fuel. The foundation stone of Indian Oil’s Panipat Refinery expansion (6 to 12 MMTPA) project and PX/PTA plant (553 TMTPA) project laid at Panipat.

2004 Indian Oil turned a Gas marketer by sale of degasified LNG Indian Oil Mauritius Ltd.’s 18 TMT state-of-the-arts Oil Storage Terminal at Mer Rouge commissioned 2004 Lanka IOC Pvt. Ltd. (LIOC) launched in Sri Lanka. Retail operations began in Sri Lanka. Indian Oil became the first Indian Petroleum Company to begin downstream marketing operations in overseas market. Lanka IOC became an independent oil company in Sri Lanka. Gasohol, 5% ethanol blended petrol, was introduced in select states. INDMAX unit at Guwahati Refinery commissioned. Indian Oil Technologies Ltd. for marketing intellectual properties of R&D centre was launched.

Foundation Stone of Panipat Refinery Expansion and PX/PTA projects laid. Maiden LPG supplies to Port Blair. KVSPL (Product) Pipeline commissioned. 38

Concept of XTRA, covering Retail Outlets and customer service, launched. SERVO became a Super Brand. Indian Oil Board approves merger of subsidiary IBP with parent company IndianOil in May.

Indian Oil Mauritius (IOML) terminal inaugurated. Indian Oil became the only oil PSU in the country to adopt instruments of risk management in international trading and commerce, derivatives trading to protect refining margins.

Indian Oil pays the highest-ever dividend of 20% (for fiscal 2003), amounting to Rs 2453 crore, to shareholders. Indian Oil signs MoU with IIM (Ahmedabad) to offer one-year Post Graduate Programmes in Management (Energy) to be conducted at IIPM, Gurgaon. Indian Oil signs MoU with Haryana government to set up the Rs 6300 crore Naphtha Cracker & Polymer Complex at Panipat. R & D Centre bags the prestigious National Technology Award for successful commercialization of INDMAX technology for conversion of low value heavy petroleum residues into high value LPG. Indian Oil moves up by two places to the 189th position in the Fortune 'Global 500' ranking based on fiscal 2003 performance.

Indian Oil’s Rs 1248 crore LAB (Linear Alkyl Benzene) plant, the world's largest single train kerosene-to-LAB unit, was commissioned at Gujarat, thus signaling Indian Oil’s entry into petrochemicals business. Indian Oil signs Memorandum of Collaboration (MoC) with Mahindra & Mahindra to roll out the country's first hydrogen vehicle in the next two 39

years. Indian Oil’s 60 km-long Rs 76 crore Panipat Rewari Product Pipeline commissioned. Indian Oil signs MoU with Nepal Oil Corporation Limited to lay a product pipeline between Raxaul (India) and Amlekhganj (Nepal). The year marked Indian Oil’s entry into gas business. As co-promoter of Petronet LNG Limited, complete quantity of gas (2.52 MMSCMD) allotted to Indian Oil was sold out and commercial supplies commenced April 2004 onwards. Indian Oil was voted as the most trusted petrol pump brand in the country in a survey of India's most trusted brands conducted by the Economic Times Brand Equity. LIOC (Lanka IOC), Indian Oil’s subsidiary, created history on the Colombo stock exchange as the biggest ever equity issue. LIOC's IPO offering 25% stake was oversubscribed 11.6 times on the first day itself. 2005 The year marked Indian Oil’s big ticket entry into the high stakes business of E&P. The Indian Oil and Oil India consortium signed its Exploration and Production Sharing Agreement (EPSA) with the National Oil Corporation of Libya for Block No. 86, in the Sirte basin of Libya. Indian Oil’s Mathura Refinery was the first refinery in India to attain the capability of producing entire quantity of Euro-III compliant diesel by commissioning the Rs 1046 crore DHDT (Diesel hydro treating unit). Mathura Refineries also commissioned India's first MS quantity up gradation unit to produce Euro-III compliant petrol. Indian Oil becomes the top oil trading company amongst national oil companies in the Asia Pacific region for the second consecutive year.

Indian Oil signs a Supply Purchase Agreement (SPA) to procure 1.75 MMTPA LNG to be received by the last quarter of 2009 at Petronet LNG Limited Dahej 40

terminal. Indian Oil breached the Rs 150, 000 crore mark in sales turnover by clocking Rs 150, 677 in turnover in fiscal 2004. Indian Oil signed a JV agreement with GAIL to enter the city gas distribution projects in Agra and Lucknow. Indian Oil allowed by Government of India to charter crude oil ships on its own instead of going through Tran chart, the chartering wing of the Ministry of Shipping.

41

Objectives of the proposed study

The main objective of the proposed study was to find out how far the employee has been satisfied and how far their performance has been improved after the commencement of 9th pay revision in Indian Oil Corporation Ltd, Guwahati Refinery. It was necessary to analyze this scenario in Guwahati Refinery as because prior to the commencement of 9th pay commission in the Indian Oil Sector the employees were not fully satisfied with their working condition along with the matching of their payroll. Hindrances and disputes were arising out between the employers and employees working in this organization.

So it was necessary for a rise in the compensation package in this sector so that the employees would be satisfied with their performance along with their compensation package in this organization. So the commencement of 9th pay commission was implemented in this organization to attain the satisfaction of the employees in this organization.

Research Methodology 42

In order to know the satisfaction of the employees working in this organization after the commencement

of 9th pay commission

one set of Questionnaire was istered to the

employees ( both officers and non officers) working in this organization on the online basis.

I.RESEARCH DESIGN: In order to understand the satisfaction of the Employees after the commencement of 9th pay commission a brief conversation was done with the employers through online and a survey was done through online basis.

II. Data Collection through Questionnaire:- Primary data have been collected personally from the respondents through questionnaire through online survey . The respondent includes both the officers as well as the non officers of every department working in this organization and analysis on the basis of their working period that is more than 20 years and less than 20 years. The respondents have been asked to fill up the questionnaire and more over data collection process also includes oral interview through online.

III. Sampling Design & Sampling Size: - The elements of research of population or universe of interest are the peoples both the officers and non officers of every department working in this organization. The sample size of the study consists of samples, which include a study of 70 respondents out of which 5% are officers and 15% are non officers from every department working in this organization. In this regards out of 70 samples 40 of the respondants were taken telephonic interview, 20 were given online questionnaire for the survey and for the rest were conducted an oral interview.

Scope/Relevance of Proposed Study 43

 RELEVANT AND WIDER SCOPE  IMPORTANT FOR BOTH EMPLOYERS AND EMPLOYEES TO KNOW THEIR POSITION IN THE ORGANIZATION  HELPS

IN

DISCRIMINATING

THE

GRADES

OF

THE

EMPLOYEES  BUILDS UP A HOSPITALITY BETWEEN THE EMPLOYERS AND EMPLOYEES  HELPS IN STOPPING THE DISPUTES ARISING IN THE ORGANIZATION  HELPS IN GIVING JOB SATISFACTION TO THE EMPLOYEES  HELPS THE EMPLOYEES IN MAKING UNDERSTAND THE IMPORTANCE OF THEIR JOB ROLE

GLOBAL SCENERIO 44

========================== Introduction to Oil Companies According to the Global Scenario Context The effects of global climate change affect every country, but not all are responsible in the same way of its causes. The response, nonetheless, should be global, involving as many countries as possible, but taking into their development degrees and their priorities and needs. Recognizing that no individual nation can effectively address a problem of this scope, governments within the UNFCCC have decided to address this challenge collectively,

fostering

collective

initiatives

to

control

the

enhanced

greenhouse effect, particularly emissions of CO2 from fossil fuel combustion. Indeed, the problem is very different for the less favored countries with enormous needs as compared to those who have reached high development levels. The latter have recently undergone important changes in economic structure, technology and energy efficiency that make them relatively cleaner countries. However, because of historic reasons they have contributed to the current environmental problems; so they bear specific responsibilities. It is not possible to adopt one common standard.

In countries like Mexico, for which international commitments haven´t been set, the need to take on international commitments, not yet included in the UNFCCC, is discussed. International political pressure for such commitments will surely occur considering

Mexico's growing involvement in the productive and financial

globalization. In the American continent the most rapid growth in carbon emissions between 1970 and 1997 was in Mexico (235%) followed by Brazil (220%) and Argentina (147%).

45

On what basis can cooperation against global warming be implemented? Which role can international or local actors play, taking into consideration their influence on the global environment? How can international institutions influence individual choices in order to make international cooperation less problematic? How to make an objective differentiation and different countries´ efforts compatible with the search for equity considering relative development degrees and historic responsibilities? Those are some of the questions frequently posed in the scientific literature and in international meetings.

True, global environment protection has been institutionalized step by step through the establishment of an international regime which began to take form since the awareness of the impact of global warming and climate change over natural systems and the humanity increased. The Rio de Janeiro conference in 1992 and the Kyoto protocol have been important steps towards that institutionalization, but the path ahead is still long and the enforcement difficulties abundant. Last

years´ events show

(Development,

Equity,

that

barriers exist to fully integrate

Sustainability)

and

climate

change

issues

the

DES

into

the

sustainable development agenda, but they show opportunities as well. Sorting out opportunities from challenges is indispensable for the advancement of dialogue, negotiations and international cooperation. One of the fields where there is no consensus is in the emphasis that environmental policies must have: command and control measures or more flexible instruments which give more options and responsibilities to economic agents. There is a recent shift, indeed, towards giving a more important place to market instruments and agent decisions in order to reach environmental objectives and implement climate change policies. This is the case of the Kyoto Protocol's international trading system, which has been proposed as a key element of flexibility, but raises many doubts and criticism, including its relation with equity issues. 46

The purpose of this paper is to put this shift to market oriented policies and the role of some important agents as the international oil companies in a broader perspective.

Oil Companies, Petroleum Companies Petroleum companies, also known as Oil companies or Oil & Gas companies, have formed a key part of the global economy for the last decade, since petroleum or crude oil has become our main fuel source. Not only have these petroleum companies become amongst the biggest companies in the world, but thanks to the fundamental importance of this limited resource, they have also become embroiled in a complex political world of government and national objectives, international relations - and all too often, outright war. Oil companies, among the largest employers in the world, cater to the global energy demand. Their areas of functioning can be grouped into the following: •

Production: This involves the extraction of crude oil from reserves, followed by its refinement in processing plants.

•

Distribution: The daily distribution quota is delivered to various sectors (e.g. automobiles, agriculture, residential). This is followed by the commercialization of oil products. Moreover,

istrating

their

employees

who

have

to

work

in

extreme

temperatures in extended shifts is an important part of the operations of an oil company.

47

Major Oil Companies of the World The leading oil companies of the world are: •

The Exxon Mobil Corporation: This American oil and gas corporation is the

progeny of John D. Rockefeller's Standard Oil Company, formed by the merger of Exxon and Mobil on November 30, 1999. The world's biggest publicly traded company has its headquarters in Irving, Texas. Its reserves at the end of 2007 were around 72 billion barrels of oil-equivalents (BBOE), which are expected to last for the next 14 years. •

Royal Dutch Shell plc: It was formed in 1907 when Royal Dutch Petroleum

Company merged with Shell Transport and Trading Company Ltd, UK. The initial establishment included 60 % Dutch and 40% British shares. •

BP plc: Having its headquarters in London, this company was discovered by

William Knox D'Arcy in May 1908 in the Middle East. It was called the AngloIranian Oil Company (AIOC) before it became the British Petroleum in 1954. In 1998, it became BP Amoco after merging with Amoco of Indiana. In 2000, it was renamed BP and adopted the tagline "Beyond Petroleum.” •

Chevron/Texaco Corporation: It was formed after the split of John D.

Rockefeller's Standard Oil Company in 1911 and named SoCal. It was one of the Seven Sisters that dominated the world oil industry in the early 20th century. •

Conoco Phillips Corporation: Based in Houston, Texas, it was formed by the

merger of Conoco Inc and Phillips Petroleum Company on August 30, 2002. Its fuel stations are named Phillips 66, Conoco and 76. It is the second-largest refiner in the US and the fifth-largest in the world, with a processing capacity of 2,208,000 and 2,901,000 bbl/day.

48

The Seven Sisters (the major oil companies of the west that divided world oil among themselves after WW-II) now control a minor proportion of world reserves. State monopolies and emerging partially-privatized oil companies hold the major share. We have listed here the main world, international or global petroleum companies, by country. The country normally indicates the headquarters location of that company, although some have multiple headquarters (for example Royal Dutch Shell is headquartered in both the UK and the Netherlands).

List of Oil Companies Listed below are the various petroleum companies of the world: •

Assam Oil Company Ltd. (ACL), India

•

Abu Dhabi National Oil Company (ADNOC), United Arab Emirates

•

Alon USA, United States

•

Amerada Hess Corporation, United States

•

Anadarko Petroleum Corporation, United States

•

Apache Corporation, United States

•

Arbusto Energy, United States

•

Atlantic Petroleum, Faroe Islands

•

BG Group, United Kingdom

•

Bharat Petroleum Corporation Limited, India

•

BHP Billiton, Australia

•

Buzachi Petroleum Operating, Kazakhstan

•

BP, United Kingdom

•

Cairn Energy, India

•

Canadian Natural Resources, Canada

•

Chevron Corporation, United States

•

Chief Oil and Gas, United States

•

Citgo, Venezuela 49

•

CNOOC Ltd., China

•

ConocoPhillips, United States

•

Cosmo Oil Company, Japan

•

Crown Central Petroleum, United States

•

Cupet, Cuba

•

Devon Energy, United States

•

Ecopetrol, Colombia

•

Enbridge, Canada

•

EnCana, Canada

•

ENSCO International, United States

•

Eni, Italy

•

Essar oil ltd., India

•

Entreprise Tunisienne d'Activites Petroliere (ETAP), Tunisia

•

ExxonMobil, United States

•

First Texas Energy Corporation, United States

•

Galp Energia, Portugal

•

GeoPardazesh - Petroleum Exploration Services Co. Ltd., Iran

•

Petronet LNG Limited, India

•

Gujarat Gas Co. Ltd., India

•

Gujarat State Petroleum Corporation, India

•

Gulf Oil, Luxembourg

•

Grupa LOTOS, Poland

•

Hargeisa Minerals & Resources Company Ltd, Somaliland

•

Hellenic Petroleum, Greece

•

Hess Corporation, United States

•

Hindustan Petroleum Corporation Ltd, India

•

Husky Energy, Canada

•

IB Daiwa, Japan

•

Imperial Oil, Canada 50

•

INA - Industrija Nafte, Croatia

•

Indian Oil Corporation, India

•

Inpex, Japan

•

Irving Oil, Canada

•

Japan Energy, Japan

•

Kaz-Munay Gaz, Kazakhstan

•

Karazhanbas Munay, Kazakhstan

•

Kerr-McGee, United States

•

Koch Industries, United States

•

Kuwait German Petroleum Company, Canada

•

Kuwait Gulf Oil Company, Kuwait

•

Kuwait National Petroleum Company Kuwait

•

Kuwait Oil Company, Kuwait

•

Kuwait Petroleum Corporation, Kuwait

•

LUKoil, Russia

•

Marathon Oil Corporation, United States

•

Maurel & Prom,

•

Maxol Group, Republic of Ireland

•

MedcoEnergi, Indonesia

•

Mol Group, Hungary

•

Naftna Industrija Srbije, Serbia

•

Naftogas of Ukraine, Ukraine

•

National Iranian Oil Company (NIOC), Iran

•

National Oil Corporation, Libya

•

Neste Oil, Finland

•

Nexen, Canada

•

Nippon Oil, Japan

•

NNPC, Nigeria

•

Oil Planet International Corp, United States 51

•

Northern Resources, Canada

•

Oil and Gas Development Company Limited, Pakistan

•

Occidental Petroleum, United States

•

Oil India Limited, India

•

Oman Oil Company (OOC), Oman

•

OMV, Austria

•

ONGC, India

•

PKN Orlen S.A., Poland

•

PSO, Pakistan

•

Petróleos de Venezuela, Venezuela

•

Petroleos Mexicanos, Mexico

•

Petroleum Development Oman, (PDO)

•

Perenco, , United Kingdom

•

Petro-Canada, Canada

•

Petrobras, Brazil

•

PetroChina, China

•

PetroKazakhstan, Kazakhstan

•

Petrom, Romania

•

Petron Corporation, Philippines

•

PETRONAS, Malaysia

•

PETROTRIN, Trinidad and Tobago

•

PetroVietnam, Vietnam

•

Pertamina, Indonesia

•

Polish Oil and Gas Company, Poland

•

Plains Exploration & Production Company (PXP), United States

•

PTT Public Company Limited, Thailand

•

Qatar Petroleum, Qatar

•

Reliance Industries Limited, India

•

Repsol YPF, Spain 52

•

Rompetrol Group N.V., Romania

•

Royal Dutch Shell, Netherlands, United Kingdom

•

Sagiz Petroleum, Kazakhstan

•

San-Ai Oil, Japan

•

Santos Limited, Australia

•

Sasol, South Africa

•

Saudi Aramco, Saudi Arabia (the largest in the world)

•

Shell Canada, Canada (subsidiary of Royal Dutch Shell)

•

Shell Oil Company, United States (subsidiary of Royal Dutch Shell)

•

Sinclair Oil, United States

•

Sinopec, China

•

Snpc, Congo-Brazzaville

•

Sonangol, Angola

•

Sonatrach, Algeria

•

SPC, Singapore

•

StatoilHydro, Norway

•

State Oil Company of Azerbaijan, SOCAR Azerbaijan

•

Somerset Refinery, United States

•

State Oil Company of Suriname, Suriname

•

Sunoco, United States

•

Suncor Energy, Canada

•

Surgutneftegaz, Russia

•

Syncrude, Canada

•

Talisman Energy, Canada

•

Todd Energy, New Zealand

•

Total,

•

Tullow Oil, United Kingdom

•

United Refining Company, United States

•

Vaalco Energy Inc., United States 53

•

Wintershall,

•

Woodside Petroleum, Australia

•

XTO Energy, United States

•

YPF, Argentina

•

YPFB, Bolivia

A Double Oil Shock Scenario As far as oil prices are concerned, many scenarios are possible. A jump to $300 per barrel or more in the near future may be the result of a geopolitical crisis in Iran, Venezuela, Saudi Arabia or elsewhere. Low price scenarios seem unlikely today but cannot be completely excluded. Another one which we consider of interest is a “dual-crisis” or “double-shock”. It would present a number of similarities with the development observed between 1973 and the end of the eighties. It has often been said that the recent rise in prices is not comparable to that of 1973, the first oil crisis having been triggered by a reduction in supply whilst the present oil price increase could be attributed to runaway demand. Note, however, that during the 1960s, worldwide consumption of petroleum products increased by 7 to 8% annually, but production capacities did not increase at the same rate. The events associated with the Israeli-Arab conflict (i.e., the Yom Kippur war) accelerated the rise in prices, but that rise would most likely have occurred anyway, although spread out over time as it has been the case since 2000. In short, the rise in prices over the past few years, as in 1973, reveals the need for consuming countries to make decisions to promote energy savings and the development of alternative energy technologies. As in the seventies 54

with the French nuclear program, several steps have already been taken, in favour of bio-fuels for instance. In spite of growing nationalism and a lack of opportunities for international oil companies, investment in exploration and production is increasing. Note, however, that the major part of this increase in investment is due to the inflation of costs, only a small part corresponds to an increase in activity.

In the absence of geopolitical events, it is possible that production capacities will be restored if all development projects are realized as planned. We might then see a stabilization or an erosion of prices for a few, or several, years. However, if demand continues to grow, these recent measures may prove to be not sufficient. Then, even if the “oil peak,” strictly speaking, only occurs around 2030, it is likely that the production of natural hydrocarbons will be unable to follow demand as early as the beginning of the next decade. Before prices return to a new long-term equilibrium which could be about $100 to $ 150 a barrel (in constant dollars), it is highly likely that an additional “crisis” will occur, similar to the 1979-80 crisis, with price levels of $200, $300 per barrel or more for several years. These high prices will probably be necessary to promote an inevitable energy transition, for investments to be made both on the supply side as well as on the demand side in order to develop renewable energy sources without major subsidies, to stimulate the production of synthetic fuels, to renew nuclear programs, etc. 55

Last but not least, we should bear in mind the role played by expectations and how forecasts can be self-destructive in the oil industry. One especially relevant example relates to the 1985 price drop. Political and industrial decisions resulting in energy efficiency, substitution, exploration and production of “difficult” oil in non OPEC regions occurred not simply because the price of crude was high but because it was considered unlikely that prices would not continue to rise. Consequently, the most effective factor for avoiding the coming crisis of a dual shock scenario would be a consensus about its arrival. In this context, the fact that the 5-6 year forward price of oil is at present reaching a hundred dollars is probably to some extent rather good news.

RUSSIA OIL COMPANIES IN RUSSIA Oil

Reserves According to the Oil and Gas Journal’s 2008 survey, Russia has proven oil reserves of 60 billion barrels, most of which are located in Western Siberia, between the Ural Mountains and the Central Siberian Plateau. Eastern Siberia is one area where little exploration has taken place. The Russian Ministry of Natural Resources estimated in 2005 that A+B+C1 reserves (roughly equivalent to Proven + Probable reserves) in E. Siberian provinces totaled 4.7 billion barrels. 56

Russia's Oil Balance With production of 9.8 million bbl/d of liquids (not including oil products), and consumption of roughly 2.8 million bbl/d, Russia exported (in net) around 7 million bbl/d. According to official Russian statistics, roughly 4.4 million bbl/d of this total is crude oil. Over 70 percent of Russian crude oil production is exported, while the remaining 30 percent is refined locally. Crude oil exports via pipeline fall under the exclusive jurisdiction of Russia's state-owned pipeline monopoly.

Production In the 1980s, the Western Siberia region, also known as the “Russian Core,” made the Soviet Union a major world oil producer, allowing for peak production of 12.5 million barrels per day in total liquids in 1988. Following the collapse of the Soviet Union in 1991, Russia’s oil production fell precipitously, reaching a low of roughly 6 million bbl/d, or around one-half of the Soviet-era peak (see Fig. 1). According to observers, several other factors are thought to have caused the decline, including the depletion of the country's largest fields due to state-mandated production surges and the lack of investment in field maintenance.

A turnaround in Russian oil output began in 1999. Many analysts attribute the rebound in production to the privatization of the industry following the collapse of the Soviet Union. The privatization clarified incentives and increased less expensive 57

production. Higher world oil prices beginning in 2002, the use of technology that was standard practice in the West, and the rejuvenation of old oil fields also helped raise production levels. Other experts partially attribute the increase to after-effects of the 1998 financial crisis, the fall in oil prices, and the subsequent devaluation of the ruble.

In 2007 Russian total liquids production averaged over 9.8 million bbl/d, including 9.4 million bbl/d of crude oil, a 200,000 bbl/d increase over 2006. This growth rate was down from annual growth of roughly 700,000 bbl/d annually between 20022004.

Short-Term Outlook Growth in output from the Sakhalin projects, (see EIA’s Sakhalin Fact Sheet) will be a main contributor to overall Russian oil output growth. In the decade, a few major oil fields (listed in Table 1 below) will contribute to most of Russia’s supply growth and others will offset decreasing production from mature fields. In the short term, however, there are only a few large new fields that are planned. They include Gazprom’s 100,000 bbl/d Prirazlomnoye field (2010), Lukoil's 150,000 58

bbl/d South Khylchuyu field (mid-2008), and year-round production from the Sakhalin II field. Lukoil/ConocoPhillips's TimanPechora project, and Rosneft's Vankorskoye (300,000 bbl/d) and Komsomolskoye fields will also help stem production losses at older fields. Lukoil also expects around 30,000 bbl/d of production from its North Caspian fields after 2010.

In 2006, around 24 percent (or 2.3 million bbl/d) of Russia’s oil production came from fields that had already produced 60 percent of their total recoverable reserves. Achieving continued growth at post-peak fields will become more problematic as oil companies run out of easy and less costly opportunities to manage the rate of decline. Updated assessments of EIA’s short-term outlook for Russian oil supply growth are available each month from Table 3b of the Short Term Energy Outlook.

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Oil Sector Taxation Government taxation of production and export revenues along with the continued lack of clarity concerning the ownership of subsoil resources contributed to lower output for 2007 and could possibly contribute to stagnating or even negative output growth during 2008. Export duties on crude oil are directly linked to the global pricing environment. The tariff schedule for export duty for crude oil at $25/bbl and higher is 65 percent of the market price minus $21/ barrel. Using this formula, the government is receiving around $47 per barrel from export taxes at current prices. Therefore, absent changes to the tax structure itself, Russian oil companies are only very modestly affected by changes in global crude prices.

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At current oil prices, the government is also receiving an additional $20 per barrel in extraction taxes. The government plans to introduce preferential treatment for those producers that extract resources at fields exceeding 80 percent depletion, which they hope will encourage oil companies (mostly in the Volga-Urals region) to bring some idle wells back into production.

Several proposals are currently being discussed to reduce the tax burden. One is a proposal to raise the non-taxable threshold level from $9 to $15 per barrel. Prime Minister Putin has also proposed a seven-year mineral extraction tax holiday for oil companies that develop fields in Timan-Pechora, Yamal, or on the continental shelf beginning in 2009. A second proposal would provide tax holidays for firms carrying out offshore exploration or granting them mineral extraction tax breaks. Another proposal by the Finance Ministry seeks to reduce annual oil company taxes by $4.2 billion from 2009. According to analysts, this is only a fraction of the $40 billion in extraction taxes and $45 billion in export duties that the government collected from oil companies in 2007.

Refinery Sector Russia has 41 oil refineries with a total crude oil processing capacity of 5.4 million bbl/d, but many of the refineries are inefficient, aging, and in need of modernization. According to Energy Intelligence, refinery throughput at Russian refineries increased by roughly 4 percent to around 4.6 million bbl/d in 2007. This total includes some crude oil exports from neighboring countries. Russian refineries produced around 1.2 million bbl/d of Mazut (heavy fuel oil), 1.3 million bbl/d of middle distillates, and 815,000 bbl/d of gasoline.

The draft proposals mentioned above for the oil sector are also geared to provide incentives for refiners to produce more high-quality and environmentally cleaner 61

fuels. Currently oil companies pay around $21/barrel ($154/tonne) for high-octane gasoline, $15/barrel for low-octane gasoline, and $6/barrel of diesel.

List of Subsea Oil and Gas Companies in Russia

Aquatic Company - specialists in the fields of design engineering, analysis, and a variety of research and development efforts Chernomorneftegaz - seismic surveys; processing and complex interpretation of seismic data Gazflot - russian exploration and ship owning company Gazprombank - services to enterprises and employees of other sectors (chemical, engineering, defence, nuclear etc.) Geobyte ltd - geological exploring of resources of potential regions of oil and gas resources and condensate JSC Gazprom Neft - is one of the largest oil and gas producing companies in Russia Lukoil - is Russia's leading oil company MNP Group incorporates - engaged in shipbuilding, offshore units design and 62

construction. Morneftegazproekt - provide integrated development of project documentation for offshore field development Murmansk Shipping Company - crude oil transshipment and icebreaking services in Russian frozen ports and along the Northern Sea Route in Arctic waters

Polar Marine Geosurvey Expedition - complex geological and geophysical research in Arctic, the world ocean and Antarctica, in inland reservoirs Rosneft - russian oil and gas exploration company Sakhalin Energy - commercially develop, operate and market the hydrocarbon resources Sea Soft Packages and Tehcnologies Ltd - developing software for realtime video integration with heterogeneous digital data Sevmorgeo - Marine geological, geophysical and geoecological research of Russian offshore and the world ocean Sevmorneftegaz, CJSC - Development of oil and gas fields on Russia’s Arctic continental shelf Sibneft - petroleum exploration, production, refining, and marketing

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Has Russia's Oil production Peaked? Has Russia's oil production peaked? The answer might as well be yes in so far as their smallish medium-term growth possibilities are well-delineated and longer term growth will require levels of investment that are not likely to to be forthcoming in time to remedy the situation. What we need to know about Russia's future oil production is as easy as 1-23. 1. The slowdown in Russia's output growth since 2003 is crystal clear (graph below left, Wall Street Journal). 2. The small set of large (≥ 50,000 b/d) new fields coming on-stream by 2012 is precisely known. Mature depleted Russian oil basins (Western Siberia, Tartarstan) and tough new fields (Eastern Siberia, Far East) require huge investments in infrastructure, new wells, enhanced oil recovery, etc. to maintain or add to production. 3. Government policy does not cap oil output but rather impedes exploration & production activity with burdensome tax rates on Russian oil companies. The Federation—Vladimir Putin and his sidekick Dmitry Medvedev—also hassles and seeks to eject foreign operators (and their capital) after they have exhausted their usefulness, e.g. Shell at Sakhalin-2.

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There is no compelling reason to believe that Russia will break out of the current plateau—permanent decline?—of oil production as it did after 1999. Even if Russia changes policies that currently stifle investment to promote future production, that money will work, increasingly in vain, to maintain, not grow, oil output. And even if a modest medium-term gain of 2-3% over current production levels should somehow be achieved by 2012, that will very likely be the end of the line for Russia production growth. The fact that the skittish oil markets have finally noticed that Russia's output growth is flagging doesn't add much to what anyone who has looked at the situation and can interpret a graph already knows. As for optimistic expectations, those are usually the product of standard bureaucratic dogma that "all will be well," ignorance following from an inability to subtract, or our typically human emotional investment in a happy future—not the data and its reasonable interpretation.

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Fuzzy Data and Expectations This update is prompted by the news that Russia's production fell 1-2% in the first quarter of 2008, depending on the type of data examined. The Wall Street Journal's Russian Oil Slump Stirs Supply Jitters cited the IEA's calculation that production of 10 million barrels per day (b/d, crude oil + condensate + gas liquids) was down 1% in the 1st quarter compared with 2007, noting that "industry watchers and Russian officials generally blame the country's production slowdown on a combination of weather and tight electricity supplies in some parts of the country." Electricity? That's another subject.

Reuters cited Russian Energy Ministry data indicating that "oil production [crude + condensate] edged down to 9.76 million barrels per day from 9.79 million b/d in February, and well below the post Soviet high of 9.93 million b/d reached in October last year." The preliminary EIA data is slightly higher than the Russian official data, but shows the same winter trend.

Despite the discouraging results in the 1st quarter, the IEA's March, 2008 Oil Market Report (graph left) was still forecasting that Russia crude output would grow this year by as much as 250,000 barrels per day. They have now revised that forecast down to an all liquids addition of only 0.8% while taking a "cautious approach" according to IEA analyst David Fife. 66

The IEA's sudden wariness, which has never been apparent before, has caused them to withhold their future Russian forecast "pending [the] spring results, which could eliminate weather-related distortions typical of winter months" (AP, April 15, 2008). Their hesitancy is absurdly shortsighted— Russia's fate does not depend on any winter's weather conditions or what happens in the Spring quarter of this year. The agency is now, like Napoleon during the harsh Russian winter of 1812/13, in retreat.

Optimism still abounds in some quarters. The Wall Street Journal cites some hopeful sources—

Many Russian oil officials say the industry could still resume growth. Some Western analysts point to more optimistic data and forecasts. Citigroup said in a report late last month that it expects Russian oil volumes to increase by 1.5 million barrels a day between now and 2012, largely thanks to new projects in eastern Siberia. Still, it cautioned: "Russian oil production growth is no longer to be taken for granted." Russia's energy ministry expects a rise of 1.8%...

Pressure on Investment in the Russian Oil Sector The IEA's February Oil Market Report gives us the basic facts about Russian taxes on operators. "Russian oil companies pay three separate taxes on their activities," including— 67

1. A royalty on crude production; taxed at 22% after certain allowances 2. An export tax; based on the market price of Urals crude in the preceding two months. Light products attract a 30% discount on the tax charged and fuel exports benefit from a 60% discount. 3. A corporate profit tax of 24%, charged on net income, in common with other industries.

This added up to $65/barrel as of last February and the net profit for Russian oil companies was only about $10/barrel at that time. This staggering tax burden cuts significantly into the amount Russian operators have left over for exploration & production. It thus comes as no surprise that Rosneft is borrowing money, secured by crude oil export contracts, to finance its shortterm debt (from Moscow journalist Sergei Blagov in Jamestown Foundation's Eurasia Daily Monitor, February 28, 2008). Can Rosneft can carry out its investment plans in Eastern Siberia?

In December 2005, Rosneft paid some $260 million for a license to develop the East Sugdin oil and gas field, with reserves of some 200 million tons of oil and more than 40 billion cubic meters of gas...

In order to achieve significant production growth, Rosneft plans to invest 50 billion rubles ($2.04 billion) in Eastern Siberia this year, and up to 600 billion rubles ($24.5 billion) through 2020, [Rosneft CEO Sergei] Bogdanchikov said. Rosneft expansion plans for Eastern Siberia largely rely on the Vankor oil deposit, which has estimated reserves of 500 million tons, he said. However, Bogdanchikov complained that the company's investment resources were limited, as it faced a tax burden of some 60%, while oil companies outside Russia pay about half that amount...

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... Rosneft may still acquire new licenses, but developing new oil and gas fields in Eastern Siberia would require billions of dollars in investments. Therefore, it remains to be seen whether Rosneft's expansion could prove economically viable in the longer term. Deutche Bank oil and gas analyst Leonid Mirzoyan states that "Rosneft is still unlikely ... capable of footing the expensive bill for developing the Vankor field on its own" (Moscow Times, April 3, 2007). Rosneft has been snapping up development licenses and shares, but they are overextended. How will Rosneft finance future development at Sakhalin-III, Vankor, North Vankor, Yurubcheno-Takhomskoye, East Sugdinsky, Verkhnechonsk and all the rest while continuing to drill more and more wells to get expanded production from older (former Yukos) properties like top Western Siberian subsidiary Yuganskneftegaz? And still pay their taxes? Rosneft's CEO Bogdanchikov doesn't know, and neither does anybody else.

Although plans have been announced to cut taxes by an estimated $4.2 billion in 2009, Leonid Fedun, vice president of OAO Lukoil, remains unimpressed. The Wall Street Journal quotes Fedun as saying that "Russia's oil industry needs $1 trillion of investment during the next 20 years just to maintain production of 10 million barrels a day." Lukoil will see a savings of about $1 billion after 2010, which will speed up development of the Filanovsky field in the Russian sector of the North Caspian. In line with 69

Fedun's pessimistic view, Lukoil recently cut its 2008 growth forecast from 5% to 1.8-2.0%. Various optimistic estimates—including Citigroup's overly cheerful private report, one presumes—have used Russian oil company growth targets to justify their forecasts. Forward-looking statements from TNK-BP, Rosneft or Lukoil are becoming increasingly worthless as a guide to future activity in light of the lack of capital available for exploration & production. Russia also has a paucity of large new fields coming on-stream and must fight off declines stemming from depletion in their mature oil basins. Continuing Depletion and New Oil Fields Lukoil's Fedun believes Russia has peaked now (Yahoo! News, April 14, 2008). Here is what he told the Wall Street Journal about the short and longer term prospects— In an interview, Leonid Fedun, vice president of OAO Lukoil, one of Russia's biggest oil companies, said a mild winter and higher temperatures mean Siberia's icy ground is less stable, making it harder to move drilling rigs between oil wells.

He acknowledged that the fall also reflects a longer-term trend -- the depletion of Siberia's older fields. "Western Siberia is repeating the fate of Prudhoe Bay, with a time lag of five to six years," he said. "When the well's productivity falls, you have to keep drilling more and more. You've seen it in Alaska and the Gulf of Mexico, and now you're seeing it in Siberia."

It will come as no surprise1 to veteran peak oil observers that Western Siberia is going the way of Alaska or the North Sea. Putting this in context, much of Russia's production growth in the last few years came from the 70

offshore Sakhalin-I Chayvo field in the Far East, which peaked at 250,000 barrels per day in February, 2007. Rosneft now expects Sakhalin-I output to fall to about 160,000 barrels per day in 2008. Exxon Neftegas was drilling record-setting new wells at Chayvo back in April, 2007 but production will never return to peak levels at Sakhalin-1.

Declines at Sakhalin-1 must be offset by the implementation of year-round production of 70,000 b/d at Sakhalin-II, the Yuzhno-Khylchuyuskoye ("YK") field in Timan-Pechora, which will likely produce 150,000 b/d sometime in 2009, and an unknown contribution from Rosneft's Vankor in East Siberia starting this year. Rosneft has set its sights on 500,000 barrels per day from Vankor by 2015. (See These Are the Good Years for an update on factors affecting Vankor, ASPO-USA, February 20, 2008.) A few other large (≥ 50,000 b/d) projects are listed at 2008 Megaprojects page at Wikipedia, including the Salym field expansion which will likely add another 62,000 b/d in 2010. Scheduled new projects delimit Russia's ability to expand oil production in the medium term. If one makes the conservative assumption that Russian output outside of the projects mentioned here will decline in the 2-3% range each year from now on, it is easy to see that Russia's post-Soviet growth is coming to an end. New project delays would only make the situation worse. Managing decline rates in the existing production base (in the medium term) depends directly on how much investment is available for new wells, new drilling technology (e.g. laterals) and enhanced oil recovery. There are tax discounts on some of these activities.

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An End to Growth is Still In Sight Everyone will have to wait & see how Russia fares in the next few years, but the only surprises will be on the downside—the limited upside possibilities are already mapped out. The Federation's growth is constrained by lack of investment, too few new large projects coming on-stream, and the geological facts of life. It

appears

that

Putin's

policy

is

to

intentionally

restrain

development through onerous tax burdens on Russia's oil companies. The Urals Blend is selling at $109.66 today. Perhaps Putin truly understands, like the Saudis apparently do, that keeping some of Russia's oil in the ground is a better longer term strategy than producing it in an unfettered way now and accruing future rate of interest returns on the unburdened revenues. All things considered, Russia is the largest crude + condensate producer in the world, and Vladimir Putin is no dummy.

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Russia’s Oil Mine Industry Faces Problems When the price of oil reached another record, at more than $126 a barrel, analysts pointed to attacks on pipelines in Nigeria and turmoil in Venezuela and Iraq as the immediate causes. Even small disruptions to supplies from such places can cause the price to jump, because only Saudi Arabia has the capacity to replace the lost production and it is disinclined to do so. But to understand how supplies became so scarce in the first place, one must look at the state of the oil industry in Russia, the world’s second biggest producer. Over the past seven years, according to Citibank, Russia ed for 80 percent of the growth in oil production outside the Organization of Petroleum Exporting Countries. The increase in the early part of the decade matched the growth in demand from China and India almost barrel for barrel. Yet in April, Russian production fell for the fourth month in a row. It now is more than 2 percent below the peak of 9.9 million barrels a day reached last October. Before that, growth in Russia’s output had steadily slowed, suggesting that the drop is not a blip. Leonid Fedun, a vice president of Lukoil, a local oil firm, said Russia’s production never will top 10 million barrels daily. The discovery that Russia no longer can be relied upon to cater to the world’s ever-increasing appetite for oil is naturally helping to propel prices to record levels. 73

Oil and gas have been the foundation of the regime of Vladimir Putin, Russia’s outgoing president, and are also a preoccupation of his successor, Dmitry Medvedev, who was chairman of Gazprom, the state-controlled gas giant. The flow of petrodollars has created a sense of stability, masked economic woes and given Russia more clout on the world stage. Yet the malaise afflicting its most important industry is almost entirely man-made.

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Rising To Challenges

I am glad to say that I regard much of this gloom and doom as vastly overdone. But we should it that, in the first decade of the 21st Century, those of us who work in the energy industry are at the very centre of the challenges which the world faces. It is not a comfortable position. Yet we should rise to those challenges wisely, confidently and rationally.

We should what our purpose is, and has always been: to ensure the efficient development of the world’s oil and gas resources and, through that, to ensure that the demands of consumers – the people of the world – are met. And we have a moral duty to act in sustainable manner. We must fulfil our purpose in ways that minimize the environmental impact, not only of our own operations, but of the customers who use our products.

It is worth examining some of the origins of this insecurity. Only then can we be clear about what actions are required. I think there are four sources:

1. The Oil Price As the price has quadrupled in the last seven years, so people have come to suspect that there is a global shortage of oil and gas. 75

In the industry we tend to dismiss that concern since most of us believe strongly that there are very large oil and gas resources remaining in the world. We know, from our own experience and own observations – and I speak as a geologist as well as someone who was, for nearly five years, head of exploration and production at BP - that there are major basins as yet unexplored; we know that we have, or can develop, the technology to double the average oil recovery rates from existing fields; we know that there are enormous resources of so-called unconventional oil and gas in heavy oil accumulations, in shale oil, in tight gas, in coal bed methane – the list goes on.

But, for the consumer concerned with high energy bills, the price of oil is a powerful, everyday symbol.

The reality, of course, is that in the oil market, what goes on above ground is as important as what goes on underground. The oil price is an economic function of supply and demand and, for the most part, it is driven by the current available production capacity and not complicated projections of future resources.

Today’s high price is caused by the inability of the industry to easily supply rising demand. This is not because of a lack of available resources, but because of inadequate investment in both production and complex refining capacity. That lack of investment happened gradually over many years, not least during the euphoria of the new Millennium. We just did not predict how fast demand would take off. 2. Source Of Insecurity Is Political Instability In The Producing Nations The absence of excess capacity in the global supply system stems from underinvestment forcing more reliance on suppliers in countries which are frequently politically unstable. Instability in Iraq, Venezuela and Nigeria, and the apparent use of oil as a lever of political influence in Russia and the Middle East all

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contribute to a feeling of imminent threat. Will the lights suddenly go out? I don’t believe so.

But the feeling is there. Many consumer countries have consequently turned inwards in an attempt to counter these threats by exploiting internal resources. Others, such as China, have embarked on a process of buying up resources overseas. The world seems to be forgetting Churchill’s adage that, in energy, the best security comes from diversity of supply and a well-functioning, competitive market, rather than a scramble for unilateral deals between countries.

3. Energy Industry Has Failed To Live Up To Its Promises. For many years, we have, as an industry, over-promised and under-delivered in of production. We have made predictions of production growth from the nonOPEC world that have not come to fruition as quickly as hoped. We can all list many reasons for this, such as project complexity, or the extreme technological challenges of operating in deep water, to name two. Many of these problems are political, caused by bureaucracy and corruption, civil strife and war, or changing fiscal and regulatory regimes creating uncertainty. We also told our customers not to worry about future supply and in so doing inadvertently discouraged OPEC to invest in new capacity by predicting strong growth outside of OPEC.

4. Growing Concern For The Environment Fears about climate change and its consequences are, in my view both well-founded and are contributing to perhaps the fastest growing international political movements in my lifetime on a par with the civil rights movement in the US in the 1960s. Many people throughout the world fear that there is an insoluble conflict 77

between the need for energy for the basic things of life – such as heat, light and mobility – and the threat of climate change. They believe they are faced with the choice between two equally unpalatable outcomes – limiting economic growth and prosperity, or ruining the planet. This is a daunting list of issues and concerns. It is particularly daunting for the energy industry because we find ourselves caught in the eye of the storm.

Promoting Energy Efficiency We must also lead the way towards the gradual substitution of oil-based fuels in an orderly and planned fashion. We must work closely with the great emerging economies, by allowing them to make the most of their indigenous resources, building their confidence that the global market can fulfil their needs and encouraging the adoption of new technology. And we must continue to lead by example in promoting energy efficiency and the transition to reduced carbon emissions throughout the world.

In summary, when it comes to dealing in a timely and practical manner with the great insecurities of the early 21st century, the energy industry is not just part of the solution, it is the solution. In that respect, we are providing a great service to the world. Through the development of technology, through long term investment and risk taking, through the application of knowledge and by acting as a catalyst for cooperation between producers and consumers, we are making enormous contributions to human progress. I believe that is something to be proud of. 78

DUBAI HISTORY The modern emirate of Dubai was created with the formation of the United Arab Emirates in 1971. However, written s documenting the existence of the city have existed at least 150 years prior to the formation of the UAE. Dubai shares legal, political, military and economic functions with the other emirates within a federal framework, although each emirate has jurisdiction over some functions such as civic law enforcement and provision and upkeep of local facilities. Dubai has the largest population and is the second largest emirate by area, after Abu Dhabi.[4] With Abu Dhabi, it is one of only two emirates to possess veto power over critical matters of national importance in the UAE.[5] Dubai has been ruled by the Al Maktoum dynasty since 1833. The emirates' current ruler, Mohammed bin Rashid Al Maktoum, is also the Prime Minister and Vice President of the UAE.

Revenues from petroleum and natural gas contribute less than 6% (2006)[6] of 79

Dubai's US$ 37 billion economy (2005).[7] A majority of the emirate's revenues are from the Jebel Ali free zone authority (JAFZA)[8] and, increasingly, from tourism and other service-oriented businesses. Dubai has attracted world-wide attention through innovative real estate projects [9] and sports events. This increased attention, coinciding with its emergence as a world business hub, has also highlighted human rights issues concerning its largely foreign workforce.

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Introduction to Oil Companies In UAE The oil and gas sector provides around a third of the UAE's Gross National Product, thanks to a successful programme in recent years of diversification of the economy, but remains the dominant contributor of Government revenues. The Abu Dhabi National Oil Company, ADNOC, supervises policy in Abu Dhabi, under the guidance of the Supreme Petroleum Council. Production is handled through t ventures with consortia of international companies,. ADNOC also owns, on behalf of Government, all of Abu Dhabi's gas reserves. Oil production is around 2 million barrels a day. Gas is increasingly important, both for export, and for meeting local demand, from domestic and industrial consumers and from power generation and water desalination plants. Dubai produces around 240,000 barrels a day of oil and substantial quantities of gas from offshore fields, with a major condensate field onshore, while Saharjah has smaller oil and gas fields. On the East Coast, Fujairah is the third largest bunkering port in the world, although all of the fuel is imported. Downstream development of refineries, petrochemical 81

plants and other related industries is increasingly creating an integrated oil and gas sector, equivalent to that of industrialized nations. Oil and gas production has been the mainstay of the economy in the UAE and will remain a major revenue earner long into the future, due to the vast hydrocarbon reserves at the country’s disposal. Proven recoverable oil reserves are currently put at 98.2 billion barrels or 9.5 percent of the global crude oil proven reserves. As for natural gas, the proven recoverable reserves are estimated currently at 5.8 billion cubic meters or 4 percent of the world total. This means that the UAE possesses the third largest natural gas reserves in the region and the fourth largest in the world. At the current rate of utilization, and excluding any new discoveries, these reserves will last for over 150 years. The UA E ’s oil production is limited by quotas agreed within the framework of OPE C to 2 million barrels per day (mbd). Production capacity, however, will rise to around 3 mbd in the year 2000. There are plans to boost that level to 3.6 mbd in the year 2005 and 4 mbd in the year 2010. Gas production is being expanded to meet a forecast doubling of demand to 3.7 billion cubic feet per day (bn cfd) by the year 2000. Domestic demand is expected to increase from 813 million cubic feet per day (mn cfd) in 1996 to 1.137 bn cfd by the year 2000, while gas used for reinjection is projected to double to 1.8 bn cfd. The value of oil exports dropped from Dh 49.1 billion in 1997 to Dh 35.7 billion in 1998 (-27.3 per cent) due to the deterioration in oil prices which fell by 34 per cent during 1998 compared with 1997 levels, to reach US $12.4 a barrel. The value of liquefied gas exports also dropped from Dh 8.5 billion in 1997 to Dh 6.5 billion in 1998, due to the fall in its prices which are closely linked with oil prices and owing to the fact that the value of gas exports in 1997 included a one-time payment of Dh 1.5 billion made to ADGAS by its main importer Tokyo Electricity Power Company. The UAE exports 62 per cent of its crude oil to Japan making it the UAE’s largest 82

customer. Gas exports are almost entirely to Japan, the world's largest buyer of liquefied gas, with the UAE supplying almost one-eighth of Japan's entire requirements. International Markets The UAE plays a vital role in achieving stability in international oil markets through its positive and balanced attitude within OPEC. The UAE participated in two production cuts in 1998 and also played an important role in the agreement adopted by OPEC member states in March 1999 to reduce production by 1.7 mbd. The UAE agreed to reduce its production by 157,000 bd to a low of 2 mbd. By early September 1999 international benchmark Brent crude oil was trading at a new high of US $21.03 per barrel. Oil prices were expected to continue rising in the fourth quarter of 1999 when winter weather in the western hemisphere is expected to increase demand. The UAE welcomed a proposal to hold an OPEC summit meeting in Venezuela in late 1999 or the year 2000 in order to reinforce rationalization of the world supply of oil.

Abu Dhabi Abu Dhabi is by far the biggest oil producer in the UAE, controlling more than 85 percent of the UAE’s total oil output capacity and over 90 percent of its crude reserves. Principal offshore oil fields are Umm Shaif, Lower Zakum, Upper Zakum, Al Bunduq and Abu al-Bukhoosh. The main onshore fields are 83

Asab, Bab, Bu Hasa, Sahil and Shah. Almost 92 per cent of the country's gas reserves are also located in Abu Dhabi and the Khuff reservoir beneath the oil fields of Umm Shaif and Abu al-Bukhoosh ranks among the largest single gas reservoirs in the world. Abu Dhabi National Oil Company (ADNOC) Oil companies from Japan, , Britain and other countries own up to 40 percent of the energy sector in Abu Dhabi, the only Gulf oil producer to have retained foreign partners on a production-sharing basis. More than half of Abu Dhabi’s oil production is generated by the Abu Dhabi Company for Onshore Operations (ADCO), one of the 10 largest oil companies worldwide and the largest crude oil producer in the southern Arabian Gulf. The second main producer is Abu Dhabi Marine Operating Company (A-OPCO). The output of oil and gas from A-OPCO fields is transported to its center of operations on Das Island for processing, storage and export. Both ADCO and A-OPCO are part of the Abu Dhabi National Oil Company (ADNOC) group of companies. ADNOC, established in 1971, is a fully owned government company controlled and supervised by the Supreme Petroleum Council (SPC), which is responsible for formulating Abu Dhabi petroleum policy and overseeing the emirate’s oil and gas operations and related industry.

ADNOC Group of Companies In addition to its own concession areas and operations ADNOC has major shareholdings in 15 ventures forming the ADNOC group. These include the 84

three main oil and gas operating companies (ADCO, A-OPCO and ZADCO), five companies providing services to the oil and gas industry, two natural gas processing companies (GASCO, ADGAS), two maritime transport companies for crude oil, refined products and LNG (ADNATCO, NGSCO), a refined product distribution company (ADNOC-FOD) and two chemical and petrochemical companies (FERTIL, BOROUGE). ADNOC also owns and operates two refineries at Umm al-Nar and Ruwais, the gas treatment plants at Habshan, gas pipeline distribution network and the chlorine industries at Umm al-Nar. ADNOC Restructuring ADNOC announced a major management restructuring plan in November 1998 shifting the firm's refinery and gas operations to two new wholly-owned subsidiaries and bringing the number of subsidiaries up to 17. The two new ADNOC companies, Abu Dhabi Oil Refining Company (TAKREER) and the Abu Dhabi Gas Company (ATHEER), were formally established on 19 June 1999. Along with the creation of refinery and gas subsidiaries the company has set up five business line directorates (BLDs) to carry out upstream and down stream activities. Another three directorates will provide services for various operations. The new management structure also creates an executive committee, chaired by a chief executive officer, to oversee the company's businesses.

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Dolphin Project The Dolphin project was launched in March 1999 following an announcement by the UAE and Qatar of plans for a t venture aimed at transporting gas from Qatar's huge reserves to industrial consumers in the UAE, Oman and other countries. Dolphin, which is being developed under the auspices of the UAE Offset Group (UOG), is intended to provide a framework to stimulate investment in a variety of related industries throughout the value-added gas chain. (For more information see section on Business Environment). Economic forecasters predict that the UAE's demand for gas will double over the next decade. Dubai s Dolphin The Dubai Government also ed the multi-billion dollar Dolphin initiative with the g of a memorandum with the UOG where by the Dubai Supply Authority (DSA) agreed to purchase its requirements for Qatari gas from Dolphin. Under the of the agreement, Dubai plans to purchase gas in the amount of 200–700 mn cfd. The Dubai Government and the UOG also agreed to cooperate in identifying and maximizing opportunities for investment arising out of the supply of gas. The Dolphin gas will bridge the gap between energy supply and demand which will develop over the next five years as Dubai’s economy expands.

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Dubai Dubai’s oil reserves have reduced over the past decade and are now expected to be exhausted within 20 years. The main fields are offshore: Fateh, Southwest Fateh and two smaller fields, Falah and Rashid. The only onshore deposit is the Margham field. Dubai Petroleum Company (DPC) is the main operator. Dubai has a 2 per cent share of the UAE's gas reserves. Dubai’s Margham gas/condensate field can deliver up to 140 mn cfd for domestic use and offshore fields can provide another 100 mn cfd. Sharjah also supplies Dubai with 430 mn cfd through a pipeline installed in 1992. The state-owned Dubai Natural Gas Company (DUGAS) is responsible for processing natural gas produced in Dubai’s offshore oil fields as well as the gas piped from Sharjah.

Sharjah Sharjah owns 5 percent of the UAE's gas reserves, mostly non-associated gas which is being utilised domestically. The emirate’s most important gas deposits are at the offshore Mubarak field and the onshore Saja’a, Move yeid and Kahaif fields. Gas reserves are estimated at 10,000 billion cubic meters and around 800 mn cfd of gas are produced. Sharjah’s offshore Mubarak field, operated by the local Crescent Petroleum Company, produces around 30,000 bd of condensate. In July 1999 Crescent Petroleum began drilling Sharjah-2 some 30 kilometers offshore of Sharjah where gas has already been discovered. The site is located 800 meters from the Sharjah-1 well. Any gas finds are expected to contain valuable liquid condensates. Crescent operates the concession area along with London-based Atlantis. Crescent – Atlantis also announced in July that they were about to begin major seismic 87

work in the gas-proven areas of Sharjah's interior desert and this would be followed by drilling. The onshore Sajaa and Moveyeid fields, operated by BP– AMOCO, produce 35,000 bd of condensate in addition to natural gas.

Sharjah Natural Gas Project The Sharjah Liquefied Gas Company (SHALCO) was formed to increase exports of liquefied natural gas (LNG). The first phase of a Dh 300 million project to supply natural gas to residences, commercial and industrial premises in Sharjah was officially inaugurated in March 1999. Natural gas was supplied to buildings in Abu Shaghara in Sharjah marking the beginning of Phase I which is due for completion in May 2000. A 172 - kilometers network of pipes, three pumping stations and the internal connections for a total of 25,000 domestic, commercial and industrial consumers will be completed in the first phase. Phase II is due to supply the remainder of the city of Sharjah. Ras Al-Khaimah Ras al-Khaimah's reserves are estimated at 400 million barrels of oil and condensate and 1,200 bn cfd of natural gas. In September 1997, Ras alKhaimah awarded Norway’s Atlantis Technology Services and Petroleum Geo Services a permit to explore the offshore Baih field. The Ras al-Khaimah Oil and Gas Company, set up in 1996, has exclusive hydrocarbon rights to the rest of the emirate. Refineries In the UAE there are six refineries operational at present and the existing refining capacity in the region is estimated to be around 800,000 tones. Development of downstream industries such as refineries and petrochemical 88

plants is a central part of UAE efforts to move away from crude oil exports. Major plans are under way to construct new refineries and increase the capacity of existing ones in order to attain production of 180,000 bd by the year 2000. Abu Dhabi is presently in the middle of a five - year (1997–2002) development project aimed at boosting refining capacity. ADNOC’s US $600 million Ruwais refinery upgrading project is just one of the many down stream projects that are included in the programme. Others include a 35,000 bd refinery plant in Fujairah and the Dh 600 million Sharjah re finery at Hamriyyah Free Zone, which commenced operations in mid-1999.

List of Oil and Gas Companies in Dubai Dragon Oil - is an independent oil development and production company Lamprell Energy Ltd - development of the offshore industry in the Arabian Gulf Likpin LLC - turnkey offshore pipelay, marine construction, services, vessel and project management for the offshore oil and gas industry RTE Group - Drilling Fluids bentonite barite lime mica starch sodium chloride Specialist Services - one of the foremost engineering and fabrication companies in the United Arab Emirates

89

Major Oil Companies operating in UAE:

State Companies: Abu Dhabi National Oil Company (ADNOC) has controlling interest in 21 domestic oil and natural gas companies. t Ventures: Abu Dhabi Co. for Onshore Oil Operations (ADCO) is held by ADNOC (60%) and a consortium comprising British Petroleum (BP) (9.5%), Shell (9.5%), Total (9.5%), Exxon (4.75%), Mobil (4.75%), and Partex (2%). Abu Dhabi Marine Operating Company (AOPCO) is held by ADNOC (60%) and a consortium comprising BP (14.7%), Total (13.3%), and Japan's Jodco (12%). Zakum Development Company (ZADCO) is operated by ADNOC (88%) and a consortium (12%) comprising BP, Jodco, and Total Original Concession Holders: Union Oil Co., venture of Union Oil Co. and Southern Natural Gas Co. Abu Dhabi Marine Areas Ltd., BP, CFP, Continental Dubai Marine Areas Ltd., Continental Oil, BP, CFP, Deutche Erdol AG, Sun Oil Co. 90

Phillips-AGIP-Aminoil, t venture of Phillips, AGIP, and Aminoil

Major Foreign Oil Company Involvement: BP Caltex Petroleum Corp., Miutsui & Co. Ltd. Parrex Pennzoil

Petroleum Crude Oil & Fuel in UAE

1

Abu Dhabi National Oil Company (ADNOC)

State-owned oil company with subsidiaries in exploration and production, services to oil and gas industry, oil refining and gas processing, chemicals and petrochemicals, maritime transportation and refined products and distribution Petroleum

91

2

Abu Dhabi Oil Refining Company (Takreer)

Abu Dhabi-based company engaged in the refining of crude oil and condensate, supply of petroleum products and production of granulated sulphur; runs the Ruwais and Umm al Nar refineries Petroleum

3

Adnoc Distribution Home Page

Company engaged in the marketing and distribution of petroleum products in the emirate of Abu Dhabi; also produces and markets specialised lubricants such as engine oils, gear oils, transmission fluids, brake fluids, etc Petroleum Lubricants

4

Emirates National Oil Company ( ENOC )

Company in Dubai engaged in refining and marketing of oil, supply of jet fuel and aviation fuelling services, manufacture of chemicals and lubricants, LPG, etc. Petroleum Gas Chemicals Lubricants

5

Emirates Petroleum Products Company ( EPPCO )

Business group with interests in lubricants, supply of marine bunker fuels, supply of jet fuel, commercial sales, procurement, storage of refined petroleum products, and retail sales through petrol service stations Petroleum .

6

FAL Group of Companies 92

Business group based in Sharjah engaged in the trading of oil products (marine gas oil, marine diesel oil, blending products, etc), shipping, supply of lubricants; a refinery is also under construction in Sharjah Petroleum Shipping Companies Lubricants

7

Ghayasiban Group

Business group based in Dubai & Lucknow (India); activities include software development, industrial measurement & control instrumentation, petroleum trading, a college in Lucknow, & a bank Business Groups Instrumentation Petroleum Software Firms

8

Gulf Oil & Gas

Portal and e-marketplace for the Middle East and Africa oil and gas marketplace; site contains a wealth of detail about companies providing products and services for the oil and gas industry, searchable by country and product category Petroleum

9

Gulf Oilfield Directory

Annual publication of companies in the oil and gas industries; online searchable version available; published by Arabian Publications, a company incorporated in the British Virgin Islands Petroleum 93

10

Pipeline Magazine

Magazine on the oil and energy industry; circulated across the Arab world; web site has samples of articles from the magazine and subscription details

Oil companies struggling to keep on top of emerging Threats Less than 10 percent of national oil company (NOC) leaders surveyed by Marsh Inc. strongly feel they have a full understanding of the risks they face – and how to effectively manage them. This finding was contained in a new study released recently by Marsh examining

risks

and

operational

challenges

among

state-owned

oil

enterprises. Marsh gathered much of the data from a recent groundbreaking global risk advisory meeting held in Dubai and attended by approximately 250 leaders from NOCs, government and academia. ‘The Impact of Risk on National Oil Companies’ also reveals a strong desire by NOC leaders to understand risk better and find better ways to share related best practices. More than 90 percent of the NOC leaders Marsh polled agreed that more discussion forums were needed. “The spectrum of risk that business leaders face today is far more complex than ever before,” said Brian Storms, chairman and CEO of Marsh. “Not too long ago, the top concern for an NOC might have been a fire at a refinery. But the study we conducted at the Marsh National Oil Companies Conference 94

in Dubai shows that newer risks – such as the impact of climate change – are moving near the top of the list.”

Insurer warns oil companies about Renewable Energy Renewable energy sources were called "a growing risk" at a gathering of oil executives today in Dubai.

As renewable energy rises in importance, it poses a threat to oil companies. “The world’s desire for environmentally-friendly energy sources appears to be rising faster than global temperatures. This is a growing risk to all energy producers – one that goes well beyond a fire at a plant, or a tanker that runs aground. What’s important for you as large producers of hydrocarbons is to view this risk honestly and address it strategically," said Brian Storms, Chairman and CEO of Marsh Inc., at the opening of the Marsh National Oil Company conference in Dubai. “The normal tendency would be a bias for action, where you might jump to a tactical, defensive position. But there is a ‘new world’ view of risk – specifically, how to find opportunity in the kind of global changes we’re seeing… where risks and potential liabilities can be turned into a competitive advantage over those companies that don’t move to address them.” With many facilities situated either on areas of permafrost or in proximity to the arctic ice shelf, a potential thawing induced by climate change would 95

present significant risk. Understanding this risk and prioritizing its potential impact allowed the client to take measures to address it. Storms also cited other potential risks faced by national oil companies, including terrorist acts, the effects of a major natural disaster on production, the concentration of supply chains – especially due to the threat of avian flu and other risks. "The world is beginning to become more concerned about climate change. It would be prudent for all energy producers, not just oil companies, to understand their footprints in the world, and that there will be more constituent groups that will produce more challenges than the past."

Price Of Oil - Drawing The Line Last summer, when the price of oil was bouncing off the rev limiter and a gallon of regular was putting $4-plus holes in our wallets, we wondered if it would continue, and what we would do if it did. The slide in oil prices has been the best news that consumers have gotten all year. But will low fuel prices continue? Just a few months after the near-$150 high, the price of a barrel of crude oil plummeted 70 percent, to about $40. It turns out that this upside has more than a little downside, and it may mean bad news in the future. Last summer's high prices were a result of a complex series of events-a "perfect storm" involving speculation in the oil markets, high demand for oil products, the peaking or near-peaking of production volumes, the incipient financial crisis, etc. But at least we now have a pretty good explanation for what went on in the price increase. The problem is that no oil producer is making money at $40 per barrel. We've heard estimates that the break-even point is now $60 to $80 per barrel, so producers are hurting. Why doesn't a producer simply stop producing if it loses money on every barrel? That question is answered when you realize that most of our oil now comes from national entities (Saudi Arabia, Venezuela, Iran, etc.) rather than companies like Exxon or Shell. 96

These countries do indeed work with companies, but the basic decisions there are governmental. These governments are dependent on oil revenue for infrastructure, social programs, military spending and all the rest. For them, if revenue stops, the government stops.

The OPEC nations want the oil price to climb to at least $70 per barrel, and to help make that happen they've agreed to cut production by about 4.3 million barrels per day. Total world production is now about 85 million barrels per day, so the OPEC cuts represent about 5 percent of the total. The result should be a boost in oil prices, but it hasn't worked-at least not yet. Part of the problem is that while the nations may agree, they may not cut as much as promised to avoid a drop in revenue.

More drastic cuts in production might do the trick, but no one knows the "tipping point" at which a large reduction in supply might lead to a rapid price increase like last summer, and those kinds of prices might hurt everyone by making the worldwide recession worse.

The $40-per-barrel price is hurting oil companies and oil nations around the world. You heard the mantra "drill, drill, drill" last summer, but something like $100 billion in new oil-industry projects have been cancelled since the fall in prices, and oil rigs, infrastructure and equipment are idle or not being maintained. Alternative energy projects have also taken a hit, as their worth is compared to the price of oil, and if oil is cheap, why seek alternatives? Some of the most negative voices are coming from old hands in the oil patch, and it's not just because of the current price. The industry's infrastructure is made predominantly of steel, and many of the rigs, platforms, pipelines and refineries that were new 40 or 50 years ago are rusting and not being renewed. The industry also has depended on a generation of workers who are not only aging, but are too often not being replaced. 97

If demand for oil increases once again as economic recovery begins, where will the necessary increase in supply come from? Are we, as many analysts believe, at or beyond the all-time peak of production? Oil at $40 per barreland the financial crisis-has left us a weaker oil industry. And, ironically, a weaker alternative-energy industry, at a time when we need both to stabilize future energy resources. If we see serious shortages, prices will spike. Let's hope it's not the making of another perfect storm.

Rising Oil Keeps Companies on Their Toes

98

Just when companies were getting used to cheap oil, crude prices have recently started climbing again, keeping businesses jittery and alert in case last year's record levels are repeated or prices spiral out of control. Nouriel Roubini, the well-known New York University professor who predicted the financial crisis, thinks that crude, which currently hovers above $70 a barrel, may rise to $100 next year. A Seoul financier predicts a rise, partly because of the weakening trend of the greenback and the financial constraints oil producers have found themselves in.

The three-digit-mark may seem like a long way off, but the International Energy Agency's newly revised forecast adds to the outlook that prices won't go back to figures seen earlier this year. 99

Crude traded as low as $30 a barrel earlier, a steep crash after it neared $150 a barrel in the summer of 2008. The agency projected Thursday that 2009 oil demand would go up on signs the recession is bottoming out, which fueled trading to spike to a seven-month high on the same day. West Texas Intermediate crude for July delivery broke the $70 threshold to nearly $73 on the New York Mercantile Exchange, while benchmark Dubai crude, Korea's main import, hit a new high for the first time since last October. What does all this mean for companies? Anxiety and a rush of worry ― no matter the industry. ``Oil prices affect everything, from manufacturing and packaging to transporting, no industry is insulated,'' said Lee Dal-suk, a senior analyst at the Korea Energy Economics Institute, a state-run think tank.

100

Indian Oil Corporation Ltd in India =========================== ==== Oil & Gas Industry in India The origin of oil & gas industry in India can be traced back to 1867 when oil was struck at Makum near Margherita in Assam. At the time of Independence in 1947, the Oil & Gas industry was controlled by international companies. India's domestic oil production was just 250,000 tonnes per annum and the entire production was from one state Assam.

The foundation of the Oil & Gas Industry in India was laid by the Industrial Policy Resolution, 1954, when the government announced that petroleum would be the core sector industry. In pursuance of the Industrial Policy Resolution, 1954, Government-owned National Oil Companies ONGC (Oil & Natural Gas Commission), IOC (Indian Oil Corporation), and OIL (Oil India Ltd.) were formed. ONGC was formed as a Directorate in 1955, and became a Commission in 1956. In 1958, Indian Refineries Ltd, a government company was set up. In 1959, for marketing of petroleum products, the government set up another company called Indian Refineries Ltd. In 1964, Indian Refineries Ltd was merged with Indian Oil Company Ltd. to form Indian Oil CorporationLtd.

During 1960s, a number of oil and gas-bearing structures were discovered by ONGC in Gujarat and Assam. Discovery of oil in significant quantities in Bombay High in February, 1974 opened up new avenues of oil exploration in offshore areas. During 1970s and till mid 1980s exploratory efforts by ONGC and OIL India yielded discoveries of oil and gas in a number of structures in Bassein, Tapti, KrishnaGodavari-Cauvery basins, Cachar (Assam), Nagaland, and Tripura. In 1984-85, India achieved a self-sufficiency level of 70% in petroleum products. In 1984, Gas Authority of India Ltd. (GAIL) was set up to look after transportation, processing and marketing of natural gas and natural gas liquids. GAIL has been instrumental in the laying of a 1700 km-long gas pipeline (HBJ pipeline) from Hazira in Gujarat to Jagdishpur in Uttar Pradesh,

ing through Rajasthan and Madhya Pradesh.

101

After Independence, India also made significant additions to its refining capacity. In the first decade after independence, three coastal refineries were established by multinational oil companies operating in India at that time. These included refineries by Burma Shell, and Esso Stanvac at Mumbai, and by Caltex at Visakhapatnam. Today, there are a total of 18 refineries in the country comprising 17 in the Public Sector, one in the private sector. The 17 Public sector refineries are located at Guwahati, Barauni, Koyali, Haldia, Mathura, Digboi, Panipat, Vishakapatnam, Chennai, Nagapatinam, Kochi, Bongaigaon, Numaligarh, Mangalore, Tatipaka, and two refineries in Mumbai. The private sector refinery built by Reliance Petroleum Ltd is in Jamnagar. It is the biggest oil refinery in Asia.

By the end of 1980s, the petroleum sector was in the doldrums. Oil production had begun to decline whereas there was a steady increase in consumption and domestic oil production was able to meet only about 35% of the domestic requirement. The situation was further compounded by the resource crunch in early 1990s. The Government had no money for the development of some of the then newly discovered fields (Gandhar, Heera Phase-II and III, Neelam, Ravva, Panna, Mukta, Tapti, Lakwa Phase-II, Geleki, Bombay High Final Development schemes etc. This forced the Government to go for the petroleum sector reforms which had become inevitable if India had to attract funds and technology from abroad into the petroleum sector. The government in order to increase exploration activity, approved the New Exploration Licensing Policy (NELP) in March 1997 to ensure level playing field in the upstream sector between private and public sector companies in all fiscal, financial and contractual matters.

To meet its growing petroleum demand, India is investing heavily in oil fields abroad. India's state-owned oil firms already have stakes in oil and gas fields in Russia, Sudan, Iraq, Libya, Egypt, Qatar, Ivory Coast, Australia, Vietnam and Myanmar. Oil and Gas Industry has a vital role to play in India's energy security and if India has to sustain its high economic growth rate.

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Oil Companies In India Bharat Petroleum Corporation Limited Bharat Petroleum Corporation Limited continues to meet the challenges of rapidly changing technology in the Indian Petroleum Industry. IBP IBP was established in the year 1909 in Rangoon. IBP is now part of the prestegious Indian Oil Corporation Group. Indian Oil is India's flagship Oil Company with nine refineries, over 6500 kms of cross country pipelines and 186 bulk storage depots and terminals. Indian Oil Corporation Limited Indian Oil Corporation Ltd. (IndianOil) was formed in 1964 through the merger of Indian Oil Company Ltd. (Estd. 1959) and Indian Refineries Ltd. (Estd. 1958). It is also the 19th largest petroleum company in the world. IndianOil has also been adjudged No.1 in petroleum trading among the national oil companies in the Asia-Pacific region. Oil and Natural Gas Corporation Ltd. ONGC ended the sectoral regime in the Indian hydrocarbon industry and benchmarked the globally- established integrated business model; it took up 71.6 per cent equity in the Mangalore Refinery & Petrochemicals Limited. Shell in India Shell businesses exist to meet the energy needs of society in ways that are economically, socially and environmentally viable, now and in future. All of our businesses are united by common goals; to make the most of our existing business; to gain new business and to break new ground. 103

List of Subsea Oil and Gas Companies in India

Aban Offshore Limited - a leading name in offshore drilling services Aeromarine - offshore supplier,ship chandler,ship repairs,dealers @ exporters of ship spares & aids to marine navigation Alfa Pumps & Systems - offers heavy-duty gear pumps Bharat Petroleum - Refining, Storing, Marketing and distributing petroleum products Cairn India - largest producing oil field in the Indian private sector Essar Oil - operates a fully integrated oil company of international size and scale in India. Great Offshore - integrated offshore oilfield services provider GSPC Gujarat State Petroleum Corporation - vertically integrated energy company across India and overseas Gumpro Chem Drilling Fluids - offers a complete range of drilling fluid additives like Specialized Lubricants, Stuck Breakers, loss Circulation material Dispersants, Guru Industrial Valves Pvt. Ltd. - one of the pioneers in the world of Valves and Pipe fittings Hindustan Petroleum - major integrated oil refining and marketing companies in 104

India Indian Oil Corp - major diversified, transnational, integrated energy company Indiana Gratings Pvt. Ltd. - design, manufacture, supply and erection of gratings all over the world. Jagson International Limited (JIL) - offshore drilling in the Indian waters

Jindal Drilling & Industries ltd - deep ocean well drilling engineering and more Kavin Engineering and Services Private Ltd - Process, mechanical, instrumentation, piping and structural engineering for oil and gas production and processing facilities. M/S Kunj Forgings P LTD - manufacturer of pipeline ries such as forged & casted valves & forged flanges Orion Instruments - manufacturers of pressure switches Parveen Industries Pvt. Ltd - manufacture metallic conduits of electric cables Petrodril - providing professional services, technical and corporate, to the petroleum and other energy related business.

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HALDIA INTRODUCTION OF OIL COMPANIES IN HALDIA

Haldia Refinery (Near Kolkata, West Bengal) Haldia Refinery, one of the seven operating refineries of IndianOil, was commissioned in January 1975. It is situated 136 km downstream of Kolkata in the district of Purba Medinipur, West Bengal, near the confluence of river Hoogly and Haldi.

From an original crude oil

processing capacity of 2.5 MMTPA, the refinery is operating at a capacity of 5.8 MMTPA at present. Capacity of the refinery was increased to 2.75 MMTPA through de-bottlenecking in 1989-90. Refining capacity was further

increased

to

3.75

MMTPA

in

1997

with

the

installation/commissioning of second Crude Distillation Unit of 1.0 MMTPA capacity. Petroleum products from this refinery are supplied mainly to eastern India through two product pipelines as well as through barges, tank wagons and tank trucks. Products like MS, HSD and Bitumen are exported from this refinery. Haldia Refinery is the only coastal refinery of the corporation and the lone lube flagship, apart from being the sole producer of Jute Batching Oil. Diesel Hydro Desulphurisation (DHDS) Unit 106

was commissioned in 1999, for production of low Sulphur content (0.25% wt) High Speed Diesel (HSD). With augmentation of this unit, refinery is producing BS-II and Euro-III equivalent HSD (part quantity) at present. Resid Fluidised Catalytic Cracking Unit (RFCCU) was commissioned in 2001 in order to increase the distillate yield of the refinery as well as to meet the growing demand of LPG, MS and HSD. Refinery also produces eco friendly Bitumen emulsion and Microcrystalline Wax. A Catalytic Dewaxing Unit (CIDWU) was installed and commissioned in the year 2003 for production of high quality Lube Oil Base Stocks (LOBS), meeting the API Gr-II standard of LOBS. In order to meet the Euro-III fuel quality standards, the MS Quality Improvement Project has been commissioned in 2005 for production of Euro-III equivalent MS. The refinery expansion to 7.5 MMTPA as well as a Hydrocracker project has been approved, commissioning of which shall enable Haldia Refinery to supply Euro-IV and Euro – III HSD to the eastern region of India.

IOC puts on hold its Haldia Refinery Plan Indian Oil Corporation (IOC), the country’s largest oil marketing company, has put on hold its plan to set up a 15-million tonne refinery at Haldia due to the economic downturn. IOC was supposed to rope in an international partner for the project. “The project has been put on hold because of the financial turmoil and no progress has been made,” said an IOC executive. Now, it may be difficult for IOC to find an international company for such a large complex, said an industry expert. IOC and the West Bengal government were to tly explore the possibility of roping in an internationally-reputed multinational company as a partner. IOC along with this international partner was supposed to carry out a techno-economic 107

feasibility study for the project. The study has not yet been conducted in the absence of such a partner. In September 2006, IOC had signed a memorandum of agreement (MoA) with the West Bengal government to develop Haldia as a Petroleum, Chemicals and Petrochemicals Investment Region (PIR). The agreement envisaged setting up of a refinery of 15-million tonne capacity with downstream petrochemical facilities. IOC already operates a 6-million tonne refinery at Haldia, which is being expanded to 7.5 million tonnes. IOC is not the only company that has put on hold its expansion plan. Last week, Mangalore Refinery and Petrochemicals, a subsidiary of Oil and Natural Gas Corporation (ONGC) said it has shelved its plan to build a 15-million tonne refinery.

Analysts say the economic downturn is not the only reason behind putting such plans on hold. Such decisions are also being influenced by the increasing surplus refining capacity in the country. India has surplus refining capacity of nearly 45 million tonnes, which is set to increase further.

IOC stops supplies as Haldia Cheque Bounces

The crisis being faced by haldia petrochemicals ltd deepened further with indian oil deciding to stop naphtha supplies after a rs 21 crore cheque issued by the former bounced on friday. this is the second time that cheques to the oil major issued by the rs 5,300 crore t venture between the west bengal government, the tatas and the purnendu chatterjee group have bounced. "some consignments are on way so we can't do anything about them. but after that we are stopping supplies till 108

payments are cleared," a top ioc official said. the official also expressed unhappiness over the post-dated cheque payment system in the commercial pact with hpl. two of hpl's cheques issued to ioc for rs 17.33 crore and rs 20.38 crore had bounced last month. subsequently, hpl revalidated them but requested ioc to delay encashment siting poor sales. hpl also has a 60-day breather for payments. the company doesn't have to pay interest for the first 30 days. hpl has been facing problems for sometime now, with the tatas seeking an exit. the latest incident may put off ioc which has shown willingness to take up to 26 per cent equity provided it gets the management control. it also envisages restructuring the existing equity share capital of the company and significant reduction in the stakes of the existing promoters. ioc has also been willing to contribute fresh equity share capital of rs 468 crore to acquire a 26 per cent stake in hpl, proposed to be made at par.

Paradip-Haldia Crude Pipeline to be ready Soon After a delay of more than a year, Indian Oil Corporation (IOC) is now poised to complete the Paradip-Haldia crude pipeline, hopefully in a month or two.

109

The project will reduce the transportation cost of crude to both Haldia and Barauni refineries in West Bengal and Bihar respectively. The Rs 1,178-crore project - including single-point mooring and storage facility at sea port at Paradip in Orissa - had run into rough weather following a series of problems involving project design, environmental clearance and differences with the Iranian contractor deployed to complete the SPM and the connecting offshore pipeline. SPM project contractor According to sources, to hasten the process, the company recently replaced the SPM project contractor - Iranian Offshore Engineering and Construction Company (IOEC) - with Oil and Gas Engineering Systems of Australia. IOEC was charged with inordinately delaying completion of the project. Escalation Though the decision may lead to legal complications between IOC and IOEC, IOC is now hopeful of completing the project shortly. There are, however, chances of escalation in project cost depending upon the legal developments. "The Australian company has just set foot on the project. There is 30-35 days residual work left in regard to the offshore pipeline connecting the SPM to onshore storage facility. However, considering the heavy monsoon in the East coast, which is about to arrive, there may be some minor delay. Overall we are now hopeful to complete the project in next two months," a senior company official said.

Sub-surface pipeline

110

Meanwhile, IOC sources said Punj Llyod has helped overcome technical problems in laying the 330 km sub-surface pipeline from Paradip to Haldia crossing a number of river estuaries, including the largest and most difficult of them all - the estuary of the Mahanadi. "There were serious problems in laying the pipeline under the Mahanadi leading even to a change in design. However, the project contractor struck to work at the agreed cost," the official said, adding that the pipeline project has been completed. It is of interest to note that Iranian Offshore Engineering and Construction Company has previously faced similar charges from ONGC for a pipelinecum-platform modification project.

Indian Oil’s Pipeline Network nears 10 K Ian IndianOil, the state-owned oil marketing company will cross a pipeline network of 10,000 km before the end of calendar 2008. The company has a pipeline network of 9,700 km now and is about to operationalise its 330-km Paradip-Haldia pipeline. Requesting anonymity a source close to the development said, "We hope to reach the 10,000 mark soon considering the Paradip-Haldia crude pipeline will be commissioned before December 31." Once the company reaches this mark, its total throughput capacity will hit ,70 million tonne per annum (mtpa).

IndianOil is setting up the Paradip to Haldia pipeline to bring down the cost of transportation of crude oil to both Haldia and Barauni refineries. Currently, the crude oil 111

is being supplied from the Haldia port in small consignments. At Rs 1,420 crore, the pipeline is one of IndianOil's most ambitious projects as it is expected to facilitate further expansion of refinery capacities in the eastern region. The source said although the project was initiated in 2004, it faced delay due to initial hurdles. Later, the offshore single point mooring system faced problems. "It is now ready and the pipeline is almost in place," he said, adding that the pipeline will have a capacity of 11 mtpa. The company which had a pipeline network of 9,273 km at the start of this fiscal year, plans to add 4,000 km before the end of the current Five-Year Plan, which ends in March 2012. "We are currently working on 13 different projects with a total investment of Rs 2,500-2,600 crore. The pipelines are an integral part of these 3 projects," the source said.

The first of the projects was a small Bangalore ATF line pipeline which was commissioned in October 2008. The second was IndianOil's first LPG pipeline from Panipat to Jalandhar Spanning 275 km, it was commissioned in November. The third is the Panipat Haldia pipeline.

Indian Oil To Gain From Haldia-Paradip Pipeline Indian Oil Corporation (IOC) has decided to lay a crude pipeline between Haldia and Paradip with an annual throughput capacity of 11 million tonne (mt) at a cost of Rs 1,154 crore. 112

The move will enable the oil major to save Rs 400 crore, when compared to the cost involved for setting up a floating storage offtake (FSO) at the mouth of the Hooghly, proposed by the Kolkata Port Trust (KoPT). KoPT’s river port Haldia will, however, will lose considerable petroleum cargo. This pipeline will connect Paradip port in Orissa with IOC’s refinery at Haldia in West Bengal and further with the help of existing Haldia-Barauni pipeline, which carries crude to IOC’s Barauni refinery in Bihar.

The Haldia-Paradip pipeline project is now awaiting statutory clearances of the Union government and the governments of Orissa and West Bengal. “It will take three years to complete the pipeline project,” IOC’s chairman MS Ramachandran said here Tuesday. He was talking to reporters on the sidelines of an interactive session on ‘Oil and Gas Scenario of India with Particular Reference to Eastern India and West Bengal’ organised by the Bengal Chamber of Commerce and Industry. “The new pipeline will be the lifeline for IOC, as Haldia and Barauni refineries are incurring huge losses because of the additional cost of transporting crude through Haldia port where larger vessels cannot call in,” Mr Ramachandran said. IOC will set up a single-buoy mooring (SBM) facility off the Paradip coast to enable VLCCs or very large crude carriers to discharge their cargo. The crude will then be piped on to the Haldia and Barauni refineries.

GUJARAT 113

Introduction To Gujarat Refinery More than 25 years ago, the Government of Gujarat conceived of the formation of a petrochemical company, that has today metamorphosed into a large-scale Rs. 3900 crore energy organization, excelling in a wide gamut of hydrocarbon activities. Notwithstanding its limited role and the low key infrastructure, the organization drew inspiration from the exciting opportunities that the hydrocarbon sector offered in the wake of liberalization of Indian economy. It gradually began to expand its vision, widened the scope of its activities and rechristened itself as Gujarat State

GSPC has grown from operator ship of small fields in Gujarat into an expansive oil and gas exploration and production company across India and overseas within just a decade. The company has recently drilled its 50th onshore well, which is a landmark considering the fact that GSPC has been an Operator only since Aprill 2000. Its rise in the hydrocarbon sector was helped in no small measure by the Central Government's opening of the sector to private participation in the early 1990s.

Indian Oil Corporation Ltd in North East Region 114

(Guwahati Refinery) PROFILE OF GUWAHATI REFINERY (ASSAM) The Guwahati Refinery in North East India -- the first Public Sector refinery of the country -- was commissioned in 1962 with a capacity of 0.75 MMTPA which was subsequently increased to 1.0 MMTPA through debottlenecking projects. The refinery processes only indigenous crude oil from the Assam oil fields. With its main secondary unit, a coking unit, it produces middle distillates from heavy ends and supplies petroleum products to North-Eastern India, and surplus products onward to Siliguri in West Bengal in 2003. Hydrotreater Unit for improving the quality of diesel has been commissioned in 2002. In 2003, the refinery installed an Indmax Unit, a novel technology developed by Indian oil’s R&D Centre for upgrading heavy ends into LPG, Motor Spirit and Diesel oil.

115

INTRODUCTION TO HUMAN RESOURCE DEPARTMENT

GUWAHATI REFINERY =========================== ==== The Human Resource Department The Personnel, istration, Management Services, HRD & Training and Corporate Communication Department at Refineries are headed by ED (HR) with the following functions under his charge: 1 2

Personnel

3

istration and Welfare

4

Training and Development

5

Management Services

6

Corporate Communication

The role of the personnel department is to promote and develop cooperative attitude amongst employees and to inculcate in them a sense of belongingness to the organization culture, evolve progressive personnel policies and practices which ensures employee satisfaction, to ensure that employees can undertake skill up-gradation through appropriate training so that they feel themselves equipped to face new challenges and technologies, enhance employee participation in management and act as change agent to new interventions. Personnel management essentially being a staff functions, Personnel Department's role will be that of a staff department with emphasis on its advisory character in all matters connected with personnel activities except 116

in respect of the promotion of welfare measures which will be the executive responsibility of this Department. Personnel Department shall also be responsible for ensuring compliance with the provision of various labor laws and other statutes.

In Guwahati refinery the functions are divided amongst two senior human resource managers (SHRM). Each SHRM appoints deputy manager to subdivide their functions. SHRM also appoints Senior istrative officers (SAO) to take care of the istrative functions. The organogram of Guwahati refinery’s HR department is given in the next page. Functions of SHRM: They have to look after employee relations which includes looking after facilities like medical facilities, wages, incentives that are being provided to the employees or not. They mainly direct their Deputy Managers to look after these aspects. SHRM is also in charge of looking after the contract labor related issues. They do this by giving approval to the entry and exit of contract labor during the contract period after the initial verification is done by employee relations officer. The SHRM also has to look after various legal activities like land and estate matters as and when arise. SHRM looks after the time office matters like entry and exit of employees and also a very important function that is wage istration. Functions of Deputy Managers: They perform the functions of approving land and estate matters, and then development of surrounding community, looks into the matters of certain educational undertakings financed by Guwahati refinery, forwards the requests for loans and advances by 117

employees to the finance department. They scrutinize the reports of senior istrative officials regarding various matters. They also monitor employee performances and identify cases where training is required. The maintenance of istrative building like looking after water filters, chairs, computers, tables etc. is also one of the functions of deputy manager.

Functions of Senior istrative officer (SAO): They look into the matters of land, carry out time to time inspection of the lands acquired by Refinery, they look into the matters of community development, genuineness of their requirements and fund allocation, they perform the function of staffing employees by placing them in those jobs in accordance to their skill set. They look after the wage istration and they are responsible for formulating the wages to be allocated. They also have to look after medical benefits, promotion, probation and recruitment and performance appraisals. Functions of Employee Relations Officer (ERO): They keep track of contract labourer’s right from their entry es to their days of work, payment and provident funds. They perform the function of approving loan and advances and forwarding them to the finance dept. They also have to keep a track of uniform and safety shoes supplied to employees working in the plant. Canteen and pantry is also taken care of by the employee relations officer. DEPUTY MANAGER (ER)

118

HUMAN RESOURCE FUNCTIONS IN GUWAHATI REFINERY ================================================== ======= STAFFING o

Manpower planning

o

Determine the organizational structure and optimize manpower to effectively meet Company’s objective

o

Job description

o

Recruitment

o

Personnel records

o

Promotion

o

Transfer

PERSONNEL MAINTENANCE o

Motivation 119

o

Performance Appraisal

o

Recreation

o

Communication

o

Employee amenities - canteen , clubs etc.

o

Safety

o

Medical Services

o

Security

DEVELOPING THE HUMAN RESOURCE o

Induction and apprentice training

o

Training & development of employees.

INDUSTRIAL RELATIONS o

Productivity Bargaining

o

Grievance Handling

o

Discipline istration

o

Providing t consultative machinery-t Management Councils

COMPENSATION o

Wage & Salary surveys & controls

o

Negotiations 120

o

Incentives/bonus

PERSONNEL POLICY & PLANNING o

Defining Organizational goals, Policy guidelines and strategies

o

Formulating & implementing Personnel policies

DATA INTERPRETATION AND ANALYSIS 1) For how many years have you been working in this organization? Analysis: It was analysed that maximum of the employees years of service is in between 10 years to 20 years.

2) What is your grade in this organization? a) A ( )

(b) B ( )

( c) C ( )

(d) D ( )

(e) E ( )

INTERPRETATION: 28.57 %

GRADE A 121

14.29 % 28.58 % 14.29 % 14.29 %

GRADE B GRADEC GRADE D GRADE E

Analysis: It was analyzed that in this organization maximum of the Employees worked in Grade C level

3)

What was your Compensation Package before the commencement of 9th Pay Commission?

a) Below 10,000(

) (b)10,000-20,0000( 122

) (c)20,000-30,000( )

d) 30,0000-40,000( ) (e) More than 40,000( ) Interpretation: Below 10 000 10000-20000 20000-30000 30000-40000 More than 40 000

14.29 % 42.86 % 28.58 % 7.14% 7.14%

ANALYSIS: It was analyzed that before the commencement of 9th Pay Revision maximum of the employees compensation package was between 10 000 to 20 000 respectively.

4) Are you satisfied with your working condition in this organization? 123

a) Yes ( )

(b) No ( )

INTERPRETATION 85.71 % 14.29 %

Yes No

ANALYSIS: It was analyzed that maximum of the employees were satisfied with their working condition prevailing in this organization.

5) Are you satisfied with your payroll along with your working condition? a) Yes ( )

( b) No ( ) 124

Interpretation: 71.42 % 28.57 %

Yes No

Analysis: It was analyzed that maximum of the employees were satisfied with their payroll along with their working condition in this organization. The ratio of their Payroll in respect to their Working Condition was beneficial to them.

6) Do you think there should be a rise in salary package in this organization? a) Yes ( )

( b) No ( 125

)

INTERPRETATION: Yes No

57.14 % 42.85 %

Analysis : Maximum of the respondants stated that there should be a rise in the salary package in respect to this organization.

7) Do you think there should be implementation of 9th pay commission in this organization? a) Yes ( )

( b) No ( )

INTERPRETATION Yes No

71.42 % 28.57 % 126

ANALYSIS: It was analyzed that maximum of the respondants stated that the 9th Pay Revision should be implemented in this organization.

8) What was the reimbursement in your salary package after the commencement of 9th pay revision? a) 10% ( )

(b) 20%( )

(c) 30% ( )

( d) 40% ( )

(e) 50% ( )

INTERPRETATION: 10% 20% 30% 40% 50%

28.58 % 14.29 % 28.58 % 14.29 % 14.29 %

Here , 1=10%, 2=20%, 3=30%, 4=40% and 5=50% as indicated in the graph below.

127

ANALYSIS: It was analyzed that at an average maximum of the respondants reimbursement was to a rise of 10% & 30% after the commencement of 9th pay revision in this organization.

9) Now are you satisfied with the payroll along with your working condition after the commencement of 9th Pay Revision? a) Strongly Dissatisfy (

)

(b) Dissatisfy ( )

(c) Neither Satisfy Nor Dissatisfy ( (d) Satisfy ( )

)

(e) Strongly Satisfy ( )

128

INTERPRETATION 14.29 % 14.29 % 14.29 % 28.58 % 28.58 %

Strongly Dissatisfy Dissatisfy Neither Satisfy Nor Dissatisfy Satisfy Strongly Satisfy

ANALYSIS: It was analyzed that after the commencement of 9th Pay Revision the employees were satisfied working in this organization

129

130

CONCLUSION Taking into consideration the 5 Rating Scale i.e strongly satisfied, satisfied,

neither

satisfied

strongly

dissatisfied

it

nor was

dissatisfied, found

out

dissatisfied

and

that

the

after

commencement of 9th Pay Revision in Indian Oil Corporation Ltd, Guwahati Refinery the employees were strongly satisfied by the payroll enhanced to them. This was because of the reason that there was a strong rise in the increment given to employees working in this public sector unit. There was a tremendous rise in the increment i.e 50%. This made the employees achieve their job satisfaction in respect to the point of view in regards to the compensation package in this particular unit. A

brief

graph

has

been

enumerated

below

showing

the

satisfaction of the working condition of the employees after the commencement of 9th Pay Revision in this particular unit. Strongly

Dissatisfy:14.29%

Neither

Satisfy

Dissatisfy:14.29% Dissatisfy:14.29% , Satisfy:28.58%, Strongly Satisfy:28.58%

131

Nor

132

RECOMMENDATION AND SUGGESTION Although it was found that the employees were fully satisfied with their payroll after the commencement of 9th pay revision in Indian Oil Corporation, Guwahati Refinery it was still advised to recommend that there should be a slight rise in the compensation package in the group of A Grade and B Grade employees. This is because of the reason that since this two categories comes under the designation of officer in this reputed organization. No doubt Indian Oil Corporation Ltd is one of the most reputed organization all over India so to keep its position mandatory in respect to the payroll scheme a slight rise increment will give a strong reflection in the virtue and vice in respect to this category. So it is strongly recommended that a slight increase in the payroll scheme in respect to grade A and grade B employees will make their position more respectable in this organization.

REFERENCE 133

Websites Referred: www.iocl.in www.monetarycontrol.com www.quickmba.com www.netmba.com www.investorwords.com www.answers.yahoo.com www.motorcyclist.com www.businessmirror.com www.adnoc.ae.com www.iloveindia.com www.valuenotes.com

INTRANET REFERRED Intranet of Indian Oil Corporation Ltd, Guwahati Refinery.

134

Questionnaire ON

135

COMPENSATION MANAGEMENT: “AN ANALYSIS IN RESPECT OF SALARY WITH 9TH PAY REVISION IN IOCL, GUWAHATI REFINERY”

1) For how many years have you been working in this organization?

2) What is your grade in this organization? a) A ( )

3)

(b) B ( )

( c) C ( )

(d) D ( )

(e) E ( )

What was your Compensation Package before the commencement of 9th Pay Commission?

a) Below 10,000(

) (b)10,000-20,0000(

) (c)20,000-30,000( )

d) 30,0000-40,000( ) (e) More than 40,000( ) 4) Are you satisfied with your working condition in this organization? a) Yes ( )

(b) No ( )

5) Are you satisfied with your payroll along with your working condition? a) Yes ( )

(b) No ( )

136

6) Do you think there should be a rise in salary package in this organization? a) Yes ( )

( b) No (

)

7) Do you think there should be implementation of 9th pay commission in this organization? a) Yes ( )

( b) No ( )

8) What was the reimbursement in your salary package after the commencement of 9th pay revision? a) 10% ( )

(b) 20%( )

(c) 30% ( )

( d) 40% ( )

(e) 50% ( )

9) Now are you satisfied with the payroll along with your working condition after the commencement of 9th Pay Revision? a) Strongly Dissatisfy (

)

(b) Dissatisfy ( )

(c) Neither Satisfy Nor Dissatisfy ( (d) Satisfy ( )

)

(e) Strongly Satisfy ( )

137

138

139

140