Challenges of the Upstream and Downstream

Sector

Think Oil
Introduction
This is why the costs of other commodities increasewith
increase in the cost of oil and gas. This makes it very
important toregulate the cost of oil and gas in order to ensure
that the costs of othergoods and services are reduced or kept
optimal.
No modern society can run smoothly without oil and gas.This
is why these products are very important today. Essentially,
the demand ofoil and gas exceed their production. This also
explains the reason whycountries with huge deposit of crude
oil are among the richest nations of theworld. Since the
functionality of a modern society relies to a huge extent on
crude oil, it is then very important to employ high tech and
cutting edgetechnological processes towards this important
field in order to ensure effectivenessin the process.
Oil and gas are highly demanded in industries as wellas for
commercial and domestic purposes. The products are used
for lots ofpurposes ranging from the driving of machineries to
the production of plasticsand fertilizers. Indeed, the world
would lose its taste if oil and gas areremoved from existence.
An Overview of the Upstream and Downstream
Sectorof the Industry
To really understand the processes involved in the oiland gas
industry, it makes sense to consider its subdivisions.
The oil and gasindustry is essentially subdivided into three
phases and these include:
Upstream sector
Midstream sector
Downstream sector
Before examining these phases, it is important to notethat the
midstream sector is also included in the downstream sector.
Upstream sector
The upstream sector of the oil and gas industryinvolves
processes including the searching for and the recovery of
crude oil aswell as its production. In the upstream sector,
discovery or exploration ofcrude oil takes place. This involves
intensive and extensive efforts towardsascertaining the actual
places where crude oil is located.
Exploration is a very difficult process and thereforerequires the
service of experts in the field. More so, information technology
plays active roles in the exploration or searching of crude oil in
order toeasily discover new grounds where oil is located and
therefore take advantageof them.
The upstream sector includes different operations suchas the
searching for prospective underwater oil and gas fields,
drilling ofexploratory wells and also making requisite
operations on the well so as tobring the crude oil or natural gas
to the ground surface.

Downstream sector
The downstream sector of the oil and gas industryinvolves the
refining of the crude oil and/or raw natural gases obtained in
theupstream sector as well as selling or distributing the
products obtained. Manyproducts are derived from the refining
of crude oil and these may includediesel oil, liquefied
petroleum gas (LPG), asphalt, petroleum coke, gasoline,
fertilizers, antifreeze, plastics, rubbers, pesticides, synthetic
rubber, jetfuel and many more.
The downstream sector of the industry is the sectorthat relates
with the consumers. Facilities involved in this sector include
petrochemical plants, oil refineries, natural gas distribution
companies,retail outlets and so forth.
The main processes involved in the upstream anddownstream
oil and gas operation include the following:
Exploration
Extraction
Refining
Transporting
Marketing

Information Technology and the Oil and Gas

Industry
Information technology has become very relevant indifferent
fields of life, industrial and commercial activities over the past
few decades. Today, no industry can exist or became fully
operative withoutinformation technology. As much as
information technology is very relevant inother industrial fields,
it is highly essential in the oil and gas industry.Different
operations in the oil and gas industry depend solely on
informationtechnology and can only achieve efficiency thereof.
This simply implies that advance in informationtechnology
would simply result to the betterment of the oil and gas
industry aswell as every other field of life. This is why lots of
intensive researches arebeing done on information technology
in the recent time and these have resultedto unimaginable
impact in the oil and gas industry.
One of the most striking developments in the ITindustry which
has helped information dissemination in the oil and gas
industrywas developed by the World Wide Web Consortium
(W3C) about a decade ago. Thistechnology known as XML
(Extensible Markup Language) uses tags and unstructured
patterns in developing requisite data (referred to as well-
formed and validdata) for information dissemination. The most
wonderful thing with XML is thatit is structured in such a way
that the information would be readable by bothmachines and
humans. Other technologies such as SGML and HTML for
transferringdata were also developed by the W3C; however
XML is the most beneficial of themall in information
dissemination.
Upstream Challenges
We will look at the challenges and opportunities in the
upstream oil and gas industry facing in current information
technology era.
1) Management and Information
Global forces such as geopolitical pressures aretroubling the
industry. We therefore need the knowledge, contacts and
skills toeffectively adapt to these troubles and geopolitical
insecurity in theindustry. It is also very important that we make
appropriate efforts towardsanticipating and reacting to the
radical changes on the global sphere.
Some challenges in the upstream oil and gas industrycan be
effectively resolved if we lay emphasis on the new
interdependenciesbetween senior management information,
operational effectiveness and decisionmaking. We also need
to appraise and understand their impact on our overallprofit
margins. This can go a long way in solving our problem.
The management involvement in information system (IS)and
MSI advancement is really crucial like MIS Quart. 9. Originally,
managementmay feel it difficult to come to be engaged much
beyond the front end of ISadvancement as a result of the
extreme distinction in between the methods andlanguages of
the data processing (DP).One more essential development
that haveactually made it possible for administration to take
part additionaltoday. ISdevelopment has actually been the
information analysis methods. These haveactually made it
possible for the data and processes of company systems to
be assessedin totally logical terms, generating a logical
information model independent ofany type of DP terminology
or hardware considerations
2) Increasing theproduction of liquid fuels
Oil and Gas has facing a real challenge of shortage ofliquid
fuel in this era. There is great need to increase the production
ofliquid fuel in the upstream sector. The output from Canada’s
oil sand can beincreased by threefold by 2035 which is
equivalent to 4.5 billion barrels perday has the capacity to
extract more oil and made effective. Not only that, butalso
there should be efficient avenues in place to bring the
extracted productsto the market. The American Petroleum
Institute pointed out that oil sandproduction can be limited in
2014 because of shortage or inadequacy ofpipelines leading
from refineries to the market.
To make the Canada’s oil sand to become more beneficialand
efficient, there is need to put the right upgraders and pipelines
in place.Shell has achieved substantial success by increasing
capacity at the AthabascaOil Sands Project in Alberta by
100000 barrels per day. It has also opened asecond mine in
which it expanded the upgrader which converts bitumen to
crude.
Again, the rising demand for oil and gas can be met by
diversifying the transport fuel mix with hi-tech technologies.
This can beachieved by increasing the contribution of biofuels.
Biofuels are highlybeneficial as they are very compatible with
existing infrastructures andtherefore can be sold and
distributed in ordinary filling stations.
3) Sources ofCrude Oil
If we take a close look at the sources of oil and gas,we will
realize that they are not renewable natural resources. The
intensiveuse of oil and gas today places the fate of the world’s
crude oil supply atrisk. In some countries like Brazil, China,
and India, crude oil is used inalarming rate on a daily basis.
Thus, this is a big challenge to the oil andgas industry.
However, it is quite obvious that the challenge cannot be
solvedby preventing people from using oil and gas or their
products. Oil and gas arevery pivotal to the modern society
and without them the modern society will notrun smoothly or
effectively. Thus, an alternative means should be sought in
order to solve this challenge.
The primary way of dealing with this problem is bydevising
alternative means and avenues for oil exploration. Alternative
sourcesof oil can be devised in order to save the world’s oil
and gas. More so, we canemploy the state of the art
technologies available today in order to convertvarious natural
resources to petroleum products. A good example of this is
agricultural products and biofuel. Shale oil can also be
employed as analternative source of oil or energy.
Information technology is needed to achieve these aims.It can
be employed in discovering and analyzing the alternative
sources ofenergy. Data can be effectively collected and
organized in a useful form so asto create a basis for decision
making. This forms decision support systems(DSS) used in
various companies for decision making and drawing
inferences.With the presence of much intelligence software
today, this can be achievedwith ease.
4) OperationalChallenges
The models used by the oil industry in the 20th centuryare
becoming rather antique. The models are now seriously facing
challenges andof course new models are being invented. The
integrated model has an originaldigital logic aimed at providing
a natural hedge, market access and balancedfunding. With the
help of integration, the operation and value chain can be
optimized. The downstream sector can finance the upstream
sector in order toachieve greater operation. By ensuring better
integration, the oil and gasindustry can balance its upstream
and downstream operation and hence reducevolatility and
risks.
Oil industries such as ExxonMobil, Royal Dutch Shell,and
ConocoPhilips oftentimes employ vertical integration model
which involvethe entire value chains. Anxiety in investment
has also increased since capitalmarket does not realize the
value of integration. Economies of scale and accessto
technology are not enough to solve the problems faced in the
upstream sectorof the oil industry. Some of the challenges
faced in the upstream sectors todayare caused by the
structure of the downstream sector and investors.
Exploration automation seeks to do simply that throughprocess
renovations, enhanced rate of penetration, constant smooth
qualitydrilling and overall exploration efficiency. Norway's
Robotic Drilling SystemsAS, previously Seabed Rig,
developed an innovative autonomous roboticexploration gear
for unmanned exploration operations. The business asserts
thatthe new device, Robotic Drilling System (RDS), establishes
brand-new criteriawith raised security and cost-effective
preparation and drilling and could beapplied on existing, in
addition to new exploration structures, both offshoreand on
land. Presently, the RDS utilizes autonomous robot working
proceduresthat could be controlled by remote control system
with an interactive 3D userinterface
5) Energy Demandand Supply
There is intense problem of demand and supply in the
upstream sector of the oil and gas industry. It is quite obvious
that thedemand for crude oil is greater than its supply. Ongoing
tensions in the MiddleEast and economic uncertainty were
pointed out in the 13th international OilSummit but this points
towards improved outlook of course the risks cannot bedenied.
Due to population and economic growth, the globalenergy
demand may double in the first half of the century. IEA stated
that theglobal fuel demand could rise by 26 percent in the next
25 years; that is over110 million barrels per day. Asian
emerging economies will experience the mostof the growth.
Vehicle fleet in China could triple to 600 million vehicles in20
years time. Global oil supply will struggle to keep pace with
the demand dueto decreasing output in mature fields by about
80 percent in 2035.
The high end data management and analytics availabletoday
can be wielded towards solving these challenges. The
requisite data canbe analyzed, archived, digitized and defined
appropriately. This will dependheavily on the new XML
technology while deals with unstructured data format.Different
kinds of data can be parsed with it to ensure high efficiency in
theprocess. Structured data analysis should also play a part in
this game. Thetext based XML can be transformed into
datasets with the use of data adaptersso as to connect it to
required structured databases such as SQL Server, OracleDB,
Access DB and so forth. This can be channeled towards
revolutionizing theoil and gas industry.
6) EnvironmentalPollution
Environmental pollution is a major issue in theupstream oil and
gas sector. There is lots of oil and corroded pipelines stillused
today resulting to oil spill which degrades the environment.
For example: Shell has led to lots of environmentalpollution in
the Niger Delta. Lots of their pipelines in the region are old and
corroded, resulting to oil spillage and pollution. However, the
oil company hasdenied responsibility for pollution. Thus, Niger
Delta residents and citizenshave protested greatly against
Shell and similar oil ventures. In a case inJanuary 2013, a
Dutch court rejected four out of five allegations posed onShell
on pollution in the Niger Delta but a subsidiary firm was found
guiltyand asked to pay compensation to Nigerian farmers.
Same issue was experiencedin Magdalena, Argentina. Here
Shell was also responsible for environmentalpollution. On 15
January 1999, a shell tank in the region collided with anotheroil
tank and polluted to fresh water.
Storyboards can be geared towards solving this problem.It
deals with the simulation of industrial accidents (gas
leakages) andcondensate.
Storyboard is a term borrowed from the filmmaking industry; it
involves narrating series of complex tasks. It can store
hundreds of events.These can involve sensitive information.
This can be employed towards buildinga framework involving
“knowledge base” with the use of NKRL (NarrativeKnowledge
Representation Language) which involves the collection of
formalstatement with negligible loss of information.
7) FluctuatingCrude Prices
Political instability and problems in various regionsof the world
has led to the fluctuation in fuel prices. Crude price went from
ahigh value of $150 per barrel in the middle of 2008 to less
than $40 per barrelat the beginning of 2009.
The political issues resulting to the fluctuation incrude prices
include slow approval of new capital projects, the squeezing of
talents as a result of early retirements and acquisition activity.
It is veryimportant to maintain effective operation as well as
ensure that the margin is maintainedin the environment.
Atomization of drilling mechanism and robotic technologycan
play a pivotal role to overcome this challenge.
8) EconomicUncertainty
This is another risk faced in the oil and gas sectorwhich has
led to the slow movement of some firms in the upstream
sector. Mostpeople will not classify economic uncertainty as a
challenge or risk but oncarefully analyzing, it will become very
obvious that this is a challenge.
It is simply the uncertainty in economics. It can bedefined as
the unknown prospect or possibility of gain or loss. Whether
thisfactor is quantified as a risk or not, it has a direct impact on
employment,income aspects and communication among the
various companies and firms in thevalue chains of the oil
industry.
Information technology has great influence on business
activities and economics. Changes take place in every part of
the business;development of goods and technology,
procurement, production, sales,distribution, and post-sale
services. Due to CAD and CASE, enterprises laygreat
importance on rapid development of diverse goods and
technology in orderto satisfy customers. Companies can
change production system from massproduction under
economy of scale into production on demand by CAM and
ERP.
9) ThePeople Shortage
The lack of skilled personnel and manpower or mainoperations
requiring high tech processes in the oil and gas industry is a
challenge in most parts of the world especially in the upstream
sector of theindustry. Processes in the upstream sector such
as exploration and productionrequires high technicality and
therefore there is need for skilled manpower.This has limited
many operations in different parts of the world such as in
Nigeria.
This problem can however be solved by attracting and
encouraging more talented young men and women into the
science and engineeringdiscipline and hence into the oil and
gas industry. Trainings have to be madehighly efficient in
various parts of the world especially in the information
technology aspect to help young people understand how to
manage the operations?
10) Marketing
Marketing is another heavy issue in the oil and gasindustry.
China produces far less crude oil and has less than half the
refiningpower than the United States of America but research
states that the oildemands of China will exceed that of the US
by 2035. To have these problemssolved or adapted to, the IEA
made estimation that there is need for $10trillion new oil
infrastructures by 2035. This involves $3 million investmentper
second for up to 25 years, adding to the huge challenge.
Therefore theavailable resources have to be channeled
towards making better investments toimprove marketing and
pricing in the upstream oil and gas operations.
In upstream and especially in downstream, the mostengaging
modification of the strategy to the marketing feature because
themillennium has actually been changing from Outbound
Marketing to InboundMarketing. Building from the experiences
picked up from doing business in thenew Web 2.0 era,
businesses have actually pertained to acknowledge the
overwhelming benefits of drawing consumers towards their
item, as opposed todriving their products towards their
customers.

Downstream Challenges

The downstream sector of the industry has broad scopeand

tentacles. These include crude supply, trading, refining,
productdistribution, marketing and retailing. Lots of products
are involved hereincluding conventional fuels such as gasoline
and diesel and low carbon fuelssuch as bio diesel.
Lots of challenges are faced in the downstream oil andgas
sector. The operating capacity of the global refining industries
iscontinually constrained and therefore there is need for
expansion in theirvarious phases. Crude oil produced today is
becoming heavier and sourer andproduct specifications are
tightened by increasing strict environmentallegislation. This
has led to the need for changes in the refining configurationof
many oil players. More so, marketing margins are getting
lower as a resultof competition from advantaged entrants.
The main challenges faced by downstream sector are
discussed as below:
1) Business JointVentures
Downstream sector is facing serious challenge due tolack of
Information knowledge management (IKM). In order to
overcome, there isneed for joint forces and alliances between
various industries to be able toarrest this problem in the oil and
gas sector. Some important industries suchas oil companies,
service companies, academia, government and so forth should
poll their knowledge together so as to achieve a better result
and solveproblems plaguing our industry at reduced cost and
as fast as possible.
To really achieve the desired aim at purposes then itis
important to ensure the following:
The various value chains of the oil industries shouldintegrate
and target at the same purposes.
Joint and targeted investment should be made in theindustry
outside the host country.
Risks should be shared and there should be diverse
commercial terms.
The workforce is very important and therefore should be
developed. More so, state of the art technologies should be
transferred inorder to aid efficiency at all levels and value
chains of the industry.
The collaboration should also include a greater sharedcontrol.
Shell launched the Raizen joint venture with Cosan inBrazil
with the aim of producing and distributing up to 2 billion liters
ofsugar-cane ethanol each year. The ethanol emits 70 percent
less pollution thanstandard petrol through its lifecycle and
therefore with their use, liquid fuelwill be more environmentally
accepted in regions of tighter legislation.
Natural gas is another promising area. The developmentof
new resources such as shale gas gives promising future.
There is good supplyof natural gas in North America today.
Natural gas can be converted into liquidfuel and it can be used
directly as a transport fuel. Shell and Qatar Petroleumbring
new innovations and significant changes into the industry.
They have madea total investment of between $18 and $19
billion showing the scale ofinfrastructure needed to meet rising
demands. Pearl is also another promisingcompany which
produces lots of GTL gasoil that can fill 160000 cars a day.
Theyalso provide other products, chemicals and lubricants
helping to generaterevenue to the nation.
Shell is also developing and LNG refueling station inCanada
which will enable trucks to use natural gases instead of diesel.
Withdeveloping technology, liquefied natural gases will play a
vital role in the transportationof fuel mix.
2) Global RefiningCapacity
There is an emergence of a structural global surpluswith
significant economic growth in various areas. This is driven by
increasingrefining capacity in various regions such as Asia
(China and India), the MiddleEast (Saudi Arabia and the
United Arab Emirates) and in Latin America (Brazil).The
cumulative impact on a global scale would be reduced
margins. The netgrowth rate would be between 25 and 30
percent higher than the existingcapacity with a CAGR of 4%
per year. Of course, the planned expansions may notall be
sanctioned or completed.
However, the key factors of the growth are as follows:
Much of the planned expansions were sponsored bynational
oil companies.
Most of the new capacity will capture economies ofscale with
greater degree of efficiency and sophistication.
Old refineries will rather die than close and alsoenvironmental
and social costs of closure can be very high in countries like
Europe and America.
The industry has to do a number of things to avoidthese risks.
These include increasing liquid fuel supplies, diversifying the
transport fuel mix and building greater flexibility in the
downstreaminfrastructure.
Reliable instrumentation and controls, and trustedtechnologies
like robotic system could raise ability. Basically, the rate of
development in the downstream industry is being assisted by
using innovationsand expertise frequently created in various
other industries to boost legacyrefining procedures.
Developments in sophisticated procedure instrumentationand
controls have enabled refineries not only to operate more
efficiently andsafely but likewise to create fuels to more-
exacting product high qualityrequirements in a much more
trustworthy way, minimizing their "performancewindow" and
enhancing high quality guarantee has enabled refinery drivers
to create cleaner and higher-performance gases
3) Corporatecommunication
Corporate communication involves orchestrating andmanaging
different internal and external communications in order to
createfavorable point of view among stakeholders. This
involves issuing a message byan organization to its audiences
which might include the employees, the media,partners and so
forth. With the aid of corporate communication, organizations
willbe able to explain their missions and gear towards
achieving their purposes andvisions. It helps stakeholders to
be linked to the company in question.
In the downstream oil and gas operation, corporate
communication is very important in order to determine
efficiency in the variousprocesses. The stakeholders should be
able to know issues taking place in thetrading and refining of
the oil. Information technology plays vital role incorporate
communication as it can be wielded to ensure that it is done
effectively.Various measures can be involved in order to
essentially supervise and monitoractivities taking place at real
time in the rig. With the aid of advancedsoftware, live
performances can be compared with historical trends in order
forquick conclusions to be drawn with ease. SWOT analysis
and IE Matrix need to bepracticed intensively to enhance
effectiveness of corporate communication.Requisite software
can be used in establishing alerts to notify the requiredsources
of events taking place at each point in time.
4) DistributionActivities for Oil Products
Distribution and trading is a very vital aspect of thedownstream
sector of the oil industry. Without establishing appropriate
avenuesfor trading, the operation of the oil and gas industry
will be futile. Thus,the value chains should be properly
examined in order to ensure efficienttrading and distribution of
the products.
More so, efficient avenues should be devised forensuring that
the products are maintained at steady prices when it comes to
distribution. In some parts of the world, the price of the
products isunnecessarily increased in their distribution centers
leading to intenseburdens on the consumers.
Like upstream industry Outbound Marketing to Inbound
Marketing must be examined. Building from the experiences
selected up fromdoing company in the new Web 2.0 age,
businesses have in fact concernedrecognized the
overwhelming perks of attracting consumers to their item, as
opposed to steering their products towards their clients.
5) Crude SupplyMechanism
Various challenges are faced in the supply mechanism ofcrude
oil. The performance of the supply chain can be greatly
affected bytimely flow of accurate information. All hope lies on
information technology toensure optimization in the process
although it currently seems to be a hugechallenge. To ensure
efficiency in this process, various processes andtechnicalities
should be brought together. These include modeling, designing
and monitoring of engineering assets.
With the use of reliable transport system and quickmethod of
disseminating information, oil supply can be mechanized and
carryingcost can be reduced. Information technology should be
incorporated by oil firmsto integrate suppliers and customers.
This can be effectively achieved with theappropriate use of
ERP. An example of state of the art solution is mechanismsuch
as GTL project with Qatar Petroleum. Shell has also been
playing vitalrole in this by perfecting the technology behind
Pearl and therefore it holds3500 patents in the GTL project.
In addition, adapting a supply-chain modern technology
technique could additionally result in every user of the system
could accessall computational web servers with higher speed
data access, link to real-timehigher rate visualization, and take
part in sensible collaboration, and beprovided on-the-spot firm
irrespective of the user's area or desktop gadget.This allows
the supervisors to handle better crude oil supply. In addition,
suchpractical aspects as business-process modeling,
automated notice, informationaccessibility and sharing, and
visualization ought to be offered to theprovider simply as it is to
employees and other interested events. This step isessential in
order to optimize the potential advantages of the collaboration
inbetween oil and gas business and its vendor organizations
6) Health, Safetyand Environmental Security
The safety of the human environment as well as health
protection should be the number one priority or concerns in
the oil and gasindustry. Legislation like implementation of
ISO15926 has forced oil and gascompanies to comply it.
Hydraulic fracturing, a common technique in extractinggas
from unconventional reservoirs have resulted to lots of
environmentalconcerns and issues with the water table.
Therefore, oil firms should paygreater attentions to health and
safety issues with broader operation concernsthrough the
various stages of the value chains.
In a gas and oil sector context, as matter of fact,thesetup of
conceptual descriptions is ISO 15926 ("Industrial automation
devices and combination-- Integration of life-cycle information
for procedureplants consisting of oil and gas production
facilities"), Several positionpapers presented at the "W3C Oil &
Gas" Workshop have actuallyproposed, as a matter of fact,
some kinds of combination in between ISO 15926and the W3C
languages.
ISO 15926 presently consists of 7 Parts. The publishedones
are Parts 1, 2 and 4. Component 1 is the "Introduction". Part 2,
the "Data Model", associated with the 4D model-- executed
makingusage of the STEP information modeling language
EXPRESS. This model is used todefine basic (axiomatic)
ideas like "thing" , "specific" or"property", and “class”, the
specific principles and connections usedto carry out the space-
- time method and to describe after that adjustments ofphysical
parameters, and some common connections appropriate to
engineeringtasks like "link", "configuration", "containment"and
"participation". This data version could be mapped to anOWL-
based taxonomy.
Requisite technologies can be employed in order tomonitor
and recognize gas leakage alarms in a gas processing plant
andtherefore trigger various processes to activate a gas
turbine. Narrative KnowledgeRepresentation Language
(NKRL) can be utilized to reveal this sort of detailsand to set
up the data base. NKRL is a conceptual meta-model created
to deal inan intelligent and full way with complicated and
content rich narrativeinformation sources.
7) Manpower andEconomy
A new study entitled “The Economic Impacts of the Oiland
Natural Gas Industry on the US” made by Price Waterhouse
Coopers (PWC)discovered that the US oil and natural gas
industry supports over 9 millionAmerican jobs and makes
significant contribution to the economy which is underimmense
pressure and has become a serious challenge.
The industry contributes over $1 trillion to theeconomy which
amounts to 7.5 percent of the US GDP. The studies also
showedthat oil and natural gas play vital role in the US even
beyond oil producingstates and regions. Oil and natural gas is
the backbone of the US economy. Itis a major source of growth
and job creation in the nation. It was a succorduring recession
time and creates more jobs and employment than any other
industry.
8) Refineryincapability and the Need for Expansion
It has not really been easy in the downstream sector ofthe
industry to meet the challenge of refining incapability. Lots of
factorssuch as economic downturn, higher oil prices and
improving vehicle efficiencyhas reduced demands in the
downstream sectors. Refinery closures have also beenerupted
by tightened margins.
Automatic devices can be incorporated in refineries forthe
complying with functionality to overcome as:
Automatic tracking of all procedure specifications andtools
status parameters,
Automatic security of procedure devices in case kepttrack of
criteria get to emergency situation,
Upkeep of common procedure methods,
Quit shutoffs control,
Programmable control and security of pump systems,
Procedure parameters control.
In this context we consider example UK, the number of
refineries in 1970s was 18 but today they have reduced to 8.
Some existingrefineries are not really suitable and capable of
refining more difficultcrude. Increasing import of higher-sulphur
crudes puts pressure on Chineserefineries designed for
processing sweeter crudes.
To solve these problems, there is need for moreefficient,
flexible and integrated refineries. With the tough investment
climate of today, this is obviously a big task. However, a
beacon of hope isthe Shell and Saudi Aramco’s Motiva Joint
Venture targeted at expanding thePort Arthur Refinery in the
Gulf of Mexico in order to increase the barrels ofcrudes
produced per day from 275000 to 600000. This is a part of
Shell’s planfor selective downstream expansion.
9) Pricing
Some major challenges in different regions of the worldpose
lots of problems and results to increased pricing. For instance,
theeasily accessible oil is trapped in some regions of the world
and therefore isinaccessible. Therefore supply oftentimes
comes from challenging and remoteregions of the world and
this result to high oil prices.
If the production cost of crude is high then priceswill also get
high. Because of the above mentioned factors, crude prices
arerelatively high in the world. To solve the challenge,
information technologycan be brought into the scenario to
discover alternative sources of oil andgas. Cutting edge
technologies can be employed to leverage oil sources such as
shale gas and so forth. However, another challenge in the
downstream isshifting demand and increasing reliance on
complex oils.
10) The cost ofServices
Increased cost of services is another huge challengefacing oil
and gas. This increased cost cuts across the value chains from
exploration to production as well as refining and
transportation. This simplyresults to higher commodity prices
and it has driven the industry activity to apoint where the
service industry lacks the capacity to respond.
Virtualization can maximize the usage of existingresources;
simplifies facilities and software application management,
maintenance, and deployment; and decreases hardware
requirements, causing lesspower consumption, and lesser
cooling costs. Downstream sector can use ServerVirtualization
and Desktop Virtualization to manage cost of services. Using
Esri's server innovations in a virtualized setting indicates that
individualshave more access to GIS processing capacities with
lesser hardware and energyexpenses
Conclusion

Obviously, the upstream and downstream value chains ofthe

oil and gas industry face lots of challenges which have been
clearlyevaluated. These challenges have constrained lots of
activities in the oil andgas industry and crippled lots of
processes. However, it has also become quiteclear that
information technology and automatic devices including
robotics arehighly needed to solve these challenges in the oil
and gas industry as well asevery other industry in the twenty
first century.
The latest technologies for data management, analysis,
relaying and dissemination can be channeled towards
ensuring effectiveness inthe various value chains of the oil and
gas industry. The text based format ofXML as well as the
structured format of DBMS would fit into many of these
processes and would go a long way to ensure effective
documentation of theprocesses so as to ensure appropriate
data management.NKRL (Narrative KnowledgeRepresentation
Language) can be used to express information and to set up
knowledge base. This will go a long way in monitoring gas
leakages inprocessing plants and therefore set up appropriate
alarm systems andnotifications. Many other IT state of the art
technologies can be used inmonitoring rig activities at real time
so as to ensure all round efficiency inthe process and
overcome the challenges.
Truly, for oil and gas industry to make headways in thenext
phase of this century, information technology should be used
as a strongbackbone to the industry. The good news is that
many key players in the oilindustry have already begun
leveraging the benefits of information technologybut this is not
enough. The IOCs (Integrated Oil and Gas Companies) have
tocooperate in both the upstream and the downstream sector
to ensure efficiencyin the entire processes.

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