Research Project

 

Managing the Risk of Resource Control Loss in Remote Sites of KSA

 

 

 

Table of Contents

1     My Innovation plan. 3

1.1   Problem.. 4

1.2    The Innovative Idea. 5

2     Logistic Centre Model 6

2.1     Functions of Logistic Centre. 7

2.1.1    Cost of establishing a logistic center. 8

2.1.2    Plans to Cope with Barriers. 9

2.2      Comparison of profit and loss of Logistic Centre. 10

3      Conclusion. 11

References. 12

Appendix A.. 13

Ghawar Oil Fields. 13

Appendix B.. 15

Sharar Oil Field Location. 15

Appendix C.. 16

Appendix D.. 17

Appendix E. 18

TAPA Safety Standard. 18

 

 

 

1 My Innovation Plan

Establishing a Logistic Centre to control resources loss in remote sites of KSA

 

This project entails establishing a Logistic Centre to control resource loss during working on a project of a newly discovered oil reservoir in Ghawar Oil Field (which is barren, deserted and remote site area) and also known as the largest conventional oil field in the world (shown in Appendix A). Publicly, the Ghawar oil field technical information is not available to common people due to restricted government policies in this regard. In Ghawar’s east flank, Sharar has some oil fields which are discovered recently (shown in Appendix B). If travelled by car at 100 kilometres, the single eastern province of this oil field visit takes at least six hours (Kawach, 2010). It is expected that new oil field discovery at Sharar (which is our point in this project) would contribute at least 20% in Saudi Arabia’s crude production.

With such significance and contribution of this new oil field in the economy of the country and the society in large level in long term, there are however some potential issues hindering the ways of its successful completion. The biggest issue here is the resources loss due to Sharar being a remote and barren deserted area of the region. 

1.1 Problem

Stitching Bouw Research centre indicated that over 7% contract expenses occur due to failures like insufficient processes (weak construction processes), which in turn bring the expected quality down. Remote construction projects throughout the world (like Sahara Desert, Antarctic regions and very barren areas of Saudi Arabia) as according to a vast number of researchers Deng et al. (2001), Kestle and London (2002, 2003), Kestle (2009), McAnulty and Baroudi (2010), and Thorpe (2000) loses control due to inadequate human resources, infrastructure weaknesses, experience of managing remote construction sites. This all means in major cases of remote construction sites a big mass of resource control is lost (due to all above factors, and yet many others).  

In KSA there is an enormous rise in the construction projects as well as exploring new oil fields with a net growth from 2011 to 2013, amounting to $43.8 billion, aside from this the construction projects that are underway amounting to $629 billion; this means the construction business is on its heights in KSA and specifically in remote regions for electric power plants, oil fields, warehouses, and customer service blocks.

The construction work in remote areas has the probability of being the most risky and challenging work because of lack of presence of civic amenities, management problems, finances, human capital, communication and a range of others in comparison to the work in central areas.

This research project will suggest an innovative solution to cope with resource loss in remote area of KSA for our new plan of successful project completion of Oil reservoir at Sharar.  

This project has specifically addressed this issue by bringing out an innovative solution through working on the following objectives:

1.     To assess the risks in losing resources in remote construction regions.

2.     To explore ways of avoiding risks of losing construction material.

3.     To bring resolutions to concern authorities through innovative solutions to avoid loss of construction material in remote areas.

1.2 The Innovative Idea

The innovation plan is to build a LOGISTIC CENTRE to cope with the issue of resources loss.

A logistic centre can here be illustrated as a facility which is spared to facilitate logistic operations (Fernie, 2009). In our case of controlling resource loss due to being remote site, this logistic centre will serve multipurpose; like, it will act as a warehouse, repair depot as well as a freight forwarder (in short, it will be an assistance toward maintenance, repair, storing material for managers when in immediate need, etc.). It will crucially act as a backup to support logistic operations and construction supply chain to control resource loss in a sophisticated way. 

However, as the discovery of new oil reservoirs involves a big length of time span to cover the operations properly as well as cost, the logistic centre may therefore has some benefits as well as cost. To find out if this idea will work feasibly for controlling resource loss, it is critical to estimate all costs and benefits associated with it to draw a conclusion. 

 

 2 Logistic Center Model

Land Size: Approximately 1,600 Acres

Location: Less than 10 miles from east flank of Ghawar Oil Fields toward Sharar

Building Size: Ranging from 100,000 to 1 million SF

 

 

 

Figure: Visual representation of Logistic Centre model (Developed by the author)

 

 

 

2.1 Functions of Logistic Center

For this plan of remote site oil reservoir project, the major concern is to reduce lead time, costs and control excess loss of resources. Another concern is to reduce communication gap, lack of presence of civic amenities, management problems, finances and human capital. According to Walsh et al, (2004) a presence of logistic centre ensures close communication of managers of logistic centres with the owners, designers, technical workers, labours and contractors to supply material and equipment in timely manner. Likewise, Kondratowicz (2003) research deliberated that an establishment of logistic centre means enhanced efficiency, reduction of lead time and immediate backup, which means a multipurpose achievement of various benefits.

In our case of oil field reservoir in remote area, this Logistic Centre will critically meet the following demands:

Storage: Through this function we will be able to reduce inventory cost and acquire possible economies of scale in purchasing.

Transport: Since Sharar is a deserted site (hundreds of kilometres away from main populated regions of KSA embedded with all facilities), the transportation cost can be minimised to a great extent by Logistic Centre establishment.

Distribution: By keeping in view the possible proximity to oil reservoir project, the material stored at logistic centre will be supplied just in time (JIT) which will minimise costs up to a considerably big level.

Distribution Network Management/ Vehicle Routing: This logistic centre will handle and optimise material distribution to vehicles and choosing the best route; in this way, immediate supply in a timely manner to oil field project could be ensured.

E-commerce services: The logistic centre will be connected to our main hubs of KSA electronically from where the supply materials will be acquired. This is another benefit of our logistic system to interconnect and support operations.

Community service: Another big and noticeable function/ advantage of this logistic centre will be to serve community of remote living people. For example, it will also act as Supermarket, food provision and gym.

2.1.1 Cost of Establishing a Logistic Center

Fixed Cost = Buying of 100 Windows Logistics Centre = $ 200,000

Variable Cost = $ 100,000

Storage material and backup supplements cost = $ 30,000

Miscellaneous = $ 25,000

Maintenance workforce, salaries and general expenses = $ 30,000

Attributes

Cost $

Proportion

 Fixed Cost

   200,000.00

51.948

 Variable Cost

   100,000.00

25.974

Storage material and backup supplements cost

     30,000.00

7.792

Miscellaneous

     25,000.00

6.494

 Maintenance workforce and general expenses

     30,000.00

7.792

 Total Cost

   385,000.00

100.000

 

 

From the analysis, it is clear that the proportion of the fixed cost would be on the higher side, manifesting a total proportion of 52% in total. Variable cost has the second highest proportion with 29% of proportion followed by Storage material and backup supplements cost with identical proportion of 7.792% each. This estimation of cost shows that initially a higher amount will be required to establish the logistic centre. Later on, the variable costs can be controlled by some alternative means.

2.1.1.1     Barriers

There are some possible hindrances in logistic plan including:

·       An increased start-up cost (approximately $100,000 million for building this logistic centre itself apart from the other fixed and variable costs identified and estimated above)

·       Security issues (theft and loss, as logistic centre will act as a major reservoir of stuffs)

2.1.2      Plans to Cope with Barriers

To cope with these issues, following steps can be effectively used:

·       Establishing a quick absorbing control system

·       To ensure safety TAPA standards will be implanted (see Appendix E for TAPA safety control system).

There are also some ways to overcome these costs in the long-run; which are as under:

Rent plan: Ghawar oil fields are divided in six parts, from north to south with Ain Dar, Ain Dar, Shedgum, Uthmaniyah, Haradh, Farzan and Hawiyah (Appendix C), and in eastern part some other oil fields including Sharar are discovered. This Logistic Plan is very unique due to myriad of functions (as identified above) and as a result the probability increases that, some nearby contractors and companies working on oil projects of Abu Hdriya, Samin, Khursaniya Fadhili, Jurabi’yat, Jaladi, Bakr, and many others (all these remote sites are very closer to Sharar site), may contact to Sharar project Logistic Centre for rent of spare space available to make their operations smooth, faster and cost effective. This may help our Logistic team to recover their costs by generating an attractive amount.

Community Services: As identified multiple services that this centre will provide to nearby communities, this can be another way of covering costs.

2.2       Comparison of profit and loss of Logistic Centre

In a nutshell, following benefits and costs are associated with this innovative idea:

Pros

Cons

Storage facility

Higher initial costs of establishment

Distribution facility

Lack of direct control over operations

Transportation facility, distribution network and ecommerce facility

Without reliable structure and workforce this may lead to big loss

Community Service

Recruiting workforce and their related expenses

 

3        Conclusion

All the estimations and research carried out in this project shows that

This Logistic Centre will be useful for:

·       The Government of KSA in Oil Reservoir project of Sharar

·       People living in remote areas of KSA

·       Society at large

Consequently, the advantages of establishing a Logistic Centre in remote sites of KSA will greatly help in control of resource loss; and not only this, it will serve multi purposes. The costs are not as higher as the benefits of establishing this centre, so it is strongly recommended that this plan should be implemented to assist in control of resource loss and benefit society at large.

 

 

References

Deng, Z. M., Li, H., Tam, C. M., Shen, Q. P. and Love, P. E. D. (2001) An application of the Internet based project management system. Automation in construction: Vol. 10, Elsevier, pp 239-246

Fernie, J (2009) Logistics and Retail Management: Emerging Issues and New Challenges in the Retail Supply Chain, Kogan Page Publishers

Hamzeh, F. R., Tommelein, I. D., Ballard, G., and Kaminsky, P, M. (2007) Logistics Centres To Support Projectbased Production In The Construction Industry, Proceedings IGLC-15, July 2007, Michigan, USA

Kawach, N. (2010) World’s largest oilfield to get even larger, [Online] Available from:  http://www.emirates247.com/business/energy/world-s-largest-oilfield-to-get-even-larger-2010-09-28-1.296259 [Accessed 24th December, 2012]

Kestle, L and London, K. (2002) Towards the development of a conceptual design management model for remote sites, In C. Formoso & G. Ballard (Eds.), 10th Annual Conference on 'Lean Construction (IGLC-10) (Vol. 1, pp. 309-322) Gramado: Federal University of Rio Grande Do Sul, 6-8 August,

Kestle, L. (2009). Remote Site Design Management, University of Canterbury NZ

Kestle, L. and London, K. (2003) Remote site design management –the application of case study methodology,  In the proceedings of the Post Graduate Construction Research Conference, Melbourne. Australia

Kondratowicz L. (2003) NeLoC- Work Package 1- Planning of Logistics Centres, Final Report, The Maritime Institute in Gdansk, Gdansk, Poland, 133 pp

McAnulty, S., Baroudi, B. (2010) Construction Challenges in Remote Australian Locations, Association of Researchers in Construction Management (ARCOM) Conference, Leeds, United Kingdom

Walsh, K.D., Hershauer, J.C. Tommelein, I.D., and Walsh, T.A. (2004). “Strategic Positioning of Inventory to Match Demand in a Capital Projects Supply Chain, Journal of Construction Engineering and Management, ASCE, November/December, 130 (6): 818-826

Yusen Logistics (2012) TAPA, [Online] Available from:  http://www.yusen-logistics.com/eng/support/quality/tapa/ [Accessed 24th December, 2012]

 

 

Appendix A

Ghawar Oil Fields