Process Management
Process Management refers to the application of knowledge, skills, tools, techniques and systems to define, visualize, measure, control, report and improve processes with the goal to meet customer requirements profitability.
The innovative side of the company
Petrom’s privatization in 2004 was critical for the company’s competitiveness and sustainable development. In 2005 Petrom embarked on a restructuring and modernization program throughout all business segments. In 2010, they marked 4 years of successful track record in restructuring and modernization with the following main achievements:
Exploration and Production
- Successful efforts to stabilize oil production in Romania (production level maintained at around 89,000 boe/day) achieved through improved drilling performance, well modernization and the application of new technologies related to well productivity;
- 2010 reserve replacement rate target achieved in 2008 (71% in Romania) as a result of the continuous revisions of mature fields, intensification of the drilling program combined with diversification of recovery mechanisms applied;
- Well modernization finalized (5,049 wells completed by end of 2008) with a significant impact on production costs, production volumes (gained incremental production for 5,000 wells of around 1,000 bbl/day) and operational safety; the number of interventions has been reduced by 60% compared to 2005.
Refining and Marketing
- Significant energy efficiency improvements (own-crude consumption level reduced from 14% in 2004 to 11.5% in 2010);
- Increased middle distillates yield (from 30% in 2004 to 37% of product in 2010);
- Significantly enhanced capabilities to produce EU specification fuels;
- Modernization of the filling station network in Romania completed; all filling stations in Romania operating under full agency system;
- Annual throughput per station reached 4.3 mn liters in 2008, up from an average of 2 mn liters in 2004.
Gas and Power
- Consolidated position in the Romanian gas market through a strong presence in all sectors of the gas market and a 34% market share;
- Optimized business model for the gas activity: the Gas business division focuses on sales to the large gas distribution companies and state-owned power producers, whereas the 100% affiliate Petrom Gas SRL expanded its market position in the end-user power plants and industrial sector; together with the small gas distribution network spun-off in 2007 into a wholly owned company (Petrom Distributie Gaze srl) OMV Petrom Group serves all segments from small households to large-scale consumers.
- Started construction of a 860 MW gas fired power plant – as part of Petrom’s strategy to expand the gas value chain and leverage the electricity industry liberalization by entering the power generation market.
Strategic Level Assessment
On May 21, 2010 Petrom announced its strategy for the next five years. After a profound and successful restructuring and modernization process, Petrom aims to become the key player in the regional energy market.
The presentation here below provides a comprehensive overview of the progress made by Petrom after the privatization, the current stage of development within the macroeconomic environment and the strategic directions pursued in order to achieve sustainable development and become a leading integrated energy player in Southeastern Europe.
As a member of the OMV Group, Petrom has embeded in its operations the '3plus' strategy. The company’s core activities are represented by the three business segments – Exploration & Production, Refining & Marketing, and Gas & Power – and operated with a focus on their sustainability. As a regional center within the OMV Group for Southeastern Europe, Petrom plays an essential role in delivering concrete economic results in one of OMV’s three growth markets - CEE, SEE and Turkey. Additionally, Petrom focuses on the three values of the OMV Group – Pioneers, Professionals and Partnership - which distinguish us from our competitors and strengthen our competitive advantage in technical and commercial activities.
Enhance value of integration, key element to value creation
We derive our value from integration in our business model and we constantly endeavour to identify and make the most of the synergies along our value chain. To this end, we focus on restructuring measures while constantly pursuing financial discipline and strict cost management to maximise operational efficiency and earnings strength. In order to adapt Petrom’s value chain and to tailor it to fit significantly altered supply-and-demand fundamentals, we changed the scope of our original investment plan in refining. As such, Refining’s primary role will be to process only domestic crude production. We also decided to exit the chemicals sector by the end of 2010. Furthermore, we are adjusting our asset portfolio by strengthening our E&P and G&P businesses, investing selectively in power generation and renewable energy sources.
Capitalize on leading position as oil and gas producer in SEE to become a key energy player
We committed to transforming ourselves from a leading integrated oil and gas company in Southeastern Europe to a key energy player by expanding into power generation. As an integrated oil and gas company accounting for approximately half of the Romanian gas production, with extensive market knowledge and experience, Petrom is best positioned to seize the opportunities in both oil and gas as well as in power markets. We therefore committed to developing a power generation portfolio in order to leverage the value of natural gas while pursuing relevant opportunities in the renewable energy field. Meanwhile, we will continue to leverage our role as the OMV Group operational hub for marketing in Southeastern Europe and for exploration and production in Romania and the Caspian region, which is our core priority.
Sustainable development through diversification of energy sources
The extension of our activities in the energy sector is a significant component for the sustainable development of the company. To this end, we plan to develop a portfolio of projects covering energy from both conventional and renewable sources. As part of this process, we are expanding our value chain to leverage the value of the natural gas by developing our own power generation business and we are positioning ourselves to enter the renewable energy market, with a focus on wind projects in order to reduce carbon intensity. Moreover, we are committed to sustainable development based on good corporate governance, high standards of corporate social responsibility, clearly defined corporate values and our internal code of conduct.
After a profound and successful restructuring and modernization process, Petrom aims to become the key player in the regional energy market.
In order to reach our objective of becoming the leading integrated energy player in SEE, with increased performance and flexibility, we will focus our efforts on consolidating and expanding the hydrocarbons business, on business portfolio diversification through power production, on improving efficiency and maximizing the integration value in all units. Against the background of major economic and environmental challenges Petrom continues to invest in key projects to maximize performance. In this way, we will secure our sustainable growth and ensure a diversified portfolio of energy products, from fuels to gas and power, at EU quality specifications for our customers. With annual investments of more than EUR 1 bn, we will continue to be a significant contributor to economic growth in Romania through the multiplying effect of our investments.
Sizeable investments for business sustainability and growth
Sustainability represents the foundation of all projects and activities at Petrom, starting from growth and diversification principles, financial discipline, corporate governance and business practices, up to employees’ development and CSR. Petrom will continue to grant special attention to HSEQ activities, operational and energy efficiency and strict cost management.
Petrom’s objective regarding sustainability consists of improving the company’s rating at Prime mid range.
In order to support the company’s sustainable development and growth potential, investments of more than EUR 1 bn per year are needed. Therefore, the company will focus on securing financing sources through a combination of strict cost management and optimization initiatives as well as a share capital increase of up to EUR 600 mn according to the authorization received from our shareholders. In addition, we intend to pursue gas price convergence and seek further access to credit markets whilst maintaining our prudent financial management.
- E&P: Aim to largely offset natural decline and unlock exploration and production potential
- R&M: Maximize integration value and strengthen position on fuels market
- G&P: Market leader on Romanian gas market and important power generation supplier
Operational level assessment
- Maintain the average throughput ratio of fuel stations to 4 mn litrs/year;
- New highly frequented locations, the new design and enhanced service quality supports the 38% total market coverage;
- The introduced full agency concept thrives towards a higher service level in both oil and non-oil business;
- Total marketing investment of EUR 0.45 bn until 2011;
- Will open till end of 2011 two modern fuel terminals.
Leader of the Romanian fuel distribution market, Petrom has the largest retail network in Romania formed of its approx. 500 filling stations located all over the country. The company has consolidated its position on the regional market where it now owns approx. 270 filling stations Moldova, Bulgaria and Serbia (including OMV filling stations). Currently, Petrom benefits from a strong position, that of an operational centre of the OMV Group in South-Eastern Europe, in its marketing activity.
Through significant investments in marketing, worth approximately EUR 450 million until 2011, Petrom is preparing to set new standards of quality, safety, reliability and convenience for customers. The concept for filling stations inaugurated in 2005, PETROMV, represents the expression of a customer oriented company. The conveniences are new for the distribution sector and vary from the basic services for a filling station to additional services (restaurant, terrace and playground) as well as a wide range of products. The modern design and features, a large variety of services and the presence of a consolidated brand as Viva are the advantages of the new filling stations.
At the same time, the administration system Full Agency was finalized, system which stipulates that the filling stations should be managed by partners chosen on the basis of objective criteria, thus determining an improvement in services
The introduction of new management systems, the improvement and diversification of products and services, the introduction of the payment system, PetromCard, the construction of new filling stations or the modernization of the existent ones triggered positive results in marketing.
In 2009, Petrom launched a new range of fuels. They are produced in Petrom’s refineries, have low sulphur content of 10 ppm and meet the European Union’s quality standards for 2009.
Improving products and services and aligning at the international standards of marketing business is a permanent preoccupation. In this way, the company continues to fulfill its customers’ requirements and to put out all efforts to achieve the objectives it committed to.
The capabilities of the new communication system are perfectly suited to evolve in tandem with Petrom’s business strategy. In addition to extending user figures of around 10-15,000 over the next 5 years some of the most striking implementations may be deployed in the filling stations. Within just a short while each station will be fully integrated. Robert Mueller observes the potential the solution can deliver: “There are a lot of possibilities with new technology, services and also unifying the infrastructure of services at Petrom. We have to bring the solutions to envelop the whole of the company. Covering all of Petrom is more of a priority than enlarging services.”
Complete integration unlocks multiple possibilities for Petrom. Pumps at the filling stations will cease to be solely dispensers of fuel; Unified Communications offers opportunities to open completely original revenue streams. An IP line to every filling station enables online communication to monitor stock and the capacity to import supplies automatically, while unifying other communication methods enables each station to allow new concepts.
Diverse areas of Petrom’s business may be enhanced, such as the possibility of increasing security by using UC CCTV. Further developments are possible in marketing due to the increased knowledge of customer behaviour. Furthermore, Petrom’s flexibility will develop through the possibility of unique offerings, enhancing the brand name, increasing customer satisfaction and, ultimately, boosting customer.
Future predictions
As an energy group OMV must respond to the challenges of rising energy demand, finite fossil fuel reserves, and climate change. We do so by investing in research and development (R&D) and in innovative projects in the renewable energy field.
From 2006–10, the OMV Future Energy Fund carried out feasibility studies to assess the potential of renewable energy for OMV Group. The results laid the basis for a new strategy to move the Group toward power production and investments in selected forms of renewable energy. The G&P business segment is in charge of developing gas-fired power plants and wind and solar power projects.
Construction of the in Romania’s Dobrogea region kicked off in 2010. OMV is investing EUR 100 million in the plant. When it begins operating in 2011, it will have an installed capacity of 45 MW, which may be increased to 54 MW.
In 2010, OMV became the first Austrian company to join the Desertec solar power project as an associate partner.
Sustainable development means meeting the needs of the present without compromising the ability of future generations to meet their own needs. An energy group like OMV must think about how to produce and secure energy in the long term while balancing environmental, social, and economic considerations in its approach to doing business.
Functional strategies in our Sustainability Strategy 2015 ensure that our business grows in an economically, environmentally, and socially balanced way.
The annual Sustainability Program provides a consolidated overview of OMV’s performance during the reporting period in eight areas: Leadership, Economy, Human Rights, Employees, Health, Safety, Environment, and Community Relations It also sets out the targets for the next reporting period.
Resources for the Future
The climate change and the increase of the demand for resources worldwide are true facts which can no longer be ignored by the society at present. Despite the attention paid to the subject at an international level, this concern is not a priority for the Romanian public agenda.
Petrom is the first private company to realise the importance of raising the public awareness regarding the responsible use of natural resources.
Petrom`s effort in this regard is the "Resources for the Future” program launched in 2007, through which we intended to efficiently act in order to generate a responsible attitude towards the environment and resources.
Through the "Resources for the Future” program we want to respect the chance of our children and to prove that we act responsibly not only towards ourselves, but most particularly towards the future generations.
Respect for the future
Petrom has also invested in many environmental projects as well as charitable actions supporting the Romanian community.
- 4,307,710 euros were invested in community and sustainable business practices (business ethics, corporate governance, health and safety, employee development)
- 4,7 million of Romanians from 16 counties will be able to benefit from emergency and specialty medical services
- 140,400 trees planted on approximately 35 hectares of land throughout the country in benefit of local communities from Prahova, Bacău, Vaslui, Suceava, Galaţi, Dolj, Giurgiu counties and Bucharest
- 318 enlisted projects out of which 23 solutions for communities financed during the project contests from Andrei's Country and that will benefit 400,000 people
- 2 schools completely rehabilitated and another 16 educational institutions renovated and equipped with new furniture that benefits 4,600 pupils from rural areas in Gorj, Teleorman, Argeş, Giurgiu, Dâmboviţa, Prahova, Brăila, Buzău, Ialomiţa and Galaţi counties
- Approximately 10,500 students familiarized with environmental protection notions, civic involvement, health, road and indoors safety
- Over 300 young Olympics with exceptional results were awarded and supported on their road to performance with monthly scholarships, prizes or participation in career coaching activities and summer camps
- 2,300 students from Bacău, Sălaj and Vâlcea benefited from workshops held by Petrom Olympics in Physics, Geography, Chemistry, Psychology, Medicine, Business or Dance during the project „Knowledge Caravan“
- 737 kindergarten children from the rural area were prepared for their integration in the 1st grade
- Over 300 professors throughout Romania learned new informal teaching methods and developed their eco-civic teaching abilities
- 400 students from 11 highschools from Bihor, Bacău, Buzău, Argeş, Vâlcea and Giurgiu counties followed leadership and personal development courses
Conclusion
The oil and gas industry is witnessing technological reform that can transform the nature of its business. Romania’s largest company, Petrom, has taken the initiative to use Cisco’s expertise to revolutionize its communication system. IP technology now enables Petrom to centrally manage its concerns while possessing the capacity to expand globally with uniformed filling stations. Customers will be able to enjoy a brand experience by using filling stations as retail experiences, enhancing loyalty to Petrom in the world’s first oil country.
Bibliography:
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- http://www.petrom.com/portal/sustainability
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