Education and Improvement of the Local Content Collaboration: Bridging the Gap in answering Supply Chain Management Quest for Better Indonesian Upstream Petroleum Industry

As a country with relatively “lack” of hydrocarbon resources compare to the other main oil and gas producer country in the world, Indonesia is at the edge of its energy security being questioned for the next decades. With only 0,2% proven oil reserves of the total proven oil reserves in the world, and 882,000 barrels dailyproduction, with 1,623 million barrels daily consumption, it shows that the over consumption of the oil and gas is not balanced with the production effort to suffice domestic consumption. Some experts’ beliefs that this condition is rooted to the lack of exploration and “troublesome” bureaucracy process, which in the long run will potentially make the energy security for oil and gas in Indonesia become jeopardize if there is no significant improvement in the industry and regulation of this sector. In a smaller scale of this sector, one of the solutions for such problem is waiting to be improved in order to become part of the answer of the energy security problem of this country. It lies with the Supply Chain Management, as one of the key part of energy management.

[caption id="attachment_409012" align="aligncenter" width="300" caption="Indonesian Oil Statistic 2013"][/caption]

Supply Chain Management (SCM) is defined by Supply Chain Forum as the integration of key business processes from end user through original suppliers that provides products, services, and information that add value for customers and other stakeholders. In the simplest words, it is the way to manage chain of supply of goods and services to the customers.In its utilization over the upstream oil and gas industry in Indonesia, the SCM has been utilized very well by ensuring the procurement of goods for this industry comply with the regulation while also maintaining optimal quality of the goods for present petroleum upstream business activities. The success of higher utilization of local content of domestic product in the petroleum upstream industry has gradually increased until up to the rate of 54,15% from total commitment for procurement of goods and services in the petroleum upstream industry in 2014. Moreover, in order to maximize the potential of SCM for this type of industry in the future, it is really important to create improvements over 2 (two) main issues inside the SCM which is Human Resources and local content collaboration.

[caption id="attachment_409015" align="aligncenter" width="300" caption="Simplified Oil and Gas SCM Diagram"]

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First, in order to effectuate the SCM, improvement must be established in its executor, which is human resources. The issues around the human resources can be divided into 2 (two) parts: external system-driven and internal system-driven. As for the external system-driven issues, is coming from the condition that even though Indonesia is well-known as the 4th most populated country in the world, finding qualified and expert human resources, especially for the SCM, is really difficult. The low level of mastery of information of technology among the SCM officer may also reflect another challenge for the improvement of the system. Moreover, the regional-based development of human resources is still waiting to be taking in to account in the bigger picture of the system. The development of region area has sometimes left the human resources behind the infrastructure and facility of the area where the resources lies. While from the internal system-driven, the lack of understanding of the SCM’s employee over the significance of their role in a greater perspective, especially to the development of the nation.

Second, along with the higher percentage of the local content utilization in the upstream petroleum industry from the past years, the potential for bigger share of involvement is still remain open for improvement. It is found that the involvement of local bank and related local goods and services industry in the upstream petroleum projects has given significant revenue for the national government. However, the regional player has not enjoy the same share of involvement which is needed for greater benefit for the province or regional where the resources extracted. The involvement of every stakeholder in the petroleum upstream projects is a must for giving maximum benefit for the government, both in the regional level and the national level.

As for the problems in the human resources, there are several improvement that is required in answering challenges faces by human resources in the SCM as mentioned above. First, the opportunity to develop knowledge and practical experience must be aligned with the future projection that the company would like to pursue. It is possible to achieve it by provide scholarship for higher degree at local or foreign universities or by giving specific training (i.e Information technology, update of SCM methodology, etc) for the employee in the periodical manner. Such training also need to be well-tailored not only for the hard skill but also to the soft skill of the employee by trying to immerse the value of integrity, interpersonal skills, and self-responsibility to the company culture as well to the future of the nation. Second, the regional involvement can also be achieved by giving scholarship and opportunity for training and internship to the regional student as part of the early recruitment from the region area. Having the opportunity to learn the industry directly may give better opportunity to develop their own region even after the production was finished from that region.

In the other hand, for the problems with local content improvement, the writer believes that the key solution to maximize the local content potential in this particular industry is by encouraging more collaboration between the stakeholders of petroleum upstream operations, such as Petroleum Company, government and the supporting industries related to petroleum upstream operation. As for the petroleum company, they can integrate their information system in order to be able to get the information of qualification and classification of vendor database, information planning (i.e. procurement plan, inventory visibility and surplus material). So that at the moment where there are some companies that require same items, therefore consolidation for utilization can be done at the same time. As for example of such collaboration among the petroleum companies for this matter is utilization of same transportation company for procuring ship and drilling rig. While for the government, incentives for such encouragement of the collaboration for certain period may give support for the petroleum industry to involve more national and regional player in the petroleum operation business activities. Further, check and balances must be established in order to effectuate the implementation of such incentives given. The last but not least, encouragement for more national and regional company to also forming collaboration to support the petroleum operation is important. Having one single roof services for all of related services from payment to shipping for the petroleum operation business activities will boosting the exploration and production as well for the revenue for the country.

In conclusion, Indonesian energy security may be suffered in the long run if there is no improvement in its industry and regulation of its resources. However, such condition can be avoided by maximizing the potential of the Supply Chain Management in its petroleum upstream business activities. The supply chain management can be maximized by up-scaling the capability of the employee through education and training. Also, the regional student can also be involved as the future employee in order to give more opportunity for them to contribute to their region from the petroleum industry. Moreover, the collaboration of the stakeholders is essential to give more benefit for every stakeholder as well to support the revenue of the country.

Reference:

BP Stastical Review

http://www.bp.com/en/global/corporate/about-bp/energy-economics/statistical-review-of-world-energy.html

Viva News – Bantahan BP Migas

http://bisnis.news.viva.co.id/news/read/368345-bantah-tudingan--ini-13-fakta-dari-bp-migas--ii-

Picture:

1. http://2.bp.blogspot.com/-cjXhJN-0FTU/Ubh_JgHk_RI/AAAAAAAAEUQ/7EhAKw3U8QU/s1600/BP_INdonesia2013.gif

2. http://www.lancs.ac.uk/~marshaj3/Group%20Website/images/Supplychain.jpg