Application of operations management modelling towards optimising research and development performance processes in the oil and gas industry: the case of SINOPEC Corp. and NNPC

• DOI: http://doi.org/10.1111/opec.12100
• Date: 01 June 2017
• Author: Hafsah Kabiru Jibril,Mukhtar Habib,Musa Salihu Danlami,Hamza Jakada
• Published date: 01 June 2017

Application of operations management

modelling towards optimising research and

development performance processes in the

oil and gas industry: the case of SINOPEC

Corp. and NNPC

Mukhtar Habib*, Hamza Jakada**, Musa Salihu Danlami* and Hafsah

Kabiru Jibril***

*State Key Laboratory of Tectonics and Petroleum Resources, China University of Geosciences, Lu Mo

Road, 430074 Wuhan, Hubei, China. Email: mukhtarhabib102@gmail.com Email: mussanga@gmail.com

**Department of Civil Engineering, Baze University, Abuja, Nigeria. Email: jakadahamza@gmail.com

***Departmentof ComputerScience,NigeriaNile University,Abuja,Nigeria.Email:decool_hafsah@yahoo.com

Abstract

This work intends to optimise research and development performance in the oil and gas industry based

ontheoretical framework on the principles of structural equation modelling (SEM). We define the bases

of the model by six different structural constructs derivedfrom literature and there interdependence in

the form of hypotheses. The constructs consist of one latent exogenous variable and five latent

endogenous variables. Furthermore, five independent operational variables were established with

respectto the latent exogenous variable while 20 dependent operational variables were also established

withrespect to thelatent endogenous variables. Theevidence of interdependence amongthe constructs

and their respective operational variables were provided by five different hypotheses carried out on the

pathdiagrams. As a result, theinteraction between each construct and its variablesdefines its individual

measurement model, which translates into some sets of linear equations. Having obtained the

measurement for each construct, there interaction can then be applied to define other sets of linear

equationsthat representthe behaviourofthe organisationof theentireprocess whichisexpected toyield

the proposed research and development programme. The developed model can easily be adopted by

interested parties for application on similar projects.

1. Introduction

A significant value of the entire world economy, mostly in industrialised nations like

China, United states, Germany etc. depends on oil and natural gas to meet there

industrial needs. As a result, the oil and gas industry operates at high intensity all over

the world. The industry consists of two different segments, the upstream including

exploration and production (E&P) and the downstream consisting of pipeline transport,

©2017 Organization of the Petroleum Exporting Countries. Published by John Wiley & Sons Ltd, 9600 Garsington

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refining and processing as well as distribution and marketing. But the likelihood in the

coming times is the growing need for increased production so as to meet global industrial

needs. With this development, the E&P sector of the industry will have to strive harder in

discovering more resource reserves while at the same time developing more efficient

recovery methods through enhanced field development programmes. Exploration

activities involve investment decisions to undertake surveying together with exploratory

and development drilling (Babadagli, 2007). Production activities involve decisions

regarding oil and gas recovery which have to be carried out considering the maximum

effective rate of recovery (Bahar and Kelkar, 2000).

Research and development activities areprimarily geared at providing the best concepts

and methodologies to all levels within the Petroleum industry in a bid to ensure overall

efficiency at a lowercost. The twin relationship is criticalfor the survival of the industry and

in ensuring commercial success and development in general (Gaskins et al.,1995).For

example, in multinational joint petroleum exploration and production agreements, both the

host country and a foreign investor should benefit from both intellectual and cultural

exchange.One major area of increasingpopularity is for more developedcountries which are

endowed with technical expertise andsuperior educational facilities totrain personnel from

less developedcountries where there is a potentialinvestment opportunity (Baunsgaard and

Emil, 2001). Similarly, this training can also be earmarked to facilitate apprenticeship and

internshipopportunities for both partners.In many cases, the method of cooperativetraining

is preferred where people are employed to work alongside personnel from the investor

country, notonly for the obvious reason of technological and intellectual transferbut also to

provide a more enabling relationship between both.

The Chinese policy on joint mineral exploration (both on a country to country basis,

country to private basis or a private company agreement) contains all elements of this

sort of reciprocal agreement (Zhao, 2008). As a result of this opening in the Chinese

policy, this paper identified a giant Chinese oil and gas company, China Petroleum and

Chemical Corporation herein referred to as SINOPEC Corp., as a potential partner to any

successful Petroleum exploration and/or development research cooperation around the

world. We went ahead to identify a singular exploration target that is in need of research

and subsequent development together with a potential research partner in the resource

home country. This paper further went ahead to develop a model that will aid research

partners to evaluate the viability of the research partnership and or cooperation thereby

providing a platform for an optimised business partnership.

2. Problem statement

The federal republic of Nigeria is Africa’s most populous nation with a teeming

population of over 183.173 million people having an approximate surface area of about

©2017 Organization of the Petroleum Exporting Countries OPEC Energy Review June 2017

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