(Solution) CIPS ADNOC Onshore Module: Sourcing Essentials in Procurement & Supply
Executive Summary
For this assessment, focusing on sourcing essentials in procurement and supply, different approaches have been evaluated. Part of their evaluation include application in context of ADNOC Onshore operations. For ADNOC onshore organisation, they are involved in different categories of sourcing. To facilitate their operations onshore, ADNOC procures different products and services in multiple categories. The category of spend used in this assessment is the logging services. The sourcing approaches which have been identified for evaluation include sole, single, dual and multiple.
From the key findings of this evaluation evidence that sole sourcing exist when only one supplier is available and have zero choices to select from. This is with single sourcing being by choice and many being available. This is therefore a monopolistic market. The key findings on dual sourcing evidence that there are two available or more available but organisation make a choice for working with two. The final multiple selection findings evidenced that there are many suppliers in the market with choice of selection depending on the organisation. This is with the sourcing approach appropriate in an oligopolistic, imperfection and perfection. The findings are informed by different models including Mendelow Matrix (Peter Block), supplier preferencing matrix, and Kraljic Matrix being used in this report.
Also, part of this assessment include sourcing appraisal of the logging services category of spend. The key findings evidence that sourcing appraisal assists in coming up with a highly qualified suppliers group, reduction of risks and achieve the best value for money outcomes for the logging services sourced by ADNOC.
There are a set of limitations which have been evidenced in this report evaluation. These can be managed by implementing the following recommendations;
- For logging services, a unique sourcing approach would be used different from other sourcing approaches
- The sourcing appraisal can be expanded to include more factors
- Policies and practices need to be put in place for improving sourcing process
- An improved stakeholders relations and inclusion in sourcing approach selection need to be enhanced
- PS&M team increased awareness for various sourcing approaches and using RFP, RFQ and Product Lifecycle
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Description
Solution
Table of Contents
1.1 ADNOC Onshore Background. 3
1.2 ADNOC Onshore Spend Category. 3
2.0 Identified Sourcing Approaches. 5
3.0 Sourcing Approaches Evaluation. 6
4.0 Models Analysis on Sourcing Approaches Rationale. 10
4.1 Stakeholders Management 10
4.2 Suppliers Preferencing Matrix. 12
4.3 Supply Positioning (Kraljic Matrix) 12
6.0 Conclusion and Recommendations. 16
Figure 1:5 Rights as Business Priorities. 5
Figure 2:Summary of the stakeholders in ADNOC Onshore.. 11
Figure 3:ADNOC Onshore Stakeholders Analysis. 12
Figure 4:Summary of ADNOC Onshore Suppliers Preferencing Matrix. 13
Figure 5:Summary of ADNOC Onshore Kraljic Matrix Analysis. 14
Figure 6:Supplier Evaluation Carter 10C’s Model 15
Figure 7:Statement and income.. 16
Table 1:ADNOC Logging Services Spend.. 5
Table 2:Summary of the Sourcing Approaches Identified.. 7
Table 3:Single sourcing justification.. 9
Table 4:ADNOC Onshore Costs-based savings. 10
Table 5:Logging Services Multiple Sourcing. 11
1.0 Introduction
1.1 ADNOC Onshore Background
Abu Dhabi National Oil Company (ADNOC) Onshore is an organisation which has been in active operations in United Arab Emirates (UAE) since 1971 (ADNOC, 2023). The organisation is involved as a leading onshore within ADNOC Group. The organisation concession area is approximately 12,000KM squared and is found operating more than 11 oil and gas fields in their 4 assets. These assets include Bab, North East Bab (NEB), Bu Hasa and South East (SE). Further, the organisation operates two different export terminals in Jebel Dhanna and Fujairah and vast pipeline network where the oils is transported form the oil fields.
The size of ADNOC spend is approximately $150 billion in next 5 years as a strategy for advancing their 5 million barrels daily in oil and gas production targeting to 2027 on back of improved market fundamentals (Upstream, 2022). Further, MEED (2022) note that their categories of spend cumulatively includer $5.3 billion in 2022. Their main categories of spend are logging services, pipeline equipment and installation, furniture and fixtures, motor vehicles, plant-based machinery, research and technologies, IT services, admin services and logistics. As evidenced in ADNOC iSourcing platform, they adopts multiple suppliers including Vallourec, Tenaris, Sumitomo, Tianjin Pipe, Hengyang, TMK, JFE and Voestalpine (Reach UAE, 2023).
1.2 ADNOC Onshore Spend Category
For ADNOC, they pursue logging services sourcing for identifying oil and gas intervals and quantifying properties of reservoir rock through placement of different forms of sensors in boreholes (ADNOC, 2024). In financial year 2023/24, the overall budget for the logging services was at AED70 Million. A summary of ADNOC Onshore spend category is as illustrated in the following;
Table 1:ADNOC Logging Services Spend
Source: Summarised from ADNOC (2024)
| Logging Services | Application of Services | Suppliers Summary |
| Directional drilling | Used in access to underground oil and gas reserves | Matar Engineering construction, Smith drilling systems, Tiempo Line Towers |
| Surface logging services (SLS) | Reliable and accurate acquisition, monitoring, analysis and integrating real-time geological data | Baker Hughes and DuraForm TPU Elastomer |
| Wireline services | Industry-based approaches lowering cables and wires into a wellbore | AlMansoori specialised engineering, front line mechanical equipment, and NOV Products middle east |
| Cased hole logging | Retrieve logging measurements by well casing or metal piping | PETECS |
| Pressure pumping | Propagation of fractures through layers of rock | Annovi Reverberi, interpum |
| Drilling and completion fluids | Final phase of the logging process with oil and gas sourced | Catalyst drilling fluids |
In table 1, in the suppliers categories (3rd column), there are different sourcing approaches which are applied. For example, in the various logging services categories, different sourcing approaches are engaged in the sourcing process. The rationale of this is achieving the 5 Rights as Business priorities (CIPS Module Notes) as illustrated in the following;
Figure 1:5 Rights as Business Priorities
Source: CIPS Module Notes
PS&M teams ensure that ADNOC does not only prioritise on initial cost but also entire costs of operation. For logging services, apart from AED70 Million cumulatively budgeted, they also incur a further AED30 Million for maintenance. For quality, PS&M ensure in every 100 units supplied, less than 2% would need to have a defect rate. This is with required quantity supplied based on purchase order, right time and onshore operations areas.
2.0 Identified Sourcing Approaches
2.1 Sole
This approach means “only one supplier (source), to the optimum understanding of the buyer/belief and sufficient/thorough research through a market survey research can be in a position of delivering product/service as required” (CIPS, 2023)
2.2 Single
This sourcing approach include “Even when different suppliers can be engaged, a specific supplier is selected by an organisation” (CIPS, 2023).
2.3 Dual
This is a strategy where “PS&M engage two different suppliers for a specific service, product, component or raw material”.
2.4 Multiple
In CIPS (2023a), this is identified as a practice where “many suppliers are involved in provision of sourced products and services”. Multiple sourcing can be involved for different spend categories or same categories.
A summary of the different sourcing approaches analysis is illustrated in the following;
Table 2:Summary of the Sourcing Approaches Identified
Source: CIPS Module Notes
| Sourcing Approaches Selected | Summary of the approach | Levels of Competition | ||||
| Monopoly | Duopoly | Oligopoly | Imperfect | Perfect | ||
| Sole | No choices in place | |||||
| Single | One supplier based on choice not limitation | |||||
| Dual | Two involved by choice or design | |||||
| Multiple | Many suppliers in place for working with | |||||
In summary, for the different sourcing approaches, various levels of competition are in place. This is dependent on the different approaches which are selected and engaged in the process.
3.0 Sourcing Approaches Evaluation
3.1 Sole Sourcing
For sole sourcing, from the outcome of detailed research and analysis, there lack another supplier or a source of a specific spend category (CIPS, 2023). As illustrated in table 2, this is used in a monopolistic competition market. In ADNOC this is preferred to source technical, specific brand option and specialised expectations. For example, for ADNOC Onshore iSourcing system,
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