Study On Procurement Environment For International Oil Companies

In this article, procurement is defined as the acquisition of goods and services, on a free market, via public tendering or single source methodology from an independent contractor. The procurement practice is the consequential evolution of a free market, and it’s evolving together with the development of market entities. It’s also the natural requirement of modern proprietorial theory, that is, separation of business management rights and property titles.Almost all purchasing decisions include factors such as delivery, handling, cost, marginal benefit, warranty and mutual liabilities. Because of scarcity, the decision regarding procurement of specific goods or services must be made. In order to avoid different risks under specific procurement constrains, and to output procurement documents in standard format, which may be provided as an evidence for justice to monitoring organizations or independent auditors, a strict work procedure is set up and must be strictly abided by. In modern oil & gas industry, the procurement procedure normally consists of 6 steps:identification of needs, sourcing, technical confirmation, acceptance of offer, final execution of contract, and supply chain management. For the international oil companies, including some state-owned oil companies, usually will establish specific and detailed procurement procedures, setting up the requirements and rules of public tendering or single source workflows. As measures for post-assessment or live monitoring, all the procurement documents created in the process of key activities shall be kept in file or utilize electric tendering systems as an auxiliary method.In this study, CNOOC (China National Offshore Oil Company for full name), one of three largest oil companies in China as an example, the procurement environment, with the background of internationalization of world economy, was analyzed and some references were made to some international oil companies (short for IOC) which were mainly dedicated in exploration, development and production of oil business globally. The emphasis of this article was also put on the procurement environments in typical countries in Africa, Middle East, Oceania and Europe. This article compared and analyzed both the macroscopic procurement environments such as political system, economic system, legal system and religious culture, and microscopic procurement environments such as petroleum contracts, joint management agreements, supplier market and company governance, in the circumstances when IOCs doing investment on oversea countries. At the same time, a complete list of measures was provided in this article, for coping strategy to avoid or minimize procurement risks confronted by IOCs. It’s expected to be a good guidance and reference for IOCs when establishing contracting strategy.