CONTRACTOR SELECTION ASSESSMENT STRATEGY IN THE UPSTREAM OIL AND GAS INDUSTRY TOWARDS GREEN SUPPLY CHAIN MANAGEMENT

DOI:10.38035/DIJEFA Abstract: Nowdays, the level of business competition in managing the upstream oil and gas industry is getting higher, therefore oil and gas companies need to improve their performance and optimize the existing resources in the company. This must also be considered in efforts to manage and save the environment, which is currently the main focus of governments and businesses to preserve the environment. In addition to internal improvements were made, improvements are also needed on the part of contractors/suppliers to support this. In this regard, this study was conducted to develop a strategy for conducting an assessment in the contractors selection/suppliers in the upstream oil and gas industry with the aim of implementing Green Supply Chain Management with the Analytic Hierarchy Process (AHP) method. This study maps the evaluation criteria and sub-criteria in the contractors selection and obtains the main criteria in the contractors selection for the upstream oil and gas industry towards Green Supply Chain Management. Results of the study obtain 6 criteria and 23 evaluation criteria in the contractors selection in the upstream oil and gas industry towards Green Supply Chain Management. The two most important criteria obtained are the Environmental criteria and the Health and Safety criteria, both of which have an assessment weight of more than 50% of the total assessment weight. The next criteria obtained are the Quality (Technical), Technical (Shipping), and Price (Quality) criteria, where these criteria are taken into account in the selection of contractors for the upstream oil and gas industry towards Green Supply Chain Management, so that the spirit of competition remains with the contractor and companies have many options contractor to achieve Green Supply Chain Management.


INTRODUCTION
The upstream oil and gas industry is progressing and developing, resulting in increased competition between the Oil and Gas Company and their supporting contractors. The high demand from upstream oil and gas companies forced oil and gas service contractors to provide optimal and quality services so that it is proportional to the costs incurred by upstream Oil and Gas Company.
The business chain in the upstream oil and gas industry has a high risk of accidents and failures. Accidents and failures in oil and gas operations have caused externalities in the form of environmental pollution, property losses and also human lives. So it must be ensured that the entire oil and gas operation chain runs safely, and environmentally friendly. Supply chain management plays a strategic role in the industry, including the upstream oil and gas industry.
The fact that the upstream oil and gas industrial sector can cause environmental damage, it is necessary to minimize the wrong events by implementing an environmentally friendly system for supply chains in the oil and gas industry, namely Green Supply Chain Management (GSCM). By implementing GSCM, it will have a positive impact on the company by increasing the company's competitiveness, enhancing its brand image for environmental management, and strategic marketing for the industry.
XYZ Company is a company engaged in oil and gas exploration and exploitation. The operational area is in the offshore area of East Kalimantan (Makassar Strait). If refers to the Environmental Safety and Health (K3L) data from XYZ company for the last 4 years, there are still environmental pollution. XYZ Company already has an environmental certification, namely ISO 14001, but in the procurement process at XYZ Company, the criteria and subcriteria for the selection of contractors with the GSCM concept have not been applied. The criteria used so far in the selection of contractors are (a) personnel and experience, (b) engineering and SOP, (c) quality and facilities, and (e) price. Taking into account some of the events associated with environmental pollution at XYZ Company, it is necessary to incorporate the concept of Green Procurement in the procurement process. Green Procurement is one of the solutions for the environment and conservative economy of the business and the concept of obtaining a choice of products and services that minimize environmental impact [1]. Therefore, in making the decision to choose the contractors towards GSCM related criteria and sub-criteria, it would be required an effective technique and can give accurate results. One method that can be used for multi-criteria decision making is the Analytic Hierarchy Process (AHP). AHP method is a form of selection decisions that allows the users to form opinions and provide limits to the problem through perception or conjecture and produce the desired problem resolution [2].

Supply Chain Management
Supply chain is the entire network (from suppliers to end users) that has activities related to the flow and transformation of goods, products, information and money [3]. Supply Chain Management (SCM) is a management activity that aims to obtain raw materials, transform raw materials to become semi-finished or finished goods and distribute these goods to the hands of consumers [2]. The main principle in Supply Chain Management is sharing of material flow, information flow which incorporates all the elements in the supply chain.

Green Supply Chain Management
Green Supply Chain Management as a process of using environmentally friendly inputs and converting inputs into outputs that can be reused at the end of the cycle so as to create a sustainable supply chain [1]. Green supply chain management is important to implement because so far the size of supply chain performance usually does not pay attention to the impact on the environment.

Difference between Supply Chain Management and Green Supply Chain Management
Following are the different characteristics between Supply Chain Management and Green Supply Chain Management [4]. High Low

Method of Procurement Process in the Upstream Oil and Gas Industry
According to SKK Migas regulations, namely PTK-007 Revision-IV / PTK / 2017 that regulates the Implementation Guidelines for Procurement of Goods and Services [5], there are several methods of procurement processes can be performed in the upstream oil and gas industry, which are: a) Open Tender This is a procurement of goods or services that is done openly to the public and announced in the official announcement of oil and gas companies, print media or electronic media. The open tender method refers to the basic principles of supply chain management.

b) Limited Tender
Limited tender is carried out by inviting at least 2 (two) candidates who meet certain criteria in accordance with PTK 007 regulations and internal company regulation. c) Direct Tender It is a method of implementing goods procurement by inviting at least 3 (three) required goods supply companies.

d) Direct Appointment
This is a method of procurement by direct appointment to 1 (one) supplier of the goods needed.

e) Procard
This card is an abbreviation for Procurement card. The method is the procurement of goods or services carried out by direct appointment and by using procard media. This media Procard is used as a means of payment without the need for an agreement, or purchase order. f) Electronic procurement This method is done using electronic network facilities (internet or intranet) or electronic data interchange (EDI). g) Self-Management The implementation of self-management can be authorized to government agencies, scientific institutions, universities, community groups or national Non-Governmental Organizations (NGOs). Self-management itself is a work whose implementation is planned and carried out by using its own personnel and equipment and supervised by itself or the implementation can be authorized to other parties.

Analytical Hierarchy Process (AHP)
AHP is a measurement theory through pairwise comparisons and relies on expert judgment to reduce priority scale [6]. In other words, this method is considered a multiobjective-multi-criteria model.
The steps in the AHP method are: Stage 1: Comparing between criteria or sub-criteria using a predetermined comparison scale. In this case, the comparison scale used is the 9 point comparison Saaty's scale [7]. The goal is to see a picture of the relative importance of one element to other elements by using a pairwise comparison scale. At this stage, a consistency test of each criteria or sub-criteria is needed to see whether each criteria or sub-criteria is consistent. The assessment will be stated with 100% consistency if CI = 0. If CI ≤ 0.1, then the assessment is declared acceptable. However, if the CI ≥ 0.1, the assessment process must be repeated.

Stage 5: Calculate Consistency Ratio (CR)
Calculation of Consistency Ratio (CR) using the formula: Random Index (RI) value is obtained by using the formula: Where the value of n is the number of criteria / sub-criteria used.
Consistency Ratio is a number that shows the level of consistency of a value. If the CR value is ≤ 0.1, it can still be tolerated. However, if the CR value is ≥ 0.1, a revision needs to be done. For the value of CR = 0, it can be interpreted as "perfectly consistent". [7] Stage 6: Add up the relative weights and synthesize for the final measurements of the alternative decisions given.

RESEARCH METHODS
In this study, the AHP method is used to assess the importance of each criteria and sub-criteria that have been selected and then submitted to respondents. List of respondents consisted of 5 expert respondents in the XYZ company. Respondent selection is based on (1) Respondents or experts having work experience of more than 15 years in the procurement and evaluation process for contractor selection, and (2) Respondents or experts always take part in the evaluation process of contractors in the upstream oil and gas sector at XYZ company. Below are the steps in the process of assessing criteria and sub-criteria using the AHP method as follows: a) The criteria and sub-criteria selected were obtained from various references, namely internal company regulations, PTK-007 Revision-IV / PTK / 2017 manual book [5], and PTK-005 Revision-II / PTK / 2018 manual book [8]. These criteria and subcriteria are then submitted to respondents in the criteria and sub-criteria selection questionnaire (stage 1 questionnaire). In this questionnaire using a Likert's scale [9]. b) From the criteria and sub-criteria that have been selected from questionnaire stage 1, then a decision making hierarchy model is made. c) Do pairwise comparison matrix for the criteria and sub-criteria using the 9 point Saaty's scale (questionnaire stage 2). d) Calculate weights and consistency test using expert choice software to get the final synthesis value and the decision making hierarchy model. The results of the final synthesis and the decision making hierarchy model are taken into consideration in the submission of conclusions and suggestions.

Analysis of the results of weighting criteria
From the results of the questionnaire stage 1 using Likert's scale is obtained there are 6 (six) main criteria and 23 (twenty three) sub criteria selected as in Table 4.1 below. Then pairwise comparison were performed on the questionnaire stage 2 using the 9 point Saaty's scale and processed using expert choice software. Table 4 shows the results of weighting of the questionnaire stage 2 for main criteria.  4 above shows that in the process of evaluating contractors in the upstream oil and gas industry towards Green Supply Chain Management, the environmental criteria have the highest weighting value of 0.366, then followed in succession namely the Health and Safety criteria (0.360), Quality criteria ( 0.093), Technical criteria (0.092), Shipping criteria (0.057), and Price criteria (0.33). Environmental Criteria and Health and Safety criteria have a total weight of 0.729 (more than 0.5) and these two criteria are priorities in the assessment of contractors in the upstream oil and gas industry towards Green Supply Chain Management.

Analysis of the results of weighting sub-criteria
From the results of the questionnaire stage 1, there were 23 sub-criteria identified and then do pairwise comparison of each of the sub-criteria in the questionnaire stage 2 used a 9 point Saaty's scale. The results of the questionnaire stage 2 were processed using expert choice software. Table 5 below shows the results of the weighting of the questionnaire stage 2 for sub-criteria.  Figure 2. below shows the local weights and global weights of the criteria and subcriteria for evaluating the selection of contractors in the upstream oil and gas industry towards Green Supply Chain Management.

CONCLUSION
Based on the calculation and analysis of the data above, the assessment process for contractor's selection in the upstream oil and gas industry towards Green Supply Chain Management contained 6 criteria and 23 sub-criteria that could be used in the assessment process. Environmental Criteria and Health and Safety criteria are the two main criteria that take priority for contractor's selection in the upstream oil and gas industry towards Green Supply Chain Management with a total weighting of more than 50% of the total weight of the assessment.
The The next criteria which includes Quality, Technical, Delivery, and Price are remain to be considered further in the assessment of the contractor's selection in the upstream oil and gas industry towards Green Supply Chain Management so that the spirit of competition between contractors still exist and XYZ company has many options contractor in order to to realize Green Supply Chain Management.