Procurement In Oil And Gas Sector Is Collaboration Key For Supply Chain Survival

Oct 3, 2022
The Covid situation has badly affected the oil and gas operators. The border closures and the worldwide lockdowns have limited the capacity of the oilfield services. They are still recovering from the consequences of the collapsing oil prices. Most oil and gas companies are still taking measures to cut down their capital and operating expenditures. Oil and Gas Procurement Such conventional approaches may destroy crucial industry capacities and impair oil and gas operators' capacity to sustain output. Even if these companies survive the current era, they'll have to forcefully reduce oil prices. Due to the current distressed scenario, large oil and gas companies can go bankrupt, resulting in shutting down. If you're in pursuit of finding a sustainable cost for near and long-term profitability, the supply chain and OFSE companies have decided to work in cooperation. The supply chain in the oil and gas industry has to accept new contracting models. The true collaboration between the two industries will help them to work in a balanced share of risk and reward, resulting in the creation of effective strategies for the supply chain management. Here are the five most effective supply chain strategies to adapt to current distressed situations:

Cost Cutting

This industry, known to be fat and comfortable with high pricing, has been shocked by the cost lowering that is necessary to meet declining profits. Optimising the costs will be a strategic supply chain management trick that will rediscover the spirit of efficiency in theΒ  oil and gas industry. For instance, the operators will have to raise the production in order to lower the cost per barrel. They will use better horizontal drilling methods and mega fracking, in which drillers inject a significant amount more particles (sand) into their wells, combined with longer wells with more frac stages. The oil and gas supply chain management companies were involved in creating effective strategies like postponements, budget cutbacks, and worker layoffs that will be retorted by decreasing their own charges to deal with abridged activities, letting down the prices. Although, the OFSE players are interested in taking some crucial strategic steps, such as rationalisation operations, examining supply-chain partnerships, identifying new income models, and using new techniques.

Vertical Integration

Developing a supply chain strategy effectively can be done by simplifying contractor management. Currently, many intermediaries add complexity and fragment the supplier base. With integrated offers that cut down coordination expenses, some OFSE businesses are now bringing in-house procurement services. As a consequence, this strategy may save 30% of the money.

Service Models and New Equipment

Some businesses are able to experience fresh growth thanks to sustained investment in cutting-edge technologies. The low price of oil today has sparked a renewed interest in efficiency, highlighting emerging technologies that can increase efficiencies - a modest investment cost. In order to increase productivity, gain business, and contribute to the creation of new business and revenue models, procurement consulting firms should think about investing in such skills and expanding their usage of digital technology in general. Although commonly used elsewhere, the strategic sourcing in supply chain management has been hesitant to adopt digital approaches, which is obviously an area of great promise. Oil and Gas Supply Chain Management

New Revenue Models

Adopting new revenue models to the OFSE industry has proved advantageous, with notable involvement in project finance and better contracts that mix services and equipment. By lowering operators' cost bases and requirements for investment in challenging times, OFSE businesses are able to provide operators greater flexibility. Oil and gas companies will have to carry additional capital costs as a result, but it may also result in a steadier income flow.

Supply Chain Market Intelligence

Effective supply chain procurement strategies help businesses choose the ideal markets to buy from, the best way to negotiate a price, and the benchmarks and objectives that will give them a competitive edge.

Find the critical procurement categories

In order to do this, it is necessary to determine the prices and sourcing choices available along the supply chain for each category and the applicable actions (e.g., seeking new suppliers, changing specifications, altering contract terms).

Conduct supply chain bottleneck assessment

Goal for a supply chain fundamental shift that could entail finding new suppliers.

Create custom-fit oil and gas procurement strategies

It includes suppliers early on in the process and offers more clarity. Additionally, carry your plan out through implementation and into operations.

Establish the infrastructure needed to support procurement and supply chain management

These rare abilities are in high demand right now. In the coming years, developing the proper talent in this area will be just as crucial as it is the most crucial technological and operational ones.


The future of strategic supply chain management in the oil and gas industry is already being rethought, but COVID-19 will hasten the requirement for a distributed global supply chain. The best choice for oil and gas firms to save expenses in this period of low oil prices and concentrate on output and research is to enhance supply chain resilience and cooperative supplier relationship management. Watching how oil and gas firms manage sophisticated supplier surveillance systems and the implementation of best-in-class supply chain practices will be quite intriguing.

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