Considering the impressive change in the prices, decrease in headcount and uncertainty relating to future stability of market, global oil and gas industry is currently experiencing challenging times. Major of its spending goes to supply. To curb this it is understandably that now they are focusing on delivering immediate cost reduction. In reference to a research done by Achilles shows that up to 80 per cent of the revenues spent with suppliers (Britain,2013). Its is therefor vital for the oil and gas company to implement a mechanism to manage risks involved in managing supply chains. Due to continuous existence of this risk, the market continues face challenges associated with pricing and volume supplied.
Every company has dreams of operating globally to spread it operation allover to acquire more profit. Though this is an advantage, it also one of the major challenges facing supply chain of gas and oil. During a debate constituting a small group of oil and gas procurement executives in Huston, they stressed this one as a major challenge (Wright, C. J, & Gallun R, 2015). They stressed on the possible challenges by land rig markets, environment become complex and chaotic. Hence transforming to a value-based strategy and less volume. Also states that the regulatory environment is raising up, as the regulatory body double in staff size in the previous year and again doubled on that year ().it transmit in the increase in the pricing.
Transportation is on the major challenge emerging from the forces of volume and pricing. As the company tries to get a better procedure on how to extract and transport the product, they get in a problem in implementing the transport scheme. In remote geographic location and complex upstream operation on deep water, pose a major challenge for the supply chain partners. It brings up the cost used in large transit inventories (Wright, C. J, & Gallun R, 2015). It forces the company to avail some amount of safety stock at the final location.
The remote geographical location mainly affecting the upstream sector is one of the challenging affected the chain supply of gas and oil. The oil laying near on the ground is explicit exploited therefore it is forcing the company to migrate into remote oils mine that is yet exploited. The companies are moving to places such as West Africa, the Caspain Sea, the Arctic, Alaska, Brazil and other places with the prospectives of continuous maintaining their volume supply (Britain, 2013). Working in that place a prospective company lacks effective logistics capabilities. They also find it difficult in acquiring permits and Right Of Way (ROW), pipelines, building road, flow lines and other facilities.
In an efficient supply, chain for an oil and gas company there needs a collaboration among the company. Due to the varying of pricing and volume in different region hiders to a successful collaboration. The companies scramble the available resource and market instead of sharing information where both would benefit in analysis the market in order to make an informed decision. The CEO of AGILITY stresses important of collaboration as an asset optimization where chemical producer and LSPs would work together with their competitors for a successful operation (Great Britain, 2013).
In relation to the volume or pricing of oil and gas, it essential for the company to implement measure that will guard sophisticated information concerning the product (Li,L 2013).. This one of the key aspect that many companies are unable to implement hence posing a challenge in on chain supply of those products. Since the transportation of gas and oil is major on ship, both the producing company and suppliers and customer should have an information location of each ship at any time.
Digesting the above, it is clear on how the two hurricane that is prising and volume pose a challenge to companies in the chain supply of gas and oil. It would impossible to hold the two force constant, therefore the companies a task in finding measure to regulate them. They should have to collaborate among themselves, as this will help them navigate over this challenge.
Great Britain,(2013).Statutory security of supply report 2013: A report produced jointly by DECC and Ofgem, OTHER THAN THE ANNEXES WHICH ARE PRODUCED BY decc ALONE. London: Stationery Office.
Li,L (2013). Supply chain management:Concepts, techniques,and practices enhancing the value throuhgh collabolation. Hackensack, NJ:World Scientific.
Wright, C. J, & Gallun R,A (2015).Fundamentals of oil & gas accounting. Tulsa, okla: PennWell.
Our editors will help you fix any mistakes and get an A+!Get started
Please check your inbox