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December 1, 2023

The State of the Oil and Gas Supply Chain

Pruks Itchayapruks, a Discovery and Strategy Manager at ExxonMobil, provides his perspective on the state of the end-to-end oil and gas supply chain.

The End-to-End Supply Chain of Companies in the Oil and Gas Industry

The oil and gas industry operates a global supply chain that can be complex, operating in unimaginable geographic and climate conditions worldwide. The industry's primary mission is to ensure that materials, equipment, and products are delivered on time and in full to their destination. The oil and gas industry supply chain generally falls into three segments: upstream, midstream, and downstream. Pruks's experience is in the chemical supply chain, which falls under the downstream segment.

"The key challenge is to ensure that we deliver on time the materials, the equipment, and the products to the destination in full. The key message is on time, in full."

Pruks Itchayapruks -
Discovery and Strategy Manager at ExxonMobil

The Most Common Supply Chain Challenges in the Oil and Gas Industry

The top three most common supply chain challenges that oil and gas industry companies face are resilience, operating costs, and environmental regulations. According to Pruks, companies' first challenge is the ability to manage the unexpected. "All of these are related to the majority of the capacity, whether it's going to be the storage, the terminals, the warehouse, the labor shortage, from the truck drivers or the warehouses, or even the port operators or the congestion in ports around the world. And also the available container and marine freight," he explains. Operating costs have always been a challenge, and companies need to manage these costs to be competitive to remain the supply chain of choice, even for internal customers. Finally, the environmental challenge is where companies need to put their focus on as oil and gas companies consume so much energy and resources like water. They are subject to strict compliance and standards; the challenge is keeping up with the industry and government regulations.

"The ability to manage the unexpected is the first one… And all of these are related to the majority of the capacity…And also the available container as well as marine freight."

Building a Resilient and Robust Supply Chain

Companies can build a resilient and robust supply chain by understanding their capability and weak points. Companies could stress test their supply chain to understand and uncover weak points and identify potential options that they can manage and plan the costs. "Work with the service provider upfront. Prepare what we can. That will be one of the main things that we could do." Another critical factor is having visibility into the supply chain. Companies must know their current situation to predict and respond to unforeseen circumstances. If they don't have visibility, they are left in the dark.

"For you to be robust, you need to understand the situation you have at hand."

Critical Priorities for Supply Chain Leaders in Oil and Gas Industry

According to Pruks, we should take digital transformation seriously. However, even though companies have digitized and transformed significantly, many processes are still paper-based along the value chain, along the process and step they must do. Therefore, companies must work with industry and suppliers to digitize those paper-based processes. Explained Itchayapruks, "Because that's going to be the key enabler for us to be able to collaborate. And that will be the key enabler for us to react to unforeseen circumstances when we need to be right. And that will also be the key enabler for us to improve our data visibility closer to the near real-time if there's such a need for us. So that would be one of the main things that I would think that the Supply Chain Leaders should consider seriously."

“[Digitalizing paper-based processes across the value chain]—that would be one of the main things that I would think that the Supply Chain Leaders should consider seriously."

The Takeaways

  • 1.

    The most common supply chain challenges companies to face in the oil and gas industry include supply chain resilience, operating costs, and environmental compliance.

  • 2.

    Companies can build a resilient and robust supply chain by stress-testing their supply chain, identifying weak points, and working with service providers to plan and manage costs.

  • 3.

    Supply chain leaders should focus on digitizing supply chain processes and improving data visibility in the next three to five years.

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