By: George Schutte, VP Global Energy Solutions
June 3, 2019
George Schutte, VP Global Energy Solutions
The disappointing downslide of 2014 has somewhat subsided in the oil and gas industry. Most segments have recovered to some degree. The global operator is enjoying increased profitability and cash flow. Where the drilling segment still has a significant amount of stacked assets and day rates have not recovered, there is clear upswing and many assets are getting back to work. The service industry still struggles to regain profitability and steady work, but overall the situation is improved from just 5 years ago.
In the meantime, the industry is in the midst of a major shift in operating protocol. Where the 'old way' was focused on 'get it done' and 'cost is no barrier', the new paradigm requires a strong focus to costs. Oil companies promise more efficient stewards of capital. Planned, measured and focused to the bottom line is the operator's mantra. That cost focus trickles down to the service sector and across all actors in the oil and gas value chain.
Logistics represents a significant cost factor in the energy sector's service delivery plan, generally speaking and dependent on the sub-segment, about 3% to 8% of gross revenue. However, the cash burden in inventory and opportunity costs far outstrip hard spend in logistics. Succinctly, lack of a qualified logistics program affects cash utilization, capital efficiency and perpetuates a waste culture across the entire organization. Logistics, or lack thereof, presents distruptive potential to asset integrity and continued uptime. Efficient downhole activity to complex and remote geographies is largely dependent upon the reliability of global supply and resupply.
Selecting a qualified LLP with a proven Vertical focus on the oil and gas industry creates opportunity to achieve capital efficiency in the logistics program and across the organization. A process and performance driven approach enables a strategic focus to effecting global supply as opposed to an inefficient transactional approach. Focus on performance and systems enables operational excellence to the oil and gas operation. A primary focus on safe and reliabile operations aligns to global industry objectives. LLP selection aligns global strategy to global execution in Oil and Gas Logistics.