SPECIAL REPORT: NEXT GENERATION SUPPLY CHAIN SOLUTIONS
A Chain of Control sss
Francis Slade, Staff Writer
As well as being a vital link in the offshore exploration and production process, the supply chain is important enough to be a business process in its own right
As Peter Dunwell made clear in the previous article, the offshore oil and gas supply chain bears considerable responsibility. Such is the value of the sector that, even in a developed economy such the UK, using the supply chain to deliver onshore value as part of its offshore role is a priority of government12. “Converting the current high investment figures into British jobs is important to the economy and an issue Government cares about. Building on current DECC [UK Department of Energy and Climate Change] initiatives, and working closely with those awarding contracts in the UKCS [UK continental shelf], will provide a better understanding of the strengths and weaknesses of the UK supply chain. The development and deployment of the UK supply chain is as important as securing investment in the UKCS [author’s italics].”
The Offshore Challenge Most offshore environments are harsh and pose significant challenges to platform operators. Offshore oil and gas fields can be found in all climatic and environmental conditions which makes offshore production even more challenging. But, over and above the risk of its location, an offshore oil platform is a working community with predictable needs. Supplies for work and for living, even waste, have to be transported to and from the platform, which requires careful planning of the supply chain13. Plus, offshore platforms are large constructions in their own right with many systems and fittings all of which must be supplied and, when necessary, resupplied.
An Important Part of the Process The picture is building that supply chains are important; as Richard Baldwin puts it in his introduction to ‘Global supply chains: Why they emerged, why they matter, and where they are going’14, “Global supply chains (GSCs) are transforming the world.” In summary15, “A supply chain consists of all parties involved, directly or indirectly, in fulfilling a customer request. The supply chain not only includes
the manufacturer and suppliers, but also transporters, warehouses, retailers, and customers themselves… A supply chain is dynamic and involves the constant flow of information, product, and funds between different stages.” The Capgemini White Paper ‘BPO Supply Chain Management’16 tells us that “The supply chain forms the core of most businesses.” In fact, while the supply chain concept has been around for centuries (it was why empires were built) the term itself was coined as recently as 1982 by Keith Oliver in an interview for the Financial Times. By December 2003, in a presentation to Supply Chain World Europe, Statoil17 confirmed that “Integrated supply chains [are] important to Statoil…” and that the company was developing a Supply Chain Operations Reference model (SCOR). Even in 2003, supply services for offshore operations were already demanding with more than 900,000 tonnes of supplies shipped annually to rigs and installations and 50 ships working for Statoil alone on the Norwegian Continental Shelf (NCS).
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Cost Control Good supply chain management is not only a pre-requisite to effective operations but it’s also important as a cost control element itself. TKDN Online in ‘The Challenges of Supply Chain Management Function in Upstream Oil and Gas Activities’ in April 2011 (no longer available) explained, “The activities of procuring goods and services, known by the term Supply Chain Management (SCM), constitutes one of the end most points in the process of expenditure in various business activities. Approximately two thirds of operational cost in upstream oil and gas business activities is expended through SCM Function.” Not only does supply chain manage costs, it also constitutes a significant cost whose management is also important. For ‘Challenging Climates: The outlook for the oil and gas industry in 2014’18, DNV GL surveyed 438 senior professionals and executives in the global oil and gas sector. Among the WWW.OFFSHORETECHNOLOGYREPORTS.COM | 11