COVER STORY
even the largest bulk carriers can’t meet at a moment’s notice. To fill the gap, oil and gas companies rely on smaller carriers.“By necessity, energy producers have entered the dispatch business – coordinating the daily movements of hundreds of individual carriers,” says Murphy.“In the area surrounding any major wellhead, hundreds of these bulk tankers can be found parked on the side of the road, all waiting for direction.” TMSforce is involved with one fracking site that is moving 2,000 loads of sand and water daily within a 100-mile radius, says Tim Sensenig, Chairman of TMSforce.“That’s a lot of loads – and doesn’t include moving the material that has been extracted,”he explains. To ensure the job gets done right, some energy companies are hiring fourth-party logistics (4PL) providers to manage, oversee, and improve certain aspects of upstream operations. “A 4PL can markedly improve the economics of these large fracking sites by taking over dispatch, systematically monitoring resources, and planning ahead for changing capacity needs,”Sensenig adds. “With this guidance, energy companies can be prepared for high-demand times without paying for underutilized assets.” Another example of how 3PLs and 4PLs can add value is in safety compliance, which is a critical aspect of the oil and gas industry. BDP International, for example, employs its own global
compliance officer and safety trainer, who travel to all its sites to ensure consistency. “Compliance heads the list of priorities for the oil and gas industry, especially in the last seven or eight years, as substantial penalties and fines have been imposed in areas such as the Foreign Corrupt Practices Act,”says Heathcock.“Logistics providers working in the oil and gas vertical have to take safety very seriously or they won’t last.”
Setting the standard Standardising compliance across a number of different carriers, many of whom are small and localised, is a difficult task for
energy companies to take on internally, explains Murphy. Logistics providers, on the other hand, have the experience and expertise to drive uniform measures all the way down to the carrier community. They can establish a baseline compliance expectation, meet regularly with carriers, and develop safety programmes – specific to each wellhead - that can be monitored, managed, and improved as conditions change. “Safety is one of the highest priorities,” agrees Sensenig. “Energy companies do not want to cut any logistics or supply chain costs that will affect compliance. Solutions providers should be focused first on safety and compliance, then on identifying ways to reduce costs.” These expectations and standards transcend the entire supply chain. But the stakes grow even higher when oil and gas companies need to transport end product, especially given the potential for combustion. With the Keystone Pipeline XL expansion project currently on indefinite hold (in April 2014, the Obama administration announced another delay in a process already beset by political and legal challenges), this translates to more pressure on railroads to ensure safe oil and gas transportation.“The railroads will invest substantially in new rail car containers and improving rail safety,”says Sensenig. In the wake of several high-profile crude-by-rail accidents, US regulators are under pressure to phase out the DOT-111 tanker fleet. Canadian authorities have already begun this process. Advanced rail cars introduced in 2014 include thicker steel and jacketed shells with ceramic insulation designed to inhibit discharge of contents during a derailment. The oil and gas supply chain presents considerable challenges and opportunities for energy producers and logistics service providers – whether it’s coordinating the transport of heavy equipment and drilling materials, managing the just-in-time requirements of drill sites, or ensuring safety compliance across the supply chain. By partnering with 3PL service providers, energy companies can streamline logistics processes, reduce costs, and add value. Now that’s what you call cooking with gas. -www.inboundlogistics.com
OCTOBER 2014 27