Volatility and unpredictability in the oil & gas sector have not abated from the levels we've observed over the last several decades. Geopolitical and economic uncertainties, regulatory restrictions, changing global markets and supply risks are compelling oil & gas companies to up their game and adopt a dynamic approach to operations and processes.
Notwithstanding the surge in oil prices that has benefited the oil & gas companies immensely by bringing more money to the table, there are several key challenges that need to be negotiated, including:
- Newer, more efficient technologies resulting in less fuel consumption than before
- Rise of electric vehicles and declining auto demand
- Significant focus on regulatory compliance and adherence to environmental and personnel safety
- Increasing cost of exploration and upstream operations
- Global operations resulting in inconsistent processes and practices
Procurement, with its increasing strategic reach, can help oil & gas companies generate more value by identifying cost-saving opportunities, redefining supplier relationships, increasing spend efficiency and mitigating supply chain risks, to name a few.
Every segment within the oil & gas sector has its unique challenges and complexities. The common thread among them is the need to contain costs and drive efficiencies.
Cost reduction is not new for upstream businesses who were compelled to slash capital expenditures following the recent oil price collapse. But this has now assumed greater importance amid increasing competition — where companies are expected to maintain the same quality of services and in fact, go a notch higher — and in the wake of personnel and environmental losses attracting huge global scrutiny. Embracing the right strategies and new digital technologies as means to tackle inevitable cost escalation, and finding new avenues of growth and efficiency will be critical to sustainable success.
Amid several positive trends including new infrastructure needs and increase in U.S. LNG exports, the midstream sector is still coming to terms with the impact of years of low oil & gas prices. Changing basin economics, tougher contracts and an influx of private equity money are making it difficult for businesses to target growth and value creation. However, cost reduction strategies and driving new efficiencies through digital technologies can jump-start the desired results.
Operational excellence is critical for refining and petrochemical companies that are up against high price volatility and increasing regulations. As capital expenditure and investments increase, companies need to offset this by driving excellence in plant management and maximizing unit value, for starters. A lot of focus needs to be placed on adopting the right strategy and technology to foster innovation and efficiency.
Comprehensive and Value-Driven Solutions
GEP has more than two decades of procurement expertise that spans consulting, technology and managed services. GEP’s procurement solutions for the oil & gas industry encompass spend analysis, category management, strategic sourcing, supply market intelligence, supply risk management, and much more.
Our team of industry experts is continually focused on identifying new avenues of growth and efficiency for our oil & gas clients, and accelerating the process of value realization.
GEP’s Savings Project Management function provides a full life cycle view of the project from an ideation phase to the realization phase, enabling CITGO to update the projected, negotiated and realized savings in each stage of the procurement process.
— John Declouette, Interim General Manager of Procurement, CITGO