The aim of this report is to provide theoretical and practical aspects of logistic and operations for the management for O&G sector. The report analyses the method for the configuring and coordinating the supply chain network in an efficient way. Along with this, the report describes the behavioral issue in oil and gas sector and also discusses the method that may be used to mitigate the issues in O&G operational strategy. Moreover, report critically analyses the service and operational related challenges and also demonstrates the potential impact of these challenges on the organization’s operation.
Logistic is widely used in the business sector that helps to identify that how to handle resources and moved along the supply chain. Additionally, logistics is a network that is associated with businesses in every industry sector. The main operations that are involved in logistics department include, managing inventory and overseeing and establishing sufficient storage for the inventory (Chima, 2011). But in Oil and Gas industry, arranging for appropriate transportation, logistics involves all the systems that are used to gather and transport oil. This includes trucks, pipelines, distribution centers and storage facilities. Therefore, it is required to have various logistics procedures that help to decrease cost and to improve the efficiency in operations.
The O&G sector involved in the supply chain of global basis that can include the domestic as well as an international transportation system, material handling process, and information technology. Along with this, the oil and gas industry offers some classic model for implementation all techniques related to supply chain management in UK (Yusuf et al., 2014). The process of logistic network management within energy sector is defined as the coordination, continuous and configuration improvement that are essential to organizing a set of operations.
Oil and gas industry uses some efficient techniques for configuring and coordinating the efficient operation supply network. One of the core strength of this is the ability to construct the long-standing value added business relationship within the customers of energy. The logistic requirements of these customers are most complex and demanding in their nature (Yusuf et al., 2013). The supply chain network refers to a system, procedure, and technology that can connect the supplier to the customers. Efficient operations supply network involve the coordination, configuration, and improvement.
The Configuration that is involved in the supply chain network like estimation the product-service bundle that has been produced by the oil and gas industry, facility capacity, location of the facilities, communication between the supplier and customers. On the other hand, the coordination within an organization involves various issue in the efficient supply chain network like- ensure the effectiveness the supplier cost, and quality, monitoring demand and supply of the product i.e. piping, drill bits, fluid mood, staff, and cement. Under the coordination, the industry should maintain the deeper water drilling operations for the quality and cost control (Carneiro et al., 2013). Along with this, the aim of logistic network management is offer utmost service to the customers at the minimum price.
Moreover, as an alternative to the vertical integration in the effective logistic network, outsourcing is a process of contracting with the third party for the product and service. This method provides much better quality and logistic network performance in the O&G sector. For the better logistic network performance, energy sector companies integrated with the customers and supplier within the supply chain. The oil and gas company reduce the operating cost and improving efficiency and revenues to look for the better supply chain network. The company plans the available capacity that can ensure the operation 24/7 during the drilling operation in the Senegal. The logistic is the major part of the logistic network. Therefore, it is compulsory to produce and deliver the bundle of product and service to customers at the time when it required.
Along with this, for the efficient supply chain network, the oil and gas company watch for all market signal and plan accordingly. It is a traditional method that depends on the demand that is forecast by the various segment of the business.
There are various issues faced that have been faced by the Oil and gas industry and also there are various ways to solve this kind of issue in the offshore drilling operation that can be described as below-
Health and safety issue
Under the oil and gas industry, the most significant issue is the health and safety issue that is caused due to site accident. The site accident was occurred because of the unsafe working condition and unsafe act in the industry. Along with this, the health and safety issue raised due to various factor i.e. inadequate maintenance of resources, mechanical failure because of improper design, and application, inability to perform the task, lack of personal job fulfilment, and physical stress due to high noise in the environment (Ismail et al., 2011).
Health and safety issue at the time of offshore drilling operation can be resolved because of monitoring and changing the behavior of the employees. The risk of health and safety reduce by increase the risk awareness and risk competence for all the employees and minimize the paperwork that will keep the process simple.
Safety culture change issue
The key success factor of oil and gas industry depends on the sound safe culture in the environment. The sound safe culture issue is important in the organization not only from the viewpoint of the employee, environment and third parties but also it is essential to generating the value in the company. The safe culture climate is a subset of the working environment and powerful to design the programs to promote the level of health and safety issue in the context of the organization (NAP, 2016). The safe culture climate is significantly associated with the safe behavior in the environment so the employee feels safe at the workplace in the form of management commitment, engagement of management in security aspect and the personal interest in the activities related to security.
To resolve the issue of safe culture, the oil and gas company should use the safe protective personal equipment. The safe culture will be introduced with the help of safety management system in which every employee improve and manage the performance in the context of safe culture. Along with this, it can be reduced by improving the level of communication among the employees as well as the organization that will help to develop trust and mutual respect.
Other issue
There are some other issues in the energy sector such as- environmental issue, social issue, ethical and sustainability issue and economical issue. The environmental issue was affected because of greenhouse gas emissions, energy use, flared gas and many more (Austin, 2016). The issue can be resolved by supplying fresh water at the time of offshore drilling operation. The social and economic issue has been occurred due to local content, human right, business transparency, labor practices and many more.
All the issue in oil and gas industry can be reduced by designing product and service, process and capacity design, manage quality, location strategy, layout strategy, job design and human resource design, logistics and transportation design, schedule system and many more. All methods are useful to resolve the behavioral issue that is occurred in the oil and gas industry.
Most of the oil and gas company will face the challenges in their enterprise and management. Some operational and service related challenges can be described as below-
Data Quality- The data quality issue hits the oil and gas companies. It can be raised if the database of oil and gas company asset is incomplete, documents of the company are not updated, the information is not fully synchronized on the mobile device, and data quality of the oil and gas company is not audited in systematic basis (Theodori, 2013). It will impact on the decision-making process and the O&G companies require undertaking the issue carefully to keep away from the risk of process.
Prevention of non-compliance
The challenge of non-compliance can occur because of regulatory pressure in the oil and gas companies. There are more requirements in energy sector companies on the operation and risk mitigation is also required for some manufacturing plan i.e. drilling, maintaining wells and many more. The non-compliance system is correlated with the data management and quality issue (Ladd, 2013). Since the system of EHS automates the management of structured and unstructured data and facilities the flow of data related to the compliance action of data such as inspection and reporting of data in oil and gas industry.
Collaborative planning, operations, and decision-making
In the O&G sector, the company faces the challenges related to the planning, operation and the decision-making process to increase the level of production. The oil and gas companies want to create strong and comprehensive relationship among the remote expert and field operations staff. As the issue related to the collaborative planning operation and decision making, explorations, development and production cost are increasing. Therefore, the refining margins are under pressure (DHL, 2016). In the O&G sector, activity stage is also increasing that has been caused by the inflation rate.
Tremendous pressure
Oil and gas industry face the pressure of tremendous that will reduce the risk but it will take some new challenges like intensive onshore operation in the populated area, drilling in the ultra-deep water and floating liquefied natural gas terminals (Armendariz, 2016). It will negatively impact on the prices of O&G. Since prices of O&G are dropping because of the production of OPEC and oil boom in the US. In addition to this, oil and gas face the challenge related to the emerging economic powerhouse that will mainly affect the demand of the oil and gas in terms of per capita use of energy.
Political uncertainty
The operation of oil and gas industry has been affected because of political uncertainty. O&G sector is covered with the range of regulation that is limited to how, where and when the extraction is done by the company (Mckinsey.com, 2016). The government rules and regulation is different from state to state. It will affect the industry because the many types of issue arise like sudden nationalization, and change in the regulatory environment.
Oil and gas industry service are connected to the development of energy sector that can be divided into two major categories like drilling supporting activities and technological advancement. The supporting activities of oil and gas may face the challenge that can be described as below-
Inadequacy in infrastructure and engineering equipment
Oil and gas industry face the challenges related to the supply deficit because of the low production in domestic and inadequate transmission. The distribution of infrastructure in the oil and gas is inadequate that can create various kind of problems like rising concern on the carbon emission (Cross, 2014). The level of infrastructure and engineering equipment can be increased due to a rise in the LNG import capacity that will meet the increasing demand for oil and gas service. Changing government policies and regulation service can play a very important role in the infrastructure and engineering equipment of energy sector.
Rising the emerging market demand
O&G sector make sufficient investment to achieve proper growth in the emerging market. As the performance in the new market of oil and gas totally depends on the pricing policy of government, foreign investment risk and bargaining power issue. All elements reduce the performance of O&G sector (Civelek, 2014). The energy sector faces the challenge of shortage of liquid fuel in the area of oil and gas sector. In this era, there is a great need to increase the level of production of the liquid fuel to increase the level of revenue. On the other hand, the rising demand for the service of oil and gas sector becomes more beneficial and efficient. It will help for achieving the substantial success because of increasing the capacity level.
Lower level technical expertise and advancement
According to the increasing global energy demand, the oil and gas industry faces the issue related to the new technology and innovation. The innovative and disruptive technologies impact every industry and the way of the life at the rapid race of the organization. The technological advancement and expertise can be established and applied in the a variety of divisions of O&G sector. Energy sector face major technical shortfall in the level of production and exploration that could decline the availability of service connected to the energy reserve. O&G companies are a service company that is facing a serious problem because they did not have a single employee in their internal pipeline groomed for the senior leadership position (Pezzotta et al., 2012). In the oil and gas companies, development of the technical talent is not possible but it requires a shift in the recruitment strategy.
Lack of collaborative efforts
In the O&G sector, universal drivers for enterprise collaborations is the solution to reduce the cost of travel, improve the level of production, decision-making process and increase the responsiveness to change the condition of the market. On the other hand, lack of collaboration and the limited knowledge share with the organization is a weakness that can stall growth in the O&G sector. If there is a lack of the collaboration in the O&G sector then it will reduce the advanced capabilities that can increase the use of material and reduce the cost (Fourcroy et al., 2012). The collaboration system is more viable and valuable tool for the user of O&G sector can enable staff of any location to connect with the decision makers of the company.
Conclusion
From the above discussion, the report can be concluded that logistic and operations procedure of the organization helps the organization to decrease the price and to maintain and improve the level of efficiency in oil and gas sector. Along with this, the industry was maintained the deeper water drilling operation to maintain the quality of service and control the cost. Additionally, there was some social and economic issue that has been raised due to the business transparency, labor practices and local content. It is identified that operational and service related challenge effect the decision-making process and effective working style of the oil and gas sector.
Reference
Armendariz, D. (2016) How to Develop Technical Leaders in Oil & Gas. [Online]. Available at: https://www.lucasgroup.com/how-develop-technical-leaders-oil-gas/ (Accessed: 10 April 2017).
Austin, B. (2016) Industry Is Focused On Prevention To Avoid Injuries, Loss Of Life, And Financial Costs Of Failure. [Online]. Available at: (Accessed: 10 April 2017).
Carneiro, M.C., Ribas, G.P. and Hamacher, S., (2010) ‘Risk management in the oil supply chain: a CVaR approach, Industrial & Engineering Chemistry Research, 49(7), pp.3286-3294.
Chima, C.M. (2011) ‘Supply-chain management issues in the oil and gas industry,’ Journal of Business & Economics Research (JBER), 5(6) pp. 28-40.
Civelek, I. (2014) ‘A commodity production model with operational flexibility of investing optional capacity on offshore platforms’, International Journal of Supply Chain Management, 3(3), pp. 30-40.
Cross, L.R. (2014) Trends and Challenges for the Oil and Gas Industry. [Online]. Available at: https://www.srr.com/article/trends-and-challenges-oil-and-gas-industry (Accessed: 10 April 2017).
DHL (2016) Compliant Logistics For The Oil & Gas Industry. [Online]. Available at: https://www.dhl.com/content/dam/downloads/g0/logistics/brochures/dhl_industrial_projects/dhl_ip_oilgas_mar2014.pdf (Accessed: 10 April 2017).
Fourcroy, C., Gallouj, F. and Decellas, F. (2012) ‘Energy consumption in service industries: challenging the myth of non-materiality’, Ecological Economics, 81, pp.155-164.
Ismail, F., Hashim, A.E., Ismail, W.Z., Kamarudin, H., and Baharom, Z,A. (2011) Behaviour Based Approach for Quality and Safety Environment Improvement: Malaysian Experience in the Oil and Gas Industry, Social and Behavioral Sciences, 35, pp. 1-9.
Ladd, A.E. (2013) Stakeholder perceptions of socioenvironmental impacts from unconventional natural gas development and hydraulic fracturing in the Haynesville Shale, Journal of Rural Social Sciences, 28(2), p.56.
Mckinsey.com (2016) Digitizing oil and gas production. [Online]. Available at: https://www.mckinsey.com/industries/oil-and-gas/our-insights/digitizing-oil-and-gas-production (Accessed: 10 April 2017).
NAP (2016) Implementing change in offshore safety culture. [Online]. Available at: https://www.nap.edu/read/23524/chapter/8 (Accessed: 10 April 2017).
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