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Supply chain improvements in oil and gas- Building an operations factory

Accenture believes supply chain improvements in oil and gas production can lead to higher returns from unconventional fuel investments.

Overview

Shareholders’ calls for higher returns from unconventional fuels investments are getting louder. There is a growing need for exploration and production (E&P) and oilfield services (OFS) companies that can handle quick-paced changes in resources, venues and priorities with almost military-like precision.

This paper discusses how E&P and OFS companies can respond to increased pressure from shareholders by managing short, but highly effective, project life cycles through the adoption of a factory mode of operating focused on three key capabilities.


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Background

In less than a decade, North American oil and gas production has changed dramatically. Estimates of technically recoverable hydrocarbon reserves have risen fast enough to spawn what might be termed a “21st century black gold rush.”

Exploration and production and oilfield services companies have strived to deal with these changes, which also include rapid shifts in venues and resource availability, such as moving from gas-rich shale plays to oil-rich shale plays.

This highlights a growing need for energy companies that can manage short, but highly effective, project life cycles by getting into a site quickly, getting the oil out quickly and getting to the next well quickly.

Key Findings

Accenture believes that both E&P and OFS companies need to move toward a factory mode of operation, combining high levels of insight and innovation with factory-like parameters, such as standardization, integration and metrics-driven decision making.

The three capabilities that support such a factory mode of operation include:

  1. Increased collaborative planning

  2. Excellence at advanced materials management

  3. Improved asset management with a formal logistics strategy

Authors

Pierre J. Mawet is a managing director in Accenture’s Management Consulting practice. Pierre has partnered with many of the largest oilfield service providers and global energy companies to design and implement supply chain strategies and operational improvement initiatives. Pierre is based in Dallas.

Matthew C. Geiger is a Manager in Accenture’s Management Consulting practice. Matthew has worked with leading oilfield service providers and global chemical companies on designing and implementing distribution network strategies and operational excellence initiatives. Matthew is based in Pittsburgh.

John H. Nichols is a Consultant in Accenture’s Management Consulting practice. John has worked with leading companies in the energy industry on supply chain strategy, operating model design and field materials management. John is based in Atlanta.

Shaun Lehman is a Consultant in Accenture’s Management Consulting Operations Practice. Shaun has helped oilfield service providers and material distributors to optimize delivery models, improve field materials management and implement other effective supply chain strategies. Shaun is based in Los Angeles.

The New Supporting Role of Logistics

The recent boom in North America energy production, specifically in unconventional oil and gas, has generated a great deal of interest and excitement.

This paper explores the need for a new operating model to effectively manage cost and other challenges from unconventional production. It also defines specific internal and supplier capabilities that oil and gas companies will need to efficiently support the growing volume of activity driven by unconventional fuels production.

Unconventional oil and gas production refers to the extraction of hydrocarbons from sources such as oil sands, coal bed methane, shale/tight oil and gas, and pre-salt geological formations. Among these sources the greatest growth is coming from shale deposits where large amounts of oil, also referred to as tight oil, and gas are being produced.

High performance in unconventional production is contingent on the ability of oil and gas operators to cost-effectively produce oil and gas products. More than ever before, logistics will play a key role in the execution of these strategies. The attainment of needed logistics capabilities is a complex journey that takes time, commitment and financial investment.

With a new manufacturing operating model in place, oil and gas operators hold the potential to experience the following benefits:

  • Improved visibility

  • Improved safety and efficiency

  • Improved asset utilization

  • Reduced costs

  • Improved stability of supplier availability

  • Reduced levels of inventory

Pierre J. Mawet is a managing director in Accenture’s Management Consulting practice. Pierre has partnered with many of the largest oil field service providers and global energy companies to design and implement supply chain strategies and operational improvement initiatives. Pierre is based in Dallas.

Bob Gosier is a senior manager in Accenture’s Resources group. He has an extensive background in logistics operations and has worked with many leading oil and gas producers and service companies supporting logistics improvements.