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Key Procurement Challenges in the Oil and Gas Industry

Sep 3, 2019

Oil and Gas Industry Overview

The US oil and gas industry is booming due to significant exports and imports. New international offshore oil fields are being discovered and companies are creating new opportunities for revenue growth. But China’s gradual shift away from coal and increasing interests for liquified natural gas (LNG) is increasing the complexity and risk of the business operations. Additionally, ever-changing regulatory frameworks, continued negative public perceptions, the emergence of battery electric vehicles, geopolitics, and decarbonization policies are adding to the growing complexities and scrutiny that oil and gas companies are operating within. Therefore, it becomes a necessity for companies in the oil and gas industry to re-evaluate how they explore, produce, move crude, refine and distribute their products to satisfy increased demand. Here are major challenges facing the oil and gas industry for reference. 

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Major Challenges in the Oil and Gas Industry

Capital Cost

Due to high operational and maintenance costs, companies in the oil and gas industry have to look at costs on a Whole Life Cycle. Producing crude oil is an expensive process and requires companies to venture into marginal fields to stay competitive in the market. This is one of the major challenges faced by oil and gas companies as high capital investment for small field reservoirs are usually a risky option. Optimizing production systems should, therefore, be a priority of the oil and gas industry.

Supply Chain Visibility

Most companies in the oil and gas industry operate in a most physically challenging environment. They have complex operations and factors such as volatile oil and gas prices, complex regulatory norms, and third party suppliers, which further add to the complexity of the situation. Improving supply chain visibility to manage risks, control costs and optimize the performance of oil and gas companies becomes a task for companies in such a situation.

Stringent Standards

The latest 2016 Paris Agreement negotiated under the United Nations Framework Convention on Climate Change to address the threat of keeping the global temp low is compelling companies to rethink extraction, production, and distribution methods to continue their operations. They need to provide guarantees and ensure transparency in the environmental management to meet increasingly stringent environmental standards.

Inability to meet stringent environmental standards can make it difficult for companies to sustain themselves in the oil and gas industry. Give SpendEdge a try by subscribing for a free demo to our platform and understand the market risks in detail.   

Talent shortage

Like any other industry, the competition for top talent is fierce. But with an aging and shrinking talent pool, employee onboarding, retention, and training have become a major issue in the oil and gas industry. Big companies need to invest in attracting the talent pool as emerging markets such as India and China are not only increasing global demand for oil and gas but also competing for talent.

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