February 18, 2019

Oil & Gas Operations & Supply Chains

Today GSM senior lecturer Dr Najib Altawell examines the complex nature of getting gas and oil from the point of extraction to the consumer.


Oil and gas operations and supply chains are complex and require the need of a number of important tasks, stages and rules. These can range from basic to specialised machineries/equipment in addition to complying with various rules and regulations, as well as the health and safety implementations.

Oil and gas operations in different parts of the world run on a 24 hour basis throughout the year.   If these operations are not followed on a continuous basis, oil and gas companies may suffer huge losses.

There are two types of operations employed by oil and gas companies.   The first one is “traditional operations” and the second one is “exploratory operations”.   Both need a logistic approach. Obviously, these logistical operations will be different from each other in various ways.

Logistic operations in the traditional method usually depend on trucking, warehousing etc., i.e. they can be costly, inefficient and time consuming, as well as being difficult to manage. For this reason, some oil and gas companies subcontract or collaborate part of their work with another specialised business in order to implement different logistic approaches for the purpose of speeding the process and reducing costs.

The second operational approach by oil and gas companies is what has been termed as “fracking” or hydraulic fracturing, i.e. the process of horizontal drilling.   This method can be complex and very costly as well.  In fact it is far less profitable than the first method. For this reason, oil and gas companies devise a robust logistic approach in order to reduce their cost and minimise the complexities of their operations.  Logistic issues begin with the very large and heavy machineries and equipment needed, i.e. their transportation (which incur oil and gas companies huge cost) and their operational issues.  However, the first main task is the preparation of the site itself.   New roads for the new site are needed as well as specially allocated piece of land designed to contain water (as artificially created ponds) to be used to fill fracking wells.  Part of the daily operation is moving sand, water and the material that has been extracted.  This kind of upstream operation requires good logistic approach.  What this means is that some oil and gas companies subcontract a specialised business to implement appropriate designed logistic operation. Again, this new approach is mainly designed to reduce costs and minimise the operational time scale.   Even though reduction in costs is vital for oil and gas companies, however, for legal and regulatory factors, some companies put their priority on safety and compliance rather than the cost itself.

Transporting the oil and gas from the site is another logistic issue.   Regardless whether the transportation done via pipes, rail or other means of transportation, e.g. tanker fleet, the challenges and cost are also high. Transporting highly flammable materials, such as oil and gas require strict compliance with the safety regulations and correct and complete implementation.

Finally, to conclude this brief outlook for oil and gas operations and supply chains, oil and gas companies face major challenges in their daily work, i.e. without the support of logistics service

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