As the Texas and Louisiana Gulf Coast recovers from Hurricane Harvey, Supply Chain organizations face the challenge of navigating its effects, from chemicals to logistics to labor.
Do you manage a utility supply chain, procurement process, or supplier relationships? Or collaborate with and depend on teams that do? If so you know how heavy a lift it can be to effectively manage asset-intensive energy sector costs. Should-cost analysis helps address two key challenges that get in the way of delivering even more value for your organization.
- Since last fall, a surge in drilling and completions activity in the Permian Basin has led to a dramatic increase in sand demand and, in turn, substantial sand price inflation.
- In response, sand mining companies have begun investing in a slew of new mines in the area.
- While new sand mines will deepen the market’s oversupply, prevailing logistical bottlenecks will likely prevent significant sand price deflation from occurring.
Sand Demand and Sand Price Inflation Since Last Fall
Demand for sand used in oil field operations plummeted after the oil-price crash in mid-2014 and the subsequent sharp drop-off in well completions activity. This trend, however, has recently reversed. Since late 2016, a surge in drilling activity in the Permian, coupled with the activation of drilled-but-uncompleted wells (DUCs), has led to a massive increase in sand demand in the basin (Figure 1). During the first half of 2017, total US sand proppant demand was 63 million tons per year, a 75% increase over 2016 levels.
Figure 1: Permian Basin Sand Demand
Sources: United States Energy Information Administration, Baker Hughes, PowerAdvocate
Over the last five years, the United States has significantly increased its production of oil and natural gas, a phenomenon referred to as the Shale Revolution. US crude oil production has increased substantially, especially in the inland parts of the Gulf Coast and Midwestern states (Figure 1). This shift has impacted the economics of downstream operators; however, the benefits for specific refineries have varied depending on location and refinery crude slate.
Buckeye Partners presents a webinar in our Q&A with the Experts series.
In this webinar recording, Buckeye Shares:
- How they've used data to achieve >$10M in cost reduction through improved supplier negotiations and bids
- Specific strategies they've used across CapEx and OpEx categories
- How they've prioritized and executed on specific cost reduction opportunities
- And lots more...
We’re thrilled to share that more than 60 Oil & Gas executives attended our Annual Oil & Gas Executive Forum on June 22, for our best event yet.
The 2017 Executive Forum provided a platform for sharing and discussing new cost-cutting strategies
Each Executive Forum is designed to enable operators to exchange innovative approaches to cost reduction with one another. This year’s event featured:
- A keynote speech by the Vice President of Global Supply Chain at Hess Corporation
- Spotlight presentations on pressing Supply Chain concerns led by 7 industry leaders:
A New Mindset for a New Market. Former CEO of Maersk Oil Houston discussed the importance of cost control in Oil & Gas and provided a new perspective on the market
Cost Reduction in Practice. Director of Strategic Sourcing at DCP Operating Company, Sr. Commercial Manager at Motiva Enterprises, and Head of Procurement at Jonah Energy shared how supply market insight and data were used to decrease their operating costs
Cost Reduction Outside the Box. Vice President of E&P Services at WPX Energy and Head of Procurement at Statoil explained how rising costs were averted by their companies
Elevating Costs. Director of Supply Chain at Southwestern Energy spoke about the factors that drive business unit engagement and their effects on category management success
- Networking opportunities that brought together over 67 executives across 38 firms
A keynote speech on current economics of Oil & Gas and how to envision Supply Chains of the future
We want to extend our gratitude and appreciation to all who attended the Forum and shared their perspectives on the Oil & Gas market. If you would like more information about any of the presentation topics, please send us an email at firstname.lastname@example.org.
The Chief Procurement Officer’s organization has become a central driver of utility competitiveness and operational efficiency. During the EEI Annual Conference 2017 in Boston earlier this month, we had a number of discussions with CFOs around how Finance and Supply Chain can collaborate more closely to drive enterprise-wide value and efficiencies. Here's what we're seeing.
In this latest clip from our Energy Intelligence Group, we share how recent political actions could affect Oil & Gas supply chains.
Specifically, we share which categories would be at risk in the event of a NAFTA renegotiation, as well as the impact of recent Executive Orders on "Buy American" rules and the importation of steel and aluminum.
Oil & Gas Supply Chain teams have built up a tried and true toolkit of approaches to cost reduction spanning everything from negotiation strategies to RFP’s to demand planning.
But beyond that standard toolkit, what are the most innovative Oil & Gas firms doing to drive cost out of their organizations?
In today’s article, we provide specific examples of out-of-the-box ideas that other Oil & Gas firms are using to creatively reduce costs. We’ll also share several tools from renowned creativity experts to help Supply Chain teams think about how to brainstorm their next big idea.
This post is the first of a two-part series on rig stacking. Part 2 will cover stacking in onshore drilling.
Are you actively tracking which Oil & Gas service providers have made the decision to stack their rigs? While rig stacking was the farthest consideration from our minds just three years ago, today it’s a concern of grave importance for E&P’s.
In today’s post, we cover the different methods of rig stacking, why they matter to E&P’s, and what impact they can have on your operations and cost structure.
Two Methods of Rig Stacking
Since the market downturn in mid-2014, stacking of rigs has become a strategy commonly employed by service providers to save money, helping weather the storm that is low-cost oil. For those new to the world of stacking, it can take two different forms:
- Hot (or Warm) Stacking involves paying a skeleton crew to stay on the rig and conduct regular maintenance to ensure a smooth reactivation when the equipment is once again in demand and brought back online.
- Cold Stacking is the equivalent of shuttering a factory in manufacturing—rigs and equipment are packed up and stored, and employees tied directly to the operation of the equipment are laid off.