To define oil and gas logistics, we must first understand the meaning of logistics itself. In the simplest possible terms, logistics may be defined as the detailed planning, organization, management, and implementation of complex operations. With the oil and gas, logistics extending to not only the flow of both physical inventory and information. But encompassing all the varied, complex factors – organization, movements, and management. However, managing the oil and gas logistics around extraction operations creates new complexities. Such complexities would require policies and procedures to be in line with the following four requirements.
Access to Local Expertise
Logistics is all about knowing the local markets – ports, infrastructure, roads, facilities, and regulations. Such expert would need to have an integrated energy logistics and able to meet the energy industry’s needs with its extensive network, capabilities, and experience. The use of local market facilitates the efficient utilization of oil and gas logistics network. To ensure availability of material and carry extra capacity.
Oil and gas logistics cost is incurred to guarantee the flow of materials from suppliers to the development or production site along with storage and inspection cost. These cost typically represents up to 15% of the total operating expenditure and can be as high as 30% depending on the location of the exploration, development or operations. The average cost of production for a major oil and gas is said to be approximately $10 per barrel of oil equivalent (excluding taxes and royalties). So if a company producing a million barrel equivalent per day it would spend $3.5 billion per year, with logistics cost ranging from $175 million to $525 million. So cutting 10% of this cost can lead to much as $50 million in savings which is a significant amount.
Visibility and Control
The company’s excessive reliance on legacy tools (MS Excel/e-mails) and mechanisms that were employed to manage its day-to-day logistics operations take a heavy toll on its operational efficiencies. The approval process primarily manual and mainly handled through e-mail would lead to lack of visibility. And lack of visibility to logistics requirements led to lack of planning, resulting in underutilization of resources and further lowered operational efficiency generating an increased operational cost.
Think of it this way: When oil and gas logistics are run smoothly with control, material availability is properly accounted for, the right item is sent at the right time, is replenished when needed, fewer errors occur, and all the people, processes, and systems fall into place as they should, your operates more efficiently. There are fewer errors and fewer problems, and that means maximized revenue.
Compliance and Safety
Though we have the benefit of controlled oil and logistics being – increased revenue. Such control in oil and gas logistics are implemented with people and material logistics forming a critical part of operations based on standards. One of such standards in the oil & gas industry is HSSE (Health, Safety, Security, and Environment). With the oil and gas companies using solutions, that has the ability to manage people safely, alongside its logistics requirements in full compliance with the standards. The solution has to be robust, manageable, scalable, efficient, off-the-shelf, and have a track record of success. Such solution provided by IBS’ iLogistics platform was able to provide an integrated people and material logistics management solution helping 100% compliant with regulations, significantly reduce costs and transforming workflow across various departments.