The supply chain within the exploration and production (E&P) sector remains a labyrinthine and highly specialised domain, yet its fundamental purpose aligns closely with supply chains in any other industry: delivering the right resources, at the right time, and at an optimal cost while managing operational risks and hidden expenses. However, industry leaders agree that the complexity of this process is only set to escalate as companies diversify their operations and incorporate novel technologies, necessitating more sophisticated systems and protocols to manage this evolving intricacy effectively.
Signe Martedal, Vice President of Supply Chain Management at Noble Corp, highlights that despite ongoing optimisation, automation, and transparency efforts, supply chain complexity will not diminish. Instead, it demands a new calibre of skillsets—analytical and strategic—that can transform complexity into a competitive advantage. The increasing integration of multiple enterprise resource planning (ERP) systems, driven by mergers and acquisitions such as Noble’s absorption of Maersk Drilling and Diamond Offshore Drilling, underscores this trend. This consolidation has prompted a shift towards process-driven and data-driven governance within supply chains, with digital tools such as large language models (LLMs) being leveraged to update and harmonise contract management and sourcing protocols.
Digital transformation emerges as a pivotal enabler for supply chain resilience. Michael Fry, Director at ModuSpec, points to the application of machine learning algorithms that can enhance decision-making by integrating equipment maintenance schedules with real-time usage data. Moving away from traditional, manual spreadsheet entries, these algorithms create a ‘digital subject matter expert’ that proactively updates maintenance timelines, thereby reducing risks of unforeseen shortages. Such predictive capabilities allow for better inventory forecasting, avoiding last-minute reliance on original equipment manufacturers (OEMs) who often face simultaneous demands from multiple contractors.
The benefits of digitalisation extend further into operational collaboration. Precision Drilling’s Director of Supply Chain, Isabela Louback, emphasises how coupling digital twins—virtual replicas collecting sensor data from rigs—with supply chain processes fosters more informed procurement decisions. Where historically requests for quotations (RFQs) relied heavily on subjective rig manager preferences, sensor data now provides objective performance insights, enabling more precise and cost-effective sourcing. This illustrates how digitalisation can integrate disparate functions, uniting supply chain management with operational imperatives to bolster overall efficiency.
However, flexibility in compliance remains a critical aspect, especially given the complex regulatory landscapes in various jurisdictions. Louback illustrates the operational pitfalls stemming from insufficiently informed customs brokers and freight forwarders, citing past problematic experiences in Cameroon and Brazil with incorrect equipment classification leading to elevated tariffs and logistical bottlenecks. She stresses the necessity for close cooperation between supply chain teams, legal, and compliance departments, alongside ongoing training to keep pace with regulatory changes. Fry adds that proactive planning around equipment maintenance, sometimes accelerating overhaul schedules from five years to every 18-24 months, can prepare companies for shifting regulatory requirements, such as those introduced by the fifth edition of API Standard 53, which imposed more stringent blowout preventer (BOP) standards and entailed unexpected costs for operators.
Sustainability concerns are increasingly woven into supply chain strategies, as exemplified by Equinor’s ambitious net-zero roadmap. Lars Erik Dale, Vice President of Drilling, Well and Intervention at Equinor, details how the company integrates carbon reduction targets directly into procurement, asking suppliers to disclose environmental data and align with net-zero ambitions. Through participation in initiatives like the Carbon Disclosure Project Supply Chain Program, nearly 80% of Equinor’s suppliers had reported on their environmental impact by early 2024. The company has also set explicit expectations for suppliers to adopt emissions targets and engage their own supply chains on sustainability, acknowledging that sometimes prioritising environmentally friendly options might come at a higher cost—a trade-off considered carefully on a case-by-case basis.
Broader industry perspectives echo the critical importance of supply chain resilience to withstand inflationary pressures, labour shortages, regulatory uncertainties, and geopolitical risks. Experts recommend a multi-faceted approach: strategic diversification of suppliers and markets, aggressive risk monitoring, real-time data analytics, and breaking down organisational silos to foster collaboration across the entire supply chain. This shift manifests as a transition from a ‘just-in-time’ to a ‘just-in-case’ mindset, promoting agility and preparedness rather than minimal inventory. Emerging technologies such as additive manufacturing and 3D printing further offer opportunities to enhance supply chain agility by enabling on-demand production of critical parts closer to operational sites.
Real-world applications underscore the transformative power of digitalisation in mitigating potential supply chain constraints before they escalate. For example, the collaboration between engineering firm Fluor and Hexagon’s Jovix® system in a large refinery project in Kazakhstan demonstrated how digital materials management streamlined operations, prevented bottlenecks, and improved transparency and collaboration among suppliers and project teams. Similarly, the oil and gas sector’s growing embrace of integrated digital platforms and automation is helping it navigate persistent supply chain woes, notably those caused by inflation and fluctuating prices of essential materials.
In summary, the E&P supply chain is evolving into a more complex but also more strategically managed ecosystem. Companies that invest in digital tools, cultivate cross-functional collaboration, maintain rigorous compliance partnerships, and embed sustainability into procurement processes are likely to build more resilient, agile, and future-proof supply chains. These developments not only mitigate risks and hidden costs but can provide competitive advantages in an industry facing increasingly volatile operational environments and mounting environmental expectations.
Source: Noah Wire Services
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