Five keys to unlocking natural gas supply chain management success.
Embedded deep in the Earth’s crust in shale formations throughout North America lie rich deposits of natural gas. Affordable, abundant and domestically available, this emerging energy source presents an opportunity to change the way we power production plants, warehouses and vehicles. It also offers a pathway to greater energy independence and opportunity to optimize oil & gas supply chain management.
According to the U.S. Energy Information Administration, shale gas is expected to account for as much 49 percent of all gas production by 2035. While the fast-growing market for alternative fuels offer exciting opportunities, if you’re managing an oil & gas supply chain, challenges can be just as significant.
The short list includes everything from structural changes in the industry, navigating a shifting fuel landscape, tightening regulations, growing margin pressures and the logistics challenges of exploring, drilling and transporting natural gas.
Extracting natural gas from rock formations via hydraulic fracturing, a.k.a fracking, is a complex and costly process. It takes a robust supply chain to transport rigs from site to site and move natural gas to refineries and then to market. Not surprisingly, non-traditional fossil fuel supply chains are very different from their traditional counterparts.
A great deal of the logistics work takes place upstream, where exploration, fracking and drilling activities occur. Materials must be moved to and from and between well sites. Pipes, compressors, pumps, sand and millions of gallons of water must be trucked in. Not only are these activities tricky to manage, as fuel costs rise, so do freight and logistics costs.
According to Oil and Gas Journal, natural gas exploration, fracking and drilling activities are driving demand for logistics services and systems capable of accommodating a variety of materials and projects at all stages of development. So, if you’re managing oil and gas logistics and transportation requirements, how do you streamline operations and keep costs under control? Consider these five keys to supply chain success:
1. Be able to navigate the terrain: fracking and well sites are typically located off the beaten path. They’re difficult to access, so transporting drilling machinery, pumps, compressors, sand and water to remote geographic locations that often don’t have sophisticated infrastructures can be challenging, requiring access to:
- Custom-fit fleets with specialized vehicles like pump trucks, flatbeds for pipes and water- and sand-hauling trucks
- Trained personnel, including qualified drivers, who know how to operate specialized vehicles and understand specialized handling requirements
- The ability to transport oversized or non-conventional freight safely, efficiently and cost-effectively
2. Keep costs under control: the cost of extracting natural gas from shale is staggering, so look for solutions and services that can help you mitigate costs, especially as the economy rebounds and fuel costs drive logistics costs higher. One way to save money is to outsource your fleet, using a dedicated fleet (many are powered by cost-saving natural gas) to minimize your investment in fleet equipment. Consider a transportation management system to improve load efficiency, streamline operations and reduce costs.
3. Get the timing, sequence and scheduling right: given the heavy investments made in well sites, your company likely can’t recoup your investment until your wells produce product/revenue. When wells sit idle because of a missed or late delivery, operational losses result. A delay at one drilling site can have a ripple effect on others. Engineering a supply chain with a focus on precise timing, sequence and scheduling can reduce or eliminating costly delays.
4. Put smart IT systems & tools to work for you: information technology systems that help oil & gas companies automate manual processes, expedite operations and boost margins are a win-win for logistics partners and their oil & gas customers. Examples:
- Control Tower solutions that provide visibility to activities across an entire drilling operation, managing orders in real time, and providing updates,
- Off-the-shelf and custom software solutions that track orders and create models identifying an optimal transportation scenario and dispatch carriers.
- Transportation solutions that safely move oversized freight to/from sites
- Systems that automate carrier contracting, bidding, freight audit, payment, insurance and safety management
- Tools and infrastructures that track/coordinate fleet movements and inventory
5. Use advanced data capture & analysis to inform decisions: want to make more informed supply chain decisions? Capture, analyze and standardize data around quantities, transport times, conditions, capacity and inventories to streamline operations and keep ahead of market demand.
Looking for ways to drive efficiency through every stage of your oil & gas supply chain? Learn more about how to meet the demands of the Energy Industry by downloading The Technical Digest by PennEnergy magazine – “Leveraging logistics: Dynamic solution systems for the business of energy”.
