Industry Expert Bryan Youd talks about oil and gas company challenges and how Maine Pointe helps companies achieve their goals.
Q: What are the most important changes facing the oil and gas industry in the coming twelve months?
We are keeping our eyes on two important changes. First—price volatility. The current high levels of volatility affect organizations’ ability to raise capital and invest in new projects. Second—and this is where Maine Pointe gets involved—supply chain optimization. Historically, oil and gas companies have built their reputations on exploration and production, but have focused much less on their supply chains.
In the case of oil and gas, we most often consult on project-related supply chain issues, for example, developing a new production site. We get involved in procurement—purchasing the required materials at the best cost from the best sources, and ensuring the lowest total cost of ownership. We also have deep expertise in logistics—making sure that you get the materials in the right place at the right time.
Q: Are the supply chain challenges you outlined related to the recent volatility, or something inherent in the industry?
The supply chain issues are genetically embedded in the companies themselves. Through both up-economies and down-economies, supply chain is not just a capability companies have invested heavily in, in large part due to an engineering mindset within the industry. If you’re talking about a new production site, there are tremendous amounts of engineering, specifications, and design work that go into the start-up. Oil and gas companies are 100% sophisticated about all those issues. However executing on the types of strategic procurement tasks that Maine Pointe works on—buying the right materials, strategic sourcing of the capital requirements, and the support and MRO materials that you need to support a production operation—is something oil and gas companies haven’t focused on.
I would make a similar argument related to logistics: oil and gas companies never considered themselves to be in the business of logistics. Logistics is typically an afterthought in good economies and bad economies.
What is new—and it’s tied to the economy going up and down—is the concept that the higher the price of oil, the more competitive alternative sources of energy become. We can impact their cost of production in a way that is very hard to replicate in any other part of the business. It’s very hard to take those kinds of costs out of the production operation itself, and it’s also very hard to take those kinds of costs out of the engineering piece. Of course economic factors will always drive prices up and down, but we can really impact the cost of putting together and executing a large project.
Q: The industry has always been influenced by global forces. For example, most recently, the industry has been undergoing some extreme geopolitical pressures in the Middle East. What is your perspective on how globalization in general, and these pressures specifically, will influence the industry over the next cycle?
This is a global industry. Best-in-class supply chain performance will need to anticipate and react effectively to global changes. Particularly within our logistics practice, we bring a wealth of contacts and experience with global service providers and transportation networks. There’s no secret that a lot of the oil production work, products, and projects are tied very closely to some very volatile areas, including Venezuela and the Middle East. Quite frankly, this has been the nature of the industry. What Maine Pointe offers our clients facing pressures from geopolitical insecurity is the knowledge, contacts and skills to adapt, sometimes by a shift in regional presence.