Opinion

Coronavirus oil and gas supply chain risks are hidden in your backyard

How confident are you that your oil and gas supply chain can withstand the impact of novel coronavirus?

As novel coronavirus hit Wuhan at the beginning of this year, many in the developed world looked on empathetically, but largely with sceptical dismissal that the flu-like bug could spread into their own ‘backyards’.

However now, as more and more communities, cities, regions and countries around the globe become locked down to limit the spread of the coronavirus pandemic, the reality is hitting home. It’s a global pandemic – not a localised problem. The pandemic is now revealing flaws in the supply chains that we have relied upon to deliver the goods and services that we need to live, work and play.

For oil and gas operators, this supply chain problem is about to get a whole lot more real. It is now very definitively a global problem – and it is likely to hit the oil and gas industry hardest in its own backyard. Western Europe and North America, the heartlands of the majors and many of their key suppliers, are facing rapid escalation in infection rates. As of 8 April 2020, the WHO reports that more than 1.3 million people have been infected by the novel coronavirus globally and more than seventy-four thousand have died. Of this total, the USA, Canada and European region countries make up over 70% of confirmed cases. Why is this important?

Like other industries, the oil and gas supply chain involves a complex web of tiered supplier networks across the globe. Of critical importance to the oil and gas industry are the specialist technical knowledge and skills in the North American and European supplier networks residing in epicentre regions such as in Houston USA, or manufacturing hubs such as in Milan, Italy.

The gathering momentum of novel coronavirus in the USA and key European oil and gas centres represents a critical supply risk for oil and gas operators around the world. The reliance on these centres combined with the opaque tiering of supply chains beyond immediate tier 1 suppliers will be an issue for many of the complex pieces of kit and personnel required in the upstream oil sector. 

The starting point in ascertaining this risk is understanding the detail of what is purchased, from whom, and mapping out the supply routes for the critical materials, equipment and services. Without that transparency, supply chain leaders will be “flying blind” now more than ever.

How confident are you that your oil and gas supply chain can withstand the impact of novel coronavirus?

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