The development of new, unconventional energy sources, such as shale gas, tight oils, coal seam gas and oil sands, are driving a shift in the global energy industry that will require rethinking traditional energy supply chain models, according to a white paper by logistics company DHL based on research by Lisa Harrington, associate director at the Supply Chain Management Center of the Robert H. Smith School of Business, University of Maryland.
With the ongoing shift in geographies of energy production and demand, the need and desire to explore and develop new technologies to reach and extract unconventional gas reserves is growing, spurring the need for energy companies to adjust their approach to supply chain management. The new approach will be highly integrated, according to the research, to drive down logistics costs and enhance profit margins.
From a supply chain perspective, both conventional and unconventional energy companies face challenges.
“Supply chains supporting conventional energy markets are still developing as companies have had to expand into ever more inaccessible and remote locations to support the growth in global demand,” said Jonathan Shortis, vice president, energy sector EMEA (Europe, the Middle East and Africa), DHL. “In such areas, conventional energy faces the same challenge as unconventional, and that is to establish and maintain a robust infrastructure to support production in undeveloped and/or remote geographies.”
Executives interviewed for the research admit that energy companies often struggle to deal with the complexity of the supply chain and are challenged by a lack of visibility and predictability when they are working with multiple stakeholders at numerous drilling locations.
“To address this issue, leading companies are adopting an end-to-end supply chain operating model, instituting a data-driven, integrated solution that connects all stakeholders in the chain,” said Shortis. “This solution blends state-of-the-art visibility and analytics with best-practice process management to achieve bottom line results.”