RESOURCE SHARING AND STRATEGIC ALLIANCES-REDUCTION OF OILFIELD COSTS THROUGH INNOVATIVE SUPPLY CHAIN MANAGEMENT

Abstract

Supply chain management is the relatively recently implemented concept of managing an integrated supply function from production of a product or service to its receipt by its ultimate end user.

This management philosophy has revolutionised production and manufacturing industries throughout the world, and has brought about dramatic efficiency improvements, with similar effects upon reducing overall costs. Traditionally, this was an area that was considered of low priority, presenting little opportunity for value adding or innovation, and characterised by adversarial, uncompetitive management techniques.

Similarly, in the oil and gas industry, especially in the North Sea and the Gulf of Mexico, extended supply chains have necessitated a re-evaluation of the mechanisms used not only for provision of the supply service, but in the relationship between the operator and the service provider. Most notable examples being the CRINE (Cost Reduction Initiative for the New Era) initiative in the United Kingdom and Chevron Corporation's (one of West Australian Petroleum's participants and also its technical advisor) CSQIP (Chevron Supplier Quality Improvement Process) methodology.

This paper will concern itself therefore with the application of cutting edge Supply Chain Management techniques garnered from both the North Sea and the United States. Focussing specifically upon alliancing/partnering, resource sharing and outsourcing, upon West Australian Petroleum Pty Limited (WAPET) and its respective contractors.

It will seek to show that through innovative use of current supply chain management tools, as well as imaginative 'out of the box' thinking by WAPET personnel and contractor personnel alike, significant cost reductions and performance improvements can be brought to bear on oilfield operating costs.