March 23, 2023

Logistics Industry: Oil and Gas

The oil and gas industry is evolving at a phenomenal pace, and greater evolution means a renewed focus on the abilities of oil and gas logistics companies to offer new and effective solutions. According to IBISWorld, the market size of the oil drilling and gas extraction industry is set at approximately $737.3 billion in 2023, despite an anticipated decline of 7.9%. Meanwhile, uncertainty is everywhere, and energy companies are looking for ways to improve operability and efficiency. That starts with effective partnerships. 

The reason is simple; that process runs alongside the value-added benefits of better logistics in the oil and gas industries. But it’s not always a simple, easy-to-execute process. Shippers need to understand the state of the oil and gas logistics industry; the challenges anticipated to affect the industry in 2023; a few predictions for what will happen; and how working with the right third-party logistics provider (3PL), a true supply chain expert in energy logistics, can help. 

The Current State of the Oil and Gas Industry

The oil and gas industry is in a state of flux. Oil and gas transportation and logistics service providers are trying to navigate the waters of change while also fulfilling the basic needs of this industry. Still, disruption is everywhere, and geopolitical factors play a role. 

Of course, the economy is on shaky ground, and consumers are approaching the future with caution. Yet, the demand to cut costs has never been greater. 

As reported by The Houston Chronicle, “The industry, meanwhile, faces pressure to raise crude oil and natural gas output to help make up for Russian oil and gas lost to the market. Russia’s invasion of Ukraine has affected the entire global economy, pushing oil and gas prices up while creating supply challenges that ripple across industries.”

The uncertainty also comes from the releases from reserves in 2022, such as the US release of 180 million barrels from its Strategic Petroleum Reserve, notes Bojan Lepic of Rigzone. Despite the challenges, industry experts expect 75% of oil and gas companies to report positive free cash flow after dividends. Positive cash flow from oil and gas product delivery and refining will lead to additional investment in logistics technology to support new supply chain operations. 

Rather than maintaining the status quo, companies will have access to the funds needed to support expansion and redevelopment of new logistics solutions that will lessen overall risk and offer lower operating costs. Still, it’s essential to understand the logistics challenges affecting this industry, whether by rail, ocean, or pipeline shipping, and what that means for their future. 

Logistics Challenges Will Wax Alongside Disruption

With so much at play in the current state of the industry, today’s oil and gas companies need to understand the top logistics challenges that will also arise alongside disruption.

These include:

• Climate. Without focusing on politically charged ideals, there is evidence to support the continued and perhaps worsening risks for logistics companies serving the oil and gas industries. This is especially true for international shipping services provided to offshore and near-port facilities, including those in and along the Gulf Coast. Logistics companies will need to leverage data, predictive analytics, and comprehensive risk management models to determine and plan the best route and sailing schedule, as well as any additional operations after hand-off to complete all deliveries. 
• Politics and green energy solutions. Sustainability is synonymous with modern supply chain management. According to Deloitte, new policies, particularly those reducing greenhouse gases, will have a massive impact on driving increased demand for natural gas and clean energy alternatives. 
• Economic instability. The ongoing Ukraine and Russia conflict has had a massive impact on the supply chain. With further reports on changing government responses to possible COVID variants and the continued rise of e-commerce, the risk of instability is still present. At the same time, more experts are pointing toward the risk of a recession as a reason to double down on the importance of efficiency and scalability in oil and gas logistics. 
• Resource availability. Limited resources and high inflation rates will drive the adoption of new technologies, reports Georgia Williams of Investing News Network: “The US has an opportunity regarding liquefied natural if it can find more efficient ways to transport it internationally.” It’s also important to realize that it’s not only about labor-related resources. Instead, only 9% of companies have experienced issues related directly to labor resources. 
• Changing requirements and investment plans. There are also additional issues with funding for investment into oil and gas technologies. Companies want to invest, but they may lack funding resources. Other changing factors may also include new regulations for operations in international regions.

The Future of Oil and Gas Logistics Solutions

Despite the losses and risks, the future of oil and gas logistics is on track to build a better world. 

The oil and gas industry faces increasing pressure to transition to cleaner energy sources and reduce their environmental impact. A heightened focus on carbon capture and storage technology, including investment in technologies to reduce emissions, will lead to renewed interest in sustainable oil and gas transportation.  

These sustainable exploration, production, and transportation practices will encourage governments and private companies to continue introducing policies and regulations to reduce emissions and promote the transition to cleaner energy. 

Still, oil and gas industry experts predict that fossil fuels will remain the primary means of transportation. Overall goals toward sustainability will grow in importance and determine the course of action for many businesses. As a result, more companies may consider outsourcing to reduce their in-house reporting and responsibility for managing emissions. However, outsourcing inherently means considering the impact of emissions from their value chain and contracting partners in logistics that embrace sustainability and clean energy solutions. 

Part of this will inherently include ongoing transportation optimization, development of new technologies, prioritization of sustainable transport alternatives, and value-added services.

For example, using electric or hydrogen-powered vehicles, advanced data analytics to optimize routes and reduce idle time, and investment in renewable energy sources for oil and gas logistics companies’ operations will take center stage in the fight for the oil and gas industry future. 

Moreover, logistics companies will be apt to partner with oil and gas companies that have sustainability within their core values. And this will enshrine a need to do more with less and a commitment to overarching ESG goals within all company roadmaps.  

Streamline Oil and Gas Industry Logistics With the Right 3PL.

The future of logistics in oil and gas industry circles is far from set in stone. However, the industry is facing several disruptions and influences that will reshape how quickly and the intensity to which these companies approach innovation. 

Now is the time for oil and gas companies to leverage a comprehensive suite of solutions, from project logistics through last-mile delivery of finished products necessary for drilling and energy production. Meanwhile, these strategic partnerships will maximize throughput and afford relief by encouraging compliance and sustainable transport in one stroke. 
It all comes down to finding the right 3PL for oil and gas companies that understands the unique needs and realities of the energy sector.

Request a quote with Crane Worldwide Logistics to find out how much more evolved your oil and gas supply chain can be.