High prices and concerns about energy security in the oil and gas industry are driving expansion into ever more sensitive environments with greater technological, political and social risks. While brands such as BP, Shell and ExxonMobil are well known, some 70 per cent of oil and gas industry activities are typically contracted out to service providers and their subcontractors.
The fallout from the April 2010 Gulf of Mexico disaster has shone a spotlight on alleged systemic failures and ongoing difficulties in contracting relationships. As the governments of oil producing countries – from Nigeria to Kazakhstan to Venezuela – seek to take greater control of their oil and gas resources, there are pressures to expand the role of local businesses in chains of contractors. Government targets for local hiring and procurement in international projects increase the challenges of managing contracting.
This paper draws on three years of research and interviews within the oil and gas sector to highlight an array of critical challenges facing oil and gas companies involved in complex supply chains, and to identify urgent and longer-term actions for progress.