Optimizing the Midstream Oil and Gas Supply Chain: Best Practices
Midstream transportation plays a crucial role in today’s oil and gas distribution and storage processes. There are many challenges that the midstream sector is facing that need to resolve, such as the environmental impact, fluctuating oil demand, and the generally complex nature of the oil and gas supply chain.
Coordinated transportation and technology investments can address many issues that the industry faces and enable a more holistic, consolidated, predictable, and transparent global supply chain.
What is a Midstream Oil and Gas Supply Chain & How Does It Work?
Oil and gas supply chains consist of many interconnected parts and are inherently very complicated. There are many stages involved in the midstream oil and gas process, i.e. upstream, midstream, and downstream. Let’s take a closer look at each stage so we can understand the role of midstream transport in oil and gas.
The primary pieces of the ‘Upstream’ crude oil and natural gas segment are the discovery, exploration, drilling, and production of crude oil and natural gas. ‘Midstream’ includes storage, processing, and transportation t serving as an intermediate link for the first and last stages of the petroleum industry. As a final link, downstream includes the refinement and sale of oil and gas end products for customer use.
What Does Midstream Oil and Gas Consist of?
The midstream supply chain is responsible for storing and transporting supplies of oil and gas to distributors as an intermediate link between upstream and downstream. It includes all processes, operations, and equipment required for material distribution.
Storage: The supply and demand of materials across the country are balanced by the storage of gas and oil. The processing of supplies in major oil tankers and the preparation of distribution equipment is part of the midstream.
Transportation: The logistics stage starts when crude oil or natural gas is ready to be transported. Most of the oil and gas is transported throughout the country with special pipelines. Highly secure and safe, oil is transported to the desired destination with extremely high pressure. The best way to move energy products safely and quickly is through midstream pipelines.
Processing: Ultimately, supplies must be delivered to the final destination: a warehouse, plant, or facility, where final products are distributed to an end customer. Multiple transportation modes (truck, barge, tankers, etc.)T is utilized after processing, and transportation is a critical stage requiring planning and execution of aligned transportation methods.
While midstream may seem more straightforward than mining or drilling oil, the reality is that midstream transportation flows are far more complex than they appear from a distance. Arranging storage and logistics of fuel materials requires following strict safety guidelines and compliance with multiple layers of bureaucracy and government regulations.
Shipping speed and quality are critical components of an efficient oil and gas supply chain, especially the critical midstream transport activity. Bottlenecks or blind spots in the transportation of gas and oil can result in costly delays and possible fines and penalties, devastating consequences, with huge impacts on the business, the environment, and the entire market.
Oil and Gas Market Outlook
To understand where the entire industry is heading, let’s take a closer look at the key processes in the industry right now:
Decreased Oil Demand
The last few years were especially disruptive to the oil and gas industry, exacerbating some issues that have been evolving for a long time. Due to the pandemic, global energy demand dropped by 30% and is only predicted to recover by 2023.
This is an unusual situation for the market because, since 2016, the US liquid natural gas exports have grown dramatically and haven’t stopped growing until the Covid pandemic. . Fluctuating economic and political conditions, including receding GDP growth and the following general economic slowdown, are hurdles still being faced today. With more competitors emerging, and delivering additional flexibility to the market, it will be more challenging to generate steady growth and maintain ongoing projects in the future.
A Quest for Renewables
Another issue that has also become more pressing recently is the industry’s sustainability and increased usage of renewable energy sources. Some experts expect coal, oil, and gas fuel to be partly or fully replaced by the 2030s, while others believe fossil fuel won’t be fully replaced within the next 100 years.
Instead of debating whether renewables will conquer the fuel market, companies should consider the ways to integrate these new energy sources into their operations. This would require oil and gas companies to focus on how their global presence can be increased, security strengthened, environmental impact reduced, and the new order integrated. Oil and gas companies will face their biggest challenge in changing and adapting to new demands while reducing carbon emissions. A major trend in oil and gas for the next few years is also expected to be sustainability.
Focus on Automation and Visibility
Due to the summary of circumstances and factors affecting midstream oil and the industry in general, a new concern has emerged: regarding increased supply chain resilience and security. To avoid potential disruptions and price jumps due to friction between oil market players, stability will become a primary interest for businesses in the upcoming years.
The key to resilience and agility is supply chain visibility and data centralization. Since midstream transport is the bridge between oil production and distribution, the efficiency of fuel transportation is critical to the success of the overall supply chain flow. Transparency and speed are crucial for a robust transportation strategy, and that’s why midstream companies need to implement software solutions to enhance and optimize their supply chains. Global supply chain visibility allows companies to increase productivity, gain more visibility into operations, store data efficiently, and streamline processes. Investing in reliable and powerful visibility software to address these blind spots will become a top priority for oilfield companies.
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Author
Trevor Read
President at Agistix based in San Francisco. I am an entrepreneur with a passion for data, and technology. I am results-oriented and committed to developing fast-deployment solutions to help customers seize the new opportunity coming from big data in the global supply chain.
