List of Illustrations .......................................... ix
Foreword ....................................................... xi
Preface ........................................................ xv
The Growing Importance of Supply Chain Management in Oil,
Gas, and Power .............................................. xv
Purpose and Organization of This Book ..................... xxii
Notes ...................................................... xxv
Acknowledgments ............................................. xxvii
Introduction .................................................... 1
How Supply Chain Management in Oil, Gas, and Power is
Different .................................................... 1
Overall Objectives, Key Business Processes, and Targets ...... 4
Organizing Supply Chain Management Activities ............... 15
First Principles for Supply Chain Design and Improvement .... 16
Notes ....................................................... 21
Part 1
1 Capex Project Supply Chain Risk Mitigation: Principles and
Methods ..................................................... 23
Types of Choices Involving Risk ............................. 25
General Approaches to Managing Supply Chain Risk ............ 27
Determining the Optimal Term of Commitment .................. 31
Technology Choices and Options .............................. 36
Materials Unavailability Strategies ......................... 39
Project Structure Choices ................................... 42
Notes ....................................................... 50
Optimal Supply Chain Management in Oil, Gas, and Power
Generation
2 Engineering and Procurement of Equipment and Services at
Minimum Total Cost and Risk ................................. 53
Bid Slate Development and Supplier Selection ................ 53
Establishing and Maintaining Partner Relationships .......... 67
The Tendering Process - Choices and Best Practices .......... 73
Notes ....................................................... 85
3 Operating and Maintenance Cost Reduction: Principles and
Methods ..................................................... 89
Maintaining Complex Systems ................................. 89
Achieving Continuous Cost Reduction ......................... 99
Notes ...................................................... 111
4 Operational Safety and Environmental Risk Management:
Principles and Methods ..................................... 113
Selected International Risk Management Standards ........... 115
Other Risk Management Standards ............................ 119
Operational Risk-Mitigation Frameworks ..................... 120
Supply Chain's Role in Reducing Environmental Footprint .... 123
Notes ...................................................... 127
Part 2
5 Upstream Oil and Gas Examples .............................. 129
Introduction: Supply Chain Cost Drivers and Relevant
Design Constructs .......................................... 131
Project Risk Mitigation .................................... 132
Managing Supply Availability and Price Risk ................ 137
Engineering and Procurement at Minimum Total Cost and
Risk ....................................................... 141
Construction and Installation .............................. 149
Operations and Maintenance Cost Reduction .................. 156
Notes ...................................................... 165
6 Midstream - Hydrocarbon Transport Examples ................. 171
Introduction: Supply Chain Cost Drivers and Relevant
Design Constructs .......................................... 171
Project Risk Mitigation .................................... 173
Engineering and Procurement of Equipment and Services
at Minimum Total Cost and Risk ............................. 175
Operations and Maintenance Cost Reduction .................. 180
Notes ...................................................... 184
7 Downstream Oil and Gas Examples ............................ 187
Introduction: Supply Chain Cost Drivers .................... 187
Project Risk Mitigation through Effective Capacity
Management ................................................. 189
Engineering and Procurement of Equipment and Services
at Minimum Cost and Risk ................................... 190
Operations and Maintenance Cost Reduction .................. 194
Notes ...................................................... 200
8 Power Industry Examples .................................... 203
Introduction: Supply Chain Cost Drivers and Relevant
Design Constructs .......................................... 203
Project Risk Mitigation through Sequential Decision
Making and Real Options .................................... 206
Engineering and Procurement of Equipment and Services
at Minimum Cost and Risk ................................... 208
Operations and Maintenance Cost Reduction .................. 216
Notes ...................................................... 222
Conclusion ................................................. 225
Appendix A: Bullwhip in the Oil and Gas Supply Chain—
the Cost of Volatility ..................................... 227
Filling an Important Research Gap .......................... 227
Evidence of the Bullwhip Effect ............................ 228
The Cost to E&P Companies, Refiners, OEMs, and Component
Suppliers .................................................. 230
Suggestions for Further Research: How to Mitigate the
Costs of Bullwhip .......................................... 234
Notes ...................................................... 234
Appendix B: Common Categories of Externally Purchased
Equipment and Services for the Oil, Gas, and Power
Industries ................................................. 237
Appendix C: Glossary of Terms, Acronyms, and Abbreviations .... 245
Appendix D: Additional Resources .............................. 261
Index ......................................................... 271
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