Oil Companies – Start Paying the Supply Chain Properly


The drop in the oil price has caused a huge amount of damage to the supply chain, with industry consolidation, bankruptcies and layoffs felt everywhere. Oil companies have taken advantage of this by driving down costs to the point where supply chain companies are no longer making any profit on the jobs they win.
The supply chain has always been competitive, with profit margins and overall costs never varying greatly between competitors, but it has now got to the point where only companies that are bankrolled from other sources can afford to win oil and gas projects. This will end up destroying the supply chain to the point where companies that cannot compete follow others into further downsizing activities. If these companies end up closing, then the industry will inevitably pay the price in long run.

IF YOU PAY PEANUTS…

There is another reason why oil companies should start paying higher rates for oil and gas projects and that comes down to the quality of work they will receive. If you get a budget from a company (that is already competitive), then negotiate it down 15% (removing all their profit) then the company has two options:

  1. Lose money on the project and do a good job (not an option for a lot of companies)
  2. Cut corners to save costs and try to make a profit.

The second option is where the oil and gas industry is currently operating, with the main cost cutting exercise involving using oil and gas industry professionals who are not skilled enough to do the job, or trying to get things done without enough people. This leads to inadequate designs, unsafe operations, and in the worst cases – failed oil and gas projects. Currently we are a workforce under too much pressure on every job we are trying to deliver, and the status quo cannot continue if the industry wants to remain profitable in the long term.

WHAT DOES THIS MEAN FOR OIL AND GAS JOBS?

For the oil and gas job search, this continual cutting of budgets means that jobs are shorter than they were before, and companies are refusing to pay adequately for peoples services. If we want a workforce to exist in the future, this culture of hammering the supply chain down on cost has to stop.