There are indications that oil and gas industry costs could increase between 6 per cent and 10 per cent in 2023 due to labour uncertainties and raw materials inflation, latest analysis from Mckinsey and Company stated.
The analysis also stated that primary operation tasks, such as regular inspections and maintenance, are becoming more expensive as labor rates grow upwards of 9 per cent per annum and costs for steel casings and tubing also rising at 5 per cent per annum. This, coupled with spiraling marine and aviation logistics prices, is said to be causing increasing operating expenditure rises.
According to McKinsey, the study examined how oil and gas companies are grappling with the business fallout of sustained global inflation, geopolitical developments in Europe and Asia and increasing economic headwinds.
The analysis detailed how the supply chain risk caused by these factors is affecting field operations and project delivery, with traditional mitigation strategies proving inadequate.
McKinsey noted that organizations that are taking measures to secure their supply chain and avoid market volatility are seeing significantly less inflationary pressure, saving ~15 per cent on costs.
The study details key high impact levers that can mitigate supply chain reliability risks that could be used to pivot away from the typical cost-reduction mindset, including:Early procurement in strategic projects to accelerate long purchase times by adjusting the sanctioning period.
Revising the approval gating process or enabling earlier budget approvals.
Improving the risk-reward ratio in major contracts to incentivize performance and consolidate contract volumes.
When it comes to staffing, enhancing offshore execution efficiency and digitizing inspection data could make the workplace more appealing.