40 OCTOBER 2004

Today, oil and gas companies are searching for ways to reduce total
operating costs and increase efficiency. As part of this quest, they are
demanding that providers of tubular goods lend a hand. For suppli-
ers, this presents both a challenge to obtain the most value from a
supply system that has not changed much during the past 40 years
and an opportunity to simultaneously reinvent it.
The Supply Chain
The supply chain is the process by which oilfield tubular goods such
as pipe, tubing, and casing are ordered, manufactured, transported,
stored, prepared, and then delivered to the wellsite for installation
in the well. Managing this chain can be a logistical nightmare for oil
and gas companies. Multiple uncertainties challenge managers as
they try to ensure availability of tubular goods at the drilling site
during the well-construction phase. Any delays in the arrival of
pipeor the lack of casing, tubing, or accessoriescan result in
expensive rig downtime.
Stockpiling: Destined to Fail
To avoid any chance of downtime because of a tubular-goods short-
age, companies purchase and store large volumes of pipes and acces-
sories far enough ahead to ensure uninterrupted rig operations.
Unfortunately, this stockpiling solution has drawbacks that can be
significant. What seems like a logical solution to a costly problem
actually winds up creating new problems that sabotage success.
Among these issues are:
The costly aspect of establishing, operating, and maintaining a
larger-than-needed tubular-goods stockyard.
Decreased flexibility of the oil and gas company to
react to changes in the drilling plan because of higher
maintenance costs and additional storage space.
Downtime costs incurred by operators to find and
bring needed pipes, casing, and accessories from remote
locations.
Pipe damage, caused by improper handling, that
potentially could cause accidents, ecological problems,
or hydrocarbon leakages.
After considering these key issues, many companies
have concluded that the potential for the stockpiling
approach to negatively affect overall project cost is sig-
nificant.
Fully Integrated Supply-Chain Management
Whether an oil and gas operation is on land or offshore,
producing companies no longer can afford supply chains
that result in inflexibility and avoidable costs. It is well
known that the potential losses for operators increase
significantly as E&P activities enter deeper waters and
increasingly treacherous regions. For example, the
potential rig downtime resulting from the lack of a spe-
cial pipe size or an accessory on an offshore location will
cost several times more than for the onshore rig, and hav-
ing the same situation in a remote onshore location will require
more time to be resolved.
To be effective and efficient, todays tubular-supply-chain man-
agement must be seamless and must deliver a wide range of services
such as full inventory management, just-in-time delivery to the rig,
procurement of accessories, and preparation of subassemblies up to
the installation of the tubular string downhole. Two basic choices
exist for oil and gas companies to obtain full integration of supply-
chain management. They must choose either the build-your-own
approach or the hire-a-professional approach.
For companies electing the build-your-own approach, they must
assemble a team containing qualified personnel with experience
correctly selecting and ordering tubular goods. Additionally, the
team must ensure that tubular goods are properly handled, trans-
ported, and stored until needed and then are properly inspected and
prepared for the well. If the alternative hire-a-professional approach
is elected, a supply-chain management firm willing to assume
responsibility for managing procedures such as handling, onshore
preparation, pipe transportation and installation, accessories man-
agement, planning, and coordination must be identified and hired.
Third-Party Management
Currently, a number of companies provide supply-chain management
services. Some fully manage the stock and delivery process and other
key aspects of the drilling project, taking the clients supply-chain
management costs and risks. Other companies offer turnkey pack-
ages, which include handling supply-chain management and drilling
and production activities. Oil and gas companies that delegate tubu-
I ntegrated Tubul ar-Suppl y-Chai n
Management Reduces Cost
Management
Brad Hoffman, Business Development Director, Tenaris Oilfield Services
Management of the tubular goods supply chain can significantly
affect operations costs.
Management.qxd 9/14/04 10:43 AM Page 40
OCTOBER 2004 41
lar-supply-chain management while retaining full control of the over-
all well operation normally are better off selecting manufacturers of
tubular goods that provide specialized supply-chain services. These
companies provide expertise and background in tubular technologies
and are able to deliver packages of products and services specifically
aimed at optimizing the management of the supply chain.
Just-in-Time Installed Column
Just-in-time installed column (JIC) services exemplify the most
innovative and seamless integration of the supply chain. By focus-
ing on the management and control of the tubular-goods supply
chain, JIC providers allow producers to deal with a single supplier
for several services usually performed by multiple suppliers. It also
often means shorter manufacturing and delivery times. Producers
also can track the progress of their orders on a Web-enabled plat-
form. The benefits of this approach include:
Single source and invoice for tubular supply, inspection, instal-
lation, and remnant management.
Resale or buy-back options that manage surplus inventory.
Full-time personnel on location to handle operations and train
the workforce.
Options to stop, change, or reschedule pipe manufacturing
quickly if needed.
Safety control to reduce downtime and injury potential.
Elimination of redundant tasks through coordination of plan-
ning and execution.
Reduced total ownership cost.
Field Applications
Two field applications illustrate how the fully integrated supply-
chain management process recently has been used to improve oper-
ational efficiency and lower well cost.
The ConocoPhillips Ekofisk offshore platform is located nearly
200 miles off the Norwegian coast in the central part of the North
Sea. The horizontal position of the last 5,000 ft of the X50 well
posed a significant challenge for the supply-chain manager.
Furthermore, the particularly severe weather conditions that affect
the area made supply delivery and operations difficult. By using a
JIC provider that coordinated tubular-goods planning, ordering,
preparation, logistics, and installation, ConocoPhillips was able to
complete the well and have it on stream in 30 days.
ConocoPhillips took the same approach at its largest offshore dis-
covery in China, the Penglai 19-3 field in Bohai Bay. In this instance,
one of the key challenges was a need for a constant supply of pre-
pared casing in two different sizes to satisfy the rapid batch-drilling
activities (some wells were drilled in 2 days). By training and coor-
dinating the workforce and activities of several local service
providers, the supply-chain manager enabled ConocoPhillips to sat-
isfy its core logistical requirements for the project. In both instances,
efficient management of the supply chain was estimated to achieve
savings of nearly 25% in procurement and installation costs.
Brad Hoffman is Business Development Director for
Tenaris Oilfield Services. He has 20 years experience
working for oil and gas operators, as well as for
Schlumberger, and joined Tenaris in August 2003. He
earned a BS degree in petroleum engineering from Texas
A&M U.
JPT