Supply chain networks servicing upstream operations in oil and gas fields after the shale revolution

Abstract

AbstractThe recent irruption of shale resources in the oil and gas (O&G) industry has dramatically changed the paradigm for managing upstream operations. Unconventional production is largely driven by drilling new wells, yielding a much larger scale of material and service flows that need to be efficiently planned. This article presents an optimization framework for the design of integrated supply chain networks (SCNs) servicing upstream operations. Novel aspects addressed in this work are the integrated planning of material and service supplies; the economies of scale in operating, transportation and capital expenditures; the concept of waiting cost to quantify production losses; and the reverse flow of materials within closed‐loop supply chains. The merits of the proposed approach are assessed through real‐world case studies from the Argentine O&G industry. Optimal designs yield significant cost savings and confirm that the integrated planning of the SCN is critical for O&G operators after the shale revolution.