Supply chain disruption represents a major threat to businesses in the oil & gas industry, and has a knock-on effect on the economic development of oil producing nations around the world. Over the years, supply chains have become longer and more complex, while the severity and frequency of supply chain disruption is increasing. From political instability and violence to legislative, regulatory and economic changes, there are a number of sources of supply chain disruption in the oil & gas industry, which often result in costly legal proceedings.

The oil & gas supply chain

The oil & gas industry remains one of the most significant industries in the global economy, accounting for four of the world’s top 10 companies by revenue in Fortune’s 2017 Global 500 list. Oil is the world’s leading fuel, with over 90 million barrels of crude oil produced every day in countries including Saudi Arabia and Iran in the Middle East, parts of Russia and China in Asia, the US and Brazil in the Americas and Nigeria and Angola in Africa.

The industry is commonly divided into upstream, midstream and downstream sectors. The upstream sector comprises the exploration, development, operation and production of oil & gas fields. The midstream sector processes, stores, markets and transports commodities, such as crude oil, natural gas, natural gas liquids (mainly ethane, propane and butane) and sulphur. The downstream sector covers the refining, distribution and retail of petroleum products around the world, all the way down to the retail of products such as petrol, diesel and natural gas to consumers.

Apr-Jun 2018 issue

Hogan Lovells