Energy sector’s supply chain faces new challenges

Manufacturers and members of the nation’s supply chain community welcomed the news last week that the Department of Interior’s would be ending the offshore drilling moratorium in the Gulf Coast region.

“Manufacturers are encouraged by the Administration’s announcement that it has lifted the deepwater drilling moratorium,” said The National Association of Manufacturers (NAM) President John Engler. “However, the lengthy permitting process keeps rigs idle and essentially creates a de facto moratorium. Every day the rigs remain idle, thousands of jobs are at risk in the Gulf Coast and throughout the nation.”

According to Engler, manufacturers who make and supply equipment, services, engines, boats and materials such as steel and concrete will continue to be “negatively impacted” by this lengthy permitting process.

“This added bureaucracy and the confusing regulatory framework only increase costs and place more uncertainty on our already struggling economy—forcing our nation to rely even more on foreign producers, discouraging investment in new projects and stifling job creation,” he said.

Engler added that manufacturers will continue to work with the Administration and Congress to ensure there is clarity in the regulatory process and permits are issued in a timely manner.

Stephen Hester, vice president and chief procurement officer with Smith International, inc.— recently acquired by Schlumberger Limited—also voiced his approval for the resumption of drilling.

Speaking at the 2010 Supply Chain Council Executive Summit in Houston last week, he noted that demand for more oil will by driven by consumers in emerging nations.

“That means that we not only have to drill more frequently,” he said, “but even deeper than ever before.”

From a procurement perspective, he added, that will present new challenges.

“Since energy companies cannot control price, we have to focus on cost,” he said. “Meanwhile, we have to be tough with our suppliers and act decisively. All industries dependent upon energy are going to be kept very busy in the coming years.”

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