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Time to reset relations with supply chain, Shell VP says

Jan 30th, 2019
by John Donovan.

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The Anglo-Dutch firm wants to “reset” the way it works with suppliers and will look to cement “fewer, but deeper” relationships, said Neil Gilmour, vice president CP integrated gas, projects and new energies.

Mr Gilmour said more benefit could be extracted from longer-term relationships were operators and suppliers “keep each other on their toes commercially”.

Speaking at BHGE’s annual meeting in Florence, Mr Gilmour said: “It’s a pivotal moment for the energy industry. It’s a pivotal moment for Shell and also for its relationships with suppliers.

“It’s worth recognising that industry has come out of a tough time. We lost a lot of expertise. A lot of colleagues left the industry and their experience went with them.

“Many suppliers disappeared and some came out in better shape than others.”

He acknowledges that suppliers are “at the core” of everything Shell does, saying: “They do the vast majority of our work. We really want to reset the way we work with them. That means working with fewer suppliers.”

He said Shell wanted to work with “enlightened” suppliers who shared the same safety values and are focused on continuous improvement.

During the same panel session, Phil Kirk, chief executive of Chrysaor, stressed the importance of engaging early with suppliers to help overcome challenges.

Mr Kirk said Chrysaor was “happy to delegate” to the supply chain, but said it was important for operators to fully understand what they are asking service companies to take on.

“Delegate, but don’t abrogate,” he advised.

Mr Kirk also said it was important to make sure the cost reductions and lessons learned during the downturn are sustained, rather than industry allowing itself to slip back into the bad ways of boom and bust.

He said industry would not be entirely successful in breaking the cycle, but that more effort was being made to sustain improvements.

Mr Kirk said some companies deserved a score of “five out of five” for their efforts to collaborate, though others are “closer to a two”.

Speaking to Energy Voice on the sidelines of the conference, Mr Kirk said: “We’re seeing increased activity, which will put pressure on the supply chain and resources.

“It’s critical that everybody – the supply chain and operators – act in best interests of the UKCS and MER UK.

“The leadership teams of suppliers and operators have to intervene if they see bad behaviours creeping in on either side.

“Having said that, I’m more positive now than I have been in past.”

Richard Dyson, chief executive of io oil & gas consulting, agreed that long-term relationships would be beneficial, but said the supply chain needed “some margin to return”.

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