Oil and Gas Procurement Evolves to Chart a Greener Path

Sustainability has not always been a top priority for oil and gas procurement. However, things are changing, and decision-makers overseeing this area realize it’s time to alter processes and stay mindful of the Earth’s future. Some of the many factors influencing a green procurement program include:

• The desire to meet sustainability objectives
• The push to satisfy changing stakeholder priorities
• The need to save money throughout the organization
• The realization that companies must be future-proof

When oil and gas industry leaders are ready to make greener procurement decisions, what should they do to anticipate a successful evolution?

Set Goals and Associated Timelines
Launching a green procurement program takes time, and it’s usually better to embrace a slow and steady process than rushing things and proceeding haphazardly. The best way to start is by setting clear goals and tying them directly to organizational objectives.

Considerations vary by company, but some of the main factors to assess are typically:

• Number of current suppliers
• Those suppliers’ sustainability investments
• The oil and gas company’s budget
• The size of the oil and gas company’s procurement team

After choosing potential goals, people should begin considering the steps necessary for meeting them and select challenging but doable time frames. For example, an oil and gas procurement team with very few green suppliers will have goals different from those of a company in the same industry with a robust, sustainable supply chain.

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Get Creative With the Green Procurement Program
Remember that there’s no universally correct way to launch or maintain a green procurement program. People will get the best results by analyzing aspects relevant to their companies or operations.

Additionally, it often works well to take an extremely granular approach to an oil and gas company’s supply chain. Consider the case of a Scottish supplier that manufactures plastic thread protectors for pipes used during drilling operations. The company emphasizes sustainability by using old recycled plastics when making its products. 

This material is usually discarded, but the business follows a sustainable production strategy that appeals to green-minded professionals. Leaders got the inspiration for this outside-the-box approach when customers began returning the thread protectors once they were no longer usable.

Company officials figured out an approach for refurbishing the old protectors, which involved investing in new equipment and creating a new business model from those used accessories. Employees also separated those that were too worn to refurbish. Those were shredded and sold back to the plastics industry, which used them to make products such as garbage bins.

Once the supplier had the new equipment installed and its process functional, it achieved carbon savings of 66  metric tons, exceeding projections by 4 metric tons. There was also such a demand for the refurbished thread protectors that the company hired four new workers and transitioned to a new shift pattern to compensate.

Although this supplier primarily serves the oil and gas industry, decision-makers were also exploring how they could begin targeting other sectors, bringing this sustainable option to more companies. This example shows how oil and gas procurement can become greener when entities work with suppliers that pursue thoughtful alternatives.

Consider Incorporating Green Energy Into the Procurement Plan
Sustainable procurement provides businesses with numerous advantages. Utility companies that use battery storage systems create four benefits or value types. The parties overseeing oil and gas procurement programs should always investigate the advantages particular choices are likely to bring. People in this industry — and many others — are getting acquainted with the perks of renewable energy and understanding why it’s worth prioritizing green sources.

A 2023 report showed that while the energy sector is not the leading purchaser of green power, it’s quickly gaining momentum. It has the second-highest clean power capacity at 6.7 gigawatts.

Additionally, the procurement rate from 2018 to 2022 increased to nearly 1.3 gigawatts within the industry. The research showed 35 energy companies were buying green power, with Shell leading that group once it committed to 1.2 gigawatts.

Data indicated the oil, gas and petroleum industries have contracted for 4 gigawatts of clean energy — 60% of the total attributed to the energy sector overall.

These examples show how the oil and gas industry can set a good example by continuing to gradually ramp up its green energy procurement in ways that make sense for individual businesses and support company goals.

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Recognize the Need to Change Oil and Gas Procurement
Leaders are most likely to create and stick to a green procurement program when they realize the inappropriateness of current processes. Companies must change to match trends and societal demands. As more people realize the importance of sustainability, they’ll urge oil and gas companies to show that value. Once those leaders evaluate oil and gas procurement strategies, they can highlight the chosen options through press releases and other ways of informing the public.

In one case, leaders from the Abu Dhabi National Oil Co. (ADNOC) recognized the time was right to emphasize sustainable procurement practices once government officials set a target to reach net-zero emissions by 2050. Decision-makers sought a substantial recalibration of ADNOC’s procurement process. One of the goals was a 25% reduction in its supply chain emissions by 2030.

Additionally, ADNOC executives want to prioritize securing energy-efficient products and services from suppliers. They believe doing so will translate into cost savings, making it worthwhile to work with supply chain partners that save power within their business models.

This case study shows how necessary it is to always launch a green procurement program after carefully considering the reasons why it’s time to do it. Executives may have many factors contributing to their decisions, but in this instance, the government’s net-zero goal was a primary driver.

Once everyone understands and is on board with why changes will occur in oil and gas procurement, they’re much more likely to stay motivated and focused on the goal.

It’s Time to Rethink Oil and Gas Procurement
Staying competitive in today’s marketplace requires leaders to be open and willing to do things differently. Maintaining outdated methods could restrict an oil and gas company’s growth and cause stakeholders to view it as disconnected from societal priorities.

Conversely, designing a green procurement program is an excellent way to position an oil and gas company as future-proof and ready to thrive.

References:
Pace of change in oil and gas industry set to deliver net zero targets gains

On the Road to Decarbonization: The Role of All-Source Competitive Solicitations

The Importance of Renewable Energy for the World

Clean Energy Powers American Business

Case Study: ADNOC - Advancing Using Sustainable Procurement

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