Overcoming Logistics Challenges in Oil and Gas: A Route to Efficiency

Our Perspective

Why Logistics Optimization Is Critical to Oil & Gas Success

The oil and gas industry relies on a complex value chain, where strong logistics are crucial for seamless operations from exploration to production. Global geopolitical factors contribute to oil price volatility, forcing companies to cut operational costs to stay profitable.

Considering the significant investments and expenses at play, many leading organizations in the industry are now focusing on ways to optimize logistics costs. With technology advancing at a lightning pace, the upstream production and operations sectors are encouraged to embrace these innovations to enhance efficiency and achieve more cost savings.

The main goals of upstream production and operations are to discover resources more quickly, boost hydrocarbon recovery from both new and existing reservoirs, and achieve greater efficiency in operational costs while carefully managing associated risks. When we look at optimizing logistics costs, it’s not merely about cutting expenses; it’s truly a strategic necessity. This approach helps us improve operational efficiency, build resilience against market changes, and ensure sustained profitability in an increasingly competitive global environment.

Key Challenges Impacting Oil & Gas Logistics Efficiency

The value chain of upstream oil and gas production operations involves various activities, each of which presents a logistical challenge. These challenges include:

• Limited infrastructure in remote areas.
• High transportation costs for oversized and specialized equipment.
• Unpredictable weather conditions causing delays.
• Ensuring the safety of personnel, assets, and cargo during transport.

One of the most pressing logistical constraints is the limited bed space on oil rigs. This limitation results in frequent workforce turnover and increases aviation logistics costs due to the constant movement of personnel with various skill sets and rotational policies. Many of these individuals are engaged in monitoring and inspection tasks.

Drilling operations further complicate logistics by necessitating the transport of heavy machinery, chemicals, drilling equipment, contingency materials, consumables, and personnel to often remote and environmentally sensitive locations. Adverse weather can prevent vessels from docking alongside the rig, presenting a significant Health, Safety, Security, and Environment (HSSE) risk. Moreover, with a limited number of personnel working on offshore rigs, there are instances when crew members are busy with other critical tasks, leaving no one available to receive the supply boat. Operational constraints on rigs – such as restricted crane usage – can cause supply vessels to wait near rigs, consuming fuel and driving up costs.

Additionally, five-day work plans and ten-day look-ahead schedules often face unexpected disruptions due to unpredictable subsurface conditions, such as high-pressure zones or unstable formations, which can lead to blowouts or stuck drilling equipment. These unplanned events affect logistics in two major ways:

• Emergency hiring of spot vessels at premium rates to supply contingency materials and equipment
• Disruption of scheduled supply vessel operations due to fixed berthing slots and limited rig resources

These disruptions ripple through the supply chain, creating a bullwhip effect that extends the idle time of supply vessels as they wait for suitable windows to unload at rigs.

Strategic Levers for Optimizing Logistics Costs

Enhancing data accessibility and visibility is vital for improving efficiency in logistics operations. At present, data is confined to functional silos resulting in inefficiencies along the value chain. Therefore, it is essential to closely track logistics activities and employ near-real-time data for their planning.

Digitalization plays a crucial role in facilitating this optimization, and a structured five-step framework can help streamline logistics operations:

1. Data Harvesting
   Leverage IIoT sensors, drones, condition monitoring tools to collect real-time data. This enables agile logistics planning and rapid response to schedule changes due to unforeseen situations.
2. Data Migration
   Migrate collected data to cloud-based platforms to ensure global teams have near real-time access, enhancing collaboration and decision-making.
3. Big Data Analytics
   Integrate big data analytics into logistics workflows to uncover patterns, forecast demand, and improve planning accuracy.
4. Advanced Technologies
   Deploy technologies such as augmented and virtual reality (AR/VR), digital twins, autonomous vessels, robotics, and drones to automate processes, enhance service levels, and increase planning accuracy.
5. AI and ML Integration
   Employ Artificial Intelligence and Machine Learning to continuously refine logistics planning and execution through self-learning algorithms.

Logistics Control Towers, Lead Logistics Providers (LLPs), and Fourth-Party Logistics (4PL) play a crucial role in reducing costs in oil and gas production and operations by utilizing data to enhance logistics efficiency. Control Towers offer real-time visibility, enabling improved decision-making. LLPs streamline operations by coordinating multiple logistics providers, while 4PLs integrate technology and expertise to optimize transportation. Additionally, LLPs can consolidate underutilized ballast voyages (reverse trips) across the industry, unlocking previously untapped value in logistics.

The visual map below highlights various technologies being deployed in oil & gas production and operations.

Real-World Applications and Impact

• Vessel Speed Optimization
  ClassNK and Marubeni Corporation conducted joint research which demonstrated that slow steaming of vessels can reduce the fuel consumption and CO2 emission by over 7%. Aligning vessel speed with Just-in-Time (JIT) arrival at rigs not only cuts fuel costs but also minimizes non-performing time. To support this, rig work plans (5-day and 10-day work outlook data) should be integrated with logistics and voyage planning. Any deviations—such as crane unavailability—must be flagged in real-time to help logistics planners respond effectively.
  
  
• Remote Monitoring and Inspection
  AR/ VR technology, IIoT sensors and drones are being increasingly used for equipment condition monitoring and inspection. Approved by regulatory bodies and classification societies, these tools reduce the need for physical inspections, thereby lowering aviation logistics costs and optimizing helicopter payloads and trip frequency.
  
  
• Cloud-Enabled Collaboration
  Cloud migration facilities enable near real-time data access for logistics teams. This transparency supports better coordination with suppliers and helps mitigate the bullwhip effect across the supply chain—ultimately reducing costs passed on to end users.
  
  
• Agentic AI
  Agentic AI enhances decision-making in upstream oil and gas logistics by autonomously analyzing vast datasets and predicting disruptions in real time. It considers both external factors and condition monitoring inputs to deliver timely insights. By integrating intelligent agents across operations, it enables proactive risk management and drives efficiency improvements – ultimately reducing costs and minimizing delays.

According to Insights Global, Shell has leveraged AI and ML in asset health monitoring, resulting in a 20% reduction in unplanned downtime and a 15% decrease in maintenance costs. Since emergent logistics needs are typically expensive and difficult to predict, minimizing such events directly contributes to reducing overall logistics costs.

Building a Smarter, Greener Logistics Future

Optimizing logistics costs in the upstream oil and gas sector is a continuous process that is crucial for maintaining competitiveness and long-term sustainability. Integrating and sharing data, adopting innovation, and implementing digital technologies are key drivers for significant cost reductions and operational improvements across the value chain.

Wipro’s data-driven approach to Digital Logistics Management rapidly transforms diagnostic and discovery activities into tangible, quantified opportunities, which are then assessed to create a digital transformation roadmap for benefits realization. Wipro’s proven methodology has consistently delivered significant benefits to clients over time. For instance, a case study of the comprehensive assessment of European maritime logistics operations, technology capabilities, gaps, and immediate digital levers achieved cost savings of approximately €52 million per year while ensuring business continuity by directly integrating with 'smart port' infrastructure for shipment tracking and exception management.

Establishing granular benchmarks for logistics is critical for measuring progress and identifying improvement areas. By adopting a holistic, data-driven approach, oil and gas companies can navigate the logistical complexities of upstream production and operations, achieve sustainable cost savings, and build a resilient, environmentally responsible future.

About the Authors

Santosh Tiwari
Managing Consultant, Energy Practice

Santosh is a logistics and shipping leader with over 23 years of experience in the oil and gas sector. He has led transformational logistics programs during his decade-long tenure at DHL Supply Chain. He gained valuable industry experience while working with oil majors such as BP and Shell Shipping (STASCO). He also led digital transformation initiatives at BP. Santosh holds an engineering degree in Marine Engineering and an MBA from a UK university.

Partha Sarthy
Global Account Executive and General Manager, Energy

Partha is a business leader in Wipro’s energy sector with over 25 years of experience in business strategy, consulting, shipping and logistics. He has worked as an offshore marine engineer. He holds an MBA in Supply Chain Management and is an alumnus of the Yale School of Environment’s clean energy program.