By Moses Patience Chat
The prices of oil and gas products are projected to rise this year, according to a new report released by McKinsey.
According to the report, this projected increase will result from uncertainties of labour and inflation in the price of raw materials.
The rise in cost, as revealed by a breakdown of the report, will be between 6 per cent and 10 per cent in 2023, if supply chain risks are not properly managed.
McKinsey added that primary operation tasks, such as regular inspections and maintenance, are becoming more expensive, as labour records increase of 9 per cent a year.
This, coupled with spiraling marine and aviation logistics prices, is causing increase in operating expenditure (OPEX), McKinsey said.
A partner at the global management consultancy, Johann Raunig said: “these issues mean supply chain security should be catapulting to the top of the CEO agenda, as organizations must swiftly implement a nimble, comprehensive strategy to navigate this turbulent period.
“We’re already seeing that production efficiency is dropping while operating expenditure is rising. Project budgets and schedule milestones are being missed, and key suppliers are struggling to provide labour and materials on time.
“It’s a vicious cycle: more work is carried out under emergency conditions, which is increasingly expensive.”
McKinsey also added that improving the risk -reward ratio in major contracts into incentivized performance and consolidated contract volumes, are strategies that could be used to curtail the increase in cost.