Outsourcing in the Persian Gulf petroleum supply chain

Abstract

Purpose

The purpose of this study is to identify the challenges, the benefits, the risks and the motives of petroleum companies in the Persian Gulf toward outsourcing strategy. While the petroleum companies are faced with massive costs of operation that stem from the aging infrastructure, human capital deficit, inefficient fragmented business processes and lack of access to new technologies, outsourcing strategy toward cost savings and the overt and covert resistance of management and employees are significant barriers for creation of continuous process.

Design/methodology/approach

Based on the review of existing literature, the industry ' s archives and in-depth personal interviews with senior executives of the national oil and gas companies in five Gulf countries and seven global outsourcing companies and 87 survey responses, this study develops a methodological framework which substantiates or refutes the hypotheses based on the objectives: industry challenges are the driving forces behind outsourcing strategy; the potential risks of cost savings of outsourcing outweigh the consequential loss in control over the product or service, companies ' safety and security of the region.

Findings

The findings indicate that the oil and gas exporters have mixed but broad positive view of outsourcing strategy. While outsourcing could provide savings across the entire supply chain, it also generates a distracting resistance due to the fear of unknown in a complex range of culture, infrastructures and sequential processes that requires resiliency for continuity of operations.

Originality/value

This study is the first of its kind in the Persian Gulf oil and gas industry investigating the implementation of outsourcing strategy. The result of this investigation reveals the compromise between the potential benefits in cost reduction and the security of petroleum supply. This study contributes to all who are in the industry or who are involved with it to share a clear assessment of the future.

Citation

Modarress, B., Ansari, A. and Thies, E. (2016), "Outsourcing in the Persian Gulf petroleum supply chain", Strategic Outsourcing: An International Journal, Vol. 9 No. 1, pp. 2-21. https://doi.org/10.1108/SO-08-2015-0019