Increased purchases from suppliers in Norway for the third year in a row
In 2020, Equinor purchased goods and services worth NOK 150.8 billion from around 8500 suppliers globally. NOK 112 billion, i.e. 74% of total purchases, went to suppliers with a Norwegian billing address.
“During the last years we have seen a steady growth in the Norwegian content of our total procurements. The trend continued also in 2020, which was a difficult year for the industry. This is an acknowledgement of the competence and innovation skills of the Norwegian suppliers who win contracts in tough international competition,” says Arne Sigve Nylund, Equinor’s executive vice president for Technology, Projects and Drilling.
The Norwegian content of Equinor’s total procurements has developed from 61% in 2017 to 74% in 2020.
Creating activity and maintaining jobs
“Following the previous downturn in the energy sector in 2014-2016, we did a lot of good work with our main suppliers to transform our joint cost base, our drilling performance and the way we develop projects. This increased the competitiveness of Norwegian suppliers and strengthened the industry to better face the challenging context in 2020,” says Peggy Krantz-Underland, Equinor’s chief procurement officer.
“Our focus in 2020 has been to minimize the consequences of the pandemic and economic recession for our suppliers. We did our best to progress the projects to create spin-offs and help sustain jobs in the supply industry. The temporary tax incentives introduced by the Norwegian authorities helped to maintain high project activity,” explains Krantz-Underland.
Equinor has twenty projects in the implementation phase with total estimated investments of about NOK 245 billion. Most of these projects are in Norway.
New ways of working with suppliers
Another focus area in 2020 has been to explore new ways of working with suppliers to respond to the demanding situation in the industry.
“We acknowledged that the supply industry had not fully recovered from the previous crisis and did not initiate re-negotiations across the entire contract portfolio. Instead, we worked together with the suppliers to further improve our joint competitiveness,” says Krantz-Underland.
Equinor aims to work with suppliers in more integrated ways to empower them and increase joint responsibility. Within project development, key suppliers are engaged early and offered an opportunity to assume a greater role in concept development and overall value creation. For fields in production and within operational support, Equinor aims to establish long-term framework agreements to create a basis for continuous improvement and provide better predictability for all parties. New incentive schemes are introduced in the agreements to reward safe and efficient deliveries.
“We believe that by leveraging these new ways of working with our suppliers, we can stay more robust and resilient through cycles. Together we can improve on safety, create more value and explore opportunities in the energy transition,” says Krantz-Underland.