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Upstream Oil and Gas

The months and years ahead promise continued volatility in oil prices.

Companies must cope with price volatility and still gain value from the significant investments in exploration and production that they have and will have to make. Managing geopolitical and economic risk is increasingly difficult. In addition, transformational technology is shifting the competitive landscape as companies tap new energy reserves to capitalize on opportunities in these areas. 

Whether they specialize in conventional or unconventional energy markets, enterprises need new approaches to this rapidly changing sector. One critical challenge that companies face is how to improve their performance in large-project capital management. Companies must successfully apply lean principles to manage operating expenses and create clear strategies for renegotiating oil and gas contracts. Linked to that is a need to rethink cost and complexity of the entire value chain. Much of the E&P sector has seen prices rise above inflation, and along with it, increased complexity in how business is done.

Eight Critical Actions for Oil and Gas Companies

To succeed in today’s challenging energy market, upstream companies must make clear strategic decisions about how they will differentiate themselves. They must be prepared to make broad operating model changes to manage their increasingly complex portfolios. 

These eight critical actions can help oil and gas companies achieve sustainable improvements in unit operating costs within 12 to 24 months:

Technical Standardization and De-Averaging

Organizational Right-Sizing

Improved Workforce Efficiency

Supply Chain Partnering and Renegotiation

Maintenance Optimization

Organization of Aviation, Trucking, and Marine Logistics

Greater Cooperation with Other Industry Players

Streamlining Overhead, Real Estate, and Support Service Costs

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BCG's Henning Streubel discusses the four elements for overcoming volatility in the upstream oil and gas industry.

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