Killing the Complexity Monster in E&P
Eight critical actions for upstream oil and gas companiesRead the story
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.
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:
Choosing appropriate standards and limiting choices
Optimizing head count and upgrading talent
Reducing administrative costs and bureaucracy
Leveraging partnership opportunities and overhauling agreements
Rethinking schedules and policies
Adjusting contracts and optimizing asset utilization
Cooperating with peers to reduce infrastructure and asset costs
Exercising greater discipline in—and thinking more strategically about—cost management
Andrew Fawthorp—who was with Chevron for 40 years—discusses how a partnership with BCG led to cultural and behavioral change that brought sustainable results to the company. This is one part in a series in which Henning Streubel interviews experts in oil and gas.Watch the video
A 20-year veteran in the oil and gas industry, Oleg Mikhailov explains how working with BCG can provide companies with continuous improvement processes that last. This is one part in a series in which Henning Streubel interviews experts in oil and gas.Watch the video