Consortium Strategizes the End-Game for a Mature North Sea Asset Portfolio

Strategic Decisions Group was asked to facilitate a process to develop a long-term strategic master plan for the asset and to help align the partners around it. Using SDG’s proven Dialogue Decision Process (DDP), participants over five months were walked through steps of: framing the problem; developing a range of feasible, different and compelling alternatives; conducting a rigorous analysis of these alternatives; and finally, planning and agreeing on a way forward.

Situation Analysis

A large multifield asset in the North Sea, developed and operated over four decades by a consortium of private oil and gas companies and a state entity, is now mature and facing declining production. An extensive, geographically widespread infrastructure sized for peak production was nearing physical end of life including imminent failure of one of the major processing hubs. As a result, unit operating costs were rising rapidly, there was a large maintenance backlog and a hub needed to be replaced.

The partners sought to develop a strategy that would realize as much value as possible from potential remaining opportunities in the face of a need for extensive renewal and rationalization of existing infrastructure. There were two additional challenges: (1) achieving alignment among partners holding different views of economic and social value metrics and (2) an operating organization unaccustomed to integrated strategic analysis around the whole asset.

Discovery & Solutions

SDG was asked to facilitate a process to develop a long-term strategic master plan for the asset and to help align the partners around it. Using SDG’s proven Dialogue Decision Process (DDP), participants over five months were walked through steps of: framing the problem; developing a range of feasible, different and compelling alternatives; conducting a rigorous analysis of these alternatives; and finally, planning and agreeing on a way forward. In developing alternatives, the partnership considered, for the first time, a range of different integrated approaches for the future of the asset. Similarly, SDG introduced a powerful analytical framework to test different possibilities and scenarios. These generated novel insights around value creation in the asset and provided the basis for a discussion among the partners.

Results & Impact

Our analysis highlighted a major trade-off that the partners would need to make — a choice between a minimal investment “milking” approach and significant investment to rebuild infrastructure for the long term. Investing in an extensive rebuild of the infrastructure had relatively low capital efficiency but extended asset life and resulted in much greater ultimate recovery. The work also pointed to a range of initiatives that could potentially increase the attractiveness of higher investment alternatives. Higher investment alternatives were hard to justify within private partner portfolios while being strongly preferred by the state partner because of their direct impact on tax revenue and indirectly from maintaining the whole sector over a longer term.

Ultimately the work aligned the partnership around a number of key actions: focus on initiatives that enhance the attractiveness of higher investment, initiate a win/win discussion with the state to ensure investment proceeds, and avoid critical decision delays by getting the partners to plan contingent actions in response to uncertain outcomes. Implementation initiatives were set up around each of these actions. Equally important, the project fostered the creation of a long-term capability within the partnership to coordinate initiatives and manage stakeholders to ensure better strategic management of the asset.