A Strategic Approach for Managing Oil and Gas Assets

The global oil market is experiencing a structural shift. Faced with a rapid price decline, large oil-producing countries have moved to protect their market share, with the hopes of permanently removing expensive supply from the market. Meanwhile, the ability of the US shale oil producers to respond quickly to positive price signals puts downward pressure on prices. On the demand side, advances in renewable technology and the continued effort to curb consumption of fossil fuel inhibit long-run growth. These factors suggest that the current down cycle may continue for an extended period of time.

Traditionally, oil and gas companies have employed a rigorous stage-gate process for managing large projects, devoting a good deal of attention to defining and designing the right development concept before making a final investment decision. But multiple challenges are threatening this traditional decision model. In such an environment, how can companies create value for shareholders? By starting with the very hydrocarbon-producing assets they already own. Measured against the entire portfolio, new and existing investments each have a “line of sight” to value and trade-offs are made clear. A successful asset management strategy will equip a company for an extended downturn by realizing the full value of its current portfolio. while readying the company to seize investment opportunities when prices rebound.

In this article from Natural Gas & Electricity, SDG authors Dr. Sang-Won Kim, Dr. Brad Powley, and Léonard Bertrand (Kim, S., Powley, B., & Bertrand, L.. (2016, September) describe two examples where companies have used a strategic asset management framework to guide decisions about portfolio assets.

 A strategic approach for managing oil and gas assets. Natural Gas & Electricity 33/2, ©2016 Wiley Periodicals, Inc., a Wiley company.


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