Cost reduction across Oil & Gas value chain

MBB
New answer on May 18, 2021
4 Answers
920 Views
Anonymous A asked on May 17, 2021

Hi, what can be the possible costs across the value chain of (say Upstream) O&G company? What are the possible ways to reduce them? I would go by Access (obtaining licenses) > Geological Studies > Exploration > Drilling > Production > Abandon. But what are the possible costs involved and methods to reduce them??

Overview of answers

Upvotes
  • Upvotes
  • Date ascending
  • Date descending
Best answer
Adi
Expert
Content Creator
replied on May 17, 2021
Accenture, Deloitte | Precision Case Prep | Experienced Interviewer & Career Coach | 15 years professional experience

Hey,

O&G value chain is a rather unique setup. I think doing a sesison or two with a coach who has experience in this area will be super helpful for you.

My background is Supply Chain & Operations, so I can help with key concepts on value chain analysis but I dont have O&G background.

Also, have a look at this thread for some related ideas: https://www.preplounge.com/en/consulting-forum/client-is-og-company-looking-to-integrate-across-the-value-chain-8585

Run some google searches on "Accenture or Deloitte O&G value chain analysis" or "O&G cost optimisation"...some relevant results show up.

Was this answer helpful?
Ian
Expert
Content Creator
updated an answer on May 17, 2021
MBB | 100% personal interview success rate (8/8) and 95% candidate success rate | Personalized interview prep

Hi there,

Funny you ask this as I worked on an Oil & Gas value chain alignment project not too long ago! I even created a case losely based off of this project: https://www.preplounge.com/en/management-consulting-cases/interviewer-led-mckinsey-style/advanced/mckinsey-digital-bcg-platinion-oil-gas-upstream-technology-196

Feel free to shoot me a message and we can talk much more in-depth about this industry and the cost/value drivers.

You're got it about right overall. The costs are massive with any of these capex projects. Fundamentally, the largest cost by far is the actual project to setup the sit to dig your resource out of the ground. This is essentially the materials, supplies, contracting/procurement work, etc.

From there, the operational costs are much lower, but consist of labor, IT, maintaining assets/infrastructure, etc.

(edited)

Was this answer helpful?
Clara
Expert
Content Creator
replied on May 18, 2021
McKinsey | Awarded professor at Master in Management @ IE | MBA at MIT |+180 students coached | Integrated FIT Guide aut

Hello!

I like your initial approach of breaking it down into the different steps of the process, as a overal guideline, and then spot the cost reduction opportunities under each of them.

I would advise you to read some literature on the topic, mostly industry reports, since this would give you a better understanding of the sub-parts and how to cut costs on them

Hope it helps!

Cheers,

Clara

Was this answer helpful?
Denis
Expert
replied on May 17, 2021
Goldman Sachs Investment Banker NYC | Ex-Bain 5 yrs| MBA Chicago Booth | Passed > 13 MBB > 20 IB interviews

In all honesty - a very nichy question - in my opinion, get specialized O&G reports from especially the Big4, they will answer this and all possible other questions. Make sure to understand the current trends and implication in O&G.

Was this answer helpful?
Adi gave the best answer

Adi

Content Creator
Accenture, Deloitte | Precision Case Prep | Experienced Interviewer & Career Coach | 15 years professional experience
176
Meetings
13,471
Q&A Upvotes
87
Awards
5.0
70 Reviews