Cost reduction across Oil & Gas value chain

Question

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??

Answer 1

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.

Answer 2

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.

Answer 3

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.

Answer 4

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