Kim Yong-bum, a partner and managing director of Boston Consulting Group (BCG)

By Kim Yong-bum

Abusiness’s sustainability can be assessed based on how effectively it adapts to changes in the ecological, social, and economic spheres. This is especially true of the exploration and production (E&P) sector, with its urgent need to reinvent itself in the face of maturity, as it keeps adapting to changes and consequently. Some players have achieved breakthrough successes.

What other sectors can learn from this is that a business facing maturity could rise again if it tries hard to restore the sustainability of its business model. Yes, “sunset” assets can have a brighter future.

The Boston Consulting Group analyzed how E&P companies successfully dealt with changes and regained sustainability and found leading players applied consistent set of 11 levers. Their approach starts with a tailored operating model.

First, the right structures — both financial and organizational — have to be established in order to place governance and decisionmaking close to operations while maintaining a portfolio overview. Within this model, successful companies instill a unique mature-field culture oriented toward speed, value, and execution and supported by tailored performance metrics. The culture attracts, challenges and retains high-performing staff and embeds processes that support the high volume and the pace of decision-making required in mature fields.

Sustainable implementation of this culture requires clear leadership and a shift from a process and tool centric approach to one squarely focused on people. It also requires real transparency on performance and broad engagement of staff across the organization.

Once the right operating model is in place, the operational base for mature-field excellence is developed and built. This entails ensuring a competitive cost base, a structured approach to production optimization at individual fields, and proactive well and reservoir management. Focusing on cost reduction and production optimization in isolation — as many companies do — can deliver short-term but ultimately unsustainable benefits at the expense of longer-term and more strategic opportunities for improvement. But done correctly within a broader approach to mature field operations, it can be a fundamental building block of success.

At the business unit level, leading operators then ensure that they frame, value, and deliver the right projects quickly, supported by a structured technology strategy. We work with many operators whose portfolios are full of incremental investment opportunities but who struggle to identify, develop, and execute the right ones. This results in a gulf between ideas generated and barrels delivered.

In contrast, E&P leaders structure their processes to capture synergy among projects and support them with leading-edge technology.

Their mature-field investments, being lower risk, tend to face lower economic hurdle rates and are often assessed using tailored criteria, such as oil-price assumptions reflecting short-term market prices (as the incremental production can often be fully hedged) and valuation metrics that recognize capital efficiency alongside scale and internal rates of return.

Finally, maturity should not signal the end of active commercial negotiations, business development or even near-field exploration using existing infrastructure. Leading operators maintain active strategy and portfolio management as a core part of their approach. They look for opportunities to capture synergy not just within but also outside their own fields through, for example, facility sharing. They also conduct ongoing assessments of their portfolio, looking at whether they can create incremental value from asset acquisitions, sales, abandonment or alternative business arrangements. Finally, they work proactively with governments to ensure a shared understanding of the potential for value creation from mature fields and of how laws and fiscal terms can create value for both sides.

Recently, BCG helped develop and embed a tailored mature-field approach for a large international operator by creating a new organization structure, retooling core maturefield processes and reviewing the company’s overall asset portfolio. In the case of fields where it was determined that other parties could unlock more value, the company either sold those assets or entered into alternative business arrangements. For some of the remaining fields, we developed an optimization pilot that resulted in significant production increases. A comprehensive review identified 20 additional project opportunities, which are expected to deliver more than $1 billion in value. Finally, we implemented a comprehensive set of new processes for ongoing management of the company’s mature fields.

The opportunities presented by mature fields are still abundant. Think sustainability as adaptability, and tackle the challenge of mature fields head-on. Stretching, tweaking, or optimizing an operating model and a culture intended for growth assets are rarely sufficient.

Companies need to broaden their focus beyond tactical production optimization to a comprehensive approach to managing their mature-field portfolio. Doing so will ensure a brighter future for these sunset assets.