Portfolio Management in Upstream Oil & Gas

By Mazen A. Skaf

Interfaces, November-December 1999

Implementing portfolio management in an organization presents both process and analytical challenges. A successful implementation of portfolio management requires an integrated solution for both the people aspects and the analytical aspects of the problem. Strategic Decisions Group developed and implemented a portfolio management process and system for a client organization in the upstream oil and gas industry. The tailored portfolio management process provides a forum for decision-focused dialogue between senior management and asset teams. The system provides the analytical support for the process and enables management to compare decisions and assets across the portfolio and determine optimal allocation of resources. The system architecture builds on a rigorous model of the asset life cycle and the key decisions in the life cycle.

To further integrate portfolio management into the organization’s business processes, the client set up an internal portfolio management core team to facilitate the process and work with the asset teams on an ongoing basis. This has helped reduce the time for developing regional and business unit portfolio strategies. The value added from strategic alternatives developed using the implemented portfolio management methodology is in the hundreds of millions of dollars.

Abstract reprinted by permission. (c) 1999, The Institute for Operations Research and the Management Sciences (INFORMS).