Project

Portfolio Management Consortium

Goal: Educate, share best practices and develop tools for portfolio management for oil and gas

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Project log

Roger N. Anderson
added a research item
Why use Portfolio Management, Who is the End User, What are some Critical Success Factors for Implementing Portfolio Management?
Roger N. Anderson
added a research item
MY VITA as of June 1, 2020, with newest Patent Numbers issued for 5 new Continuation Patents.
Roger N. Anderson
added a research item
Albert Boulanger
added 3 research items
The oil industry is still staggering from the recent price collapse, with management energy focused on cutting costs and improving return on capital employed (ROCE). The major fiscal problem of the energy business is that it is not competitive as an investment vehicle when compared to other growth industries such as computing, the internet, and biomedicine, because our ROCE is so poor. While new exploration hotspots like offshore west Africa and the ultra deepwater Gulf of Mexico offer the promise to return >30% ROCE, refining and marketing is a drag at <5%. The industry's hope to return from its current "contrarian" financial position to become a sound fiscal industry rests in the delivery on promise from the high return offshore areas around the globe. It is not enough to discover and prove out large reserve numbers anymore in these giant and super giant oil fields. As often as not, survival of the oil company owners rests on delivering to market at a 60% or higher recovery rate. When the economics of 4D Reservoir Management are considered in a stochastic portfolio model of future cash flow, various price scenarios can be considered quantitatively in terms of the relative contributions of each large field to the company's overall success. It becomes clear that high recovery rates are required to balance risk and reward sufficiently. However, if cost cutting models are used that exclude 4D Reservoir Management from future development scenarios for these fields, cash flow shortfalls result in all but the most optimistic future price scenarios. Thus, reservoir development plans that deliver cash when it is needed for a company are required, and in all-important fields, 4D Reservoir Management becomes essential. The costs of repeated acquisition of 3D seismic surveys and continuous downhole instrumentation and monitoring become cost effective near term investments when considered in this long-term cash flow framework. There are several examples from key fields in prime offshore areas where it has already been demonstrated that 4D Reservoir Management is a key to economic success of the basin. We will review a Gulf of Mexico field where 4D seismic monitoring produced significantly different drainage patterns from those expected, and early on in the life of the field, as well. Extraction of as much of the discovered oil and gas in known reservoirs is a critical capability that will be required to balance supply/demand in the 21 st century. 4D Reservoir Management returns substantial capital versus that invested, and therefore is an essential component of responsible Business Unit management in the modern age. Introduction to Portfolio Management (PM) Oil and gas production companies make money based upon on their skills in identifying a portfolio of properties and utilizing technologies to discover, produce, and sell oil and gas produced from those properties in an optimal manner. The key ingredient to improved business performance is portfolio management, which allows a company to present the performance of all its producing properties and exploration targets in a normalized way.
Modern portfolio analysis tools give decision-makers in the oil and gas industry analytical support and specific guidance to the intuitive sense that the best balance for the business lies in a combination of tactics and simultaneous actions on multiple projects. Because of the complexity of considering several projects or tactics simultaneously, decision-makers tend to treat their projects and tactics as independent of anything else in the business. Yet all of the projects in the business interact with one another. Project interactions arise from factors such as price-resource sharing, performance targets, commercial and market interactions, and technical risk. Knowledge of how projects interact and how the aggregation of all projects sum to meet balanced business requirements should guide decisions. A portfolio perspective helps the decision-maker understand the total impact on business balance resulting from a single decision. With portfolio tools, the decision-maker is ultimately able to frame options in terms of the probability of meeting a suite of balanced performance targets.
The exploration and production (E and P) business is in the midst of a major transformation from an emphasis on cost-cutting to more diverse portfolio management practices. The industry has found that it is not easy to simultaneously optimize net present value (NPV), return on investment (ROI), and long-term growth. The result has been the adaptation of quantitative business practices that rival their subsurface geological equivalents in sophistication and complexity. The computational tools assess the risk-reward tradeoffs inherent in the upstream linkages between (1) the application of advanced technologies to improve success in exploration and in exploitation (reservoir evaluation, drilling, producing, and delivery to market) and (2) the maximization of both short- and long-term profitability. Exploitation is a critical link to the industry`s E and P profitability, as can be seen from the correlation between earnings growth of the international majors and production growth. The paper discusses the use of tools to optimize exploitation.
Albert Boulanger
added a project goal
Educate, share best practices and develop tools for portfolio management for oil and gas