Strategies for oil and gas companies to remain competitive in the coming decades of energy challenges

There are a variety of challenges facing the energy industry, from decreased access to sovereign reserves, to declining fields, innovation challenges, increased regulation and new energy policies. These challenges pose a threat to the basic industry structure. Oil & gas companies espouse four common industry-wide strategies of Portfolio Management, Operational Efficiency, Financial Management and Sustainability-of which the first three are core operating strategies of oil & gas companies. The companies have derived their profitability, growth, and shareholder returns based on the superior execution of these strategies. Though talk about Sustainability is a business imperative, it is no longer a differentiating factor and is not integrated with the core strategies. The current challenges facing the energy industry, however, necessitate that the companies integrate sustainability, innovation and management of technology strategies with their core strategies of portfolio management, operational efficiency and financial management. In this thesis, we propose two distinct strategic options: Total Life Cycle Management and Management of Technology. Environmental management and organizational efficiency are an integral component of both the strategic options. Through Total Life Cycle Management, the companies address challenges of continued access to easier to develop and produce reserves and legacy fields, efficiencies, costs and hosts expectations. The key components of Total Life Cycle Management constitute Portfolio Management with enhanced relational strategies with the hosts, Operational Efficiency with continuous business process innovations, Sustainability with focus on long-term energy needs of the hosts and Financial Management with focused capital allocation to build scale and synergies in a region. Management of Technology strategies address the innovation challenges to tap the next big reserves in ultra deep water, arctic, unconventional hydrocarbons, etc. These strategies will provide differentiation on capabilities to better identify, develop, and deploy technologies. Key components of the Management of Technology strategy include R&D strategy, innovation fronts, organizational efficiency and operational performance. Companies can position themselves either as a cost- and efficiency-driven company, or as a technology-driven company-or both provided they have different organizations managing the two distinct options. The industry needs new performance metrics to reflect company performance vis a vis the variety of energy industry challenges.

Department dc:contributor.department

Sloan School of Management.

Grantor dc:publisher

Massachusetts Institute of Technology

Year dc:date.issued

2010

Author dc:creator

• Singh, Aditya, M.B.A. Massachusetts Institute of Technology

Advisor dc:contributor.advisor

• Donald Roy Lessard.

• Sloan School of Management.

Statement dc:rights

• M.I.T. theses are protected by copyright. They may be viewed from this source for any purpose, but reproduction or distribution in any format is prohibited without written permission. See provided URL for inquiries about permission.

Licence dc:rights.uri

• http://dspace.mit.edu/handle/1721.1/7582

Language dc:language.iso

eng

Handle dc:identifier.uri

http://hdl.handle.net/1721.1/59130

OAI identifier oai:identifier

oai:dspace.mit.edu:1721.1/59130