Standardizing development and production

A mid-size upstream oil and gas company came to Strategy& looking to improve the process of discovering and developing unconventional gas opportunities. At the time, the company was employing a variety of ad-hoc R&D processes for each gas asset. Because the client was not using standardized decision-making processes to allocate investments across its exploration opportunities, the exploration and piloting phases were taking much too long.

Using best practices in lean, long-term product development devised for clients in the aerospace and auto industries, we designed a stage-gated, end-to-end process to manage the process of discovery and development of unconventional gas assets. We constructed an analytical decision framework for each stage-gate to provide a consistent view of the expected risks and benefits — including production rate and reserves — for each asset. And we developed a governance framework for capital investment allocation to align with the new end-to-end process.

More than 500 people at the company adopted the new operating model — including all the first- and second-tier decision makers. At present, the stage-gated process is being implemented for two of the client’s critical assets; it is expected to accelerate time to commerciality and reduce the cost of piloting. The analytical framework also helped evaluate the risks and benefits associated with a proposed major acquisition.