Maximizing the value of every molecule

A new approach to optimizing national oil company value chains

Executive summary

National oil companies (NOCs) in resource-rich countries should take a holistic approach to the management of activities across the oil and gas value chain. Whether they are emerging players developing the oil and gas sector based on newly discovered resources, or long-established companies managing mature and complex oil and gas operations, they have a common challenge: to maximize the overall benefit of hydrocarbon resources to the national economy.

Typically, NOCs have developed their oil and gas production, refining, and petrochemicals portfolios as a series of semiautonomous assets and companies. They tasked each asset with maximizing value within its own separate area of operations. Now, an increasingly volatile market outlook, growing complexity, and interdependent operations across the value chain, along with the requirement to manage multiple, potentially conflicting objectives make this a questionable approach.

Irrespective of their level of maturity, NOCs must respond by being more proactive in the management of their portfolio of operations. To do so, NOCs must standardize and align operational plans, address issues of fragmented and inconsistent data, develop new portfolio management tools and capabilities, and establish a culture of transparency and collaboration.

As an initial step, NOCs must develop an integrated approach to planning, linked firmly to national objectives and corporate strategies, and based on consistent and comprehensive data that provide the basis for the allocation of capital and resources across the portfolio. In addition, NOCs need new models of the end-to-end oil and gas value chain to identify bottlenecks and areas of misalignment, and to assess and quantify strategic options and trade-offs for the allocation of oil and gas to competing end-uses. The benefits of optimizing value chains are substantial for the financial performance of NOCs, and the achievement of broader national objectives.

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Barriers to NOC integrated portfolio management

Recent volatility in the oil price, coupled with an uncertain outlook for global oil and gas markets, has forced NOCs across the maturity spectrum to focus on greater integrated portfolio management. The model of semiautonomous operating assets and entities managed primarily to meet ambitious production and output targets has changed for good. Mature NOCs in Abu Dhabi and Qatar have embarked on the merger of previously stand-alone joint ventures, whilst the need to make better use of capital is one factor behind the partial privatization of non-core operations in Abu Dhabi and Saudi Arabia. Government decisions to allow increased participation of international companies in Brazil and Mexico also reflects the need for NOCs to change their traditional models for managing their portfolios.

However, establishing integrated portfolio management capabilities requires companies to address a number of barriers that are common to many NOCs. These barriers often reflect legacy ways of working and include:

  1. Fragmented, incomplete, or inconsistent data due to different data definitions, standards, and reporting procedures in the companies or assets within the portfolio
  2. Diverse, non-standardized planning and portfolio management tools and systems, with inefficient links to technical systems, incompatible software platforms, and business planning schedules
  3. Rigid organizational silos that encourage focus on optimization of business results for the individual organization entity, rather than the NOC as a whole
  4. Key performance metrics that incentivize activities and operations within one organizational entity, but may be counterproductive for other organizational entities
  5. Limited individual and organizational capabilities to identify, evaluate, and resolve critical cross-organizational and cross-functional issues
  6. Culture and behaviors that discourage collaboration and the active sharing of data, insights, and pursuit of business improvement opportunities, across the NOC portfolio


The benefits of implementing an integrated planning process and developing a value chain optimization model can be immediate and tangible. Prioritizing projects and investments, and identifying and addressing bottlenecks, results in more efficient use of resources to maximize production and reduced deferment of production. This comes hand-in-hand with the increased ability to benchmark and optimize costs across the portfolio, and to direct capital toward the highest-performing assets. Finally, an important additional benefit to NOCs is the increased collaboration and teamwork that comes as a consequence of treating planning as an integrated exercise, and emphasizing the NOC portfolio as an integrated, interconnected set of assets that act together to maximize the value of every molecule of oil and gas resources.

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Georges Chehade

Georges Chehade

Partner, Strategy& Middle East

James Thomas

James Thomas

Partner, Strategy& Middle East

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