Unlocking the Value of Mature Oil and Gas Fields

Unlocking the Value of Mature Oil and Gas Fields

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Unlocking the Value of Mature Oil and Gas Fields

A Brighter Future for Sunset Assets
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  • In This Article
    • Mature fields—those with declining production—often provide quick access to a relatively low-risk source of oil and gas.

    • But these fields are also associated with marginal economics, technical complexity, and a range of managerial and operational challenges.

    • Exploration and production companies need a holistic, comprehensive approach to harvesting mature fields—tweaking the operating model will not suffice.


    Mature oil and gas fields matter today more than ever. In a world of increasingly competitive access to new reserves—and with half the world’s oil and gas output now coming from countries with declining production—the challenges of mature fields are increasingly relevant to host governments, operators, and suppliers alike. Indeed, governments in many countries that possess these resources are placing a growing emphasis on recovery and production enhancement in their legislation and fiscal terms. Mature fields can offer fast and low-risk access to supplies, but they often struggle with marginal economics and technical complexity. What can exploration and production (E&P) companies learn from other industries that have faced maturity, and how have operators successfully tailored their approaches to the unique demands of mature fields?

    In contrast to new oil and gas field development, the opportunities presented by mature fields are often too small and incremental to command the attention of senior managers. Top technical talent is drawn to the challenges of new frontiers—water depth, location, and reservoir characteristics—rather than to those of legacy assets with limited budgets and aging infrastructure. Moreover, the value of local and rapid decision making increases dramatically in the context of mature fields, and this can be at odds with the increasingly structured and coordinated approaches of many larger companies. Decisions need to be made quickly regarding numerous small improvements with rapid payback, and facility decommissioning schedules can create a “hard stop” for activity in a particular field.

    In addition, operations can come under severe strain in mature fields. Aging wells and facilities present integrity and reliability challenges, making operations less predictable and damaging performance. Meanwhile, it can be difficult to ensure partner engagement as the importance of mature fields declines in partners’ overall portfolios and gaining approval for investments becomes more challenging.

    In response to these challenges, many larger operators—believing that their capital is better deployed funding long-term growth investments—have in recent years divested mature fields to smaller or more focused specialists. But others have continued to invest in these assets, either because they are unwilling to give up a reliable foundation of their production or because they are committed to remaining in their “legacy heartlands.” At the same time, mature-field specialists have delivered widely publicized successes.

    Lessons from Other Industries

    E&P is not the first industry that has had to reinvent itself in the face of maturity. Early in the last decade, Qantas—already facing structural change in the global airline industry—was confronted by an additional threat in its home market with the launch of low-cost carrier Virgin Blue. The newcomer’s tailored cost structure, customer experience, and operating model threatened to undermine Qantas’s broader offering. In response, Qantas launched Jetstar, its dedicated low-cost carrier, in 2004. Wholly owned but separately managed, Jetstar grew from a staff of 650 at launch to more than 1,200 just a year later, and by 2010 it was flying almost 15 million passengers per year. Jetstar demonstrates the value that can be unlocked by a ring-fenced organization—with a distinct operating model, culture, and positioning—coexisting within a larger business.

    Thirty years earlier, the challenges of maturity and intense foreign competition were demanding disruptive change in the shrinking U.S. steel industry. Incumbent producers, reluctant or unable to invest for growth, clung to traditional blast furnaces. Against that backdrop, Nucor emerged as a player willing to think, work, and invest differently. With a headquarters staff of fewer than 100 people and only five layers of management—and performance bonuses for frontline staff of up to 200 percent—Nucor broke the mold of traditional steel. Divesting noncore assets, it pioneered a fundamentally new approach to steel, with a high degree of plant-level autonomy and the use of innovative technology such as electric-arc furnaces and minimills.

    What E&P companies can learn from these examples is that a genuinely tailored operating model is vital—either across the entire company, as with Nucor, or within a specific part, as with Qantas. Merely stretching a model designed for a different age is not enough. And the approach taken must be comprehensive, covering technology, organization, culture, and portfolio.

    Lessons from E&P

    Some E&P companies have successfully embraced these principles, with several specialized mature-field operators actively acquiring fields in the Gulf of Mexico, the North Sea, and West Africa over the last decade. The results they have achieved are impressive. Aggressive investment, a focused operating model, and the application of tailored technologies have in some cases doubled reserves over preacquisition levels, and production increases of up to 20 percent in a matter of just weeks have been delivered both on- and offshore.

    Success is not limited to specialized operators. Some large multinationals are also making their maturing legacy assets work for them, often in their traditional heartlands. Over the last decade, several leading operators with growth-oriented portfolios have shown the potential that can be unlocked by focusing on mature fields. In most cases, specific business units or programs were established to focus exclusively on mature fields, resulting in improved recovery rates of more than 20 percent compared with initial projections.

    How have these companies achieved such breakthrough results, while for others, mature fields remain a drag on their portfolio? BCG research suggests that leading E&P companies—both large players and mature-field specialists—apply a consistent set of 11 levers. (See the exhibit.)


    Their approach starts with a tailored operating model. First, the right structures—both financial and organizational—have to be established in order to place governance and decision making close to operations while maintaining a portfolio overview. Within this model, successful companies instill a unique mature-field culture oriented toward speed, value, and execution and supported by tailored performance metrics. The culture attracts, challenges, and retains high-performing staff and embeds processes that support the high volume and pace of decision making required in mature fields. Sustainable implementation of this culture requires clear leadership and a shift from a process- and tool-centric approach to one squarely focused on people. It also requires real transparency on performance and broad engagement of staff across the organization.

    Once the right operating model is in place, the operational base for mature-field excellence is developed and built. This entails ensuring a competitive cost base, a structured approach to production optimization at individual fields, and proactive well and reservoir management. Focusing on cost reduction and production optimization in isolation—as many companies do—can deliver short-term but ultimately unsustainable benefits at the expense of longer-term and more strategic opportunities for improvement. But done correctly within a broader approach to mature-field operations, it can be a fundamental building block of success.

    At the business unit level, leading operators then ensure that they frame, value, and deliver the right projects quickly, supported by a structured technology strategy. We work with many operators whose portfolios are full of incremental investment opportunities but who struggle to identify, develop, and execute the right ones. This results in a gulf between ideas generated and barrels delivered. In contrast, E&P leaders structure their processes to capture synergies among projects and support them with leading-edge technology. Their mature-field investments, being lower risk, tend to face lower economic hurdle rates and are often assessed using tailored criteria, such as oil-price assumptions reflecting short-term market prices (as the incremental production can often be fully hedged) and valuation metrics that recognize capital efficiency alongside scale and internal rate of return.

    Finally, maturity should not signal the end of active commercial negotiations, business development, or even near-field exploration using existing infrastructure. Leading operators maintain active strategy and portfolio management as a core part of their approach. They look for opportunities to capture synergies not just within but also outside their own fields through, for example, facility sharing. They also conduct ongoing assessments of their portfolio, looking at whether they can create incremental value from asset acquisitions, sales, abandonment, or alternative business arrangements. Finally, they work proactively with governments to ensure a shared understanding of the potential for value creation from mature fields and of how laws and fiscal terms can create value for both sides.

    Recently, BCG helped develop and embed a tailored mature-field approach for a large international operator by creating a new organization structure, retooling core mature-field processes, and reviewing the company’s overall asset portfolio. In the case of fields where it was determined that other parties could unlock more value, the company either sold these assets or entered into alternative business arrangements. For some of the remaining fields, we developed an optimization pilot that resulted in significant production increases. A comprehensive review identified 20 additional project opportunities, which are expected to deliver more than $1 billion of value. Finally, we implemented a comprehensive set of new processes for ongoing management of the company’s mature fields.

    E&P operators must tackle the challenge of their mature fields head-on. Stretching, tweaking, or optimizing an operating model and a culture intended for growth assets is rarely sufficient. Operators need to broaden their focus beyond tactical production optimization to a comprehensive approach to managing their mature-field portfolio. Doing so will ensure a brighter future for these “sunset” assets.

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