Of the varieties of enterprise real-estate portfolios, the oil and gas industry claims some of the most complex asset inventories with the highest risk. As the market continues to evolve and regulatory obligations expand, oil and gas companies may find that the complexity of their portfolios has quickly outgrown the standard means of management, requiring more in-depth optimization techniques. This is especially true for real estate asset life cycle planning and prioritization, which has massive financial, environmental, and reputational implications.
Optimization of a complex portfolio of global upstream-producing assets, downstream assets, and future energies is best managed in a systematic fashion that has application to the broader organizational context and strategy. This means making data-driven enterprise real-estate decisions at the portfolio level instead of on a site-by-site basis, which can be challenging using a traditional project management approach.
The level of complexity inherent in oil and gas real-estate management decisions requires a sophisticated solution that is less about project management and more about continuos stewardship—fulfilling environmental obligations while optimizing costs.
A Real-Estate Portfolio Management Catalyst
When oil and gas organizations make decisions purely at the site level, they lose a holistic view of how those decisions might impact the portfolio as a whole and, thus, the organization’s long-term objectives. When dealing with hundreds of entities across various departments, a site-by-site analysis can easily become cumbersome and seen with a narrow view as the overall strategy is not connected to execution, and the overall risk isn’t necessarily mitigated.
Seismic shifts in the market can put pressure on an organization’s ability to identify and prioritize asset remediation decisions that align with organizational objectives and environmental initiatives. A more methodical, data-driven approach can ensure real estate portfolio decisions:
- Reduce and mitigate risk
- Account for resource capacity
- Optimize life-cycles in an efficient manner
- Create value by forecasting costs
Why and How to Adopt a Simple Strategic Analysis Model
In oil and gas organizations, each real estate asset goes through stages that often require decisions that will impact the overall portfolio, though some may be more complicated than others. Adopting a more systematic approach and elevating decision-making to the portfolio level not only enables necessary business strategies to be implemented but also creates an environment of strategic alignment and the ability to understand how decisions and actions impact the larger portfolio.
A more systematic evaluation and optimization of an oil and gas real estate portfolio would encompass these general irritative steps:
- Define methodology and inputs to test the boundaries of portfolio constraints
Configure multiple scenarios, constraints, etc., to measure risk and optimize resources.
- Use models to produce visual outputs that assist in data interpretation
Visual models help bring to light scenarios that are of interest against the status quo. For each scenario, the data helps you consider your goals and determine which are worth pursuing.
- Build a business case for a preferred scenario
With the data you’ve collected so far, show how the strategy is progressing and how it is tracking against your goals, whether they’re around risk, cash flow, or something else.
- Engage with leadership using visualizations developed from models and comparisons
Robust conversations produce alignment with strategic groupings and a clear definition of roles and resource requirements. The end result is alignment and agreement on the path forward.
Understanding Risk Within the Oil and Gas Real-Estate Lifecycle
Adopting a methodology that enables a more holistic optimization of a complex portfolio would be a challenging task using traditional tools that can be static and may lack the processing power to run such detailed scenario analyses. However, ignoring the innate complexity of these real-estate portfolios and an unwillingness to manage them as a whole will open an organization up to risk and misalignments that can burn through resources and damage relationships.
These adverse outcomes can be especially problematic when disruptions lead to wholesale changes in the energy market. The need for change is evident.
The willingness to explore a more systematic, analysis-driven approach to oil and gas real estate portfolio management will result in massive boosts to an organization’s efficiency, value, and reputation.
By becoming stewards of the portfolio, oil and gas companies can meet their strategic objectives by making adjustments that will deliver a positive impact over time. They also can mitigate risk and optimize resource deployment while concurrently working in an efficient manner and being good stewards of the environment.
Planview Advisor can help create a systematic approach to portfolio management and optimization. To learn how, please click here.