Production Enhancement Contracts: A Smart Path Forward for Mature Oil & Gas Fields Optimization

How can countries with aging, obsolete infrastructure seize on their energy potential without crippling finances? Instead of massive expenditure or ceding ownership, the answer may be found by embracing the more recent and innovative contractual frameworks that are quietly enhancing mature fields.

As global energy markets adjust to renewed geopolitical tensions, innovative partnerships – known as Production Enhancement Contracts – are turning fading fields into revitalized national assets. And they are making this possible without breaking the bank.

The Challenges of Mature Fields

Mature oil and gas fields face a perfect storm of challenges that prevent operators from maximizing their potential. The persistent decline in production from these aging assets requires increasingly sophisticated and expensive interventions just to maintain output levels.

This technical complexity coincides with a difficult economic environment. Capital requirements for new exploration and development projects have reached historic highs, while successful discoveries are becoming harder to come by. Field owners find themselves in a bind: they need to invest more just as returns become less certain. The result is a growing phenomenon of ‘stranded’ reserves that remain inaccessible due to constraints.

“It is always striking to consider that in average only 20%-30% of oil in place is typically recovered for  gas fields it is around 75%,” explains David Martinon, the CEO and co-founder of Expert Petroleum (XP), a specialized oil and gas field operator. He highlights that with a new approach and better management, as well as the latest technology — operators can push these limits even further and this can have a major impact on the overall oil and gas recovered.

“Every additional percentage of oil and gas extracted from an existing field is a victory we want to be part of,” Martinon says, noting that relying solely on exploring new areas is neither the only solution, nor the most environmentally sustainable one.

Reserves within mature fields often require enhanced recovery techniques. Sometimes this demands specialized technology or expertise that exceeds the current operator’s capabilities or risk appetite.

Without innovative approaches to overcome the technical and financial hurdles, valuable energy resources remain locked away, representing both lost economic opportunity and unrealized energy potential.

How Production Enhancement Contracts Work

Production Enhancement Contracts (PECs) represent a specialized agreement structure in the oil and gas industry designed to address the specific challenges of mature oil and gas fields.

Such contracts were quite unique 20 years ago, but now are becoming increasingly common, David Martinon explains: “We can describe it as a hybrid contract, positioned between the traditional production-sharing agreements used for decades in the oil and gas industry […] and the oilfield service contracts offered by companies such as Halliburton, Baker, Weatherford, and others.”

The Production Enhancement Contract falls between the two models, as contractors invest in the field, but have no equity in the oil or gas production or reserve. These arrangements create performance-based compensation structures that align contractor incentives with increased production and optimized operational expenditures (Opex). The financial risk is borne by the contractor, while the field owner benefits from additional resources that were either difficult to exploit so far, or uneconomical and a more sustainable operation which can last longer.

PECs offer a win-win solution, allowing field owners to maintain ownership while contractors receive compensation based on incremental production and optimized operational expenditures (Opex). Applying their specialized knowledge to realize value from otherwise untapped reserves and using latest digitalization and automation technologies to increase operations efficiencies.

Expert Petroleum demonstrates the practical success of the PEC model, having revitalized aging gas fields in Romania through its specialized approach to production enhancement and operations decarbonization.

PECs from XP first began in Romania and have focused on increasing production, optimizing operations to improve efficiency from an OPEX perspective, reducing gas emissions, and improving energy efficiency.

The company’s technological innovation is central to its success in addressing these complex field challenges. Michel Louboutin, Co-Founder and COO of Expert Petroleum, emphasizes their cutting-edge capabilities: “We utilize technologies that only a handful of companies have […] some of which we have even developed in-house to address specific challenges.”

One notable example was XP’s development of a specialized pump for water extraction from deep and hot gas wells — a solution initially met with scepticism due to extreme operating conditions but ultimately proven successful.

Or using Artificial Intelligence to increase the analysis historical production and reservoir data to uncover new trends and opportunities for production enhancement.

Beyond technology, XP’s approach to PECs recognizes the value of local expertise. “To enhance brownfields’ production, you have to combine a long-term, big-picture rehabilitation plan with detailed local inputs from the production operators who have been operating the fields for many years,” notes the company’s CEO, David Martinon. This strategy not only improves field performance but strengthens the domestic industry by developing capabilities within a local workforce.

Applications in Ukraine

Ukraine presents a compelling case for the PEC model’s implementation, offering a solution uniquely suited to the country’s current challenges and future potential. Facing the dual pressures of wartime disruption and economic transformation, Ukraine needs approaches that can rapidly modernize its energy infrastructure without requiring massive capital from government or state-owned enterprises like Naftogaz.

The PEC framework enables Ukraine to attract specialized expertise and targeted investment while maintaining national ownership. It can accelerate the revitalization of existing fields, helping Ukraine realize its potential as a significant contributor to European energy security on a faster timeline.

Ukraine’s substantial gas reserves represent a strategic asset not just domestically but regionally. As the country deepens its integration with European markets and regulatory frameworks, the sustainability aspects of PECs could become increasingly important. Field operators working under PEC arrangements can incorporate decarbonization objectives directly into their enhancement criteria. This would help in aligning Ukraine’s production practices with international standards, as well as meeting the requirements of international initiatives, like the International Methane Emissions Observatory.

Protecting the Environment

Methane, a potent greenhouse gas, significantly contributes to climate change. Massive methane leaks, known as super-emitter events, have been detected worldwide, including in the United States. These leaks, often resulting from oil and gas equipment failures, can persist for weeks. In December 2021, a substantial leak was identified at a Gulf of Mexico oil platform, discharging 40,000 tonnes over 17 days, or the equivalent of 3% of Mexico’s annual oil and gas emissions.

Gas leaks are a serious issue. XPs philosophy, according to its CEO, is that nothing should be wasted, while the environment should be protected as much as possible. “For example, over the last 10 years, we have reduced the energy intensity of our operations by more than 85%, the greenhouse gas intensity by 87%, and the freshwater withdrawal intensity by 93%,” Martinon says.

By modernizing infrastructure, reducing emissions, and implementing more efficient extraction techniques through PECs, Ukraine can transform mature fields into competitive assets that meet EU expectations for responsible resource development.

A Pragmatic Solution

Production Enhancement Contracts represent a pragmatic solution to the complex challenges facing mature oil and gas fields globally. By aligning incentives between field owners and specialized operators, PECs unlock value from previously stranded reserves without requiring massive capital investments or ownership transfers. This model proves particularly valuable in regions with aging infrastructure and limited investment capacity.

The success of companies like Expert Petroleum in Romania and Ukraine demonstrates the model’s effectiveness in real-world applications. Their ability to combine innovative technology with local expertise has revitalized declining assets while supporting broader economic and environmental objectives.

As energy markets continue to evolve amid geopolitical uncertainties and growing sustainability demands, the flexible nature of PECs offers a balanced approach to resource development.