Productivity-Based Service Contracts

An essential element for business success is to secure the best quality services from external providers at the lowest possible cost, which is a challenge not only for operating companies but also for service providers. This challenge is becoming more important for D&WO business, which is a major services consumer. NOCs strive to create a competitive and fair environment to encourage long-term business partnerships with service providers through a transparent process to assign more than 13 D&WO services. A new process put into practice in the last 2 years, objectively evaluates service providers based on measurable criteria that include the pricing schema, historical performance, HSE compliance, and nationalization compliance of all providers against their contractual obligations. To assure the integrity of the process, an application was developed to fully automate the process, starting with the collection of data from its original sources to evaluate the service providers, through the electronic approval of the final assignment by management. The application, Automated Services Assignment System (ASAS), provides different functionalities that allow seamless integration of different data sources like performance data from drilling rig morning reports and rig activity scheduling from a corporate database. It evaluates and ranks service providers automatically and provides an automated workflow for approving the services assignment based on a hybrid business model (standard process, service packaging, or lump sum turnkey), and allowing the adoption of additional business requirements during the execution phase through automated change request functionality. The process and the application enabled D&WO organizations to respond to dynamic changes in their business by running as many scenarios as needed to identify the best business approach, with potential cost savings up to 15 percent (initial rough estimate). Effective management of the process delivers time savings up to 40 percent, compared to the manual process. Implementing multidimensional evaluation criteria strengthens the credibility and integrity of the process compared to evaluations done based upon single criterion, such as cost or performance. In addition, this automated system combines three different business models seamlessly; capitalizes on corporate official records for drilling operations, HSE, and rig schedule; and enforces comprehensive business rules.

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A Fair and Competitive Drilling and Workover Services Assignment Process

Amer

Ilya

Ali

et al. 2016

IADC/SPE Asia Pacific Drilling Technology Conference

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Alliances and Partnering: A New Relationship Between Oil/Gas Producing Companies and Service Companies

Gazi

Hottman

Logan

et al. 1995

Middle East Oil Show

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The current state of the energy industry finds both operating and service companies squeezed by lower prices and higher costs. Investment in exploration, equipment, and technology has been severely restricted. Many operators are responding to these harsh market conditions by re-engineering their work processes and focusing on core business activities. Re-engineered work processes encourage operators and service companies to work closely together. This motivates both to eliminate duplication, simplify processes, increase efficiency and capitalize on combined expertise to enhance production and optimize total system cost. Alliances and partnering are based on mutual trust and the commitment to add value to both organizations. Aligning interests is fundamental in establishing a lasting and mutually beneficial relationship. This paper presents an overview of these new relationships. The benefits and concerns of changing from traditional bidding agreements to new business arrangements between producing companies and service companies is discussed. Evaluation criteria for potential candidates, how to structure an alliance or partnering agreement, and a discussion of the key issues in the application of incentive contracts is presented. Introduction As oil fields mature, the cost of producing a barrel of oil is increasing. New discoveries are getting costlier, while real crude oil prices have declined (see Figure 1). Petroleum Industry Profit Margins (Figure 2) are decreasing and remaining flat. These facts necessitate a different business approach for both operating and service companies. P. 199

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Productivity-Based Service Contracts

Cited by 2 publications

References 8 publications

A Fair and Competitive Drilling and Workover Services Assignment Process

A Fair and Competitive Drilling and Workover Services Assignment Process

Alliances and Partnering: A New Relationship Between Oil/Gas Producing Companies and Service Companies

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