Abstract

Partnering & Alliancing is the predominant means of CAPEX and OPEX contracting in the North Sea at present. Many services are bought on this basis from Drilling and Well Services to Engineering and Construction and Management. Generally, contracting in this manner has realised significant gains to both Operator and Contractor.

This study concentrated on OPEX reduction contracting, particularly in the Engineering & Construction activities related to Offshore Production, Maintenance and Modification activities. The North Sea OPEX market was reviewed and focused on three Operators to illustrate different cultures, approaches, levels of success and aspects of success and failure.

Project Research/Objectives

The project research objectives were to establish whether commonality existed between the Operators in their approaches to lowering their individual operating expenditure budgets.

This exercise attempted to understand the reasons for success and failure and how these were manifested by evaluating the different contract styles and how the Operators and Contractors came together and, at times, how and why they didn't.

Methods Used

Grant Jardine is appointed by Oil & Gas Operators internationally. It is from working internally and/or analysing externally that these results have been gained. The research and work periods have now been in excess of three years.

Summary

In their attempts to lower OPEX, not all companies have been successful and not all Alliances between Contractors and Operators have survived.

Too many organisations have been 'hung up' in maintaining and developing team spirit as 'the' means to a lower OPEX end. Generally, this has not worked. There are Operators who have implemented an incentivised contractual arrangement too early into the relationship only for the contract to founder. The Operator maintained a policing role (through lack of trust) only to end up changing his Alliance Contractor.

A total fixation of lowering CAPEX, without due consideration being given to OPEX, has resulted in a CAPEX good - OPEX bad job. However, the industry has sufficient good examples of Alliances working:

Shell Brent - Lowering OPEX

Shell Northern - Lowering OPEX

BP Millar - Vastly Improved OPEX

BP MAST - Vastly Improved OPEX

BP Magnus - Vastly Improved OPEX

Mobil North Sea - Now seeing considerable improvements.

The concept and experience shows that when partners are in unison with a common goal that reflects each party's best interests, results can be rewarding.

In analysing the Culture of the various organisations and the chosen Contractors for each, one could assess their suitability. When looking for instant answers for instant success, these didn't exist and time was needed to develop the relationship.

Sophistication of the Alliance partners was seen as a pre-requisite for success - getting rid of man-hour spend and calculation and focusing on total cost, although sensible, and sometimes lacking, was fundamental to achieving a good outcome.

Speed of Operator change, in decoring their activities, was a critical factor. Some raced at it (BP) and lost a lot along the way, others were slow to start the "new development" of needed support and enthusiasm.

The successful ones had the uncanny knack of forming a strong bond in which the team felt themselves to be an intricate part of the decision making process.