Pertra AS (Pertra) had stipulated few and governing requirements for the rig, (capacity, Acknowledgement of Compliance (AoC), certificates and use of a recognized supplier) and could implement a very simplified evaluation.
The rig contract describes strong incentives to achieve a well with good quality and at the same time ensure prudent safety and progress.
The payment structure has been based on this and is very different from other drilling contracts normally used in the Norwegian sector.
The company's organization, together with the contractor and hired consultancy firms, are well coordinated and the interviews identified few discrepancies.
Background for the audit
Pertra is an entirely new type of operator in the Norwegian sector with a very small organization. For the NPD is was of particular interest to look at the company in terms of expertise and capacity.
The company has conducted several drilling operations and has hired rigs several times since starting up. The NPD wanted to audit the hiring process for the rig.
For this drilling operation Pertra will employ special incentive agreements with Maersk Contractors Norge AS (Maersk) and Halliburton. The main features are a lump sum payment upon start-up of the work, a very low day rate and a share of the oil production in a limited period of time that constitutes a significant part of the total contract sum.
We wanted to see if these agreements had any effect on safety and quality.
Purpose of the audit
The objective of the task is to evaluate the hiring process for the rig and how safety evaluations were made.
Result of the audit
Due to the special situation the license was in, with planned shutdown of production at the end of 2003, a very rapid rig hiring process was conducted. About a month passed from the license decision to drill two sidetrack wells was made on 6 June 2003 until the agreement with Maersk was signed.
Few and governing requirements were stipulated for the rig to be used. In principle, it was to have an Acknowledgement of Compliance (AoC) and relevant certificates, it was to have sufficient capacity and a recognized supplier was to be used.
An evaluation of available jackup rigs showed that only Maersk had relevant rigs, Mærsk Giant and Mærsk Galant. Mærsk Galant had worked for the license before. It soon became clear that Maersk wanted to offer Mærsk Giant for this assignment. The operator thus in reality only had one possible rig.
How a choice is made among several available rigs was therefore not a topic for this audit. The main focus was on responsibilities related to the operation and in this connection the incentives of the various parties.
The background for the focus on responsibilities was the organizing of the hiring process and operation. Pertra used DPT as a consultant in connection with the rig hiring and implementation of the rig process.
In practice, DPT does what a drilling department in a major oil company does in connection with a drilling operation. Pertra has one resource person for drilling operations, the company's drilling manager.
Despite a quickly implemented hiring process and an unusual organization of the hiring process, all parties gave positive feedback to the effect that this was efficient, there was good leadership focus and clear ownership of the individual elements in the tender process on both sides. Available time and use of resources in the hiring process were sufficient according to the parties.
The hiring process indicates a strong focus on the time spent. The incentive agreement used, however, differs from similar arrangements used by other companies.
The fact that compensation is not directly linked to the time spent, but to production, probably curbs the focus on time in relation to the quality of the well. The effect of production division in relation to HES is, however, an issue that may be relevant for further review.
The interviews with individuals in Pertra, DPT and Maersk identified few discrepancies among the parties. The company's organization, together with the contractor and hired consultancy firm, seemed well-coordinated.
As the organization is of a limited size, there will also be the issue of how easy it will be for the company to acquire expertise in special areas when needed, and capacity to handle major accident situations.
All parties gave positive feedback to the effect that this was efficient, there was good leadership focus and clear ownership of the individual elements in the tender round on both sides. Available time and use of resources in the hiring process were sufficient according to both parties.
The conclusion of the audit is that the hiring process for the rig has been implemented to the NPD's satisfaction, but that we have identified some matters with an improvement potential. These are the responsibilities between Pertra and the suppliers, evaluation criteria for the rig and the consequence of the selected incentive structure.