Thanks, my response as mentioned below. Let me know your opinion, Views , Experience and suggestions please.
I am looking incentives challenges, which should be in Operator's point of view.
To a large extent it is true that Service companies are always focused only on their profit margins and are somehow due to highly competitive market are unable to walk in line with operators requirements and perspectives.
In order to balance the uncertainty and create a win-win situation for the operator and the service provider, (which is a Must) there is a need to expand the basics structure of incentives beyond only focusing on the operational efficiency and achievements.
Also these suggestions are based on the need and Target to enhance/increase the oil Production BBLs/day at the earliest. i.e Drilling - Running Completion and putting more no. of wells on production.
Below are few observations and suggestions for discussion:
Usually the concept is to award higher incentives for better operational efficiency and achievements and vice versa.
Operator should enhance the incentives appropriately or as best fit by allowing the Service Provider to regain the lost time and also carry the routine incentives. This could create a healthy atmosphere and motivation for service provider, as there is scope to undo the mistake and or catch up the profit margins.
Redefine the well delivery concept, there should be an approach to include a large element of multi-delivery agreements which will in turn improvise the well acceptance criteria and well delivery timings.
Multi-delivery agreements could mean benchmarks set in tabular form to avoid or eliminate the downhole problems in typical Formations.
4) Need to set the benchmarks for drilling efficiency for each section through a dialogue between operator and Service Company.
5)On the basis of Operator company internal study and findings, if it is doable, provision can be made to allow service companies to recover the lost time amongst all the services provided by performing better in other specific services and reduce the total accumulated down time/ NPT.
Provision in the contract for service provider to regain or nullify the punishments, penalties, negative incentive for the previous wells.
Provision in the contract for service provider to regain or nullify the punishments, penalties, negative incentive for the previous hole sections.
i.e If service provider performs better in next well or in specific well in next section and regains the lost time, then punishments, penalties, negative incentive should be nullified or routine incentives to be offered for saving time.
For section wise incentives should be offered on percentage basis (Flexible compensation structures) or only if total actual time for a well is less than the planned time and all the job acceptance criteria is maintained.
Only in exceptionally outstanding performance the lost time / penalties can be completely nullified.
If formation or operating conditions differ from the assumptions, there should be provision in the contract to amend the benchmarks along the way. This must be agreed in writing between operating company and service provider before starting on the relevant well section.
6) It is always questionable whether the incentives to improve deliveries are strong enough to outweigh the disadvantages. The service companies may have to shoulder the bigger risk of the innovative approach and the risk is bigger than the reward/incentives.
Provisions in the contract term should be motivational and appropriately balance to creating urge to rectify the failed solutions for specific downhole problems with present best possible procedures or with innovative and proven technologies in the market.
There should be preference and extra advantages to win the upcoming new contracts for such service providers. The terms in the contract should imply that developing better solutions may increase the contractor’s opportunities to win new contracts.
For well-known major down hole problems, contractor and operator should share the gain and the loss.
There should be a compensation system for which allows the contractors to introduce the new technology and share in the gains/ loss made jointly. That suggests various forms of profit sharing that could be achieved.
Note: It is continues effort to set up huge amount of database. On the basis of strong database and excellent operational and interpretational skills can help to minimize the uncertainty and formulate the best terms in the interest of achieving the objective.