Feasibility Study for Future Drilling Contract Strategy in Mahakam Block: Impact on Safety, Operation & Cost

Abstract

Procurement for drilling operation normally consists of several packages based on the different activities conducted on the drilling rigs. There are as many as 15 to 20 different contracts to cover the overall activities started from wire-line logging, mud logging, cementing service, drilling fluid services, directional drilling services etc. Each individual service will have to be processed through a call-for-tender before a contract is signed. At the end there will be several contracts with different contractors which will have to be managed by the operator.

The study is in feasibility stage and conducted in Mahakam Block in East Kalimantan under the operatorship of PT Pertamina Hulu Mahakam. The main output is a "bundling" (integrated) contracts strategy for the activities on the drilling rig. A comprehensive review was undertaken to the current strategy to see how different elements is intertwined and to see if the "bundling" strategy could actually work without impacting the safety of the operation while contributing to lower operational cost.

The current procurement process is highly segmented according to different services and also to different value of the services. Procurement strategy was set on a tender by tender basis with the emphasis of giving more opportunity to contractors rather than finding the best solution to the operator. A call-for-tender is therefore a complex process which is highly regulated and time consuming and if it is not properly handled could delay the commencement of the drilling operation and at the end could result in production loss.

This paper will try to address this situation within the environment of low oil prices (2014 to 2018) and declining production where every oil and gas operator will have to manage its operation cost to stay profitable and to sustain the operation for longer horizon. The study used questionnaire, benchmarking, simulation and economics review to evaluate whether "bundling" strategy would bring efficiency to the process and lower the overall cost without sacrificing the safety of the operation. The result was promising however further study and pilot project is proposed to better understand the technical and non-technical risks and challenges in future implementation stage.