Realising efficiency and collaboration in oil and gas

Alongside collaboration, efficiency has been one of the key words associated with the oil and gas industry in recent years.

Whether we’ve been talking about decommissioning, maximising recovery or simply the ongoing process of inspection and maintenance, operators and supply chain companies seem to be continually — and doggedly — seeking ways to be more efficient.

But what more can the industry put in place for true collaboration and improved efficiency to happen?

Contracts and trust

Firstly a strong foundation for the relationship with clear contract terms and trust between the parties that the right work will be done and the appropriate level of engagement will be maintained.

Many businesses in the industry will use extended term framework agreements or master service agreements as an indication of a strong relationship, but in many circumstances these contracts can be very one sided; are seeking to cover a very wide scope of activities; and don’t always allow for the parties to act to the best of their abilities.

Moreover, while the scope may be varied or updated over time, the specific contract terms themselves are usually not revisited over their lifetime (some of which can exist for up to 10 or 15 years) to ensure that they remain fit for purpose and appropriate for the updated scope.

Even where the scope is repetitive inspection and maintenance, it’s important to make sure the terms are fit for purpose and relevant.

A standard approach

The second element is some level of standardisation.

This can be in the contract terms, but also in other documentation used in conjunction with the contract (for example, inspection reports or maintenance logs). Employing a standardised approach to reporting, particularly where work is being carried out over a number of years, ensures consistency which leads to efficiency.

Leveraging new technology

Lastly, digitalisation is the final part of the puzzle when it comes to true efficiency.

Digitalisation is a wide-ranging concept in the oil and gas industry and can extend from multi-access point online records databases — for efficient upload of maintenance and inspection records — to the use of drone technology for inspections.

Typically, digital solutions offer a cost-effective way to reduce downtime, effectively manage personnel time and result in quicker response and delivery rates— all key indicators of efficiency.

While the industry is beginning to improve inspection and maintenance regimes, as well as other areas, by applying these concepts there is still a way to go.

The oil and gas sector has not always been quick off the mark to embrace change and, for many, the view is that elements of standardisation, digitalisation and clear contracting do apply across the industry already.

The reality, however, is that these do not go far enough to properly achieve the levels of efficiency that could be reached, so — in truth — we’re not seeing the sector’s true potential.

On that basis, maybe it’s time to inspect and maintain the inspection and maintenance routines in order to not just sustain efficiency, but to excel at it.

This article previously appeared in Oil and Gas Vision in February 2019.

Laura Petrie

Aberdeen-based partner Laura is a corporate and commercial lawyer with significant experience in upstream oil and gas.

She frequently advises operators on a range of exploration and production matters and also undertakes transactional work, both on an asset and corporate basis, advising on due diligence preparation or review, SPAs, and allocation of decommissioning liability on acquisition/divestment.

Posted, 05 March 2019 by Laura Petrie
Categories: Commercial contracts | Corporate | Oil and gas

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