Abstract

Since early in the 1990s, international oil and gas majors have made various efforts to reduce cost and risk in response to the dramatic change of business conditions such as continued low oil prices, deregulation, liberalization, and diversification of energy trade worldwide.For instance, they have introduced drastic budgetary cutbacks, sharp reduction of the work force and simplification of the process of decision-making through restructuring and reengineering activities.Regarding exploration and development activities, some incentive contracts such as Turn-key contract and Lumpsum contract have been applied. Additionally, we can find some successful projects to effectively reduce cost and risk in such places as the North Sea, the Gulf of Mexico.In point of the alliance contract, one operating oil company will organize an alliance team with selected contractors and service companies. This team has been considering how to eliminate overlapping posts and simplify the decision-making process. Furthermore, they are trying to produce new profits by avoiding unnecessary procedures and obstacles. And these new profits will be shared by members of the team.Such a new movement has begun to spread to Southeast Asia and the Oceanian region. Its pace is not so smooth and quick compared with the vanguards because of some geopolitical and domestic conditions such as local content and preferential policy toward domestic enterprises. However, people in related businesses are still concerned with introducing these cost-reduction measures. So, they're expected to be introduced in the near future. This report briefly describes the applicability of these new contracting strategies and their effectiveness in reducing cost and risk.

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