Well Construction Team Approach Creates a New Future for One Company's Operations on the Dutch Continental Shelf

Abstract

Summary Rising costs and low energy prices were inhibiting the development of marginal fields on the Dutch Continental Shelf, resulting in a reduction in drilling activity and a loss of business opportunities. Independent benchmark surveys and critical analysis of total well costs showed the potential for major cost reductions that could turn many of the smaller offshore gas finds into economic development prospects. This triggered a change from traditional operating and contracting strategies to a partnering approach with the principal drilling and service contractors and the institution of a well-construction team (WCT). The WCT proved so successful, with an average well cost reduction of 21% in the first year, that a similar organization has been set up for all the land drilling and workover operations. This paper describes the strategies used and presents a comparison between the traditional performance and the results from the first year of operating as a WCT. The comparison includes the results of an independent benchmark study of 20 North Sea operating companies. Introduction The operator's Well Engineering Dept. delivered 22 offshore wells of various types during 1992 at a cost of $260 million. Subsequent remedial work with associated production deferment cost a further $60 million, giving a total cost to the operator of $320 million. Although this was considered to be representative of the general industry performance on the Dutch Continental Shelf, these cost levels made many of the smaller gas finds subeconomic development prospects. This resulted in a reduction in activity from five rigs in 1992 to two rigs in 1993. Further reductions in drilling activity were likely in the following months unless major cost savings could be realized. The prospect of minimal activity threatened both the contractors' survival and the continuation of the operator's offshore activities. These threats dictated a need for a radical change in strategy. The following options for achieving this change were considered by the operator:terminating the current contracts and retendering in order to obtain lower rates oraggressively pursuing improvements in all elements of the well-construction process while retaining the existing contracts. The latter option was selected as the only sure way of delivering the "best -value" wells to the operator while providing the contractors with the profit margins necessary to sustain and improve their business into the future. This decision was supported by an analysis of the 1992 well costs, which indicated that, in an ideal world, the total costs could be halved by a combination of optimization of well design and working practices, the development and application of new technology, and avoiding workovers through improved quality.