Potential Cost Optimization and Efficiency Through the Innovative Hybrid Contracting Model in the Southern of Sultanate of Oman
Authors: Arfi Zulfa , Akaramethakorn Nichapa , Mahruqi Issa , Aziz Mohammad , Radwan Mohamed , Riyami Abdullah 
Published: October 2022

This paper is predominately for people to realize the potential promising outcomes of the innovative contracting strategy model of which it can provide a minimum of 10% cost reduction while still offering flexibility to accommodate upside scope with faster oil acceleration through efficiency in execution.

Continuous improvement through optimization and cost reduction has always been top priority in the BN area, that has been the focus for current and future development. Approximately eleven fields in the BN area are contributing to the success today. The fields in the area offer lots of opportunities and many upside scopes. A cross-functional team was deployed to ensure the preferred contracting strategy model is properly explored and fit for the project value drivers.

Clear value drivers and scope optimisation was determined upfront and different in-house contracting models were compared and ranked using SWOT analysis (Strength-Weakness-Opportunity-Threats). Innovative contracting model was introduced, a Hybrid model that can deliver the project value drivers and provide the management the optimum long-term results.

Value drivers of the project have been revisited prior to the contracting strategy workshop in order to reflect the latest view of the project. Apart from CAPEX saving, flexibility has become crucial to the project success due to nature of subsurface uncertainty in the area.

Pre-workshop preparation involved many stakeholders’ engagement in order to take learnings from existing/current on going contracts in the company. SWOT analysis for each contracting type has been built with support from all the contract holdership team who has an experience in each contract type. The SWOT analysis has been combined and ranked against the value drivers of the assessed project.

Contracting strategy assessment workshop has been conducted successfully and the Hybrid Model was ranked as the preferred option. Hybrid model concept looks-into two different contracting models (Insourcing and Integrated Service Management (ISM)) of which each Model has its own characteristics and benefits. Hence, Well Services Review is vital to identify and detail the project Hybrid Scope of Work (SOW) such as interference, enablers, etc.

Minimum 10% saving of well cost through standardization and efficiency in project management is a target set; however, the ongoing Gap to Potential, external benchmarking, and full integrated project economics will entail further cost savings. In addition, Hybrid Model commercialisation is being studied for potential project attractiveness, cost savings, and efficiency i.e., rental fee analysis.

The approach involves a true understanding of the project value drivers and uncertainties. Integrated team from subsurface, surface, contract and procurement are the heart of the success which allow the project to be analyzed in detail through out. Creative, innovative with commercial mind-set thinking has actually proven to deliver continuous improvement and contracting effectiveness.