Alliance Contracting Strategy - One of the Key Successes for One Company's Gulf of Mexico Deepwater Subsea Systems
Authors: Trosclair W.J. , Houlgrave Robert C. 
Published: October 2008

The challenges to Shell's Gulf of Mexico deepwater subsea production systems in the mid-90s prompted the implementation of a contracting strategy to facilitate standardization, learning and continuous improvement. This paper discusses the incorporation of these principles in an alliance contracting approach deployed in the execution of subsea projects and the results achieved to date.

Introduction -- Case for Action and Framework

The objective of value creation through contract alliances is often desired but seldom achieved. Statistics indicate that over 60% of alliances fail! A different story unfolds here together with reasons for the alliance's success.

The right conditions and environment must exist before initiating an alliance. Additionally, there must be commitment on the part of the participants (stakeholders) to ensure the right processes are in place, that they are being followed and that progress towards meeting objectives is frequently reviewed with key stakeholders, management and customers.

The right conditions.

The background information described in "A History of Shell's Gulf of Mexico Deepwater Subsea Production - System Development Strategy," (OTC 13116) by Dennis Schneider, indicates the conditions developing in the early 1990s were right for an alliance.

Following is a highlight of the circumstances existing prior to the decision to pursue an alliance for the design, manufacture, and installation support of subsea hardware. Fig. 1 shows the flow of subsea technology evolution and alliance maturity and sets the stage for the following discussion.

In the early and mid 90s, Shell had a large inventory of midsized deepwater prospects for which subsea production systems would provide a viable development option to the large surface-based production systems such as tension leg platforms.

In view of the size of the reserves, business drivers meant that cost and cycle time would have to be progressively reduced for each new well, and that efficiency of the limited staff was paramount (doing more with less). Within Shell's subsea organization, there was not a large base of subsea expertise from which to draw. Experience and knowledgewere limited, as was subsea technology. This gave rise to a need to look outside the company for expertise and resources.

Additionally, the need to expediently develop a large number of projects required a portfolio approach. The key ingredients of this approach were pursuit of technology development followed by creation of standardized designs and processes. From a commercial standpoint, developing subsea equipment for technically challenging areas, such as Mensa in 5,200 ft of water more than 50 miles from a host platform, falls into a high risk, high reward category. Such a category is one of the commercial criteria for considering the benefits of an alliance.

Once standards were developed, a focus on continuous improvement when applying them would be necessary. Having a single contractor involved in this activity would be beneficial and is another factor favoring an alliance.