ABSTRACT
A different bidding strategy must be adopted by the Drilling Contractor when bidding for incentive contracts as opposed to normal dayrate contracts, if expected reward to be gained is to be equated to the additional risk taken during incentive operations. Risk analysis, in relation to expected or perceived drilling problems and which in turn are part of the Contractors contractual liabilities, is essential in all incentive type contracts. Based upon such an analysis the Drilling Contractor must then decide whether to accept the proposed contractual risk allocation, include contingencies in the price, make contractual exceptions, take out insurance to cover the risk assumed, or adopt any combination of the aforementioned solutions. This paper addresses risk analysis in relation to the risk-reward scenario, and suggests a methodology /procedure for assessing and calculating the risk when preparing incentive bid proposals.
