In 1993, Qatar General Petroleum Corporation (QGPC) conducted a comprehensive review of its Offshore drilling operations and cost under the then existing day rate contracts for the three offshore jack-up rigs under hire. The results of the study indicated that substantial cost saving could be achieved through the implementation of integrated footage contracts, such that most of the hole sections are drilled under footage; giving the rig contractor footage incentives to drill vertical and deviated hole sections. Similar "integrated" footage contracts had been successfully employed by QGPC in their onshore operations (vertical wells) for several years.
In August 1994, the first integrated footage contract for Offshore Operations was implemented. Some 25 wells have been drilled and side-tracked under integrated footage contracts since. Following the success of the first footage contract, two subsequent additional jack-up rig contracts were awarded on a similar contract strategy.
The paper focuses mainly on the differences in rig charges, intangible drilling cost and overall drilling performance under the integrated and day work contracts, as most of the tangible cost have remained relatively constant.
Qatar General Petroleum Corporation (QGPC) is a state owned oil and gas exploration and production company of the Government of Qatar, active in operations both onshore and offshore Qatar. QGPC's Drilling Department is responsible for planning, programming and execution of drilling, workover, completion and well services activities for all QGPC operated fields. At present, three (3) Offshore Jack-up Rigs and four (4) Land Rigs are being operated for Drilling and Work-over activities. Some 500 Onshore wells and 200 Offshore wells had been drilled to date.
After the amalgamation of QGPC's onshore and offshore drilling departments in 1993, a comprehensive review of offshore drilling performance, for wells drilled during the period 1991 - 1993, under conventional day rate contracts, was carried out. Average drilling time and associated drilling problems and cost, for different hole sizes/sections, were analysed and established (Table 1). The review revealed that excessive drilling time and unscheduled events were substantially adding to drilling cost. Two particular phenomenon were clearly apparent. The first was the frequency of stuck pipe and side-tracking, the second was the relatively short footage achieved per bit trip.
QGPC onshore had been successfully drilling under footage contract for some 15 years in the vertical wells of the Dukhan Field. Comparison of the onshore and offshore performance showed that room for significant improvement existed to be realized. With this background, a strategy was initiated to award future offshore rig contracts on footage contract. Using the onshore footage contract model as the basis for this new strategy, the footage contract was further enhanced by integrating with it all directional drilling services.
From the well cost review, a benchmark average cost of QR.610 ($167) per foot per well was established. Any footage rate will have to be less than $167 in any footage contract to be cost effective for QGPC.
In August 1994, the first integrated footage contract for QGPC offshore operations was awarded to Santa Fe Rig 103. The Tender for this contract was competitively floated with several drilling contractors bidding for the integrated footage work. Santa Fe, which also had the footage contract for the onshore work, won based on competitive pricing. The contract duration was for three years with options.