Drilling Magazine Media Intelligence, Contextual Wisdom
To further investigate the importance of codification of description of integrated services for presenting drilling services we sat down to talk with Ali Reza Azedi. Mr. Azedi is the technical and engineering deputy of Iranian Offshore Oil Company and has been the technical and engineering deputy of Pars Oil and Gas Company. Due to extensive experience in engineering field, Azedi has a deep understanding of the relationship between clients and contractors, the problems and weaknesses in this area.
How do you evaluate the task description of services and workflow in client and contractor sector of the country?
It is first necessary to have a clear definition of the client and the contractor in manufacturing and development companies. If we consider development projects, we can divide three important sides of an upstream project, i.e. the governmental client, general contractor and the subcontractor. In this case, client authorization will be delegated in order of priority from the top. It is safe to say that among the three sectors, more transparency belongs to the task description between the governmental client and general contractor and the task description between and public contractors and subcontractors happens as a result of that. However, it should also be noted that even the description of this part of the job is not thorough and transparent enough, and has resulted in various technical, legal, contractual, and financial problems. Regarding workflow, there is major vagueness in communications a result of the nature of client and contractor at all three levels. Basically, in some communications, the workflow process and responsibilities is not even written. However, it should be noted that for workflow one must consider the nature of implementing the contracts in the manufacturing and development companies.
What are the most important weaknesses and shortages in the field of technical service description in the current situation?
Before answering this question, the current situation of technical service description must be determined. In most cases, the overall title of the project is declared without the details of the work done by the client and the client provides and presents his proposal based on his own perception and from the perspective of contracting. The technical task description must include all milestones, reports, products offered by the contractor and the client’s obligations in this regard. In other legal, contractual, and financial sectors, it must clarify and explain all items that will be encountered during implementation. Given that providing a comprehensive service description has as a direct relationship with the client and then its thorough and transparent clarification in the contractor’s proposal, any generalization and lack of attention to detail and hidden aspects of the work will create the possibility of parties’ claim regarding vague requests during implementing the contract. Unfortunately, at the moment, either in the client or the contractor side, task description and suggestions are regulated in a vague and general way so that they can have the maximum extent of demands and benefit from the hidden aspects implied in the task description. In this regard, all tasks and relationship between client and contractor in the discussions of supply and financial payment, supplying content or executive or technical prerequisites, project management, buying or supplying materials and goods, monitoring and technical verification of project products must be specified clearly. Therefore, the main weaknesses include lack of job description and expected targets of both parties (client and contractor), which will cause losses to the parties.
“Unfortunately, at the moment, either in the client or the contractor side, task description and suggestions are regulated in a vague and general way so that they can have the maximum extent of demands and benefit from the hidden aspects implied in the task description”
How do you evaluate task description in Iran in comparison with other countries? In codification of task description, to what extent are international experiences possible?
Provision of service description is directly related to recognition of content and method of work /project by the client. According to multiple projects at the country level and gaining enough experience, both in upstream and downstream oil and gas industries, there is adequate managerial and technical experience in the oil industry in Iran. Therefore, using the experiences of other countries in this area will contribute to the oil and gas industry considerably. It should be noted, however, that the level of maturity and applying experience in providing a clear and comprehensive job description in order to carry out projects is different at the level of companies and management subsidiaries of the national oil company. Of course, in all the areas with weaknesses, duplicating both successful domestic and international companies will be useful. Obviously, eliminating weaknesses would be possible by standardization and provision an integrated framework of task descriptions of oil and gas projects at National Oil Company level. Effective activities have been carried out in this regard and in case of managerial persistence and support, we will witness solving problems resulting from the weaknesses.
How necessary is it to codify and implement service description?
Provision of service description would mean client’s recognition of the project. As explained before, it would be necessary to conduct a comprehensive and impeccable project. The fact is that if the description of services is not regulated correctly, the client would suffer from technical, legal, contractual, and financial problems during project implementation and obtaining its results. In addition to preparing description of services, client’s monitoring and continuous follow-up in order to implement the job description precisely to achieve project goals is necessary.
Based on your experience in onshore and offshore fields as a client, how do you perceive the requirements and susceptibility of service description in these areas?
Reviewing service description, especially in the discussion of controlling the quality and transparency of authority and responsibility is one of the most important issues that must be prioritized in drilling services offshore and onshore and its efficiency and effectiveness must be considered. Obviously, the major difference of drilling services onshore compared to offshore services lies in the logistics sector and the difficulty of access to required facilities during running drilling services at the sea. Therefore, special attention to logistics is inevitable and clients, active onshore must give high priority to this issue. Necessary coordination for timely services and sequencing them to avoid wasting the rig’s time offshore and onshore are among the main tasks of client’s supervisors. Nevertheless, because of the high level of relevant risks onshore, the cost of drilling services offshore will be higher compared to similar services. This causes an increase in cost of a well onshore compared to the sea. Thorough compliance with environmental cases onshore is a requirement of activity at the sea.
What do you think the description of drilling services include?
Description of services must include a full explanation of the equipment and product /service requirements, both key and non-key human resources, issues related to security and the environment, the expected results and controlling service quality and required standards, timetable or schedule, parties’ commitments/ responsibilities and powers including the client and the contractor, workflow and communications, and standards regarding regulating reports, monitoring directive, delivering and transforming the final product. Obviously, regulating all details and directives and work breakdown structure (WBS) and also valuation and payment to each of (CBS) must be considered in the task description completely. Applying contractor’s penalties or fines in case of unfavorable service will be required, too.
What is the difference between clients and contractors sectors in terms of description of services?
As you are aware, the detailed task description is presented to the contractor by the client. Then, the contractor offers his technical/ financial suggestion to provide requested services in accordance with the client’s request. It is obvious that task description (client) and offer (contractor) must be proportional and corresponding and must have complete overlap. In most cases, due to the nature of the work, the client’s request will be regulated beyond the client’s request.
“Eliminating weaknesses would be possible by standardization and providing an integrated framework of task descriptions of oil and gas projects at National Oil Company level. Effective activities have been carried out in this regard and in case of managerial persistence and support, we will witness solving problems resulting from the weaknesses.”
What would be the achievement and advantage of creating integrated service description in the drilling industry, particularly in the areas of employing?
Integrated drilling services approach is a strategy in which all or most of the services and facilities are integrated in a single contract. This approach transfers many operating risks to the contractor, resulting in more flexibility in providing drilling services. In addition, by increasing productivity, improving communication and interaction and increasing the use of advanced technologies, reducing lost time and a lack of compliance, an acceptable profit margin is provided for the client and for contractors. Among the main objectives of integrated drilling services approach are as follows: – Focus on key goals such as high quality wells with optimal cost to meet the needs of the client – Improving the efficiency of operations through a transition of unrelated duties of the client to the main contractor – Coordinating the parties involved in the drilling operation to achieve common and measurable goals and equitable incentives to reward genuine performance-based targets – The establishment of a group to start with maximum efficiency and continue to enhance the collective experience on the basis of a learning curve – With centralization of management contract to cover the entire scope of work in a large tender in integrated service approach, the opportunity to reduce the total cost drastically increases. This happens due to collaboration, strong communication, teamwork, continuous improvement, and increasing responsibilities in all project phases. In an integrated system, the total cost of the system can be reduced more optimally.
Each project has its own characteristics and requirements. In various projects done around the world, different approaches have been adopted in order to optimize performance of the parties and increase operational efficiency. According to the history of drilling contracts and studies carried out, we can benefit from integrated drilling services approach as a means of aligning the goals and interests of clients and contractors in many projects with various models. Among the most important factors in the success of this approach are as follows: – Strong management and organizational proper for the main contractor in order to coordinate sub-contractors’ operation – A substantial reduction in activities related to tenders and contract management in the client’s organization – Support and commitment of all parties involved, including employers, contractors, and subcontractors – The management of services by the main contractor – Precise and effective exchange of information and cooperation – Transferring the logistic risk of the projects to the main contractor – A greater focus of the client on policies and the main activities by outsourcing much of the work and coordination to the main contractor – Ability to define the mechanism of reward /punishment in integrated services contracts to achieve higher performance and ultimately reducing the total cost of the operation In general, if the description of integrated services is properly regulated, it will have many beneficial effects. However, it is necessary to mention that the client’s role for precise and impeccable monitoring of implementation of work stages is essential and inevitable.
What problems in the oil industry are due to the weak description of services that will be eliminated with the development of the structures and procedures?
There are many conflicts because of the ambiguity and lack of clarity in the current description of services. Safety and environmental requirements and the way to control the quality of services are not written with a preventative attitude; service description is merely qualitative without details. As already mentioned, lack of transparency causes immense costs to the client and the contractor and has occasionally resulted in legal /financial claims between the client and the contractor. It is obvious that obtaining the final product of the project with the requested quality, in the least possible time with the lowest cost or the optimization of time/ cost/ quality must be given priority by managers in running projects.
Author: Ali Reza Azedi