The decision to construct horizontal or complex-geometry wells is driven by return on investment from technically supported predictions of incremental production or recovery. Variables that can be controlled during the construction phase, which contribute to a well’s performance over its lifetime, can be defined and set as “well-construction key objectives.” The well then can be designed and constructed using the ingenuity of knowledgeable people who are applying technologies and techniques to deliver on these objectives successfully.
However, wells are often constructed under contractual arrangements that conflict with these objectives. A highly beneficial project outcome may not result in commercial success for all parties who contributed. Worse still, it is not uncommon for events that are undesirable and unfavorable to one party to benefit another party inadvertently, often resulting in misalignment. Therefore, to deliver what is important to the project, we rely on a range of integrity-centered human factors such as professionalism, pride in doing a good job, reputation, and relationships.
This misalignment has been ongoing for years; however, there are notable exceptions to standard contractual arrangements. Interest in moving to contracts aligned to rewarding delivery of the desired result is increasing, but we might ask ourselves why the movement is slow. Certainly, designing project-specific “smart” contracts requires more effort, but, if all parties know what they want, the actual process of constructing the contract will benefit the project. Another factor that may explain the slow uptake is that, ideally, multiple parties should be incentivized on delivery of common key objectives across the asset team. This complicates matters because the tendering, evaluating, and awarding of different activities traditionally have different timelines (for example, tendering and selecting; drilling-rig contractor vs. drilling services vs. completions systems).
Therefore, while we have knowledgeable, innovative, professional people with access to great technology, we should remember that the way a contract is constructed helps maintain focus on what really matters when it comes to delivering the best outcome. Well-conceived contracts may also accelerate development of new technologies, to deliver what is not currently achievable. In a nutshell, things tend to align under a well-considered contract.
Horizontal- or complex-geometry-well construction projects are potentially good candidates to work out new contractual arrangements. Authorization to proceed with these projects is technically based, and measurable key variables can be defined. Performance of these wells is often more sensitive to the key variables; therefore, high focus on them by means of novel contractual arrangements should drive greater value.
This Month's Technical Papers
Development Optimization of a Marginal Oil Field in Bohai Bay, China
Hydrocarbon-Mobility Steering for Optimum Placement of a Power Water Injector
Design Optimization of Horizontal Wells With Multiple Hydraulic Fractures
Recommended Additional Reading
IPTC 16813 Advancing Multistage Fracturing Using Horizontal JITP and Autonomous Completion Systems by Tim Benish, ExxonMobil, et al.
SPE 163979 Challenges to Geosteering and Completion Optimization of Horizontal Wells in the Cotton Valley Formation, East Texas by S. Liu, BP America, et al.
SPE 167448 Production Optimization of a Long Horizontal Well Using Permanent Downhole Distributed-Temperature and Pressure Monitoring and Surface-Controlled Zones by Magnus Carlsen, Maersk Oil, et al.
Jon Ruszka, SPE, holds the position of drilling adviser for Baker Hughes operations in the Europe, Africa, Russia, and Caspian areas. He has more than 25 years of industry experience in various technical, operational, and marketing positions focused on the application and advancement of directional-drilling technology and wellbore-positioning techniques. Ruszka holds a BS honors degree in aeronautical engineering from the University of Bristol and a post-graduate diploma with distinction in offshore engineering from Robert Gordon University, Aberdeen. He has authored or coauthored numerous SPE papers, serves on the annual IADC/SPE Drilling Conference and Exhibition Organizing Committee and the 2013 SPE Offshore Europe Committee, and is a member of the JPT Editorial Committee.