Understanding Drilling Contracts
- • Understand some of the key issues that must be incorporated into a statement of requirements when tendering for a drilling contractor
- • Grasp the basic different forms of drilling contracts
- • Become familiar with the key contractual elements of a drilling contract
- • Be able to discern both the advantages and disadvantages that stem from being involved within a JV
- • Gain an understanding of the intricacies of the joint operating agreement
- • Understand the importance of the project scope and the role played by variation and change orders within projects
- • Grasp the essentials of stakeholder management and why this is important to commercial contracts
- • Become aware of the differing formats and mechanisms that can be used to resolve disputes
- • Have awareness of some of the different abandonment securities that exist/are imposed in different jurisdictions
Overview
The ‘Upstream’ or Exploration and Production (E&P) segment of the International Oil and Gas Industry, is in all probability, the riskiest in terms of capital intensity, long payback periods; technological dependence and a host of legal/environmental compliance requirements. It is commonplace for entities seeking hydrocarbon reserves to offset this risk exposure through collective entities such as Joint Ventures.
This course has been specifically designed to provide the delegate with a holistic understanding not only of drilling contracts, but to understand them within the wider context of the larger governing framework of which they are a part in terms of hydrocarbon discovery and extraction. The course is an immersive experience and the focus is on open dialogue throughout and class exercises/problem solving and knowledge sharing.
Location
Course Syllabus
Day 1
Topic one: Some important considerations
- Why are commercial contracts important?
- Drafting and construction
- The element of risk
- The drilling crew (onshore/offshore)
- Description of the work to be performed
- Day rates
- Some other cost considerations – contract price adjustments; liability for damage to equipment (+ 3rd party equipment); liability for pollution; liability for well control; liability for reservoir damage)
- Payment considerations
- Class exercise
- Local content
Day 2
Topic one: Different types of drilling contract and the joint venture mechanism
- Daywork
- Footage
- Turnkey
- International
- The key features of a Joint Venture
- The rationale for Joints Ventures – advantages and disadvantages
- Common types of Joint Ventures
- Corporate Joint Ventures and Contractual Joint Ventures
- Some legal aspects of Joint Ventures
- The 4 phases of a Joint Venture – planning; formation; operations; abandonment
Topic two: The JOA
- The Right of First Refusal
- Sole risk and non-consent
- The question of third-party access (TPA)
- Important factors in Tie-in Agreements
- Pipeline Crossing Agreements
- Proximity Agreements
Day 3
Topic one: Centrally important contractual provisions
- Governing Law
- Establishing the rights; duties and obligations of the parties to the contract
- Understanding the ramifications of Indemnity; insurance and liability provisions
- Provisions relating to risk and performance
- Warranties and guarantees
- Termination clauses
- Damages – LDC’s
- Payment terms
Day 4
Topic one: Centrally important contractual provisions (con.):
- Dealing with breach of contract
- Class exercise
- Price escalation clauses
- Cost escalation and cost reduction
- Class exercise
- Assignment and novation
- Force Majeure
- Class exercise
Day 5
(optional)
- The Total Cost of Ownership
- Project variation and change orders
- Class exercise – scenario analysis
- Stakeholder Management
- Group exercise – stakeholder mapping
- Class exercise – scenario analysis
- Dispute resolution
- Abandonment security
