CHALLENGES AND REWARDS OF FORMING A DRILLING ALLIANCE IN INDONESIA – A CASE STUDY

PROCEEDINGS, INDONESIAN PETROLEUM ASSOCIATION
Twenty-Eighth Annual Convention & Exhibition, October 2001

CHALLENGES AND REWARDS OF FORMING A DRILLING ALLIANCE IN INDONESIA – A CASE STUDY

Muslim*
Jun Hadisutrisno*
Andrew Swale*
Gary Gauntt**

ABSTRACT

In early 1999 VICO Indonesia recognized that improved teamwork with its major service providers and vendor companies could result in significant reductions in well costs. A study performed by VICO Indonesia drilling and contracts personnel resulted in the implementation of a drilling alliance with VICO’s major service provider. This alliance incorporated the integration of planning, execution and evaluation of the well construction process with a joint project management arrangement based on mutually agreed bottom line goals. The challenges overcome and the results achieved during this project have major implications for the future of operator – supplier relationships in Indonesia.

Historically, contract procedures and legal restrictions in Indonesia have limited the operator – supplier relationship to a tightly structured traditional contractual approach. These restrictions, for the most part, precluded alignment of goals between the operator and supplier. VICO Indonesia and the service provider, however, were able to formulate an innovative approach to overcome these barriers resulting in savings of over US $5.5 million during the drilling of the first eleven wells in the program.

This paper presents a case history of a successful integrated services team in an Indonesian production sharing contract (PSC) organization. The discussion includes details of the contracting approach in addition to the main improvements in the operation that continue to reduce costs.