Meeting of Progressing Partnership Work Group (Operators)

PP/52/01 Meeting of Progressing Partnership Work Group (Contractors) held at 13.30 on 24 August 2001 at Shell Expro Offices, Altens Aberdeen

Present: Apologies: Tom Botts Shell (Chair) Nigel Essex UKOOA Sir Ian Wood Wood Group Dennis Krann IADC Iain Todd DTI Alan Wilson Kvaerner Clive Fowler BP Mel Fitgerald Halliburton John Colegrave Stolt Offshore / IMCA Doug Duiguid Brown & Root Rep Roy Phillips Kerr McGee Dick Pearce IADC Rep Mike Mannering Schlumberger Sarah Kydd DTI Deirdre Michie Shell Mick Longton Baker Hughes / WSCA

PART A Action

01.8.10 Welcome: TB welcomed members. The minutes of the last meeting were approved. It was agreed that FPAL should be considered by the group at a future meeting as a means for facilitating contracting practices. DM [Ref PP/17/01]

DP reported that IAC have a draft report relating to the impact that resource flight is having on drilling services which suggests that resource flight is unlikely to be an issue in the drilling sector unless that sector goes through a prolonged down turn in activity. There is consensus that resource flight issues will be sector specific. 01.8.11 Code of Practice [Ref PP40/01] The code of practice was discussed. In general it is considered to be an appropriate tool to change industry behaviours. However concerns were expressed with regard to how the code could be effectively implemented, and how its implementation could then be measured. There was also agreement that the code should incorporate a preamble which sets out a compelling case for change which will encourage a change in behaviours throughout industry. During discussion the following comments were made:  Some of the resource issues apparently relate to long term call off contracts with a small number of companies. These specific issues should be dealt with by those companies without attempting a broad brush Industry approach.  Engineering contracts have historically set targets which. In the effort to achieve continuous improvement, have then become benchmarks.  Call off rather than exclusive contracts mean that contractors have the right to take their equipment elsewhere -eg to areas that offer more attractive margins and pay for value.  High unit costs are driven by a variety of pressures including regulatory requirements, cost of people, and a physical environment that are not a factor in other areas/basins. These costs sometimes serve to sterilise equipment .  If resources (people and equipment) are limited, then an improvement in the planning process Is required.  Contractors remain committed to serving their customers and not letting them down.  Unavailability of resources needs to be documented.  Contracting practices need to be changed to demonstrate value.

It was agreed by the participants that the draft code of practice be amended to reflect the group's discussion. As a result the code will incorporate : 1. A preamble which makes the case for change; 2. The contracting value chain which will be split into Forecast/Planning; Tender; Negotiation; Finalise /Agree Terms; Review.

Good and bad practices will be detailed under each heading to illustrate the behavioural changes required to make the Code of Practice effective, and each participant was requested to forward such examples to S Kydd.

The draft code will be circulated as widely as possible (including to UKOOA) and will be discussed at the September ILT meeting in anticipation of PILOT meeting in October. Post meeting note - UKOOA have convened a full Council meeting on the 7th November at which all PPWG initiatives will be considered.

01.8.12 WSCA Survey [Ref PP/42/01]

ML reported to the meeting on the preliminary report that has been undertaken by WSCA into resource flight issues that are affecting the well services sector (see presentation).

There was general discussion relating to the preliminary findings and some concern with regard to how this information would be used. The WSCA findings suggest that their sector will be able to meet market demand if investment in 2001 comes in at the lower end of the anticipated £3.5b - £4b. However the concern remains that if investment exceeds these levels then this sector will be stretched to meet such demand.

Some operators are already experiencing resource shortages which are causing project delays. 01.8.13 Attractiveness of UK All [Ref PP/38/01] Due to time constraints this item was discussed briefly and will need to be considered in more detail at a later date. It was agreed that the PPWG needs to understand if there are systemic and fundamental issues that could be making the UKCS unattractive. Participants were invited to forward examples asap to S Kydd. st Next 2pm - 5pm on 21 September at John Wood House, Aberdeen. Meeting