Drilling Contract Historical Development and Future Trends Post-Macondo: Reflections on a 35 Year Industry Career
- Cary A. Moomjian (Consultant Former Drilling Co General Counsel)
- Document ID
- Society of Petroleum Engineers
- IADC/SPE Drilling Conference and Exhibition, 6-8 March, San Diego, California, USA
- Publication Date
- Document Type
- Conference Paper
- 2012. IADC/SPE Drilling Conference and Exhibition
- 1.6.1 Drilling Operation Management, 1.10.4 Onshore Drilling Units, 7.5.3 Professional Registration/Cetification, 4.1.5 Processing Equipment, 1.6 Drilling Operations, 1.6.5 Drilling Time Analysis, 1.7 Pressure Management, 1.6.6 Directional Drilling, 1.7.5 Well Control, 2.1.7 Deepwater Completions Design, 4.5.4 Mooring Systems, 5.1.2 Faults and Fracture Characterisation, 4.1.2 Separation and Treating, 6.5.5 Oil and Chemical Spills, 1.10 Drilling Equipment
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The author reflects upon a 35 year drilling industry career, over half of which was as General Counsel for two major drilling companies, to review the evolution of drilling contracts and discuss future contracting trends post-Macondo.
The historical review begins with the advent of the oil and gas industry and considers developments that led to issuance of the first (IADC predecessor) AAODC standard drilling contract in 1952. The paper then traces the evolution of drilling contracts as they became more complex and sophisticated while the industry extended into the offshore and international arenas.
Major events that impacted contracting, such as development of various standard contracts, anti-indemnity statutes and other legislation, judicial decisions, the "Drilling in the '90s" and other strategic initiatives, are considered. Incentive, variable rate and multi-party drilling contracts are reviewed. The paper also discusses contractual provisions that were implemented to address operational and technical innovations such as horizontal drilling, extension into deepwater and dual activity simultaneous operations capability.
The dichotomy between U.S. land operations (which primarily utilize IADC model contract forms) and offshore and international operations (which generally are based on operator standard contracts) is considered along with the impact of market forces upon drilling contract terms. The difficulties encountered when contracting with national oil companies that insist upon adherence to their standard forms are discussed. Controversial issues, such as the enforceability of indemnities in the event of gross negligence, are reviewed. The paper also discusses the impact of Macondo upon drilling contract terms.
With this background, anticipated future contracting trends in a post-Macondo world are considered.
Although I generally am loathe to use the first person in a publication of this nature, the reader's indulgence is requested inasmuch as this paper is largely based on knowledge derived from my personal experiences in the drilling industry over the past 35 years.
My drilling industry career has entailed service as an in-house attorney and manager of a contracts/marketing department as well as an unprecedented 18-year stint as General Counsel for two major drilling contractors (Santa Fe and Ensco).
I was privileged to have chaired the International Association of Drilling Contractors ("IADC??) Contracts Committee for a decade and am honored to be the only practicing attorney to have been named IADC Contractor of the Year.
I have participated in virtually all facets of drilling contracts addressing domestic and international operations involving land and platform rigs, tender rigs, drilling barges, jackups, semi-submersibles and drillships. My experience includes traditional daywork, footage, modified footage (a combination of footage and daywork), turnkey and various other forms of incentive contracts, as well as strategic alliances and rig sharing agreements.
During the course of my career, I have seen drilling contracts evolve from relatively simple documents to lengthy, complex contractual arrangements. Emerging trends prompted by the Macondo well blowout - which resulted in loss of life, total rig loss, a major oil spill and a plethora of litigation and new regulations - will undoubtedly add more complexity to drilling contracts over the next few years.
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