Published by the DTI Oil & Gas Directorate for the reservoir engineering and IOR community in the UK.
Send comments on this issue and contributions for next issue to iornewsletter@senergyltd.com by 15 August 2002.

Senergy Ltd

Senergy Ltd (RML) is a leading geoscience and reservoir engineeering consultancy with offices in Aberdeen and London. With 30+ permanent staff and numerous associates in geoscience and petroleum disciplines, RML's clients include most major operators together with smaller oil companies, both in the UK and overseas. RML also provides the DTI Oil and Gas Directorate with geoscience and reservoir engineering expertise in support of its regulation of UKCS operations.

Increasing Reserves Using Novel Contracting Arrangements

David Sherrard (d.sherrard@senergyltd.com)

Beauly is one of the smallest developed oil fields in the North Sea with recoverable reserves of 3MMstb. A novel risk sharing contracting strategy involving owners, engineering contractors and transporters (collectively termed the Stakeholders) has delivered production of 10,000 b/d from a field which by most conventional measures would not have been developed.

This project was considered marginal in that, though the base case offered an acceptable return, analysis of downside scenarios indicated high potential to loose money. Regardless of the potential for a viable project such downside risks are often sufficient to discourage investors. A novel contracting arrangement has been adopted for Beauly with the aim of sharing the risks and rewards so that that all parties share in success, but no party (to the extent possible) profits if the project disappoints.

In conventional analysis profits to contractors and transporters are fixed and are regarded as costs to the project. In the Beauly model all Stakeholder profit is variable and subject to performance of the investment. By adopting this model the chance of any participant incurring a loss is reduced and in exchange for risking profit the Developing Contractors gain access to the possibility of greater than normal return.

Following definition of the Owners' preferred contracting strategy oil field contracting companies were invited to express interest in developing Beauly on a shared risk basis. Following a series of engagement meetings interested organisations were invited to review available field data and make proposals. One Development Contractor was selected and, working with the Owners, the field has been successfully developed.

Key elements of the contracting methodology has been adopted by the North Sea industry body LOGIC for its Satellite Accelerator initiative.

• The Beauly Oilfield - Creating and Sharing Value from a Marginal Discovery, D W Sherrard (Reservoir Management Limited), A Beckly (Reservoir Management Limited), P Howell (Global Marine Integrated Services), A MacAskill (Talisman Energy), SPE 71860
• All For One and One For All: A New View of Beauly, D Sherrard, RML, SPE Review, Decmeber 2001, pp10-11

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