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Ancillary Service Contracts Related to Offshore Operations

Charles W. Barnes, Offshore Exploration, Drilling and Development (1975)

It was suggested I might list these service contracts broken down by ease of contracting.

I have not done this. Very few are easy to negotiate and high costs are an even more serious problem.

Despite sky-rocketing offshore drilling costs, oil companies have not yet broken down but they have been cutting back.

The large number of ancillary contracts, the rush with which they usually must be prepared after a drilling rig is secured, the shortage of services compared to demand during the last few years which created a sellers' market in favor of the service contractors — these and other factors have made negotiation on what oil company people consider reasonable terms very difficult.

It is hard to do much about costs when prices keep rising, but there is more resistance to accepting contract terms which shift all the risks to the oil companies.

The assumption apparently has been the oil companies can bear any and all costs and risks because their rewards when oil is discovered are so great.

The foreign take-over of concessions, higher taxes and tax reference prices, and so-called “loop-hole” plugging, Government oil companies who want to share the profits but be carried for the costs, escalating regulations, price control and environmental concerns, high interest rates and sky-rocketing drilling and service contract costs are c