Saturday February 26, 2011
Petrofac explains key performance indicators
IN an e-mail response to StarBizWeek, London-listed Petrofac Ltd group of companies elaborates on the key performance indicators (KPIs) used under the risk-service contract (RSC) for the Berantai marginal oil field development.
Petrofac says that the Berantai partners' investment and services will be repaid and remunerated from the production revenues by way of a fixed entitlement, subject to ongoing variation based on KPIs.
“The level of the entitlement will be based on certain agreed KPIs as at first gas and finally determined at project completion. The signing of this first RSC where such risks are significantly mitigated for the contractor, thereby enabling delivery of a lower cost solution, is an important achievement for Petronas and the Malaysian oil and gas industry.”
The partners will begin recovery of their investment from first gas and remuneration from project completion within a year from first gas.
“The partners' entitlement is to be satisfied by an agreed share of the field's production revenue and the remuneration element will be determined according to the delivery against four KPIs up to project completion and one ongoing KPI based on performance.”
As at project completion, the remuneration will be determined based on actual capital expenditure spent against control budget, timing of first gas, actual project completion date and sustained gas delivery measured at a point after project completion.
“These KPIs will result in an aggregate positive or negative variation to the expected base case return. Thereafter, our performance against an agreed operational efficiency factor will either enhance or reduce our annual financial entitlement.”
The company says the first RSC to be signed in Malaysia marks a major milestone for all parties involved and its skills include subsurface, drilling, engineering, project delivery, operations and overall our commercial and asset management expertise.
“Our intention is to repeat this commercial model within and outside of Malaysia for other development opportunities. The Berantai field, in addition to the recent award of the Sepat early production system, will enable us to grow our offshore engineering capability in the Far East, leveraging our existing knowledge on the Cendor field and furthering our relationship with Petronas.”
Petrofac says Malaysia is a very interesting market for it due to the country's many undeveloped fields, which require relatively low-cost/fast-track solutions in order to be developed.
“These represent important reserves for Malaysia and we see an opportunity to unlock their reserve potential using low-cost, innovative development solutions. Together with Petronas, we have enjoyed the benefits of the successful Cendor field development, where we executed an unconventional fast-track oil field development in 16 months, and continue to operate the field to the highest standards.”