History, Disruptors and Future of Changing Well Construction Business Models

Advances in performance, digitalization, and automation create the environment for significant changes in well construction business models. Drilling contractors and suppliers are now better positioned to quantify the savings generated by their technology investments and define commercial structures that equitably share in the savings. This paper reviews disruptors driving non-traditional forms of contracting leading to a new value-driven business model based on a System of Systems architecture that meets industry needs. Disruptors driving new reward methods for technology providers are overcoming barriers resisting change such as status quo inertia, legal liability, and fear of sharing data. For example, new real-time systems enable remote operation expansion and improve operational alignment; digitalization and open data exchange create operational transparency across the complex well construction organization; process automation is being applied to multiple systems and is being scaled across equipment fleets. Organizational alignment to common value goals can be achieved through a System of Systems (SoS) architecture. This approach permits aligned and cascading outcome-based goals, including broader objectives like safety, environmental, social, and governance (ESG), to be recognized throughout the System of Systems which spans all operational elements. Two case studies are presented: one for short duration repetitive wells and one for longer duration offshore wells. Incentive style contracts have cycled through footage targets, "Drilling in the Nineties" style contracts, gainshare models, and even production enhancement/sharing contracts. Lump sum turnkey-style contracts have become established, and gainshare is making a comeback. Today, the changing landscape of digitized integration and automation from supplier investment creates an environment in which a high rate of change is becoming the norm. Modern incentive contracts, and other methods to invest in new technology based on aligned goals, are expected to increase in usage. As well delivery becomes more efficient using the new systems and tools, incentive contracts also enable ways to account for and exchange value. System of Systems architectures, leveraging those recent advancements, can provide an industry approach, at the higher levels, for improved application of common style incentive contracts. Crucially, the value can be quantifiably distributed, and new commercial value streams can be created and measured, driving new and adaptable business models. Capital asset-based contracting could become redundant in this new business and operational paradigm. System of Systems is a way of describing the digital and physical interconnectedness of well construction. It maps and manages how system elements interact to provide unique capabilities that none of the constituent systems can accomplish independently. System of Systems simplifies these complex processes and interactions of well construction with better organizational alignment.