The Petrosam Project
The project investigates to what extent procurement and contracting are drivers for the rising cost problem in the Norwegian oil & gas industry.
About the project
The increasing complexity of petroleum activities on the NCS calling for more advanced and thus expensive equipment, might be a plausible explanation for the rising cost problem experienced in Norwegian oil & gas industry. However, this would imply increasing operating margins for the supplier companies which is not the case. Moreover, the prices E&P companies pay for generic products are substantially higher than those paid for similar products by other industrial actors.
One possible explanation for this is the E&P companies’ approach to contracting based on detailed specifications and documentation requirements also on a rather generic product, squeezing the operating margins of both the E&P companies and their Suppliers.
The primary objective of the project is to explore to what extent the heavy burden of product specification and documentation requirements in the Norwegian oil & gas industry affects procurement costs. A separate yet related objective is to get a better understanding of the role industry regulation plays in this regard, i.e. to what extent the increase in costs relating to procurement and contracting is a result of HSE regulation or merely company-specific requirements. Finally, the project attempts to identify the effect that contractual structures have on the innovative behavior of industry actors throughout the value chain.
The project is carried out from august 2015 to august 2016 and the results from the study will be published in a report written by the research partners in cooperation and also in conference presentations and articles written by each of the research partners.
The project is financed by the NODE cluster, Menon Business Economics and the Norwegian Research Council.
The project is carried out in collaboration between the Scandinavian Institute of Maritime Law, Menon Business Economics, Christian Michelsen Research (CMR) and Buskerud and Vestfold University College.
- Petroleum relevant laws, regulations and guidelines
- Several rounds of interviews and conversations with industrial actors (E&P companies and suppliers)
- Review of a number of contracts and related specs issued in relation to product deliveries