It seems that the discussion around commercial models typically begins with the usual questions: Do you go with a reimbursable model? An incentivised model? Or a lump sum model? Another way of looking at it is: Should the operator take on all the contracts? Put together a consortium for a specific portfolio? Or work with an alliance?
However, if we really want to break new ground as an industry, we need to look more at how we can put commercial models in place to make multi-operator campaigns, aggregation, and bundling attractive.
Incentivising multi-operator campaigns
For this to work, the commercial model needs to deliver on three main elements:
- It must be attractive for the first operator to sign up;
- It must encourage active participation from the operators to expand the campaign across multiple assets – getting others to join is the only way to increase the benefits;
- It must distribute savings among all the participants.
At Maersk Decom, we’re working on some innovative models to try and make this happen. We believe bundled campaigns have to be the way of the future and as a dedicated decommissioning company we have the incentive to find a way to make it work.
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Currently however, there are obstacles standing in the way of setting up multi-operator campaigns. One such obstacle is the way joint operating agreements are set up in terms of budgeting cycles, non-operator cost control measures and project planning. Current formats do not seem to have developed in alignment with the way the industry has, meaning that multi-operator campaigns are for the most part only taking place when it is opportunistic to do so, for example when a campaign happens to be taking place in the vicinity. If campaigns could be planned in advance, the gains from timely pre-planning and ease in sharing them would be much greater.
There are also savings opportunities beyond bundling campaigns that can be achieved through the right commercial model, such as out of season work to benefit from low-season activity gaps and rates, as well as innovative ways in which to apportion weather risk. The key ingredient in making any of this work is early engagement between the operator, contractor and relevant regulatory bodies.
Increasing transparency in recycling and waste management
Another element that should not be underestimated in the conversation about commercial models is the focus on recycling and waste management and its environmental impact. Today, responsibility is a complex picture – with contracts, transfer of ownership, a potentially emerging extended liability focus and CSR considerations to take into account. We need to be working towards commercial models that increase transparency, traceability and responsibility.
We believe one overarching contract can reduce complexity and increase accountability. Maersk Decom offers to take on the complete end of life waste management process in a highly transparent and responsible way for our customers. By having commercial models that require us to manage this process and keep tabs on where everything ends up, we believe we can extend the lifetime of offshore materials, reduce waste, and increase re-use and closed loop recycling. In short, we think that the industry could improve its contribution towards circular economy with increased focus on these aspects.
Ultimately, our goal is to ensure decommissioning does not take up more resources than it has to, which could otherwise be put towards development work and creating value. Working with a turnkey contractor that provides scalable, holistic solutions can help incentivise bundled campaigns and increase transparency in recycling and waste management in order to arrive at a less wasteful way of doing things. Download the presentation here