Amid market volatility, partnership, understanding of pain points can create win-win
By Linda Hsieh, Editor & Publisher
The relationship between the drilling contractor and the operator is multifaceted. It’s not just about one being a provider of services and the other paying for those services. For both sides to benefit from a contract, there also needs to be a partnership. The organizations that recognize this fact will be much more likely to succeed, even if the multiple – and sometimes drastic – ups and downs in the oil and gas market make this a difficult task.
At the 2026 IADC Drilling Africa Conference on 24 February, a panel session zeroed in on some tough challenges around the operator/contractor relationship – particularly around how that relationship can shape contractual agreements.
It was clear from this panel that there can still be misperceptions about the other side, for example when it comes to the operational costs and capital investments required, as well as risk allocation. Speaking on the panel, Taiwo Olushina, COO at Oriental Energy Resources, noted the dim near-term prospects for newbuild offshore rigs. From an operator’s perspective, he said, drilling contractors should focus on OPEX rather than CAPEX, which should make negotiations for rig mobilizations easier.
The three drilling contractors on the panel – Noble, Seadrill and Shelf Drilling (now part of ADES) – all noted that the existing offshore fleet continues to age, with many approaching their 10- or even 15-year SPS cycle. Jacob Taylor, Director of Business Development at Seadrill, noted that initial estimates of approximately $40 million to keep a drillship in class can balloon to $75 million to $80 million when factoring in inflation and the necessary upgrades to replace obsolete equipment and implement new, operator-requested technologies for safety and efficiency improvements. “It’s not only the capital investment that has to go into it, but it’s a painful out-of-service period, as well. So you’re having all these costs, and you’re not generating any revenue during that period of time,” he said.
To help ensure both sides can benefit from a project, they must understand each other’s pain points. When there is understanding, new ways of working can be forged to ensure win-win situations. The long-term collaborative agreements between ExxonMobil and Noble in Guyana and between Aker BP and Odfjell Drilling in Norway were cited as great examples of innovative business models where both parties can benefit in the face of volatile market conditions. “It’s not a tit-for-tat type of relationship,” Mr Taylor said. “When times are challenging, everybody needs to be able to compromise and make some sacrifice.”
I spoke with Mr Olushina during the conference to hear more about the operator’s perspective on collaborating with drilling contractors. Click here for a link to the video interview. DC
Linda Hsieh can be reached at linda.hsieh@iadc.org.
