Drilling Contract Historical Development and Future Trends Post-Macondo: Reflections on a 35 Year Industry Career

摘要

The author reflects upon a 35 year drilling industry career, over half of which was as General Counsel for two major drilling companies, to review the evolution of drilling contracts and discuss future contracting trends post-Macondo. The historical review begins with the advent of the oil and gas industry and considers developments that led to issuance of the first (IADC predecessor) AAODC standard drilling contract in 1952. The paper then traces the evolution of drilling contracts as they became more complex and sophisticated while the industry extended into the offshore and international arenas. Major events that impacted contracting, such as development of various standard contracts, anti-indemnity statutes and other legislation, judicial decisions, the "Drilling in the '90s" and other strategic initiatives, are considered. Incentive, variable rate and multi-party drilling contracts are reviewed. The paper also discusses contractual provisions that were implemented to address operational and technical innovations such as horizontal drilling, extension into deepwater and dual activity simultaneous operations capability. The dichotomy between U.S. land operations (which primarily utilize IADC model contract forms) and offshore and international operations (which generally are based on operator standard contracts) is considered along with the impact of market forces upon drilling contract terms. The difficulties encountered when contracting with national oil companies that insist upon adherence to their standard forms are discussed. Controversial issues, such as the enforceability of indemnities in the event of gross negligence, are reviewed. The paper also discusses the impact of Macondo upon drilling contract terms. With this background, anticipated future contracting trends in a post-Macondo world are considered.