How contract strategies affect the efficiency of drilling operations

Master's thesis in Industrial economics Rig contracts represent the leading expenses in a drilling operation. The high rates and rig shortage are factors that make it urgent to come up with ways to increase the efficiency of drilling operations. The objective of this thesis is to investigate through different literature sources how contract strategies can be used to increase the efficiency of drilling operations. Three contract strategies have been studied, which are contract types, incentives and KPIs. Contract types affect efficiency indirectly by improving teamworking quality, resulting in a performance improvement. Likewise, incentives affect performances indirectly, since it improves relational attitudes, leading to a better teamworking quality, which finally will result in improvement of performance. It was concluded that KPIs are the best tool to increase the efficiency of drilling operations. The natural competition between contractors, caused by comparing their KPIs, will result in efficiency improvement. KPIs will also lead to a reduction of nonproductive time by identifying and eliminating Invisible Lost Time (ILT).