Wellhead Procurement Strategy

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This article describes the key items to address to develop a Wellhead Procurement Strategy.

Vendor selection

To qualify as an acceptable equipment supplier of Wellheads and Christmas trees, the potential supplier's technical ability, quality assurance plan, and commercial viability should conform to internationally acceptable standards and be auditable.

Tendering

Before issuing requests for proposals it is advisable to check if existing supply or price agreements for identical or similar equipment are available. Where such agreements exist, negotiations on a single source basis should be considered. This practice increases the benefits of standardisation and price. It is also possible that a centrally negotiated or tendered worldwide price agreement for wellhead equipment already exists.

Tender specifications

It is a practice to use the nomenclature of a known manufacturer when specifying equipment requirements. This can lead to mistakes and sub optimum design. It is recommended to issue tender specifications which include a functional description of the required equipment, details of the environmental situation, and information on the produced fluids and gases.

This approach gives more enterprising manufacturers an opportunity to submit alternative and sometimes more suitable designs, without invoking the risk of being disqualified because of not adhering to the specification. Provision of a functional description will make it easier to evaluate and qualify designs submitted by potential suppliers. This means the final decision on the acceptability of a proposal will be based upon its design and its suitability according to the specification issued to bidders.

Technical evaluation

The recommended method for evaluating the received tenders is based on a series of tables. These tables break down the bids into discrete sections so that each aspect of the tenders can be compared, e.g.:

  • General Requirements
  • Technical Specifications
  • Standard Equipment, Non-standard & Emergency Equipment and Tools
  • Tubing Head, Xmas Tree and Suspension Equipment & Tools
  • Handling, Operations & Safety
  • Summary of Scores
  • Scores Weighted per Items & Groups

It is important therefore that the method of technically evaluating the bids is decided upon before any invitations to tender are issued.

Before rating the proposals, bidders should be coded for ease of reference.

The general requirements are considered for each bidder and given a rating from O (unacceptable) to 3 (exceeds requirement). Each rating is then multiplied by the weighting factor

The ratings are established for the hardware characteristics:

-Handling, Operations & Safety.

Contracting out

When the technical and quality related requirements of all bidders has been compared and evaluated, it merely suffices to award the purchase order to the supplier that offers the most cost effective and safest solution for the operation and its ongoing service support or the fastest delivery.

The purchase order, contract or supply and stocking agreement should address the following elements:

  • Focal point for project management
  • Quality requirements (normally API 6A with PSL specified as appropriate)
  • Manufacturing point (QA rating acceptability)
  • Price basis (FOB, C&F or other)
  • Fixed pricing to end of contract or 12 months minimum with an agreed cost escalation formula in the contract for thereafter
  • Quantity discount structure for subsequent orders if any, or linking the contract to other contracts already existing with other Opco's
  • Packaging and FOB charges to be negotiated separately and not to be quoted as a percentage of the equipment value
  • Payment terms
  • Bank guarantees (if required)
  • Spare parts proposal with quoted prices fixed for the first five years of operation and an agreed price escalation formula thereafter
  • Required level of after sales services specified
  • Availability of Field Service Personnel and their cost
  • Buy back clause for equipment remaining at contract campaign end
  • Provision of running tools on Loan/Rental
  • Quality Control requirements
  • Inspection programme during the manufacturing Process
  • Quality Plans, where applicable.

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