Proposed Contract and Procurement Strategyfor Jack-Up Drilling Rig Services: A Case Studyof PT. OG Upstream in Indonesia

The contractual and procurement landscape for Jack-Up Drilling Rig is a complicated interaction governed by the volatility of the Jack-Up Rig market that depends on global conditions. Historically, the major determinants of this market have been oil prices and drilling rigs’ daily operating rate, serving as crucial considerations for operators in undertaking economic sensitivity analysis. The market for Jack-Up Rigs and changes in oil prices have historically been closely tied. The procurement of jack-up rigs in Indonesia is facing multiple complex contractual, regulatory, and production targets, longer lead time procurement processes, and operational challenges. These challenges have significantly contributed to oil and gas production targets, increasing drilling costs, reducing efficiency, and operational risks. Through this research, the author aims to examine the root cause, propose strategies for accelerating the procurement process, and best alternative tailored to the PT. OG Upstream’s needs. The theoretical framework for this research comprises PESTEL, Porter’s Five Forces, Supply Chain Risk Management (SCRM), Kraljic Matrix and Procurement Maturity Model to evaluate the internal capabilities and external market conditions. This research uses a mixed-method approach, incorporating both qualitative and quantitative research. The designated respondents for that said method are staple stakeholders, i.e., Regulator, Operator Representatives (Procurement and User), and current Major Rig Contractors in Indonesia, resulting in data analysis for the qualitative and further data analysis for the quantitative, which assesses the selection criteria using SMART Decision Analysis. The results of the qualitative analysis highlight two major issues: lack of contract flexibility and inefficiencies in decision-making processes as the internal root causes, and rig availability issue, oil price volatility (global market trend) as the external root causes of prolonged procurement process whilst to accelerate the procurement process entails standardization contract and strategy in strict & multiple regulatory. The quantitative analysis result is investment affiliate-owned jack-up rigs as the best alternative (83.5 aggregate score). Based on the research, it is recommended that PT. OG Upstream considers investing in jack-up rigs, developing long-term contracts with strategic rig contractors, standardizing contracts, adopting digitalization, introducing regulatory flexibility for high-capex rig procurement, and forming a cross-functional rig procurement task force. These recommendations are expected to secure long-term rig availability to reduce external supplier dependence, reduce procurement cycle time, and enhance the operator’s overall procurement process efficiency.