1 AIT Asian Institute of Technology

Deriving a lump sum price contract for a service company in the oil and gas industry

AuthorTanapon Ariyaprayoon
Call NumberAIT Thesis no.ISE-20-17
Subject(s)Lump sum distributions (Pensions)
Oil and gas leases
Petroleum industry
NoteA thesis submitted in partial fulfillment of the requirements for the degree of Master of Engineering in Industrial and Manufacturing Engineering
PublisherAsian Institute of Technology
AbstractIn oil and gas exploration industry, generally, due to the offshore working condition, company (customer) could not control the number of working days for the service job on remote platforms. So, the easiest way to set the maintenance contract is to use the day rate price. But due to the disadvantage of the day rate contract such as risk of variance of working day and contract budgeting, customer may prefer fixed-price contract (lump sum) in which the budget can be known at the beginning of the contract period. The challenge for the agent is how to estimate the number of working days in order to calculate the price. This research uses the case study of crane maintenance service provider (agent) who provides preventive maintenance and corrective maintenance to customer. This agent used deterministic model to estimate the number of working days based on his experience, and found that his profit decreases after the contract changed from day rate to lump sum and found out that his price is lower than the competitors. This research turns from deterministic model to probabilistic model using simulation approach based on historical record from the agent. The result shows that the agent underestimated the number of working days which resulted in low lump sum price and low profit. We propose two lump sum contract options 1) lump sum contract for only preventive maintenance and charge actual cost for corrective maintenance, and 2) lump sum contract for both preventive maintenance and corrective maintenance.
Year2020
TypeThesis
SchoolSchool of Engineering and Technology (SET)
DepartmentDepartment of Industrial Systems Engineering (DISE)
Academic Program/FoSIndustrial Systems Engineering (ISE)
Chairperson(s)Huynh Trung Luong
Examination Committee(s)Pisut Koomsap;Mongkol Ekpanyapong
Scholarship Donor(s)Royal Thai Government Fellowship
DegreeThesis (M. Eng.) -- Asian Institute of Technology, 2020


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