Room for more despite looming slowdown

Shales Driving New Rig Technology

Look for unconventional resource plays to transform the North American drilling industry.

Of course, in some ways that transition already has started.

Unconventional gas prospects, especially shale gas plays, have provided steady demand for new rigs. They've also led operators to demand the latest technologies in new or upgraded rigs.

And the move to a much younger generation of workers – the industry's famous "crew shift" – is well under way in the drilling business.

John Lindsay serves as 2008 chairman of the International Association of Drilling Contractors. He's executive vice president of U.S. and international operations for Helmerich & Payne Inc. in Tulsa.

Lindsay said unconventional gas plays not only create a market for new rigs but also help drive rig technology.

"From my perspective, being in this business for 22 years, it's changed the game for drilling contractors," he noted

"At HP we really started trying to change the game 10 years ago, with our new technology rig we call the FlexRig," he said.

That rig is designed to reduce drilling cycle times, an important factor for shale gas operators.

Newer versions integrate the top drive into the mast and have joystick draw-works controls.

The rapid growth of shale gas plays has spurred development of rigs with features for long-lateral horizontal well drilling, including top drives, increased horsepower and integrated mud systems.

"In 2002, 20 percent of all wells drilled in the United States were directional or horizontal. Lindsay said "Today, 50 percent of all wells are directional or horizontal, or both."

Where the Action Is

Strong demand from both old and new unconventional plays is drawing rigs to shale-gas areas, according to David Crumpler, vice president of marketing for National Oilwell Varco (NOV) in Houston.

The company is a leading rig builder and supplier of rig technology and services. In July, it announced a whopping $10.8 billion backlog of capital equipment orders in its Rig Technology segment.

"The shales are driving equipment movement. Whether you're looking at the Haynesville or the traditional Barnett, there are a lot of rigs in there. The Fayetteville shale is very active now," Crumpler said.

"If you go through Houston and look at the rig yards, there are quite a few rigs being fabricated," he added.

While the Barnett shale's core area is now well defined, other shale plays are expanding with new plays continuing to emerge.

"I see the Barnett up here as being more focused around the Fort Worth area. The Fayetteville is stretching out, more to the south and farther to the east," Crumpler said.

He noted that relatively high rig demand continues in the Rocky Mountain region, in part because of shale oil work.

Both the Haynesville and Marcellus shale plays are expected to absorb a significant number of rigs, with work for 60-90 rigs in the Haynesville alone.

NOV is looking at several locations for new rig yards around the country, including in the eastern United States because of potential demand for drilling the Marcellus shale, Crumpler said.

Technology's Impact

The industry's push for upgraded rigs, improved drilling capabilities and the newest technologies has changed the rig business, according to Lindsay.

"It's not a commodity game anymore," he observed.

"And it's not just the shale plays," he said. "Everywhere we look, the operators' expectations have changed."

As one example he cited the development of rigs that can easily drill multiple wells from a single pad.

"You think about what that does. Not only does it increase cycle times, but it also eliminates environmental constraints," Lindsay said.

"The day rate's higher but the cost of each well is lower because the drilling cycle is faster," he added.

Apart from drilling demands, new technology has emerged to make rigs a safer and more comfortable place for rig crews – essentials for recruiting new personnel. Lindsay noted that the industry has cut rig incidents in half over the past five or six years.

Crumpler said demand is growing for equipment like "iron roughnecks," automatic units that make up or break out pipe joints and make pipe trips both faster and safer.

Current technology also supports the driller and crew in operations, leading to new generations of ever-smarter and more automated rigs.

Lindsay recalled his days of starting out in the business as a roughneck and driller.

"To hoist the drilling equipment on a rig took a lot of experience," he said. "With a joystick control anybody can sit back in the chair and hoist.

"The new rigs make it a lot easier for new guys to come in and start drilling."

Enter the Young

Both safety features and support technology can help the drilling industry meet one of its biggest current problems – attracting qualified personnel.  

"Everywhere I go I hear the same thing – it's hard to come up with rig crews. That's a real challenge," Crumpler said.

Even the best and most modern equipment can't make life cushy for a roughneck.

"They don't call it 'roughnecking' because it's an easy job. It's a tough, tough job," Lindsay said.

But new recruits continue to arrive, and Lindsay said he's heartened by the number of younger workers taking up rig work as a profession.

"A lot of young people are coming into the business," he said. "The compensation is attractive, and I think we do a good job of training. At the same time, we're in an industry that has an aging work force."

An upside of all those retirements is opportunity for new hires to climb the career ladder rapidly, even those who enter as trainees straight out of school.

"I'm encouraged by the number of people in their late 20s or early 30s that are in supervisory positions that, 10 years ago, you would never have put them in. And they're doing very well," Lindsay said.

Younger workers are entering the industry with different skill sets from their seniors because they grew up using computers and are more comfortable with new and changing technologies, he noted.

To attract service and technical personnel, NOV has set up a training center in Houston known in the company as NOV College or NOV University.

One of its aims is to recruit technicians, mechanics and other workers from outside the industry and bring them up to speed on oil and gas operations. NOV also offers a range of ongoing training for current personnel.

Today, Lindsay said, you can see a trainee become a rig hand and six months later a driller – and six months after that a rig manager.

"There's just lots of opportunity in this business for people who work hard and have the aptitude and ability," he said.

Slowdown in the Making?

Natural gas prices have fallen from record highs, easing pressure on rig builders and drilling contractors. Some see a slowdown in the making, compounded by recession fears.

"I think the market's been very hot," Crumpler said. "But for no more than a month or so, people have had some uncertainty in the market."

Chesapeake Energy Corp. of Oklahoma City, which may be the nation's largest shale gas driller, announced it will cut its drilling capital expenditure program by $3.2 billion through the end of 2010.

That decision came in response to "a 50 percent decrease in natural gas prices since June 30 (2008), and concerns about the possibility of an emerging U.S. natural gas surplus," the company said.

Lindsay sees room for new and more capable rigs even in a slower market, although some older rigs may end up stacked permanently.

 "You saw the last slowdown – you had 200, 300, 400 rigs that got stacked, but the rig count kept growing ever so slightly," he said.

"When things started slowing down you had an influx of new rigs into the market while older rigs were being stacked. I think that trend will continue," he added.

In a way, that turnover reflects the personnel changes in the drilling industry. As the older stalwarts retire, new and high-tech replacements come into service.

"If it slows down, I think some rigs will be laid down and won't come back," Lindsay predicted.

"But my goodness," he said, "some of these rigs have been in the field for 20 or 30 years."  

Comments (0)

 

What Can I Do?

Add Item

Enter Notes:
 
* You must be logged in to name and customize your collection.
Recommend Recommend
Printable Version Printable Version Email to a friend Email to a friend

Image Gallery


See Also: Book

See Also: Explorer Article

Rising Production Not Limited to the Big Two
Several U.S. states show increases Rising Production Not Limited to the Big Two

See Also: Explorer Emphasis

Arctic Challenges Get Multi-Faceted Response
Mixing science, technology, environment and culture Arctic Challenges Get Multi-Faceted Response
Shale Play Extends to Canada
Utica emerges in Québec Shale Play Extends to Canada
Louisiana’s Story Is More Than Shale
Drilling deep in the Deep South Louisiana’s Story Is More Than Shale