Paced growth allows development of competent crews, safety culture to maintain uptime performance
By Joanne Liou, associate editor
Shelf Drilling is a jackup drilling contractor with 38 rigs and operations in 12 countries. Since Shelf Drilling was established in 2012, the company reactivated three stacked rigs. Another rig is being reactivated and is expected to commence operations in April. What have been the challenges to reactivate rigs in your areas of operation – the Middle East, Africa and Asia?
Our project management team has been able to do reactivations on time and on budget. The bigger challenge is staffing the rigs for operations and operational readiness with a fully trained and competent crew.
We learned a lot of lessons in project execution and keep building on best practices so as to continuously improve our project execution performance. We’re always learning lessons to get full operational preparedness for the rigs that are reactivated because you have to staff it with a crew that doesn’t have a long-dated experience operating that rig.
We have had a 99% uptime performance. To maintain this exceptionally high standard of operational performance across the fleet, we have to pace our growth so that we can develop a competent crew with the right safety culture with a commitment to operational excellence. You can’t build a crew overnight. It takes time to create a crew with a strong safety culture, and we have to go through a very intensive training program to have the right competency. That’s why it’s important to have the rig contract well in advance so that we know the customer requirements and the geography of operation in advance of operational preparedness.
We didn’t reactivate on spec, other than the latest reactivation – the Adriatic I. In fewer than 30 days of starting the engineering for the reactivation project, we were able to secure a contract for the rig. We know where the rig is going and know how to get prepared from an operational point of view. We have had time, and I think that has helped make our reactivation successful.
What types of upgrades are being made to the rigs that are being reactivated?
All reactivations involve some level of upgrade. For example, with the Adriatic I, we will upgrade the water depth capability from 300 ft to 350 ft, upgrade the hookload capacity from 1.2 million to 1.5 million lbs, upgrade to high-pressure flow lines from 5,000 psi to 7,500 psi and upgrade the accommodation capacity from 108 to 120 people. The rig will have a 60-by-30-ft cantilever envelope. It recently underwent a significant power upgrade and has three high-spec mud pumps running in parallel.
At the 2013 SPE/IADC Middle East Drilling Technology Conference in Dubai, there was a lot of discussion about newbuilds replacing the aging jackup fleet. What is the average age of your fleet, and do you see a need to upgrade/replace rigs?
The average age of our fleet is 32 years. Our rigs have a broad range of specification in terms of operating capability. However, all our rigs are well maintained, and many have been highly customized for their operating environment over the years such that they are truly fit for purpose for the operation they are working. For example, the rigs in India are doing mainly workover, recompletion and in-field drilling on the Mumbai High redevelopment project. This type of activity is not well suited to the higher-specification newbuild jackups.
Similarly, our rigs working offshore Egypt in the Gulf of Suez are engaged in workover and in-field drilling, where the well depths are typically less than 10,000 ft. In Saudi Arabia, we have a number of MLT 82 SDC rigs working on the Safaniya field development, where the draft is typically less than 15 ft. This type of activity is not open to newbuilds, where minimum draft is 15 ft or less.
For the most part, our rigs are very fit for purpose for the producing activities in the geographies where we work, and newbuild rigs offer no advantage in drilling or workover efficiency and operate at a significantly higher cost. The dayrate environment with these lower-spec rigs is substantially less than the dayrate that would be needed to support a newbuild, and the operating costs is also about half of a newbuild’s.
All six of Shelf’s rigs in India operate at a low operating cost and support good margins at current market rates of $85,000 a day. If you are going to spend $240 million on a newbuild, you can’t afford to put it on a contract for $85,000 a day without a significant destruction of capital.
In Egypt, the rigs are also lower specification in terms of fluid-handling capacity, water depth and drilling depth, but they are very fit for purpose for what they do, operating in workover and in-field drilling in a normally pressured environment with well depths typically less than 10,000 ft. The rigs move very frequently – sometimes every six days. Doing that with a new jackup rig would be very inefficient and much more expensive.
I agree with “new versus old” in deepwater environments, but with jackups, bigger is not always better. When you’re working over platforms, especially older platforms, your drilling package has to be more nimble to access well slots on older platforms. The vast majority of our activity is working on mature producing assets, where we are working over older platforms. Currently, our fleet is almost exclusively working on producing assets. We have very minimal exposure to exploration.
We have a wide range of specs within our fleet so we do compete against newbuilds in some areas. The Adriatic I, in terms of specification, is very close to the newbuild MLT 116E rig design. In Vietnam, we operate alongside newbuilds at comparable dayrates, but we have lower operating costs.
What is your take on whether the industry will be able to absorb the influx of newbuild jackups?
There is a concern that the industry may oversupply the market. There are approximately 140 newbuilds on the current order book, with deliveries projected between now and 2017. Some of them are being built by yards that are untried and untested. They may deliver; they may not. A large number are being built to a North Sea specification, which are fit for purpose for the North Sea and similar harsh environments but are not fit for purpose for activity in tropical and temperate environments.
The North Sea and other harsh environments represent a smaller market than the more conventional jackup markets. The North Sea-type rigs are heavier and bigger, and they tend to have difficulties in soft sediments with penetration issues. They also tend to be more difficult to move and subsequently can spend a significant amount of time waiting on weather to move.
I don’t think newbuild jackups will have a big impact on Shelf Drilling’s market from an activity view point, as our rigs are fit for purpose for what they do.
We are, however, also looking at newbuilds, with the difference that our newbuilds are designed to be fit for purpose for our geographies and offer a specification that will provide greater efficiency while drilling and during rig moves based on proven technologies. We also believe that we can build a new rig fit for purpose and more efficient that is 25% less expensive than what they’re building today. That will give us a competitive advantage.
Our newbuilds will focus on specification that is particularly relevant to the geographies where they will be deployed. For example, we are looking to build it for 400-ft water depth, with an 80-by-40-ft cantilever reach that will be able to jack up and jack down under full preload and with offline capabilities to enhance the drilling efficiency.
What kind of offline capabilities are driving increased efficiency?
It’s a matter of being able to build stands and casing offline and being able to prepare your next sequence of operation offline so that when you want to pick up something, it is already made and ready to run in the hole. When you take these activities off the critical path, you’re able to increase the efficiency of the entire well construction process.
You mentioned that Shelf Drilling has had an uptime performance of 99% in the last year. How did you reach that uptime, and how are you maintaining it?
We are solely focused on jackup operations, and our rigs are well maintained and manned with experienced crews. We have created a performance culture and have the right degree of oversight and right degree of accountability. It comes down to how you manage your people and maintain the equipment.
A lot of what we do in operation is fairly repetitive, and our operations are less risky than high-end exploration activity. We also strive to have stability in our operations – stable rig crews, long-term customer contracts and continuity of operations.
As long as you keep your people happy, you keep them motivated and you spend adequately on maintenance to make sure your rigs are well maintained, you shouldn’t have a performance issue.
What is your take on integrating more automation into jackups?
If you look at the major jackup incidents that have happened in the past few years, a large number of them have been related to a failure in the integrated automated system. Automation by itself does not create efficiency and can add inefficiency if it is overly complicated to use and/or maintain. For this reason, we have gone with a more conventional design with our newbuilds that is more focused on drilling efficiency in the offline capability.
What impact have politics and increased regulations around the world had on your operations?
Geopolitics has played a major role in our business since the beginning of the oil industry and will continue to. For example, we currently don’t operate in Iran owing to trade embargo restrictions. There may be relief from this in the near future given recent political events, which would have a meaningfully positive impact on the jackup market. Mexico is opening its oil and gas business to foreign investment. The exact mechanism of this remains unclear, but again, this has the potential for profound impact on the jackup market.
Regulations have become more stringent over the years. Certification is more onerous than it was before Macondo, but these changes are for the better and not at a pace that causes huge discomfort.
Given your 30-plus years of experience in the industry, what challenges are you seeing today compared with the past?
One of the biggest challenges is attracting the right level of people. Shelf Drilling is fairly well situated because we’re not as reliant on Western countries for our workforce. Egypt is a very good resource for people, as are India, Nigeria, Malaysia, Thailand and Indonesia. It’s easier to hire people in those geographies today than from the US, UK and Europe.
I think industry needs to diversify more and have a larger global reach. The industry, especially the drilling segment, is still overly dependent on labor from Western countries.
Given the staffing challenges, what are you doing to ensure compet-ency? What type of training programs have you put in place?
We have developed a competency program that is fit for purpose for the industry segment we serve. We have developed a training platform that is based on a blend of internal and external training programs that are administered via an outsourced platform. In developing our training program from scratch, we have been able to leverage the latest technologies and content to provide our people with an outstanding learning experience. This has provided them great flexibility in how and where they do their training and self-learning, as well as ensured that their competency is assessed by their supervisors at relevant stages throughout their development.
Do you see infrastructure challenges in the markets where you operate?
Dubai is central to our activity and provides an excellent infrastructure, which is one of the reasons why Shelf Drilling is headquartered here. We have an excellent transport infrastructure, with direct flights to all the countries in which we operate. Dubai affords a relevant oilfield service supply chain and excellent shipyards for rig repairs and newbuild construction.
One challenge to jackup operations is the actual rig move. How can drilling contractors reduce the related risks?
One way is to design a rig to jack up and jack down with full preload. This minimizes the risk of a punch-through. Jackups are not self-propelled, so you have to find the most effective way to move them. We don’t have the same exposure to tropical storms as in the Gulf of Mexico, but we do have tropical storms. We need to be cognizant of that and make sure we have all the right metocean data before we move our rigs and minimize the risks.
Rig moves represent the highest risk in jackup operations in the geographies in which we operate, which is why we made sure that we have the right expertise and technical resources available in our Dubai and our onshore/offshore teams to plan and oversee the rig moves that we conduct throughout the year.