CATEGORIZED | 2008, January/February

As reservoirs evolve, so do challenges

Posted on 29 October 2009

Critical D&C issues with Keith Morley, Weatherford

Keith Morley is senior vice president well construction and operations support, chief safety officer for Weatherford International Ltd.

DC: What do you see as the most critical issue facing the drilling and completion industry today and what can we do about it?

Morley: Well, the second part is the tricky question. But I think it’s the changing dynamic of reservoirs we’re facing. Production from existing reservoirs is declining, and the quality of new reservoirs is decreasing. Aside from the Gulf of Mexico and West Africa, and excluding Russia and China, there haven’t been many new fields of truly significant size discovered in the past 10 years. Difficulty in replacing reserves is a big challenge for the industry and obviously a worrying issue.

The industry is also moving to more extreme environments that are geographically and geologically harsher. There’s an increasing focus on nonproductive time, and new technologies can be the vehicle to eliminate or reduce NPT. Service companies are becoming much more involved in planning the drilling program design, as operators and suppliers collaborate on a more integrated approach. They’re working aggressively on process and delivery quality as well as equipment quality. We’ve focused for years on improving equipment quality, but the industry is still falling down on process quality. The greater the degree of collaboration integration between the service sector and the E&P sector, the more we can make sure operators get workable systems that can be effectively implemented.

The industry is heading towards collaborative partnerships between service companies and operators. It’s no longer acceptable to just ask for something to be delivered and installed in the wells. We have to understand exactly what the conditions are in the field-of-use so both sides can set the right expectations, work through the delivery processes and consider every risk element.

DC: What improvements have oil companies and service companies made in forging these types of partnerships?

Morley: Operators are seeing service companies more as solutions providers and less as just a product manufacturer or a labor force. They see us as a key part of their overall process. There’s more pre-deployment discussion, more pre-drilling involvement in HAZOP/HAZID and DWOPs.

From a drilling engineering perspective, E&P companies are challenging the status quo to find new ways of doing things. In turn, that challenges us to find the right technology, process or solution to match their changing expectations. Working collaboratively, we can quickly and successfully deliver new technologies and get the benefits into the field.

DC: Is operators’ increased interest in pushing the status quo driven by the harsher environments they’re working in or cost increases they’re dealing with?

Morley: There’s a whole suite of things driving it. Certainly, there are cost increases that might be related to raw materials, personnel or to changes in processes, and operators want to make sure they get the value out of that incremental cost.

In general, there is not only a desire — there’s an existential need — for them to push the envelope on technology, the same way we’re pushing ours. I would encourage them to look at their risk models and get these newer technologies into the field more quickly. Operators are dealing with cost increases, but new technology adoption should not be a first cost issue; it’s a value issue. A new technology that looks more expensive on paper will end up significantly less expensive in terms of its overall performance reward and therefore value. That’s sometimes hard to push. Operators, like all of us, work on extremely tight budgets. If we can’t prove the value proposition well enough, you can’t really blame them for not adopting the technology. That’s where working together is so important.

DC: What are some examples of technologies operators have shown more willingness to put more risk in?

Morley: From our perspective, the move towards expandable screens technology and expandable completion systems. We have worked with a number of operators to successfully demonstrate the capabilities and reliablity of these systems. It’s a good example of collaboration and moving away from the classic gravel-pack approach to a more innovative sand control and completion design.

On the drilling side, there is drilling with casing, managed pressure drilling techniques, new LWD systems or new rotary steerable systems. Or, for example, drilling a series of underbalanced horizontal wells that cost a little more than conventional vertical wells, but then you get increased productivity. The payback is dramatic, and I think operators have moved aggressively to incorporate these changes into their basis of design.

DC: You mentioned earlier that there’s an increasing focus on nonproductive time. Has there been an increase in NPT in drilling and completion operations?

Morley: I’d say there’s been a gradual decrease. It’s not that NPT is increasing as a total amount of the time used to drill the well, but it’s still significant. Operators tell us that as much as 50% of the time to drill a well is essentially nonproductive time. That doesn’t mean it’s time lost to errors, but it’s time spent not adding value to the drilling process.

We tend to focus on providing a piece of equipment or providing an aspect of a service, and try to fine-tune the length of time it takes to accomplish that. In very simple terms, for example, running casing; 10 or 15 years ago, when equipment was predominantly manual, how quickly casing or tubing could be run depended on the muscle and skill of the crew. Now, rig mechanization equipment and improved handling techniques have changed that and accelerated the process. Eliminating safety risks and accelerating the rate a task can be completed is key, and there have been significant steps forward in many drilling and completion processes in the past 10 years. Another example is the dual derrick capabilities on some offshore rigs, which has dramatically reduced NPT.

We have already seen a lot of improvement in nonproductive time reduction, but as an industry we’re trying to fine-tune even further. Sometimes it gets down to relatively small increments of time — an hour is an extremely expensive amount of time on a rig nowadays.

DC: What downhole breakthroughs is Weatherford working on?

Morley: A lot of our focus has been on improving the adoption rate of new technologies we have already developed. We have a number of new technologies and processes that are still in the early adoption phase. Getting them more broadly adopted as the industry standard is the primary focus.

DC: Can you give some examples?

Morley: Specifically, some of the new, advanced HPHT LWD technologies, cost-enabling rotary steerable systems for onshore and mature field applications, new “compact” wireline tools with novel conveyance methods and, of course, expandable technologies, both solid liners and sand screens. In a broader sense, if you look at where we are with managed pressure drilling and the control pressure drilling processes that we are delivering, they can safely accelerate the drilling process efficiency as well as improve productivity in reservoirs. These are surely the primary objectives of wellbore construction.

DC: What’s keeping these technologies from achieving wider adoption?

Morley: I think we, as service companies, have to provide a clearer definition of the value proposition. The first cost may be higher than traditional methods, but it’s the total cost that makes or breaks the value proposition.

For example, say a process using the traditional technology costs $100,000 on paper. If you add all the costs of associated processes, taking reasonable account of the various risk elements that are inherent in the operation, such as ancillary support costs, downtime or delays in production, the actual full implementation process cost may be $250,000. On the other hand, a new technology might have a quoted first cost $150,000 with a total process cost of $175,000 for full deployment. Communicating the value proposition effectively would help operators evaluate the full process cost, not looking at the $100,000 vs $150,000 but comparing the full cost, which is $250,000 vs $175,000. We have to do a better job of communicating this type of performance value.

Many clients are actually implementing systems to measure the comparative performance of service companies. These metrics allow them to verify the value proposition through experience, thus select both new and traditional technologies on a true value basis.

DC: Do you expect to see much wider adoption of the new technologies you mentioned within the next couple of years?

Morley: Absolutely. The rate of adoption is already accelerating. In many cases, new technology is not an option anymore; it’s existential. It may be the only way to get to the depth they require or to the reservoir producibility they must have to be economical. Moreover, these technologies are beginning to be demonstrated as the better and safer way to get there.

DC: How is the adoption rate of new technologies different for frontier areas compared with traditional operations or lower-cost operations on land?

Morley: It’s hard to generalize, but I think, in aggregate, there’s an increasing level of adoption of evolutionary technologies in more mature drilling environments as operators can measure the value more easily and can better assess the risk of incorporating new technologies into well design programs.

In the very high-exposure and deepwater environments, it may be more difficult to fully assess the operational and financial risks with implementing new technology, even though in many cases the payback may be greater.
In terms of broad adoption, I think it’s happening more in “commodity” well environments. These are wells more simplistic in design, and the drilling process has been turned into a factory-like process. The drilling and completion process is set and repeated over and over again. With each experience gained, you can tweak the process or equipment application and create more efficiency. You see it in a lot of the later-phase development or re-development drilling in mature drilling environments where we’re re-entering reservoirs whose production has significantly declined.

Many “step-change” or more revolutionary technologies tend to have a market application in the more frontier areas.  These operations provide for greater returns from the new technology for the E&P companies, but implementation of new technology is obviously more complicated in these environments. Many of the technologies destined for frontier applications are deployed initially in the more mature onshore applications and then migrated to the frontier application after numerous early commercial deployments.

In some unconventional drilling too, like tight sand or shale gas applications, we’re seeing more of the repetitive factory approach, with incorporation of new technologies and thereby increasing efficiency as a result.

Overall, the adoption of new technologies is increasing significantly. The more people see them used and successful, the faster the rate of adoption increases.

DC: What is your vision of smart wells for the future?

Morley: Smart wells mean different things to different people. You can talk about a smart well being anything from an automated artificial lift pumping system on the one end, to one well that’s controlled with remotely activated downhole flow meters, control valves and a wide range of downhole and surface sensor technologies.

I think the truly intelligent well is one where optimized production is totally automated, without any human intervention, in a closed-loop approach. The intelligent field is a fully integrated, intelligent system of multiple wells within a field, where the in-well and surface flowline systems are linked together and monitored as a batch. Basically, the whole infrastructure of that field is monitored and controlled through essentially an “artificial intelligence” framework, including software and hardware systems. An optimized software system will manage the flows and pressure conditions from individual wells and the surface infrastructure to optimize the field’s total production. To us, that would be a field of truly intelligent wells.

DC: How far are we from achieving a fully integrated system like that?

Morley: In some places we’re already very close to it. Hundreds of thousands of wells are being monitored with relatively sophisticated, but relatively inexpensive, gauge systems and software automation systems that minimize the amount of human interaction needed to optimize production. This competency has certainly been part of Weatherford’s technology development program over the last 7-8 years. The technology to do it exists; it’s just a matter of broadening adoption as I mentioned earlier.

DC: Have operators brought up any specific challenges in the deepwater environment that they would like to see addressed?

Morley: Deepwater has many challenges to the drilling and completion processes; a lot is related to rig equipment and drilling support equipment. From our perspective, probably the toughest areas for operators is getting appropriate pressure management in wells so they can drill deep enough to reach their objectives. We’re looking at technologies based around drilling hazard mitigation, including monobore expandable solid capabilities, which allow for reduction in the amount of telescoping needed of the casing. These technologies get a larger hole size deeper into the formation without risking damage to the formation, lost circulation, or the risk of fluid influx.  We’ve also developed subsea rotating control head devices to allow effective operation in conjunction with subsea trees.

Not always in deepwater, but temperatures in a number of frontier environments have pushed the limits of traditional tools. Weatherford has been working on a wide range of high-temperature tools, particularly those that incorporate electronics or elastomers. We have been able to develop our MWD/LWD systems over the last six or eight years with a better understanding of deepwater environmental conditions. Our LWD fleet was designed to handle the higher temperatures anticipated in the new frontier well environments. That’s why we have been able to set so many pressure and temperature records with our LWD and rotary steerable systems.

DC: What have been the major factors driving cost increases on the service side?

Morley: A lot of the increases are related to raw materials. Look at the global demand for steel, whether it’s for infrastructure development in China or Dubai, or simply global GDP growth. There is a supply-demand pressure on steel price, particularly the higher-quality and alloy steels. There’s also pressure on intellectual capital. It’s becoming increasingly difficult to find experienced personnel. We’re spending significant amounts of money on the training and development of personnel. Of course, with demand for personnel increasing, cost for personnel is going up too. We have to attract people to the industry, and we have to pay them to remain with us. Experience is vital to us. So those are the two most significant factors: human capital and materials cost.

DC: As you said, experience is vital. Overall experience levels have come down in the industry. What are some ways we can fast-track training and fill that knowledge gap?

Morley: At Weatherford, we’ve implemented a new employee development system to accelerate development of competencies in our existing workforce and for new recruits. This has completely revamped the competency processes we use and allows effective matching of training to those competencies. We’ve been very aggressive in making sure our employees are capable of doing the jobs our clients need them to do.

Weatherford has been fortunate because we’ve made a large number of acquisitions as part of our growth program, and that has brought experienced people to us. The experience is extremely valuable because they come from different backgrounds with perhaps a different perspective and knowledge set. We’ve been able to integrate that knowledge into our organization as part of our growth curve. On top of that, we still aggressively recruit around 2,000 new hires per quarter.

DC: How can the industry ensure we keep up with our safety performance with so many new people even as wells get harder to drill?

Morley: The industry’s overall safety performance has definitely improved. That’s a result of the commitment that operators and service companies have made to put safety as the primary priority in everything we do. We communicate that to all employees, but until we have no one injured, we will always have room for improvement.

The mindset of individuals is critical on three levels. First, there’s the mindset of employees who have their hands on the tools. Second, there’s the mindset of the supervisors overseeing that particular process. Third, there’s the mindset of industry leaders who must challenge everyone to have an incident-free environment. We must maintain focus at each level so people understand they need to conduct their tasks in a safe manner.

We have to constantly make the conscious decision to be proactive about safety. I believe there’s a commitment, at least amongst all operators Weatherford works for, to see that happen. We have received letters of commendation from many operators where our employees have pointed out a hazard and stopped an operation. That’s nonproductive time they’re prepared to accept. It’s very encouraging to get that kind of feedback.

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