Home / 2018 / Process automation may provide next performance differentiator in ultra-competitive shale market

Process automation may provide next performance differentiator in ultra-competitive shale market

Automation-enabled tools paving the path to reduced invisible lost time, could help drilling contractors become better rewarded based on quality of wells drilled

By Linda Hsieh, Managing Editor

David Reid, Chief Marketing Officer, National Oilwell Varco

David Reid, Chief Marketing Officer, National Oilwell Varco

David Reid is Chief Marketing Officer for National Oilwell Varco.

What do you see as the most critical challenge facing our industry?

Right now, it’s survival. There are a lot of people struggling to make the money that is required for their businesses, and we have to think about how our businesses are going to evolve going forward. Everyone is having to work out how they can make money with minimal investment. One way is consolidation, which we’ll likely see more of in the coming years. Another way is to find lower-cost and more innovative ways to do things.

How do you see business models evolving in this type of environment?

Back in the 1990s, turnkey wells were very common, but that business model wasn’t robust enough. Companies weren’t being rewarded enough to cope with problems when they came up. The industry is looking at going to a reward-type system again, but the challenge is to make the model balanced enough so that everyone can be rewarded for the work they do.

I think the shale market could really lead in this space because of the type of drilling they do. Drilling contractors could be rewarded based on the quality of the wells they drill, rather than just for delivering rigs, people and equipment.

We’ve already seen some drillers take on services like casing running and managed pressure drilling. Next they are starting to look at directional drilling, which is more feasible now with the development of agnostic app-driven automated systems and complex downhole tools that used to be available only as part of an integrated package from big service companies. The cost to run directional services is also falling significantly because the tools are more available and less specialized and, if you need a specialist, they are available on the open market. The margins are smaller, but with automation they’re able to deliver fairly consistent results.

As the technology becomes more commoditized, drilling contractors can take it on as a value-add and start tying performance to rewards. Rather than a dayrate model, they can align with the things that oil companies care about, like well placement and tortuosity. For the operator, this model also gives them valuable KPIs that are consistently worth rewarding.

How do you see automation changing the well construction process in the coming years?

Historically, this industry has relied on a lot of rules of thumb, but those rules came about because we lacked data on what was really happening downhole. Now, we do have data, and we don’t have to guess anymore. For example, we have used a number of sweeps, cycling out mud through the wellbore to clean it of cuttings. Today, we can actually see when the wellbore is clean and watch the wellbore clear precisely, eliminating excessive conservative practices and eliminating invisible lost time (ILT).

We’re also having to rely less on individual skill and expertise, which is good because we’re realizing that the inherent inconsistency of humans is worse than we ever thought. Look at the way drillers – even the experienced ones – tag bottom. The inconsistency in the way they engage the earth is one of the primary reasons for failures in drill bits and downhole tools. In the work we’ve done, we’ve seen fewer downhole failures by automating the tagging bottom process.

The NOVOS process automation platform (left) works hand in hand with wired drill pipe (right). While wired pipe has for years provided a large network of constant data from downhole, there were no tools to allow third parties to easily take advantage of that large network. “It was like having high-bandwidth internet but no YouTube... That’s what led to the development of NOVOS,” said David Reid, Chief Marketing Officer for NOV.

The NOVOS process automation platform (left) works hand in hand with wired drill pipe (right). While wired pipe has for years provided a large network of constant data from downhole, there were no tools to allow third parties to easily take advantage of that large network. “It was like having high-bandwidth internet but no YouTube… That’s what led to the development of NOVOS,” said David Reid, Chief Marketing Officer for NOV.

What’s the role that wired pipe will play in this?

Drilling with mud pulse telemetry is like driving with your hands over your eyes and only releasing them every 20 seconds. Drilling with wired pipe is taking those hands away, so you can have a constant stream of information to help you steer better and make better decisions.

Before NOVOS, we didn’t have any tools to allow third parties to easily take advantage of the large network provided by wired pipe. It was like having high-bandwidth internet but no YouTube. People weren’t able to realize the value of that bandwidth. That’s what led to the development of NOVOS.

What will be key to the adoption of a system like NOVOS in the drilling industry?

Easy installation will help. In our first job, we were able to install a stable system in 11 hours. We’re able to do that because of the way the system was built. It’s not asking the rig for specifics. It doesn’t have to be tuned to the machine itself, which would take a long time because each rig has different code under the hood.

Instead, the system asks for outputs, like a certain torque or a certain speed. If you describe the outputs and verify them, the system can self-correct and then find a norm. Then you can create an algorithm that communicates in terms of “I need this torque” or “I need this speed at the bit.” The system operates in an app-based environment so different companies can adapt their own software to run on an app within just a few days. It’s an open system.

The system also operates more like cruise control. If you turn it off, just continue drilling like you used to. It removes a lot of the drilling control complexities that people used to have to deal with, while offering more complex, traditional direct control, if necessary.

How does this kind of cruise control functionality impact the role of the driller?

His focus changes. Rather than focusing on the next button that he has to press to get an output and checking to see if he got that output, he can start looking at what is happening to the bit or the string, or what his crew is doing on the floor. His role becomes more process based and supervisory, rather than tool-by-tool function driving. I think the result will be a less stressful, performance-focused environment for the driller, who will in turn deliver better results.

Will it be difficult to get experienced drillers to accept this change in their day-to-day jobs?

We should remember that automation is just a tool. If it is user friendly and consistently delivers good results, people will use it. In North America, we’ve already seen that tripping using the automated system is generally more than 40% faster on a traditional rig, combined with humans manually tripping pipe on the floor.

You said in an industry presentation last year that you believe performance is becoming a commodity in the drilling industry. Can you elaborate?

If you look at today’s rigs, both offshore and on land, you’ll find that everyone is getting closer and closer to the same high level of performance. So, what’s the next differentiator going to be? This is where integration starts to make sense for the driller. Today, the driller doesn’t deliver wells. He delivers a machine that can deliver wells; he drills the easy part and gives the hard part to specialists. Now, that capability can go into the driller’s hands so he can offer more specific outcome-based value to the operator and get better rewarded for better wells.

Overall, I think we’ll start to see more drilling contractors doing more work across different functions, because we’re going to give them the tools that will take away the high-stress things they have to do. Their minds will be a lot more focused on the job being done. I think we will become hyper-efficient.

I hope that means the cost for drilling will stay low. I know that some people want the oil price to come back so they can charge more, but I don’t know if that’s going to be helpful. Once drillers gain more confidence in what they can consistently deliver, they will take more risks in their contracts, and that’s going to lead to higher rewards.

Besides automation, what advances in rig capabilities do you see on the horizon?

I think there’s room for more stability in pipe-handling systems where you can have better, simpler systems with fewer parts and less cost. I don’t subscribe to the idea of making a large industrial robot to handle pipe. We should be simplifying, not making things larger and more complex. For offshore environments, perhaps technologies should be proven in the low-cost shale market first. If you can make it work there, you know you can adapt it for a better solution offshore.  Bringing complex offshore to systems can’t be economical in our future rigs.

There will also be technologies that we don’t know about yet. The important thing is that we support startups in our industry and provide them with room for innovation. For example, last year NOV participated in SPE’s Startup Village at ATCE. It connected entrepreneurs to funding and support from the oil and gas sector. It’s really important for the industry to encourage them and push them along.

Where do you see additional opportunities for collaboration?

Data sharing is good, but boundaries do have to be set, and companies still have to manage their value. With the app-based platform we developed with NOVOS, it only takes 11 hours to install. We designed it to be easy for people to get onto. I think operators and start-ups are seeing the immediate, rapid and low cost opportunities for collaboration there, and it’s quite exciting.

I’m also seeing a couple of offshore drillers collaborating to develop offshore apps for NOVOS, where they couldn’t afford to do it themselves but they’re collaborating because they work for the same operator. They’re now working with the operator and the service company as a group. I think we’ll see more partnerships like this.

I truly think that collaboration is part of the new world and the younger generation. That’s what we’re doing as an industry with the Drillbotics competition, where a team of students from different universities compete to build fully autonomous drilling systems. Once the competition is won, everyone in the program shares all their data with each other and the next contestants, so they can build on previous work that’s already been done. When these students go into their jobs, I think they will expect to collaborate for the greater good and more rapid progress.

In big data, you also see big companies that have proprietary systems. But on the other side of the fence are people all over the world who are using open-source big data systems and code, where collaborating with everyone else is foundational, and they’re moving much faster than the big companies.

The future is going to be collaborative. The people who enjoy what they do and who are going to be best at what they do are going to be successful, rewarded and still collaborative by nature. The challenge is to make money while being collaborative. People have to find a way to make money from an open system, and that can be inherently risky.

What do you see data analytics doing next for our industry?

It really is on the back end. Having systems that know when a part is going to fail and can act by itself to find a replacement, then make sure it’s close by and even plan the work, or at least get the resources lined up without human intervention. That’s where there’s good work being done with data analytics. If you’re in West Africa and the part is in Melbourne, Australia, that’s a potential pain point. But if you know beforehand that the part is going to fail, you can also know instantaneously that it’s in Melbourne, and you can start moving it closer to where you are.

That’s where the money is going to be. You can start to have tighter control over what’s needed to drill a section. The standby costs this industry pays is accepted waste. We pay for people to stand around or for parts to be on a shelf waiting to be needed. If we have more control over the process, our total costs will go down. It’s not just about using data analytics to predict a failure; it’s creating systems that can use that prediction to cut out the waste.

If we look further down the road, we can even go beyond eliminating wasteful spare parts or on getting just-in-time delivery. When we talk about very expensive components like top drives, we can also take out significant costs by telling our supply chain that something doesn’t need to be built until a certain point. When something exists and sits on a shelf, it costs money, and that money isn’t being fruitful. If you can manufacture to order, your costs really go down.

Look at the steel needed to build a top drive – why should we hold so much steel? Why can’t it be prepared for a certain date, then moved straight from the supplier’s plant to our plant so it never sits on a shelf? We’re still a distance away from this type of capability, but the journey there will be fruitful.

What’s your take on attracting more young people into our industry, considering that we’ve lost so many of them in this downturn?

The thing about the new generation is they go as fast as they can. They leave quickly, and they jump around. It can be a challenge to performance, but that’s where software will help. Rather than worry about passing on our knowledge to the next generation, what if we can give new employees systems and tools so they don’t need 20 years of drilling experience to drill consistently good wells?

As for attracting people, I don’t think we’ll have a problem. Look back at the early 2000s when we were worried about how we were going to get all the people we would need, and I think we did OK. The key is to adopt new technologies so we keep pace with the rest of the world. If we insist that people go backwards in their experience, they will choose something else. DC

About The Author

Linda Hsieh is a graduate of the journalism program at the University of Texas at Austin, where she also completed the Business Foundations program at the U.T. McCombs School of Business and minored in Asian Studies. She has been writing for Drilling Contractor since 2005.

    

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