DRILLING OUTLOOK
“Even though certain investors might say they’re
not going to focus on fossil fuels and will focus on
renewables going forward, at the end of the day,
when you look at global energy needs, for the
next 10, 20, 30 years, worldwide consumption for
hydrocarbons is going to continue.”
- Seenu Akunuri, PricewaterhouseCoopers
conditions) and energy transition activi-
ties on the line items of its consolidated
financial statements.
The proposed rules would require com-
panies to report Scope 1 and 2 emissions.
Scope 3 emissions would be voluntary
unless a company has set an emissions
reduction target that specifically includes
them. Another pressing challenge is the exo-
dus of labor, Mr Jelinek said. The frequen-
cy of downturns and perception issues
among younger workers are both contrib-
uting factors, but the latter is especially
concerning, he noted. In a 2020 EY study
on the energy workforce, 92% of oil and
gas executives surveyed said they believe
the ability to re-skill their workforce will
determine their company’s success in the
near-term future. However, only 9% felt
strongly that they have a “robust plan” in
place to do so, and just 3% felt strongly that
their organization is adept at re-skilling
their workforce.
While executives surveyed were bullish
on their ability to fill skills gaps through
hiring, this confidence is a double-edged
sword. The fact that an increasing num-
ber of new graduates and existing work-
ers are developing these in-demand skills
reflects a strong growing demand for
those skills across multiple industries, Mr
Jelinek said. This means the oil and gas
sector will face increasing competition
for talent, at the same time that a nega-
tive industry image drives young workers
elsewhere. To address this challenge, Mr Jelinek
urged the industry to vigorously promote
its long-term commitment to sustain-
ability. “I think there’s a realization now
within the industry that you need to show
people how this industry is a humanitar-
ian necessity. People need energy, and
24 they’re seeing that this industry is actu-
ally contributing to the energy transition,”
he said.
Drawing investor interest
in a divided future
In its 2022 World Energy Investment
Report, the International Energy Agency
(IEA) noted that the average level of invest-
ment in oil and gas projects is expected to
hit $720 billion this year, a 10% increase
over 2021 levels. This figure is higher than
what the IEA had projected for year-end
2022 ($550 billion) and significantly higher
than its projection for what needs to be
invested in the latter half of this decade
($340 billion). Both projections were made
under the IEA’s NZE (net-zero emissions by
2050) scenario.
The juxtaposition of actual investment
levels with analyst projections raises the
question of whether the current energy
security crisis will open up opportunities
for greater long-term investment in oil and
gas. Mr Akunuri described this question
as essentially balancing between different
visions of the future.
“Companies are going to be much more
focused on not only the return and the
risk, but also from a longer-term perspec-
tive, as they are going to have to decide
what their portfolios are going to look like
10, 20, 30 years from now. They have to
make investments based on that. Some
of the projects under consideration alle-
viate short-term issues, some are being
made toward a future where everything is
renewable, and some are more of a balanc-
ing act,” he said.
Some regional variations in renew-
able investments can be seen. From 2010
to 2022, countries with more advanced
economies grew its capital spending
on renewables and electricity grids by
$50 billion, according to the IEA. While
emerging economies saw this spending
increase by around $1 trillion, China alone
accounted for approximately 90% of that.
Other emerging economies only saw their
spending on renewables grow by $10 bil-
lion, but stayed resilient on their invest-
ments into fossil fuels, averaging around
30% of total power investments. Advanced
economies, as well as China, averaged less
than 10% investment in fossil fuels in that
time period.
Mr Akunuri noted that fossil fuels will
continue to remain vital to developing
countries, which will require significant
electricity as they industrialize. “In my
view, with fossil fuels, the returns are fast-
er and they come sooner than renewables.
When it comes to building clean energy
like solar farms or wind turbines, that
still takes a lot of investment, and some of
these developing countries don’t have the
infrastructure or the cash to build those
things yet,” Mr Akunuri said.
As investments into both fossil fuels
and renewables continue in the com-
ing decades, it’s becoming clear that
the market will reward companies that
diversify. In a report issued this year
(“Shifting Grounds: The Future of Global
Energy Systems and the Infrastructure
Challenge”), PwC noted that energy tran-
sition and wider technological changes
are creating opportunities for companies
to capture new sources of value, as previ-
ously separate value chains are becoming
increasingly interdependent. This trend is
leading oil and gas companies to develop
collaborations down the value chain.
The PwC report mentioned the ongoing
work on hydrogen development, but Mr
Akunuri also cited the industry’s work
with battery energy storage systems and
carbon capture and storage as examples
of long-term renewable investments that
will help companies in the oil and gas
space to stand out from their peers.
“You can’t just be at status quo,” he
said. “Even though we’ve had a couple of
downturns recently, the industry has gone
through cycles before and it will in the
future. At the current commodity price, if
you’re cash flow positive, you need to be
making investments with a view towards
the future and a balanced portfolio. That’s
what investors want to see.” DC
NOVEMBER/DECEMBER 2022 • DRILLING CONTRACTOR
DRILLING OUTLOOK
Drilling contractors can play
important roles in supporting
scale-up of geothermal energy
Investments in and partnerships with startups
and producers can help to reduce surface,
downhole risks, improve well performance
BY STEPHEN WHITFIELD, ASSOCIATE EDITOR
In recent years, geothermal has become a
pathway for drillers to step into the world
of renewable energy while using existing
drilling equipment and expertise. In fact,
technologies and know-how from the tra-
ditional oil and gas sector has the potential
to remove current limitations to geother-
mal and help it take off on a wide scale.
Geothermal energy is ubiquitous, but not
all geothermal resources can be economi-
cally exploited. Many pockets of the hot
rock found within geothermal reservoirs
are too far below the Earth’s surface to
profitably access with current technology.
Other pockets may not be hot enough.
Current geothermal systems typically
require water heated to at least 200°C
to drive the steam turbines that produce
electricity, and there are a limited number
of shallow reservoirs with sufficient heat.
According to the US Energy Information
Administration (EIA), only six states
produced geothermal electricity in 2021
– California, Nevada, Oregon, Idaho, Utah
and New Mexico. Further, geothermal
accounted for only 0.4% of total US utility-
scale electricity generation in 2021.
Scaling geothermal will require access-
ing reservoirs at less-than-ideal tem-
peratures, said Cindy Taff, COO of Sage
Geosystems, and that will require addi-
tional technical advances. “Current tech-
nologies can only unlock geothermal in
places near volcanoes and geysers, where
the steam is already near the surface,”
Ms Taff said during a panel session at
the 2022 IADC Advanced Rig Technology
Conference in Austin, Texas, on 30 August.
“As the technologies advance for low- to
mid-temperature range, we’re going to
have geothermal in more places.”
Ms Taff was joined on the panel by Joey
Husband, Senior Advisor – Nabors Energy
Transition at Nabors Drilling; Gustavo
Perez, Chief Financial Officer at EarthBridge
Energy; and Barry Smitherman, Chairman
and President of the Texas Geothermal
Energy Alliance (TXGEA).
Investment opportunities
Nabors has made several strategic
investments into geothermal in recent
years, partnering with technology devel-
opers to help make geothermal drilling
more widely accessible. For instance, in
March it announced an $8 million invest-
ment in GA Drilling, whose plasma-based
drilling tool utilizes a chemically assisted
plasma pulse to penetrate crystalline rock
at high penetration rates and at depths
exceeding 6 miles. It also invested $10 mil-
lion in Sage Geosystems, which is develop-
ing a modeling tool that targets subsurface
designs to optimize the power generated
from geothermal systems.
Mr Husband said he believes drill-
ing contractors will play a critical role
in expanding geothermal capabilities, not
necessarily by developing new technolo-
gies themselves but through partnerships
with startups and other companies that
already have projects under way.
“We’ve invested in geothermal partner-
ships, and our role is just as support,” he
said. “These are small investments, and
we’ve been very disciplined with capital,
but when we look at our engineering, our
manufacturing, our drilling solutions and
services, that’s a pretty good platform for
a startup geothermal company or partner
to leverage, so they can accelerate that
roadmap for development. I think that’s
one role the drilling contractor can play.”
There are also a host of innovations
in the unconventional drilling space that
can help to scale geothermal, such as
integrated managed pressure drilling sys-
tems and continuous circulating systems
that can keep mud systems cool. Such
technologies can help drillers to increase
ROP at greater depths while guarding the
bottomhole assembly against the extreme
heat and challenging geology found in
geothermal formations.
“There are a lot of initiatives going on
to reduce the risk in geothermal, includ-
ing surface work on the rig and downhole
technology to handle both the BHA and the
completions. We’re helping to put all these
pieces together,” Mr Husband said.
On the commercial side, geothermal
producers are increasingly relying on
power purchase agreements (PPAs) to cre-
ate more predictability. These contracts
between power plant operators and buy-
ers, which can be either a municipal utility
or an electric cooperative, sets fixed prices
and locks them in for the duration of the
contract term.
PPAs, which typically last between
20-30 years, can be extremely beneficial to
buyers and sellers, Mr Perez said. Sellers
can more easily secure funding from lend-
ers because they can prove, through their
PPA, that they will have a steady revenue
stream for years to come, while buyers
can plan long-term operations without
worrying about price fluctuations. Such
contracts will likely serve as a backbone
for geothermal funding moving forward,
he noted. “PPAs mean a source of revenue.
When we get that signed contract, we can
go to a financial institution and ask for a
loan or ask for equity in a project. That’s
where everything starts. This is how the
market works,” Mr Perez said.
Geothermal producers are also identify-
ing ways to improve development costs
by improving well performance. Ms Taff
estimated that current geothermal tech-
nology can generate 3-4 MW of electricity
per well, meaning that a typical power
plant would require an 18- to 20-well pad to
provide 50 MW of commercial power gen-
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