THE OFFSHORE COMEBACK 2023 outlook remains strong with tight rig supply, rising dayrates – p12 NOV/DEC 2022 2022 NOV rig census points to healthy recovery period Official magazine of the International Association of Drilling Contractors www.drillingcontractor.org www.iadc.org Active US rig count is up by 40% since last year, while Middle East is driving up jackup demand – p31 Volume 78 • Number 6 Oil and gas draws renewed interest from investors amid energy shortfall Companies that can diversify, embrace sustainability will likely be favored – p22 Tip the Scales in Your Favor You might think that you can’t get high performance from water-based fluids, that they negatively impact your well economics, or that there really isn’t a well-developed, balanced approach between performance, sustainability, and economics. Well, M-I SWACO has developed one of the most complete portfolios of aqueous fluid solutions that not only deliver sustainability but competitive performance in drilling and drill-in reservoir drilling fluids and also include advanced digital management and automation. Aqueous fluid solutions—water-based drilling fluids that are more than just water. slb.com/AFS Copyright © 2022 Schlumberger. All rights reserved. 22-WCFL-1260840 TAB LE OF CONTE NTS Official magazine of the International Association of Drilling Contractors NOV/DEC 2022 Volume 78 • Number 6 drillingcontractor.org iadc.org There is growing optimism around the global offshore drilling market and its prospects for 2023, with dayrates and utilization both expected to increase. See article on Page 12. “Gulf of Mexico Glow” painting by artist Crystal Wreden. DRILLING OUTLOOK Active Rigs Drillship Utilization Semisub Utilization 120 12 Buoyed by strong oil prices and rig demand, offshore drilling 100 to see continued comeback in 2023 BY STEPHEN WHITFIELD, ASSOCIATE EDITOR Total Rigs Jackup Tender 12 Rig Count 80 18 Analysts maintain optimistic outlook for onshore drilling market, 60 but uncertainties remain BY STEPHEN WHITFIELD, ASSOCIATE EDITOR 40 22 Oil and gas projects draw renewed interest from investors 20 amid energy supply shortfall BY STEPHEN WHITFIELD, ASSOCIATE EDITOR 0 25 Drilling contractors can play important roles in supporting scale-up Jan-22 18 Feb-22 Mar-22 Apr-22 of geothermal energy BY STEPHEN WHITFIELD, ASSOCIATE EDITOR WELL CONTROL & PRESSURE CONTROL EQUIPMENT 27 Saudi Aramco applies 4IR technologies to improve safety, well control readiness at rig site BY MICHAEL AFFLECK, ARAMCO OVERSEAS COMPANY; RICHARD PYE, BODONG LI AND GUODONG (DAVID) ZHAN, SAUDI ARAMCO Traffic light GUI NOV ANNUAL RIG CENSUS 31 2022 NOV rig census shows a welcome recovery period, but challenges loom ahead BY TARJEI “TJ” MYKLEBUST, KARL APPLETON AND KEVIN SCHERM, NOV ab le and US Avail 6000 gs Active Ri  e rigs Av ailabl s Activ  e rig 5000 Data Analycs/AI 4000 3000 2000 1000 AUTO MATI O N & SAFET Y 0 2015 2011 2013 2007 2009 2003 2005 1999 2001 1995 1997 1991 1993 1987 1989 1983 1985 1979 1981 1975 1977 1971 1973 1967 1969 1963 1965 1959 1961 1955 1957 55 Uptake of automation, remote operations enhances need for systematic alarm management BY JESSICA WHITESIDE, CONTRIBUTOR DRILLING CONTRACTOR • NOVEMBER/DECEMBER 2022 3 TAB LE OF CONTE NTS IADC CONNECTION 42 From the Chairman: To help the public understand essential role oil and gas plays, we must each become advocates BY JEREMY THIGPEN, 2022 IADC CHAIRMAN 43 IADC spearheads efforts to communicate the value of our industry 48 News Cuttings 49 Wirelines 50 Conference Calendar 51 Editorial Preview BY JASON MCFARLAND, IADC PRESIDENT, AND KATIE CARR, IADC SENIOR COORDINATOR – EXTERNAL COMMUNICATIONS 48 DEPARTMENTS 7 6 Drilling Ahead: Technical innovations, sensible policies vital to energy security 52 HSE&T Corner: Safety-critical task analysis is not a silver bullet, but it can help improve procedural integrity BY LINDA HSIEH, EDITOR & PUBLISHER 7 D&C News BY VARUN SARPANGAL, MAREX 57 People, Companies & Products 8 D&C Tech Digest 9 News Briefs: Environmental, Social and Governance 59 Advertisers Index 60 Perspectives: Martyn Parker, 10 Oil & Gas Markets NOTE: Some articles feature QR Codes which can be scanned using your smartphone to access web-exclusive, enhanced editorial on DrillingContractor.org or in our Digital Reader. NOV/DEC 2022 Volume 78 • Number 6 Drilling Contractor (ISSN 0046-0702), the official magazine of the International Association of Drilling Contractors (IADC), is issued six times per year. DC is a wholly owned publication of IADC, which is also the publisher of the annual IADC Membership Directory. Drilling Contractor strives to ensure that the articles and information it publishes are accurate and reliable. However, DC cannot warranty the information provided in its editorial content, and publication in DC is not a guarantee that the material presented is accurate. DC wants to hear from its readers. Send your comments or inquiries to editor@iadc.org or Attn: Editor, Drilling Contractor Magazine, 3657 Briarpark Drive, Suite 200, Houston, Texas 77042 (please include your name, plus an email or phone number). We hope you will enjoy and benefit from DC’s editorial. However, should you wish to 4 complain, please contact the publisher. 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Pruitt – Technical safety, working to industry’s recommended practices are both non-negotiable BY LINDA HSIEH, EDITOR & PUBLISHER PUBLISHED BY IADC OFFICERS IADC 3657 Briarpark Drive Suite 200 Houston, Texas 77042 USA Chairman Jeremy Thigpen Phone: +1 713 292 1945 drilling.contractor@iadc.org www.drillingcontractor.org EDITORIAL STAFF Vice President, Editor & Publisher Linda Hsieh Vice Chairman William Andrew “Andy” Hendricks Secretary-Treasurer Scott McReaken Division VP North America Onshore Mike Garvin Creative Director Brian C. Parks Division VP International Onshore Miguel Sanchez Associate Editor Stephen Whitfield Division VP Offshore Brian Woodward Contributor Jessica Whiteside Division VP Drilling Services Robin Macmillan President Jason McFarland A full list of IADC staff is available here: www.iadc.org/about/staff NOVEMBER/DECEMBER 2022 • DRILLING CONTRACTOR DEPARTMENTS • DRILLING AHEAD Technical innovations, sensible policies vital to energy security BY LINDA HSIEH, EDITOR & PUBLISHER IADC DRILLING CASPIAN 2023 CONFERENCE & EXHIBITION 7-8 FEBRUARY 2023 FOUR SEASONS HOTEL BAKU, AZERBAIJAN www.iadc.org/event/ iadc-drilling-caspian-2023 For more information, contact IADC by phone at +31.24.675.2252 or via email at europe@iadc.org 6 As we head into the winter season, it’s heartening to see to the world refocusing on the critical issue of energy security. For a long time, it seemed that our industry had done such a good job of finding and producing oil and gas that the world was taking energy for granted. But we know that affordable and reliable energy is not a given. Sultan Ahmed Al Jaber, Group CEO of ADNOC , recently said at the Energy Intelligence Forum in London that “all progress starts and ends with energy security.” He couldn’t be more right. Energy security is essential for social, economic and climate progress, he said, adding that market sentiment does not reflect the real underlying fundamen- tals, tight spare capacity and long-term demand growth. Governments should not be focusing their policies on ending the current energy system before a new one is firmly in place . “Yes, we must all commit to mitigating the impact of global energy supplies, but let’s keep our focus on capturing carbon, not canceling production. Let’s hold back emissions, not progress,” Dr Al Jaber said. He further urged the world to make good use of the technical expertise within the oil and gas industry. “For the energy tran- sition to succeed, the energy professionals need to be in the room, as equal partners alongside all other stakeholders.” Dreaming big on technology Within the drilling industry, companies are stepping up to meet calls for increased production, even as we’re dealing with con- tinued cost challenges, staffing shortages and supply chain bottlenecks . Technology is and will continue to be a key enabler. For example, compared with 20-30 years ago, data has become much more easily acces- sible, allowing engineers to spend more of their time on data interpretation and decision making. “Just like we did with unconventionals, we think we can create another 10x in the subsurface, we can have 10x higher NPV, be 10x more productive, if we focus on it,” Hess CTO Robert Fast said during a panel session at the 2022 SPE Annual Technical Conference & Exhibition on 4 October in Houston. When it comes to making technical advances, he said, “you’ve got to dream big .” Speaking on the same panel, Daniel Kalms, Executive VP Technical Services and CTO at Woodside Energy, urged com- panies to “be disruptive” in their technol- ogy development and deployment. “It’s too easy in our industry to just accept every- thing within our own little echo chamber,” he said. Interacting externally with tech startups, for example, can help our indus- try to adopt agile innovation. “If we don’t get disrupted and challenged , we’ll just be going in a relatively modest pace down a set path.” Sensible energy policies While technology can go a long way in helping our industry to provide ener- gy to the world, we still need govern- ments to implement sensible policies . API and IOGP, for example, recently commis- sioned a study highlighting the potential for American LNG to strengthen Europe’s energy security . “The EU needs to secure alternative supplies now if it wants to fully phase out Russian gas imports by 2027,” said Francois-Regis Mouton, IOGP’s Regional Director for Europe. This means that both US LNG export capacity and the EU’s import capacity will need to be expanded in the coming years , based on decisions that policymakers make today. The renewed attention on energy secu- rity we’re seeing now should not fade away without making an impact on pub- lic policy. It’s an opportune moment for policymakers to pave a sustainable path that will lead to dependable and affordable energy in the decades to come. DC Linda Hsieh can be reached at linda.hsieh@ iadc.org. NOVEMBER/DECEMBER 2022 • DRILLING CONTRACTOR DRILLING & COMPLETION NEWS • DEPARTMENTS Valaris announces multiple contracts, extensions in Mexico, UK North Sea, Australia Valaris recently announced several ■ A four-well contract extension with contract is expected to commence in Q1/Q2 contract awards: ■ A three-well contract with Eni Mexico offshore Mexico for the VALARIS DPS-5 semisubmersible. The contract is expected to commence in Q4 2022 and has an esti- mated duration of 240 days. The dayrate is $313,500, plus a mobilization fee of approx- imately $1.2 million. Shell in the UK North Sea for the VALARIS 122, a heavy-duty harsh-environment jackup . The extension will be in direct continuation of the existing program and has a value of over $60 million. ■ A one-well contract with an undis- closed operator offshore Australia for the VALARIS 107, a heavy-duty jackup . The ADNOC Drilling wins new contracts covering 14 jackups In October, ADNOC Offshore award- ed two new jackup contracts to ADNOC Drilling . One was a contract worth $1.53 billion covering the provision of 12 jack- up s and two island rigs and associated integrated drilling services . The second contract, worth $980 million, was for two jackup s and associated manpower and equipment . These contracts bring the total value of awards from ADNOC Offshore to ADNOC Drilling in 2022 to $5.95 billion . Two other awards had been given out in August worth $3.43 billion to hire eight jackup s. Over 80% of the award value will flow back into the UAE’s economy under ADNOC’s In-Country Value Program. ADNOC aims to expand production capacity to 5 million bbl/day by 2030 and enable gas self-sufficiency for the UAE . ADNOC Drilling’s rig fl eet includes 28 jackups. The company has been awarded contracts from ADNOC Off- shore this year covering 20 jackups and two island rigs. New discovery for APA at Baja-1 offshore Suriname APA Corp has announced an oil dis- covery offshore Suriname at Baja-1 in Block 53 . Baja-1 was drilled to a depth of 5,290 m (17,356 f t) and encountered 34 m (112 f t) of net oil pay in a single inter- val within the Campanian. Evaluation of open-hole well logs, cores and reservoir fluids is ongoing. APA recently received regulatory approval regarding an amendment to the Block 53 Production Sharing Contract (PSC), which provides options to extend the exploration period of the PSC by up to four years . APA is operator and holds a 45% work- ing interest in Block 53, with Petronas holding a 30% working interest and CEPSA holding a 25% working interest. Baja-1 was drilled using the Noble Gerry de Souza in water depths of approxi- mately 1,140 m (3,740 f t). The drillship will mobilize to Block 58 following the completion of current operations, where it will drill the Awari exploration pros- pect, approximately 27 k m north of the Maka Central discovery. APA also announced that operations have concluded on the Dikkop explora- tion well in Block 58. The well encoun- tered water-bearing sandstones in the targeted interval and has been plugged and abandoned. TotalEnergies is the operator with a 50% working interest, and APA holds the remaining 50% working interest. The Maersk Valiant drillship will be moving to the Sapakara field to drill a second appraisal well at Sapakara South, where the joint venture conducted a successful flow test late last year. 2023 with a dayrate of $120,000 . ■ A one-well option exercised by DNO in the UK North Sea for the VALARIS 247, a heavy-duty, ultra-harsh-environment jackup . The one-well option has an esti- mated duration of 45 days and will be in direct continuation of the existing firm program. KCA Deutag announces $112 million in contracts KCA Deutag has secured contract awards, extensions and options worth around $112 million. The contracts are primarily related to land rigs in Saudi Arabia and Oman and were announced as work continued to close out the acquisi- tion of Saipem’s land rig business . In Saudi Arabia, the company has been awarded multiple one-year extensions worth a total of $35 million. In Oman, a one-year contract with a new client, which includes a further one-year option, in addition to contract extensions and options with existing clients on multiple rigs, have delivered an additional $70.5 million. In Europe, KCA Deutag has been award- ed almost $6 million in new contracts in Germany and the Netherlands. Blackford Dolphin awarded new work offshore Nigeria Dolphin Drilling has secured a 12-month contract with Nigeria-based General Hydrocarbons Ltd (GHL) at a value of $96 million. The contract for the Blackford Dolphin rig will commence during Q4 of this year. The rig recently completed work in the Gulf of Mexico for PEMEX and will mobilize to Las Palmas for its spe- cial periodic survey prior to commencing operations in Nigeria. “We are proud to announce the final award of the Blackford Dolphin contract, proving our position in the niche moored semisubmersible market,” said Bjørnar Iversen, C EO at Dolphin Drilling . The com- pany owns a fleet of three fourth- and fifth-generation drilling rigs: the Borgland Dolphin, Blackford Dolphin and Bideford Dolphin. DRILLING CONTRACTOR • NOVEMBER/DECEMBER 2022 7 DEPARTMENTS • DRILLING & COMPLETION TECH DIGEST OPC Foundation, FieldComm join forces on interoperability of instrumentation devices The OPC Foundation and the FieldComm Group have announced a collaboration to drive multi-vendor interoperability of instrumentation devices based on OPC UA and the extensions for the field level, named OPC UA FX (Field eXchange). This development will incorporate preliminary work by both organizations. This will ensure that the market will have only one single standard. The aim is to provide an interoperable interface between PLC/ DCS and instrumentation devices, such as transmitters, instruments and actuators. The solution will support different indus- tries, including oil and gas . To begin this work, a new OPC UA Instrumentation Working Group is being hosted by the OPC Foundation, under the leadership of the Field Level Communications Initiative. Participation in the working group is open to members of the OPC Foundation, as well as corporate entity members of the FieldComm Group. Many well-known manufacturers in the process and factory automation industries are represented . In order to achieve inter-vendor interop- erability of instrumentation devices, the working group will add to the UAFX base specifications the definition of interfaces and behaviors which are typical for instru- mentation devices, including: ■ Commonly used interfaces and data types for the industries mentioned above including functional safety; ■ Diagnostic information specific to instrumentation devices; ■ Operation modes of instrumentation devices; and ■ State machines and timing models for instrumentation-specific functionality, where appropriate. The new instrumentation device profile specification will use PubSub and can be combined with different underlying com- munication protocols (e.g. UDP/IP) and physical layers (e.g. Ethernet-APL) to sup- port all relevant use cases in discrete and process manufacturing, including safety instrumentation based on OPC UA Safety and deterministic data exchange based on Ethernet Time-Sensitive Networking , where appropriate. 8 An operator in the Middle East recently used a Neuro autonomous solution from Schlumberger to autonomously drill the curve and lateral sections of a well while achieving a 13% increase in rate of penetration. Curve and lateral sections of Middle East well drilled autonomously using Schlumberger’s Neuro solution Schlumberger recently launched its Neuro autonomous solutions , which use advanced cloud-based software and con- nected intelligent systems to create a continuous feedback loop between sur- face and downhole. This increases the efficiency and consistency of E&P opera- tions while reducing human interven- tion and footprint . The solutions are seen as a step to achieve fully autonomous operations . The first Neuro solution being intro- duced delivers steering autonomy for directional drilling. The solution uses artificial intelligence with surface and downhole automation workflows to self-determine steering sequences and deliver the well trajectory on plan. As the well is drilled, a real-time continu- ous feedback loop between an intelligent downhole system and a surface advisory system automates downlinks, reducing control loop time. The instantaneous cor- relation between downhole and surface actions in accordance with the well plan significantly reduces risk, refines preci- sion and increases efficiency —reducing associated drilling emissions. Neuro autonomous solutions for direc- tional drilling have been deployed across North America, South America, Middle East and East Asia. The solution has been deployed on more than 50 rigs across 10 countries and executed on 131 customer wells, drilling 612,000 ft. In the Middle East, an operator recent- ly used the solution to autonomously drill a well from 22° to 90° inclination with a curve section measuring 2,500 ft and a 5,400-ft lateral section. Both sections were performed using an autonomous- capable rotary steerable system that con- tributed to the balance between surface and downhole autonomy enabling the operator to reduce downlinks by 33%, compared with offset wells drilled in manual mode, while achieving a 13% increase in rate of penetration . Separately, Schlumberger also launched its Digital Platform Partner Program, which will allow indepen- dent software vendors (ISV) to lever- age the openness and extensibility of Schlumberger’s digital platform to build new applications and software and offer them to the market . At launch, nine ISVs are offering soft- ware solutions to Schlumberger custom- ers, and the platform has been designed with an open framework to quickly onboard new partners. The solutions are built and deployed through the DELFI digital E&P platform and integrate with industry-standard data platforms. This enables enhanced interoperability across workflows and organizations. NOVEMBER/DECEMBER 2022 • DRILLING CONTRACTOR ENVIRONMENT, SOCIAL AND GOVERNANCE • DEPARTMENTS North Sea emissions down nearly 22% since 2018 US Energy Secretary Jennifer Granholm announced the DOE’s Enhanced Geo- thermal Shot at a launch event in Houston on 8 September. This is the fourth Shot in the DOE’s Energy Earthshots Initiative . US DOE aims to cut geothermal costs by 90% by 2035, make enhanced geothermal systems widespread The US Department of Energy (DOE) recently announced a goal to make enhanced geothermal systems (EGS) a widespread renewable energy option in the US, with aims to cut its cost by 90% to $45 per megawatt hour by 2035. It’s estimated that the US has more than 5 terawatts of heat resources – enough to meet the world’s electricity needs . Geothermal energy currently generates about 3.7 GW of electricity in the US. Recent DOE investments include $44 million to help spur EGS innova- tions for DOE’s Frontier Observatory for Geothermal Energy Research field labo- ratory and up to $165 million to trans- fer best practices from oil and gas to advance both EGS and conventional geo- thermal. The Bipartisan Infrastructure Law also supports work to advance EGS with $84 million in funding to support four pilot EGS demonstration projects that will provide valuable information about EGS in different geographies and geologies. The DOE also recognizes that the geo- thermal industry and workforce are sim- ilar to oil and gas, presenting an opportu- nity to transition skilled workers as well as existing equipment. The Enhanced Geothermal Shot is the fourth Shot in the Energy Earthshots Initiative , which support the US goal of achieving net-zero carbon emissions by 2050. Previously announced Energy Earthshots focus on hydrogen, carbon negative solutions and long-term energy storage. Equinor report calls for more burden sharing in sustainability To address long-term sustainability challenges , the world needs to establish more trust, cooperation and burden shar- ing , according to Equinor’s 2022 Energy Perspectives report . It describes two scenarios that high- light the challenges the world needs to overcome in order move from the slow, incremental changes that characterize the energy transition today (Walls sce- nario), to the radical changes needed to align with the 1.5°C ambition of the Paris Agreement (Bridges scenario). In the Walls scenario, gas demand will continue to grow before peaking in 2041. By 2050, it will be approximately 10% higher than today’s level. Demand for fossil fuels will peak in 2026, followed by a “gentle” downward trajectory. In the Bridges scenario, gas demand will peak in 2025 and fall to around a quarter of today’s level by 2050. Demand for fossil fuels will also decline rapidly after 2025. By 2050, all remaining fossil fuel use will be either fully abated or compensated by carbon removal. The latest Emissions Monitoring Report from the North Sea Transition Authority (NSTA) shows that the North Sea oil and gas industry cut its greenhouse gas emis- sions by an estimated 14.6% to 14.3 million tonnes of CO 2 e last year . This adds up to an overall reduction of 21.5% since 2018. The large number of platform mainte- nance shutdowns, timed to coincide with temporary pipeline closures, contributed to a substantial fall in production and associated emissions last year. Encouragingly, NSTA projections indi- cate the sector is on track to meet interim emissions reduction targets of 10% by 2025 and 25% by 2027 – which were agreed in the North Sea Transition Deal between the sector and UK government in 2021. However, bold measures, such as upgrading platforms to run on alterna- tive fuels instead of gas or diesel, will be needed to hit the 2030 goal of halving emissions , according to the NSTA. In 2021, the NSTA started requiring licensees to implement emissions reduc- tion plans for new and existing projects and introduced guidance to reduce flaring and venting. Chevron, MOECO to explore geothermal in Japan Chevron New Energies International and Mitsui Oil Exploration Co (MOECO) announced a collaboration agreement to explore the technical and commercial feasibility of advanced geothermal power generation in Japan. The collaboration will study geothermal resource potential across Japan and evaluate the effective- ness of advanced closed loop (ACL) tech- nology for a pilot project . The companies may also assess potential collaboration for advanced geothermal technology opportu- nities using ACL globally. Unlike conventional geothermal proj- ects, which use traditional steam turbines requiring high temperatures often found in concentrated locations limited by geo- logical characteristics, ACL can potentially enable access to geothermal resources at a wider range of temperatures and geolo- gies through the application of alternative technology above and below the surface. DRILLING CONTRACTOR • NOVEMBER/DECEMBER 2022 9 DEPARTMENTS • OIL & GAS MARKETS Report: American LNG can support Europe’s long-term energy security Sultan Ahmed Al Jaber, Group CEO of ADNOC, urged governments not to discard the old energy system before a new one is built. ADNOC Group CEO Al Jaber: All progress starts and ends with energy security Energy security is essential for social, economic and climate progress, and the responsibility of the energy industry in main- taining energy security has never been clearer, according to Sultan Ahmed Al Jaber, UAE Minister of Industry and Advanced Technology and Managing Director and Group CEO of Abu Dhabi National Oil Company (ADNOC). Speaking at the Energy Intelligence Forum in London in early October, he said market sentiment does not reflect the real under- lying fundamentals, tight spare capacity and long-term demand growth. Therefore, policies aimed at pulling the plug on the cur- rent energy system, before we have built the new one, are mis- guided. He added that, for economic progress to be maintained, substantial investment is required in hydrocarbons, the energy source the world will rely on well into the future. “We have seen that all progress starts and ends with energy security. And, as the world’s energy leaders, our responsibility in maintaining that energy security has never been more evident,” he said. “Yes, we must all commit to mitigating the impact of global energy supplies, but let’s keep our focus on capturing car- bon, not canceling production. ” Dr Al Jaber went on to explain that partnership with the energy sector is critical to the energy transition as it represents the most complex and capital-intensive project in human history . No one has more experience in delivering these kinds of projects than the energy industry, he added. New analysis from API and the International Association of Oil and Gas Producers highlight s the potential for US LNG to strengthen Europe ’s energy security. The study shows that abundant and affordable natural gas will make it possible to substitute Russian imports before 2030 . Findings include: ■ LNG will meet approximately 50% of Europe’s natural gas demand through 2030. After 2030, LNG will meet an even greater share, reaching about 75% of demand by 2040. ■ Growth in European LNG demand will be more than double the 50 billion cu m/day specified in the March agreement between the US and the EU. While US LNG is already flowing to Europe at record levels, significantly more will be required to fully rebalance European gas markets. ■ To meet shared energy security commitments , the US will need to expand its LNG export capacity and the EU will need to expand its import capacity over the next several years. ■ Long-term LNG purchases and infrastructure contracts are crucial to ensuring a stable supply of energy and should be supported by an appropriate European legal framework. DNV outlook report: Europe likely to double down on renewables amid energy crisis The rising cost of energy is reinforcing the difference in decarbonization speed between Europe and the rest of the world, according to DNV’s new Energy Transition Outlook . Europe will double down on renewables and energy efficiency to increase its energy independence. Additionally, Europe’s gas consumption will fall dramatically as a result of the war in Ukraine . In lower-income countries, however, cost remains the main driver of energy policy. In those regions, high energy and food prices are reversing the coal-to-gas switch and putting a dampener on decarbonization investments. For example, the share of gas in India’s energy mix will fall from 11% to 7% in the next five years, while the share of coal will increase. However, the impact of the current crisis on the overall energy transition is outweighed by the plunging costs of renewables and increased carbon costs in the longer term. The short-term increase of coal consumption will not prevent it from rapidly exiting the energy mix, with its peak in 2014. OEUK survey of students shows 54% would consider starting career in energy industry In a survey of 1,000 secondary school pupils (ages 11-18) and 1,000 university stu- dents in the UK, more than half (54%) said they are open to working in the energy sector . The study, commissioned by Offshore Energies UK (OEUK), aimed to discover what young people today want out of their future careers. It found that 29% are seek- ing a job that has a positive impact on 10 society and 21% want to positively impact the environment. When looking at how they view the oil and gas sector, the most popular opinion (31%) was that the industry is better than it used to be in terms of addressing climate issues. Over a fifth (22%) acknowledged that we still need oil and gas and believed the industry has a role to play in develop- ing lower-carbon technologies. The survey also showed that when con- sidering next steps, the events of the last few years have influenced their career interests . Over a quarter (28%) said the cost-of-living crisis has caused them to rethink their future careers. A total of 15% said the pandemic has caused them to change course, and 13% said the climate crisis has had an impact on what they want to do with their professional lives. NOVEMBER/DECEMBER 2022 • DRILLING CONTRACTOR DRILLING OUTLOOK “Gulf of Mexico Glow” by artist Crystal Wreden Buoyed by strong oil prices and rig demand, offshore drilling to see continued comeback in 2023 Middle East, South America and US GOM are all among regions expected to see tight rig supply and rising dayrates next year BY STEPHEN WHITFIELD, ASSOCIATE EDITOR There is growing optimism around the global offshore drilling market and its prospects for 2023, with dayrates and uti- lization both expected to increase and sev- eral key markets either already rebound- ing or set to rebound. As of September, the global contracted fleet consisted of 378 jackups, 68 semisub- mersibles and 73 drillships, according to Westwood Global Energy Group. The firm is projecting modest increases for each rig type in 2023, with jackups going up to 395, 12 semis to 75 and drillships to 78. Marketed fleet utilization this year, as of September, was 87.3% for jackups, 79.6% for semisub- mersibles and 93.5% for drillships. In 2023, utilization is projected to increase to 90% for both jackups and semisubmersibles and 95% for drillships, according to Terry Childs, Head of RigLogix at Westwood. These expected activity increases will be directly tied to oil price, he added. As of 13 October, Brent crude was at $94.69/bbl, which is a high enough level to encour- age operators to increase activity, and that should continue into next year. “In most regions of the world, rig activ- ity has picked up from increased opera- tor demand,” Mr Childs said. “Obviously, increased oil prices play a factor, and as usual we’re seeing a bit of a lag time with that – oil prices go up, then utilization goes up and then, ultimately, dayrates go up. That’s what we’re seeing right now – oil prices have been strong, everything’s going up for most every rig type in every region, and that should continue in 2023.” Esgian has a similar view of the offshore market. It measured the global contracted rig fleet in 2022 as averaging 317 jackups, 50 semisubmersibles and 65 drillships. Cinnamon Edralin, Head of Rig Market Research at Esgian, is also forecasting modest increases for each rig type in 2023, with jackups averaging 350, semis at 60 and drillships at 80. This will push mar- keted utilization for jackups from 76% to 85%, semis from 60% to 80% and drillships from 82% to 90%. “It’s really nice to have conversations with drilling contractors where they’re actually enthusiastic and optimistic,” Ms Edralin said. “Not only are they get- ting to the point where they can just pay their bills, we’re now seeing that they can undertake new investment. It’s an exciting time to be in offshore drilling.” The Middle East The Middle East will be the biggest driv- er of jackup activity, with forecasts calling for 150 active rigs in 2023, compared with 120 in 2022. The bulk of this increase will come from Saudi Arabia, which is planning to double its offshore fleet to 90 jackups by the end of 2024 as part of its drive to boost production capacity by 1 million bbl/day. To that end, Saudi Aramco has awarded 30 rig contracts since March 2022, with the majority of contracts going for five years each. Ms Edralin said this push from Saudi Arabia could have a trickle-down effect on other countries in the Middle East, par- ticularly Qatar and the UAE. Both of those countries have also expressed interest in contracting additional rigs to bolster their production, but Aramco may effectively drive up dayrates to a point beyond which those countries are comfortable paying. NOVEMBER/DECEMBER 2022 • DRILLING CONTRACTOR DRILLING OUTLOOK Dayrates currently average between $70,000 and $120,000 for jackups in the Middle East, and they’re expected to range from $80,000 to $140,000 next year. While Esgian does not have country-specific dayrate breakdowns, Ms Edralin said Saudi Arabia’s dayrates are generally clos- er to the high end of that range, while Qatar and the UAE are closer to the low end. However, with Saudi Aramco con- tracting higher-spec jackups in the region at higher dayrates, other countries may soon have to offer higher dayrates in order to stay competitive. “With all these rigs going into Saudi Arabia, those dayrates are going to be higher than the dayrates you’re seeing in Qatar and the UAE, and that’s going to have a big impact on what they might do,” Ms Edralin said. “It’s putting those other countries in a sensitive area where they’re going to have to decide if they’re willing to pay higher dayrates, or are they going to stick with the fleet that they have?” Asia Pacific in Malaysia, followed by Indonesia and Vietnam. Some of the increase in activity in this region is actually also being driven by the uptick in the Middle East, Mr Childs noted. “Some of these other operators (in the Asia Pacific) are looking at all those jackups being absorbed in the Middle East, and they’re thinking, is there anything left for us? It’s prompted these companies do some things maybe a bit earlier than they intended to,” he said. Southeast Asia only has four active drill- ships, and one unit is scheduled to leave for India shortly. Dayrates for new drill- ship fixtures had been around $200,000, but Westwood said two recent fixtures were both over $375,000. One deal saw a rate of around $408,000, but that included managed pressure drilling (MPD) services, which can add $50,000 or more to a con- tract. For upcoming fixtures, dayrates will likely improve, but there are currently only 10 drilling programs planned that desig- nate a drillship. There are 12 semisubmersibles located in the APAC region – seven in Southeast Asia and five in Australia. Four of the seven units in Southeast Asia are work- ing, but only two of the four are firmly contracted beyond 2022 , and three of the four have options that could extend their available dates further into next year. Dayrates for semis in this region remain below $200,000, although that will change going forward. Mr Childs noted that Southeast Asia has nine drill- ing programs in the rig inquiry stage, but only two of the nine are scheduled to last more than 100 days. These numbers likely ensure no semisubmersible supply growth in 2023, and some units might even leave the region next year. All four of the semisubmersibles currently work- ing in Australia are contracted into 2024. Leading-edge dayrates have improved from around $265,000 early this year to the $325,000-$379,000 range for more recent fixtures. According to Westwood, the rig market in the Asia Pacific (APAC) region, which comprises Southeast Asia and Australia, got much busier in 2022, and 2023 could be more of the same, primarily due to a strong jackup market. Marketed utilization for jackups has already improved from 78% at the begin- ning of the year to 90% currently, and it could increase to 95% in 2023. However, this number can be a bit misleading, Mr Childs said. Of the 45 marketed jackups in Southeast Asia that are contracted or com- mitted, six are destined for Saudi Arabia next year as part of Saudi Aramco’s con- tracting frenzy. An additional four new- builds are also slated to move there. By the middle of 2023, it’s projected that 15 jackups will have moved out of Southeast Asia for contracts with Saudi Aramco. Dayrates for jackups in the APAC region ranged between $67,000 and $90,000 dur- ing the first half of this year, but more recent fixtures have been as high as $120,000, and that could increase further in 2023 due to the amount of potential activity. The region currently has more than 40 pro- grams in some stage of rig inquiry, includ- ing 13 in Australia. In Southeast Asia, the largest number of jackup requirements are DRILLING CONTRACTOR • NOVEMBER/DECEMBER 2022 13 DRILLING OUTLOOK Top: Global offshore rig demand is ex- pected to increase from 453 in Novem- ber 2022 to 539 by December 2023, and utilization will increase from 72% to 83% in the same time frame, according to Esgian Analytics. Bottom: New jackup contracts this year have averaged 1.7 years in length – up from 1.3 years in 2021 – with several monthly averages approaching or exceeding two years. Much of this increase has been driven by the Middle East, particularly Saudi Arabia, where Saudi Aramco has awarded several five-year contracts as part of its move to increase production capacity by 1 million bbl/day. South America South America is another potential area of interest going into next year. The rig count in 2022 was not particularly high – six semisubmersibles and 12 drillships – but a number of open tenders could signifi- cantly boost those figures. For example, in September TotalEnergies announced FID on the shallow-water Fenix development offshore Argentina. Shell and Ecopetrol announced a discovery at Gorgon-2 off- shore Colombia in August. One of the main drivers in South America, however, remains Guyana/Suriname. ExxonMobil and Hess announced seven new discoveries in the Stabroek Block offshore Guyana between January and July of this year – Fangtooth, Lau Lau, Barreleye, Lukanani, Patwa, Seabob and Kiru-Kiru. There are six drillships – four from Noble Corp and two from Stena Drilling – working for ExxonMobil offshore Guyana, with firm charters stretching into late 2025 for the Noble rigs and 2024 for the Stena rigs. Also, ExxonMobil is looking into drill- ing as many as 12 further exploration and appraisal wells at the Canje and Kaieteur blocks offshore Guyana in 2023-2024. The operator has already drilled three wells in Canje and two in Kaieteur, all of which came up empty. In Suriname, TotalEnergies and Apache announced dis- “It’s really nice to have conversations with drilling contractors where they’re actually enthusiastic and optimistic. Not only are they getting to the point where they can just pay their bills, we’re now seeing that they can undertake new investment.” - Cinnamon Edralin, Esgian 14 coveries at Krabdagu and Baja in Block 58 this year. Brazil is another key driver of South American activity. In April, Petrobras issued a tender to contract as many as eight deepwater rigs for three and four years starting in 2023, and Esgian expects Petrobras to issue more tenders next year. These tenders are expected to push dayrates upwards in the region from its current levels around the mid- to high $300,000s. Rates could exceed $400,000 next year, Ms Edralin said, adding that most of the rigs in the eight-rig Petrobras tender should remain in the mid- to high $300,000s, with one of the low-spec float- ers coming in just below $300,000. By Westwood’s count, Brazil is currently operating at 100% utilization with 25 float- ing rigs, and Mr Childs said it’s a certainty that the number will increase next year. There are currently 16 drilling programs for floating rigs where a rig inquiry or ten- der is active. Four to eight additional units could mobiliz e into the region through 2023. A revised fiscal regime has been a key factor in driving operator interest to Brazil, he noted. This includes a gradual shift away from its bid round structure to the Open Acreage program, where a bid round is triggered by a company declaring inter- est in a particular sector. Contracts signed under Open Acreage are concession agreements, where the winning company holds exploration rights to a block and is only required to pay a roy- alty to the government. The previous bid- NOVEMBER/DECEMBER 2022 • DRILLING CONTRACTOR DRILLING OUTLOOK The rest of the Golden Triangle Another hub of the Golden Triangle – the US Gulf of Mexico (GOM) contin- ues to be the leader in terms of dayrate movement. Rates for drillships in the region have reached as high as $440,000 Active Rigs Drillship Utilization Semisub Utilization Total Rigs Jackup Utilization Tender Utilization 100% 90% 100 80% 70% 80 60% 50% 60 40% 40 30% 20% 20 Committed Utilization % 120 Rig Count ding regime required winning companies to sign production-sharing agreements, which adopt a split profit system where the government and the winning company agree to a share of the profits generated from a block. “With Brazil, we’re seeing the reports every so often that show more and more operators being approved to bid there, so there’s clearly an interest from outside operators,” Mr Childs said. “Also, given the amount of production there, there’s no rea- son to think that operators won’t continue to be interested. They will definitely want to operate there as long as the terms from the government stay favorable in their view.” 10% 0% 0 Jan-22 Feb-22 Mar-22 Apr-22 May-22 Jun-22 Jul-22 Utilization in the Asia Pacific region has increased across all rig types in the first half of 2022 and is expected to keep increasing in 2023, according to Westwood Global Energy Group. However, this is due in part to a drop in available supply, with several jackups moving from Southeast Asia to the Middle East. ($480,000 including MPD services), while dayrates for jackups are around $85,000. Mr Childs believes rates for both rig types will increase in 2023 – drillships could reach $500,000, while jackups are likely to see rates in the $90,000s. The increase in dayrates have been primarily driven by a limited rig sup- We serve as the supply chain coordinator for drilling contractors and oil & gas companies Your reliable source for: • Rig Mobilisation & Reactivation • Marine & Port Agency Services • Procurement Services SCAN FOR DETAILS • Rig Repair Maintenance & Marine Support • Sale & Rental of Rig Equipment • Logistics / Warehousing Services 9 Pandan Crescent, Singapore 128465 T : (65) 9819 2225 F: (65) 6778 9990 E: enquiry@kimheng.com.sg www.kimheng.com.sg DRILLING CONTRACTOR • NOVEMBER/DECEMBER 2022 15 DRILLING OUTLOOK coming back, that’s making it a little bit easier for companies to pursue deepwater.” North Sea The semisubmersible market in Norway is in a dry spell and could get worse at the beginning of 2023. However, Esgian is forecasting that utilization will increase start- ing mid-2023 and could even reach 100% by mid-2024. ply. Floating rig marketed utilization has remained at 100% throughout 2022, while the 85% marketed utilization for jackups includes just one available unit. Westwood expects those numbers to continue into next year. “Rig owners in the Gulf of Mexico have been pretty disciplined in that they haven’t brought excess equipment into the region, which has not historically always been the case. No rig owners have moved any- thing on speculation, so that full utiliza- tion has been able to be maintained,” Mr Childs said. The limited nature of the US Gulf of Mexico market is driven, in part, by the US regulatory environment, Ms Edralin said. The US Bureau of Safety and Environmental Enforcement’s (BSEE) well control rule, issued in the wake of the Macondo incident, requires rigs working in the US GOM to use BOPs outfitted with double-shear rams designed to allow drill pipe to be centered during shearing opera- tions. The costs required to comply with these regulatory standards limit the num- ber of contractors working in the region and puts upward pressure on dayrates. “Even if you have a seventh-generation drillship, it doesn’t mean you can just automatically come into the US Gulf and start working,” she said. “If an operator in the US doesn’t have a rig, they will have to either pay a rig contractor to get a rig ready to bring it in, or they will have to get in line and wait for one to become available. The 16 drilling contractors have created a very tight market.” The third hub in the Golden Triangle – West Africa – could also see some improve- ment in 2023. West Africa has 14 floating rigs under contract, but Ms Edralin said that number could increase to 20 in 2023, depending on certain FIDs being reached. For example, a joint venture between BP and Kosmos is expected to make FID on the Yakaar-Teranga development offshore Senegal and the Orca discovery offshore Mauritania by the end of the year. In the near future, Africa may also see expanded E&P activity outside the tra- ditional western zones. This year, Shell and TotalEnergies announced significant discoveries offshore Namibia at the Graff-1 exploration well and the Venus 1-X well, respectively. Shell is currently drilling its second well on Graff, while TotalEnergies is drilling its third on Venus. Ms Edralin said both operators seem “pretty keen on moving forward with them, and they’re already looking at rigs to potentially bring over there” next year, in addition to the recently contracted Deepsea Bollsta semisubmersible, which should start work around the end of 2022. The overall activity rebound seen in all three parts of the Golden Triangle bodes well for deepwater drilling moving for- ward, Ms Edralin said. “People are optimis- tic about deepwater again. They’re real- izing that oil and gas is part of the energy transition, and now that investors are The North Sea region has been in flux due to energy security concerns fueled by Russia’s invasion of Ukraine in February 2022 and the subsequent sanctions on Russian oil and gas that cut off a major supplier to European markets. Currently, the floater market in Norway is in a significant quiet spell, but Esgian expects that market to tighten consider- ably in mid- to late 2023. In fact, competi- tive utilization should increase from the 80% range in September 2022 to the high 90% range by the end of next year. There is even potential to reach 100% utiliza- tion, if all the planned long-term develop- ment drilling programs kick off between 2024 and 2026 as currently forecasted. Dayrates for contracts on rigs scheduled to work in 2023 range between $340,000 and $400,000. Prior to the Russia/Ukraine conflict, Norway and UK had been fueled by “a lot of idealism” about moving away from oil and gas projects, Ms Edralin said. Now, European governments are pivoting to a more balanced view of the energy transi- tion as it faces energy security concerns. “There’s more of an understanding that oil and gas needs to be part of the transi- tion, so that’s leading to more collaboration between renewables and offshore oil and gas,” she said. “There are some potential projects where they’re trying to decar- bonize offshore projects, either through electrification, or potentially hooking up an offshore wind turbine to the rig or a production platform, or using alternative fuels like green hydrogen. They’re real- izing that they can reduce emissions on the rig while they’re producing the fossil fuels that they need, until they get to a point where renewables can meaningfully increase power generation.” As such, emissions reduction technolo- gies will eventually become a prerequisite for rigs working in the North Sea . Esgian notes that of the 42 active rigs around the world that have at least one kind of emis- sion reduction system installed, 21 are working in the North Sea. Globally, of the 13 operators using these 42 rigs, nine are European-based operators. DC NOVEMBER/DECEMBER 2022 • DRILLING CONTRACTOR DRILLING OUTLOOK Analysts maintain optimistic outlook for onshore drilling market, but uncertainties remain Rig counts and wells drilled are expected to increase in 2023, but market still remains in flux due to supply chain, geopolitical factors BY STEPHEN WHITFIELD, ASSOCIATE EDITOR In the face of a potential global recession in the coming year, coupled with con- tinuing supply chain pressures, outlook for the global onshore drilling industry remains murky – but mostly favorable. The good news is that outlook for oil prices remains strong. Even though WTI prices have settled down from an average of $127 in March 2022 to $89 as of 14 October, it is still expected to remain in that range over the coming year, supported by strong energy demand as more countries open up post-pandemic and with Russia’s produc- tion under question due to the continuing conflict with Ukraine. Between Q3 2022 and Q3 2023, WTI will likely trade at between $75 and $110, accord- ing to John Spears, President of Spears and Associates. He expects the Henry Hub gas price to decrease from $7.50/mmBtu to $6.30/mmBtu in the same time span. “We’re assuming that there’s going to be a recession and, more importantly, we’re assuming that any economic recession is going to result in a reduction in oil demand,” Mr Spears said. “But that’s not nearly as straightforward as you might imagine because more than half of global oil consumption now comes from emerging markets. Their demand is not tied so much to economic cycles as it is to urbanization and industrialization. So, there’s a possibility that oil demand might go up anyway. If that’s the case, that could push prices higher.” The global onshore rig count is expected to average 4,070 by the end of this year, which would already represent an 18% increase from the 2021 average of 3,450, according to Westwood Global Energy Group. By the end of Westwood’s forecast period in 2026, that rig count is expected to increase by an additional 24% to 5,050 rigs. Total wells drilled are also expected to rise from 49,600 in 2022 to 60,000 in 2026. “If you’re a drilling contractor and you’re hearing about the operators and their free cash flows, that’s certainly good news. Maybe there’s some ability to add on addi- tional services,” said Luke Smith, Analyst at Westwood. North America onshore outlook Mr Spears projects US onshore rig count will average 705 in 2022 – up from 460 in 2021 – and go up to 770 next year. Wells drilled is expected to average 19,500 in 2022 and go up to 21,400 in 2023. Lower 48 onshore dry gas production could increase from 94.3 billion cu ft/day in 2022 to 97.6 billion cu ft/day in 2023. This would essen- tially bring drilling activity back to the level he originally projected the US mar- ket to reach in 2020, prior to the down- turn. However, the industry that’s emerged from the downturn is not the same as what existed before. Operators are focus- ing more on returning free cash flow to shareholders instead of chasing additional growth. Global oil demand is expected to go up from 99.4 million bbl/day in 2022 to 101.5 million bbl/day in 2023, a 2.1% increase, according to Spears and Associates. This uptick in demand should trickle down to the North American onshore drilling market, as rig counts, crude production and wells drilled are all projected to increase in 2023. 18 NOVEMBER/DECEMBER 2022 • DRILLING CONTRACTOR DRILLING OUTLOOK This focus on capital discipline will likely have a trickle-down impact on the rig market. Average asset utilization for US onshore will likely end up falling between 80-85% this year, and Mr Spears said he does not expect any significant change in 2023. For drilling contractors, their contin- ued focus on capital discipline means they are unlikely to bring newbuild rigs into the market to meet demand. “The operators and service companies have been restructuring their balance sheets so that they’re less burdened by debt. Because of that, they’re going to be less volatile, which means growth is prob- ably not going to be as high as it might have been before the last downturn,” Mr Spears said. In Q3 2022, leading-edge dayrates were approaching the low-$30,000 range , a 25% increase from Q3 2021. However, Mr Spears said he does not expect that number to increase significantly in the next year. At most, he anticipates average dayrates for US onshore to reach $32,000 in 2023 – primarily because drilling activity is not expected to grow at the same rate as it did in 2022. “If things flatten out on the activ- ity side like we think they’re going to do, I don’t see how we get a lot of movement on dayrates. The upward movement in dayrates has been all about rising asset utilization, but now most of the high-spec rigs are under contract.” As usual, the Permian Basin remains the primary driver in US onshore activity, and that is expected to continue into 2023. Mr Spears estimated a 10% increase in the basin’s rig count over the course of the year, from 342 in 2022 to 376 in 2023, while wells drilled will also see a 10% increase, from 8,150 in 2022 to 9,000 in 2023. Permian activity could see a boost due to the planned addition of five natural gas pipeline projects. If completed as planned, they will increase the Permian’s takeaway capacity by a total 4.18 billion cu ft/day over the next two years, according to the US Energy Information Administration (EIA). Three of these pipeline projects – Kinder Morgan’s Gulf Coast Express Pipeline Expansion and Permian Highway Pipeline, and Whistler Pipeline Capacity Expansion led by Whitewater and the MPLX joint venture, are expected to come on stream in 2023. Top: US onshore crude oil production is expected to rise from 11.9 million bbl/day in 2022 to 12.75 million bbl/day in 2023, a 7% increase, according to Spears and As- sociates. Middle: Spears and Associates projects a 3.5% increase in US natural gas production from 2022 to 2023, aided by the addition of several new pipeline proj- ects under way. Bottom: US onshore rig count increased by 53% from 2021 to 2022, as activity rebounded from the post-COVID oil price downturn. Spears and Associ- ates anticipates a more modest 9.2% increase in rig count for 202 3 because most of the high-spec rigs are already under contract. This means there will also be less upward movement in dayrates next year. Any delays in the construction or per- mitting for these pipelines could negative- ly impact the forecasted drilling activity growth, Mr Spears said. “It takes a long time to get a pipeline built, even in the state of Texas, so that’s a bit of a wildcard: How soon can we get to full utilization on the pipeline side out of the Permian?” DRILLING CONTRACTOR • NOVEMBER/DECEMBER 2022 19 DRILLING OUTLOOK 10,000 Capable Fleet ( S upply) upply ) 70,000 Rigs Operational (Demand Demand)) Wells Drilled Rig Utilization 100% 90% 60,000 9,000 80% 8,000 50,000 Number of Wells Number of Rigs 7,000 6,000 5,000 4,000 3,000 70% 60% 40,000 50% 30,000 40% 30% 20,000 2,000 20% 10,000 1,000 10% 0 0% 0 Left: The outlook for global onshore rig demand is improving with elevated commodity prices spurring increased drilling activ- ity in many regions . Westwood Global Energy Group estimates that there will be 5,050 operational land rigs globally by the end of 2026, representing an increase of 24% compared with 4,070 rigs this year. Right: Westwood projects the number of onshore wells drilled to increase year-on-year, reaching 60,000 in 2026, compared with 49,600 in 2022. By 2024, the number of wells drilled is expected to exceed 2019 levels. Besides the Permian, the industry can also look to the Haynesville Shale for some additional drilling activity next year. Mr Spears projects a 15% increase in rig count there, from 66 rigs in 2022 to 76 in 2023, and a similar increase in wells drilled, from 700 in 2022 to 800 in 2023. Like with the Permian Basin, growth in Haynesville depends heavily on takeaway capacity. The basin has already seen an increase of 1.3 billion cu ft/day in take- away capacity over the past two years, according to the EIA. This can be attributed in part to three pipeline projects that were completed in 2021: The Enterprise Product Partners’ Gillis Lateral pipeline and its associated expansion of the Acadian Haynesville pipeline, along with Enbridge Midcoast Energy’s CJ Express pipeline. These pipe- lines have allowed producers to reach industrial demand centers and LNG ter- minals on the Gulf Coast, making the Haynesville a more attractive drilling loca- tion. “The Haynesville is all about gas, and the fact that gas prices this year are going to average $8 means it makes sense to drill gas wells there, so the region can accept more rigs. It’s well positioned with regards to access to pipelines, and as a supply basin to both export markets for LNG as well as domestic industry,” Mr Spears said. 20 While pipelines and LNG terminals are helping to spur growth in some of the big shale plays in the US, the lack of this mid- stream infrastructure is hindering onshore drilling growth in Canada. Mr Spears said he expects just a 2% growth in Canada’s onshore rig count next year, from 178 rigs in 2022 to 182 in 2023. The country has hit a bottleneck, he noted, where it cannot export enough oil and gas to justify an increase in production because of issues with approving new pipelines into the US, along with the high cost of oil sands development and a lack of LNG terminals. The country’s first two LNG terminals, the Shell-led LNG Canada project and the McDermott-led Woodfibre project, are not expected to come on stream until 2025 and 2027, respectively. “The issue for Canada is that, on the land side, their big market for oil and gas exports has been the US. With US produc- tion growing for both oil and gas, plus the lack of LNG terminals Canada has in place, it’s tough. They’re not going to have an LNG terminal up and running for a while. It’s going to be that way for another two or three years.” Global onshore outlook Outside of North America, China and the MENA (Middle East and North Africa) regions are expected to be among the key drivers of onshore rig activity in the near term. In China, NOCs that operate the coun- try’s largest oil fields are aiming to increase both oil and gas production, leading to increased activity in the country’s shale oil deposits. In July, Sinopec announced a major oil discovery in the Subei Basin, and PetroChina sanctioned a development plan for shale gas extraction at the Yang 101 Block in the Sichuan Basin. Over the next three to four years, Westwood fore- casts these two projects will help drive onshore rig count from 1,210 in 2022 to 1,440 in 2026, and the onshore wells drilled over that time period should jump from 14,200 in 2022 to 16,120 in 2026. In the Middle East, Westwood forecasts onshore rig count to increase from 580 in 2022 to 730 in 2026, while onshore wells drilled are forecast to go up from 3,310 in 2022 to 3,900 in 2026. Saudi Arabia and the UAE will be the main drivers of activity growth, with their NOCs announc- ing ambitions for increasing production capacities by 2030. “When you look at the Middle East and China, the high oil prices we’ve seen this year certainly helped solidify their long- term national strategies,” said Ben Wilby, Senior Analyst at Westwood Global Energy Group. “Saudi Arabia wants to get to 13 million barrels, the UAE wants to get to 5 NOVEMBER/DECEMBER 2022 • DRILLING CONTRACTOR DRILLING OUTLOOK million barrels, and China wants to reduce its imports.” Argentina is also expected to be a bright spot in the onshore market, in anticipation of the launch of the country’s new pipeline in the Vaca Muerta in 2023. Rig count there has already increased from 38 in 2021 to 87 in 2022, and Westwood expects that number to hit 113 by 2026. Number of wells drilled could reach 1,200 by 2026, Mr Wilby said, adding that these projections are “bearish” and could go higher if the pipeline launches on schedule. Russia, bogged down by its invasion of Ukraine and geopolitical pressures, has already seen a notable drop in drilling activity this year. The number of wells drilled has dropped by almost 28% in 2022 compared with 2021. This decline is expected to continue into 2023. US and Western Europe’s sanctions on Russian oil and gas have certainly contributed to this decline, as have the departure of several operators and major service companies, all announced this year. BP cut ties with its 19.75% shares in Rosneft, while Equinor announced it will exit its Russian joint ventures, including the North Komsomolskoye development project in West Siberia and 12 E&P licenses in East Siberia. Shell also ended its involvement in the Nord Stream 2 pipeline and dropped its 50% shares in the Gydan and Salym develop- ment projects. Schlumberger, Halliburton and Baker Hughes all announced plans to suspend new investments in Russia following the invasion. On the drilling contractor side, KCA Deutag has suspend- ed new investments and is evaluating options on its 21 rigs located in Russia. In the EU, which is facing something of an energy crisis due to its reliance on Russian gas, countries are now scram- bling to find new sources of energy. In the near term, this is unlikely to lead to a significant increase in rig count. Mr Wilby forecasts Western Europe will only have six onshore rigs in operation next year, the same as last year. That could change in the longer term, with the UK government’s recent decision to end its moratorium on hydraulic fracturing, as well as news that Shell may have discovered major shale reserves in Block 2 and Block 4 in the southern part of Albania. However, it is more likely that Europe will boost its gas imports through pipe- lines from Africa. In July, the Energy Ministers of Algeria, Niger and Nigeria signed a memorandum of understand- ing to set up a task force for building the Trans-Saharan Gas Pipeline, which would deliver natural gas from Nigeria to Spain. “There’s certainly an appetite we haven’t seen before, and that’s because Western Europe is just desperate for natural gas,” Mr Wilby said. “However, the reaction we have seen from the region is not one of increasing domestic drilling activity. Instead, they are seeking alternative sup- ply outside of Russia. There is some poten- tial for some projects in Western Europe, but whether that will translate into any- thing, it is hard to say.” DC DRILLING CONTRACTOR • NOVEMBER/DECEMBER 2022 21 DRILLING OUTLOOK Oil and gas projects draw renewed interest from investors amid energy supply shortfall Companies that can diversify, embrace transparency in sustainability and continue focus on capital discipline likely to be favored BY STEPHEN WHITFIELD, ASSOCIATE EDITOR Geopolitical events of the past year, and the resulting supply shortfall that has gripped much of the Western world, have placed energy security back in the fore- front for a number of countries. The inves- tor community has taken notice. While the “energy transition” continues – with governments around the world imple- menting policies that aim to replace fossil fuels with renewable energy – the process remains gradual. The supply shortfall, on the other hand, is an immediate concern that could have long-term global impact. Investors have come to realize what operators and drill- ers have known all along: Oil and gas will continue to play a major role in the global energy mix for years to come. “We are not at a point where renewables can completely fuel the needs of the world. It’s a long way to go,” said Seenu Akunuri, Energy, Utilities and Resources Deals Leader at PricewaterhouseCoopers (PwC). “Even though certain investors might say they’re not going to focus on fossil fuels and will focus on renewables going for- ward, 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.” Still, the next few decades bring with them a ton of uncertainty. Just how big of a role will oil and gas play in the energy mix? What will companies need to do to draw interest from an investment com- munity that, despite its recognition of the importance of oil and gas, is still under public pressure to move away from sup- porting the industry? For this story, DC spoke with analysts to gauge what the transition to net-zero could mean in the coming years. Embracing sustainability Pat Jelinek, Americas Oil and Gas Leader, US West Energy and Resources Market Segment Leader at Ernst & Young (EY), noted that the exact role of oil and gas in a low-carbon economy is uncertain. EY outlined four scenarios covering the range of possible scenarios for the energy transition, from a very gradual move away from hydrocarbons to the rapid adoption of renewables: ■ Meet Me in Paris: Alternative energy quickly becomes cheap enough to displace existing energy infrastructure. In this sce- nario, peak oil has already happened in 2022, and demand will fall steadily after that. However, EY says this scenario is unlikely, as demand is still expected to increase next year. In fact, the US Energy Information Administration is forecast- ing global consumption of petroleum and liquid fuels to increase by 2 million bbl/ day in 2023. ■ Slow Peak: Peak oil does not happen until 2047, thanks to developing coun- tries’ demand for petrochemicals, energy- intense industrial usage and aviation. ■ Critical Gas: Oil demand peaks and trails off in 2037 as consumers migrate to elec- tric vehicles. Capital moves toward gas- focused upstream and LNG assets. ■ The Long Goodbye: Oil demand peaks in 2040 and continues at the same level through 2050, as oil consumption from existing vehicles, consumer inertia and continued growth in aviation and petro- chemicals keep demand stable. While these scenarios describe very different outcomes, they do share a few trends. For example, natural gas, in com- bination with renewables, will help drive decarbonization. This will create a signifi- cant upside for gas as a power-generation fuel, although projections for natural gas demand vary wildly. In the “Meet Me in Paris” scenario, gas demand grows by 42 billion cu ft/day between 2022 and 2050, a rate of 0.3% per year, compared with growth rates of 285 billion cu ft/day in “Long Goodbye” and 613 billion cu ft/day in “Critical Gas.” It’s important to note that investors should see positive returns on their oil and gas projects regardless of the energy tran- sition scenario, Mr Jelinek said. This is In each of Ernst & Young’s four energy transition scenarios, the global energy market will see peak oil demand sometime in the next 25 years, although the estimated time frame ranges from 2022 all the way out to 2047. The scenarios also illustrate significantly different demand for natural gas as a power-generation fuel, with up to 613 billion cu ft/day of growth between 2022 and 2050 under the “Critical Gas” scenario and only 42 billion cu ft/day of growth under “Meet Me in Paris.” EY has said the “Meet Me in Paris” scenario is unlikely, however, with oil and gas demand both expected to increase next year. 22 NOVEMBER/DECEMBER 2022 • DRILLING CONTRACTOR DRILLING OUTLOOK Top: Year-on-year natural gas demand growth is forecast to drop off in each of EY’s energy transition scenarios, al- though actual demand declines under only one of those scenarios (“Meet Me in Paris”) . Bottom: Regardless of the en- ergy transition scenario, EY expects oil and gas assets in every region around the world to generate positive returns for investors through 2050. Upstream reserves and liquefaction are the asset categories expected to generate higher returns on average – EY noted OPEC and Latin American upstream reserves as particular segments of interest. because, even after peak oil, there will still be demand for oil and gas. The challenge is that the returns will not always be stable and predictable, and the pressure on gov- ernments around the world to reduce fossil fuel usage introduces geopolitical risk. There are some actions that the industry can take to help investors overcome their hesitation. One is a continued focus on capital discipline and on returning cash to shareholders instead of chasing growth. This has already been ongoing since the 2020 downturn, and, if continued, could help to reassure investors. Additionally, increasing transparency around emissions data and sustainabil- ity efforts can be advantageous. In a 2022 study, EY reported that 82% of oil and gas companies published a sustainability or ESG report aligned to the GRI, SASB or TCFD frameworks in 2021, compared with just 76% in 2020. This increase in sustainability report- ing has made investors “more educated and comfortable” about the oil and gas industry’s pledges toward the low-carbon future, Mr Jelinek said, because they can see the progress being made . However, he noted that companies will need to improve the quality of their sustainability reports in order to maximize their value. In particu- lar, EY noted in its report that only 26% of oil and gas companies include third-party assurance on ESG metrics in their sustain- ability reports. There’s also still a lack of reporting on Scope 3 emissions. EY pointed out that oil and gas companies primarily report on direct emissions from company-owned and controlled resources (Scope 1) and indirect emissions from the generation of purchased energy from a utility provider (Scope 2). Only 33% of companies in the EY survey reported Scope 3 emissions, the indirect emissions that occur in the value chain of the reporting company, including both upstream and downstream. This can be problematic because Scope 3 emission sources typically represent the majority of a company’s GHG emissions, but they are also the most difficult to mea- sure and report because they cover sources that are not directly under a company’s control. “Scope 1 and Scope 2 emissions are manageable,” Mr Jelinek said. “Now, the lift is enormous when you think about some of the complexity and the breadth of the operations needed to reduce those emissions, as well as the age of some of the assets that exist in the industry. But accurately reporting on Scope 3 emissions is getting into areas that can be outside of the control of the operators, or even the investors. You’re get- ting into areas where there aren’t technical reporting standards.” As the energy transition further pro- gresses, sustainability reporting will likely become a must-have, rather than a nice- to-have, in order for the industry to secure funding for new projects. In March 2022, the US Securities and Exchange Commission proposed rule changes that would require companies to include climate-related dis- closures in their registration statements. Under the new rules, which could go into effect for FY 2023, companies would be required to disclose information about : ■ Its governance of climate-related risks and relevant risk management processes; ■ How climate-related risks have had or are likely to have a material impact on their business in the short-term and long- term future; ■ How climate-related risks have affected or are likely to affect the company’s strat- egy, business model and outlook; and ■ The impact of climate-related events (severe weather events and other natural DRILLING CONTRACTOR • NOVEMBER/DECEMBER 2022 23 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- DRILLING CONTRACTOR • NOVEMBER/DECEMBER 2022 25 DRILLING OUTLOOK A panel of industry experts discussed challenges and opportunities around geothermal development at the 2022 IADC ART Conference on 30 August . Pictured are (from left) Joey Husband, Nabors Drilling; Cindy Taff, Sage Geosystems; Barry Smither- man, Texas Geothermal Energy Alliance; and Gustavo Perez, EarthBridge Energy. eration. Producing more power per well can reduce the number of wells that need to be drilled. “Projects with super-hot rock and higher temperatures will deliver a higher magni- tude of power per well,” Mr Husband said. “If you can deliver 30 MW per well and reduce the number of wells you need, that really reduces your development costs.” Interest in geothermal Some work may also be needed to change how the public perceives geother- mal energy, Mr Smitherman said. Because it still only makes up such a small percent- age of the global energy mix, geothermal is not often discussed as a reliable renewable resource. However, given the thin margin between available supply and demand, the additional volumes geothermal can provide would be valuable. In Texas, Mr Smitherman noted that the Electric Reliability Council of Texas (ERCOT) anticipates having around 90 GW of installed power available from all avail- able energy sources next year, while usage is estimated to peak at around 80 GW, typically in the summer months. Any dis- ruption to the power supply – like Winter Storm Uri in 2021, which took an estimated 50 GW of power off the grid – could spell 26 catastrophe for the state. The TXGEA is currently crafting an agenda for the Texas State Legislature on potential steps to pro- mote geothermal development. “We’re dealing with a fairly small mar- gin when it comes to summer heat. If 90 GW is all we’re going to have next sum- mer and if we have an interruption – like if a nuclear plant goes down or we have some weather event – then we’re going to need every megawatt we can find,” Mr Smitherman said. “If we had an additional 1,000 MW of geothermal that could’ve been dispatched during the most critical time of Winter Storm Uri, we could have ridden through some of the outages and avoided the highest price spikes that we saw. We’ll take whatever we can get, because we are likely going to be tight on several occa- sions going forward.” Geothermal can also play a role in cre- ating localized microgrids, or intercon- nected loads that act as a single control- lable entity, Ms Taff said. These microgrids can disconnect from traditional grids and operate autonomously, providing a sus- tainable power-generation option that also protects against grid failure. Sage Geosystems is working with the US Air Force and the Texas Air National Guard on a feasibility study to deploy closed- loop geothermal energy systems to supply power to Ellington Field Joint Reserve Base in Houston. The aim is to build a geo- thermal power facility at a military instal- lation in Texas in the near future. Geothermal-powered microgrids can also provide sustainable energy to under- served areas that may lack adequate transmission infrastructure. “You can go into the middle of Kenya, where there may not be the structures that can generate electricity, drill a single well and produce that 3 MW of power,” Ms Taff said. “It can service communities without having to rely on long transmission lines.” DC “There are a lot of initiatives going on to reduce the risk in geothermal, including surface work on the rig and downhole technology to handle both the BHA and the completions.” - Joey Husband, Nabors Drilling NOVEMBER/DECEMBER 2022 • DRILLING CONTRACTOR WELL CONTROL & PRESSURE CONTROL EQUIPMENT Saudi Aramco applies 4IR technologies to improve safety, well control readiness at rig site Auto Well Space Out, Wireless Remote BOP Control and upgrades to BOP hydraulic hoses all aim to facilitate well shut-in, evacuation BY MICHAEL AFFLECK, ARAMCO OVERSEAS COMPANY; RICHARD PYE, BODONG LI AND GUODONG (DAVID) ZHAN, SAUDI ARAMCO Despite the best efforts of everyone involved in drilling a well, accidents still occur, and some of them result in loss of life or permanent injury. To address this challenge, Saudi Aramco’s research teams in Aberdeen, UK, and Dhahran, Saudi Arabia, are working on three new technologies, enabled by Fourth Industrial Revolution (4IR) innovations, targeted at shutting in the well in a timely and safe manner in the event of an emerging well control situation. Current state What’s below the Earth’s surface is usually relatively unknown, even though efforts are made to predict pressure gradi- ents, design casing programs from offset wells and engineer drilling fluids to drill the well safely. Due to a variety of reasons, such as pockets of overpressured formation, an underestimation of the formation pressure or poor drilling mud management, forma- tion fluids can be unintentionally intro- duced into the wellbore. Depending on the size of the influx, they can significantly reduce the effective bottomhole pressure as they make their way up the annulus. As formation fluids (water, oil or gas) migrate up the wellbore, the incident worsens with time, and well unloading accelerates. Gas kicks can be extremely dangerous as the gas comes out of solu- tion and expands rapidly due to the reduc- ing pressure. It is always better to act early and decisively to contain a poten- tially out-of-control well. Thus, techniques and training, including regular practice drills at the rig site, currently focus almost entirely on early intervention. Drillers are required to check the well for undesirable flow and shut in using blowout preventers (BOPs). Before closing BOP valves or rams, the driller must calculate that no obstruc- tion lies across the valve being used. An obstruction will almost certainly prevent some BOP sections from securing the well. The most common tubular string obstruction is the tool joint. Pipe sections, including the connections, are typically 30- to 44-ft long, with the connections themselves approximately 12 to 18 in. in length. If necessary, an obstruction must be moved away from the valve to be actu- ated by changing the string vertical posi- tion using the main rig hoist or draw- works, or spacing out. For reliability and security, drilling standards dictate that the monitoring and control of the BOP systems must occur through wired connections, at fixed loca- tions on the drilling rig location. On a land rig, such locations typically include the rig floor, the BOP control unit (often under the rig) and at the toolpusher’s office. In the event of a developing well control incident, response time is key to how the event will turn out. A best-case scenario is one where the incident is spotted early, the well is shut in, and the influx is safely circulated out of the hole. However, all too often, situ- ations are not spotted early. Figure 1 shows how the severity of an incident increases exponentially with time. Depending on the situation and the equipment available at the rig site, it may be that the only safe method of assessing and initiating the corrective process is from a remote location. In Figure 1, this period is represented by column C. Column B represents the period of uncertainty where there is often no single correct course of action. How much more effective would it be to have a procedure for rig evacuation during this period? In blowout situations, which invariably lead to rig fires, it is the personnel closest to the rig floor at the time who are usually severely or fatally injured. Figure 2 shows the increased safety window or margin associated with the ability to remotely function a BOP system to shut in a well. Although it is possible to activate the wireless remote control unit at point A, procedures are expected to dictate that wired stations on the rig are used until the event has escalated to a severity represented by point B. During the period t1, the BOP system is capable of control by both the traditional wired panel system and by a supplementary wireless remote- controlled system. At point C, the crew is forced to evacuate the rig; with current systems, no further control is possible. During period t1, with the knowledge that monitoring and control is still pos- sible beyond evacuation, companies can instruct personnel to evacuate potentially hazardous zones earlier than may be the case today (point B vs point C). The time and/or severity escalation during periods t1 and t2 effectively becomes an increased safety window. Period t2 on the horizontal axis is defined as the time during which rig evacuation begins at point C, and the window of opportunity to shut in the well ends at point D, at which time the wireless system is unable to secure a well shut-in, “The Wireless Remote BOP control system provides the rig crew an opportunity to evacuate earlier, increasing the potential to save lives.” DRILLING CONTRACTOR • NOVEMBER/DECEMBER 2022 27 WELL CONTROL & PRESSURE CONTROL EQUIPMENT Incident SeSeSeveveverity rity A B A.A.A. Incident easily and sasasafefefelylyly shut in with cococonvnvnvenonal enonal BOP cococontntntrororol l panels atatat rig lololocacacaon. on. B.B.B. Incident sasasafefefely ly cococontntntrororolled lled either frfrfrom om locacacal lo l panels or remotely , away frfrfrom remotely, om rig lololocacacaon. on. C.C.C. ToToTo minimize crew cr ew safefefety sa ty risk Incident mu muststst be contrororolled cont lled remotely frfrfrom om rig locacacaon. lo on. C Time Figure 1: In the event of a developing well control incident, response time is key to how the event will turn out. A best-case scenario is one where the incident is spot- ted early, the well is shut in, and the influx is safely circulated out of the hole . possibly due to system elements failing through exposure to extreme heat or pres- sure (explosion). There are two key stages to a successful manual shut-in: ■ a. The well must be spaced out correctly ■ b. The chosen annular or rams must close There is one key stage to a successful remote shut-in. ■ a. The rams must close When developing new technology, the research teams sought to address these main challenges: ■ 1. Reduce risk of an attempted shut-in with incorrectly spaced-out string in hole. ■ 2. In the event of serious incident, allow (or mandate) the crew to evacuate to a safe distance from the rig site before function- ing the final BOP element. ■ 3. Ensure the equipment remains func- tional long enough to execute a remote shut-in command. Auto Well Space Out The Auto Well Space Out technology constantly monitors the position of tool joints above and below the rig floor level to calculate and inform the driller if the required BOP can be reliably functioned or if the drill string needs to be moved. In addition to being an advisory system, on some rigs, the BOP control system can be updated to prevent the operator function- ing ram close. On other rig systems the hoisting system can be set to automati- cally adjust the drill string to space out when a tool joint proximity is calculated. It works by using one or more high- definition cameras positioned at approxi- Ability y to t o shut Abilit s hut in i n welelell w l A B C t1t1t1 D t2t2t2 A.A.A. EaEaEarliest rliest potena potenall Influx ix indicat Influ ndicatororor ndicat detecon.. detecon B.B.B. Alternave earl earlyy evacuao evacua on n me o  me me.. C.C.C. FoFoForcrcrced ed evacua evacuao onn o frfrfrom om rig-site panels. D.D.D. Re Remote mote syst system em unable e to t o shut unabl s hut in i n wellllll.. we SeSeSeverity verity ofofof incide incidentntnt / me  me Figure 2: Expansion of safe time windows with the ability to remotely function a BOP system to shut in a well. 28 mately 30 ft on the rig floor to observe the well center. The camera(s) have sufficient resolution to detect changes to the drill string position and properties, including drill pipe outside diameter (OD) as it is deployed into and out of the wellbore. Image data from the camera(s) is fed to an Edge gateway processor, which com- bines the data with operator input parame- ters to calculate the relative position of the string when moving it into and out of the well. By continually tracking the positions of the larger OD sections (tool joints) and knowing the fixed positions of the BOP ram components (Figure 3), it is possible to dynamically calculate the positions of those tool joints or other larger compo- nents relative to BOP position. To ensure accuracy, it is important that the camera has visibility of at least one tool joint or major tubular OD change at all times. In another application, the plan view position of the tubular string is monitored for centralization through the rotary table, which can be significant for some BOP ram functionality and in other drilling operations. Figure 4 details the control loops asso- ciated with primary function processes. Data input comes from two sources: opera- tor and camera image. The operator input is low-frequency data of the type that changes less than once per day on average, whilst the camera provides parameters that update at a frequency greater than 1 Hz. Both data sources feed into the Edge Gateway Processor unit. After processing and storage, data is output to multiple locations. In the simplest application of the tech- nology, a traffic light human-machine interface (HMI) allows the user operat- ing the BOP panel to identify a potential problem that would prevent a reliable well seal. Such information allows the driller to proceed with immediately shutting in the BOP if “green,” or selecting an alternative BOP in the stack or moving the string to ensure there is no clash if “red.” Wireless Remote BOP Control The Wireless Remote BOP control sys- tem provides the rig crew an opportunity to evacuate earlier, increasing the potential to save lives. In blowout incidents that result in rig fires, the rig crew is often inca- NOVEMBER/DECEMBER 2022 • DRILLING CONTRACTOR WELL CONTROL & PRESSURE CONTROL EQUIPMENT pacitated from the start, which escalates the severity of the incident. After a certain point, no one is able to manually shut in the well because they are either trapped, injured or, unfortunately, dead. A wireless remote shut-in has only one function – an emergency closure of the BOPs. The system is only hooked up to one set of rams. It is to be operated as a last resort when the situation has deteriorated to a point where it is the only option left. With regulators reluctant to authorize the use of wireless communications in well control applications, the research teams sought a supplementary solution that could provide additional functionality without affecting or compromising exist- ing systems and procedures . To this end, an additional set of rams is added to the BOP stack, which will be actuated by the wireless controller. These are blind shear rams designed to sever the pipe and seal the wellbore; at this stage in the incident, space out may no longer be an option . The system hardware is described in Figure 5. An additional set of rams (item 2) is added to the stack and connected to a dedicated hydraulic power unit (HPU) (item 7), which in turn is connected to a wireless base station with local controls (item 8). The base station is situated at the rig site and contains the PLC, HMI and radio telemetry device. The base station acts as a monitoring point for the HPU and controls and as a secondary control station. It allows the ram open function, operationally required for system testing and training. Additionally, the base station hosts a UPS and a user display showing key operating parameters, such as ram close pressure (trend), ram open pressure and accumulator pressure. The BOP ram can be functioned from the base station or from a wireless por- table control station (item 9). In addition to closing the ram, the wireless station provides status feedback and strength of the radio link. The portable unit is mount- ed in a carry case suitable for shock, vibration, sand and heat exposure. The device has an HMI to provide process status with instructions and feedback on use. Valve operation is a multi-stage pro- cess to prevent accidental or unauthorized BOP activation. All switches and buttons IoIoIoT T Devic D evic evicee DrDrDrililillslslstrtrtrininingg asasasasasassesesemb mblylyly mb Tool jojojoininintt DrDrDrililill fl fll oor BlBlBlowou owoutt owou prprpreven eventeteterr even TrTrTraffi afficc light GUI affi Rams Ra ms Wellllllbo We borerere bo Edge/Fog Datatata Analycs Da Analycs/A/A/AII Figure 3: The Auto Well Space Out technology tracks the positions of the larger OD sections by using one or more high-definition cameras on the rig floor to observe the well center . have covers to reduce the chance of mis- operation. The portable station has continu- ous backup power, with the ability to be charged either from a mains power supply or an electrical point in a vehicle. The light weight of the unit allows for flexibility in its use. At rig sites where H2S may be present, it would be advantageous to not house the Operator Data Input parameters Rig data network Safety and efficiency KPI generation unit in a fixed location, which may end up being downwind of a release. Instead, the unit can be located in a truck, which can be moved to a safe location upwind to operate. Upgrades to BOP hydraulic hoses The successful operation of the remote shutdown system (or the existing BOP Camera Input parameters PROCESSOR Data Logger Traffic light BOP “clash” interface Rig Control network or direct link to equipment control: Drawworks, BOP Control Panel Operator takes Action Drill String Movement Automatic Action Well Control Incident Figure 4: Data flow and control loop of the Auto Well Space Out technology. DRILLING CONTRACTOR • NOVEMBER/DECEMBER 2022 29 WELL CONTROL & PRESSURE CONTROL EQUIPMENT Figure 5: The system hardware of the Wireless Remote BOP Control System. operation) depends on having sufficient hydraulic pressure at the time it’s needed. It was concluded after an incident inves- tigation from a blowout fire in 2018 in Oklahoma that the hydraulic hoses link- ing the accumulator unit to the BOPs had failed due to high temperatures before the BOPs were attempted to be closed. In attempting to function the BOPs, the tool- pusher and companyman had put them- selves in a dangerous situation for what was, ultimately, a futile endeavor. Referring back to Figure 2, the point D at which the system is no longer operable in a rig fire due to failure of equipment can be just a few minutes. In order for this system to work as intended in a burning rig scenario and to buy the crew as much time as possible to shut in the well from a remote location, possible weak links need to be eliminated. Prompted by the findings of the report, the research team looked at the existing specifications for the hoses (API 16D) and found them to require a survival time of 5 minutes at a temperature of 704°C. This spec was considered to be too conservative given that a hydrocarbon fire can reach 1100°C very quickly. The location of the hoses and likely fuel source during a well Figure 6: Base control station and display of the Wireless Remote BOP Control Sys- tem. The base station is situated at the rig site. 30 blowout means that a hose needs to be able to withstand the higher temperature and, if possible, for longer than 5 minute s. Evidence from independent third-party testing and from the incident report sug- gested that the current hose configuration would fail at the 5-minute mark or earlier in a hydrocarbon fire. At the current lower API specification temperature of 704°C, the hose easily exceeded the requirements . The company tested a commercially available hose design from a global manu- facturer to establish the benchmark per- formance at the two temperatures and a number of new designs incorporating a silica-based material. The new material was again commercially available and is currently used for protecting pipework from extreme fire and heat. Testing was done under API 16D quali- fication conditions. In total, four new configurations were tested, and the best exceeded 15 minutes before failure. This tripled the requirements of the specifica- tion at 704°C at the new elevated tem- perature of 1100°C, and this should provide sufficient time for the rig crew to get to a remote wireless box and shut in the well. The research team also believes this time can be pushed out with further design tweaks to the hoses. In conclusion Ensuring a well can be shut in is of para- mount importance to protect the rig and its crew. The three technology advances pre- sented in this article improve the chances of a successful shut-in by tackling differ- ent aspects of the problem. The Auto Well Space-Out removes guesswork and relieves pressure from the driller in stressful situations. Additional functionality can also apply safety fea- tures designed to prevent accidental clo- sure of the wrong valve by tying into the rig system. The Remote Wireless BOP Controller and the upgrades to the hydraulic hoses buy the crew extra time and allow them to leave the rig at an earlier juncture. Removing them from the rig will reduce the chances of serious injury whilst the ability to secure the well remains. Although currently applied to land drill- ing , these technologies can be easily trans- ferred to the offshore environment. DC NOVEMBER/DECEMBER 2022 • DRILLING CONTRACTOR NOV RIG CENSUS 2022 NOV rig census shows a welcome recovery period, but challenges loom ahead Active US rig count up by 40% since last year, while Middle East continues to drive jackup demand and ultra-deepwater segment is tight BY TARJEI “TJ” MYKLEBUST, KARL APPLETON AND KEVIN SCHERM, NOV Rig counts, dayrates and operator earnings paint an even healthier picture this census than last. Cold-stacked rigs have been reactivated, and some stranded rigs have found homes. From the start of the year to census time, US land saw dayrates increase by 30% in some regions, as well as longer terms. Offshore, for the first time since 2014, new contract rate averages are better than the old ones when the contracts roll off. Due to elevated oil prices, operators have announced some of the best profits ever. However, the austerity caused by oil prices averaging less than $20/bbl only two years ago is being felt today, as the industry struggles to achieve its full poten- tial due to difficulty finding experienced crews and resilient supply chains. The war in Ukraine has led to anxiety over energy and food availability as the year progressed, and associated inflation- ary and recessionary pressures may sty- mie future rig growth even as increased long-term energy needs are predicted. Energy security concerns, however, have put oil and, especially, gas back at the fore- front of planning for future needs along- side the energy transition. 2022 census highlights The US available fleet, including land and offshore rigs, decreased by 23 rigs to 1,640 due to a combination of scrapping and removal according to census rules for prolonged inactivity. The active rig fleet in the US increased by 40% to 893 rigs. This is just over double the record low of 440 active rigs in 2020. The Canadian rig utilization hit 51% in 2022, the highest during the census period since 2006. The global offshore rig fleet is gaining traction again after the false start in 2019. Utilization has increased this year to 76%, the highest since 2015. Global offshore rig activity will con- tinue to increase as jackups are put to work by national oil companies (NOCs) in the Middle East, and the ultra-deepwater drillship segment continues to be tight due to demand in Guyana and the Golden Triangle of West Africa, Brazil and the US Gulf of Mexico (GOM). Every region saw an increase in land activity and utilization except Europe, where the effects of the war in Ukraine were felt. US fleet and activity The US rig fleet totaled 1,640, reflect- ing a decrease of 23 rigs compared with the previous year. Additionally, it almost matches the record low of 1,636 rigs set in 2000. During this year’s census, 30 rigs were scrapped, and 31 rigs were removed due to census rules. A total of 38 rigs were added to the fleet – six newbuilds and 32 reactivations of rigs that had been inactive for more than three years. US rig additions A total of 38 rigs were added to the US fleet since the last census. Six are newbuilds, while 32 are reactivated cold- stacked rigs that had previously been Census Ground Rules Contractor-owned rigs belong to companies whose primary business is offering drilling contracting services. The methodology used to count active rigs for the NOV census has been standard since 1955 and differs from other published rig counts. To be considered active, a rig must be drilling at least one day during the 45-day qualification period during the early summer each year between 6 May and 20 June. Only workable rotary rigs are included. Cable tool rigs are excluded. To be considered available, a rig must be able to go to work without requiring significant capital expenditure. Rotary land rigs stacked for an extended period, typically three years or longer, are not counted as available. Offshore rigs may not be stacked for more than five years. A rig must be capable of and normally employed for drilling deeper than 3,000 ft. Therefore, some shallow drilling rigs are excluded. This ensures that well-servicing rigs are not counted. Electric rigs include all those that transmit power from prime movers to electrically driven equipment. Inland barges include barge-mounted rigs that may be moved from one location to another via a canal, bayou or river and drill in sheltered inland waters. Offshore rigs include stationary platform units (self-contained and tender-supported), bottom- supported mobile units and floating rigs (drillships and semisubmersibles). The US geographical breakdown for the NOV rig census is shown in Table 4. DRILLING CONTRACTOR • NOVEMBER/DECEMBER 2022 31 NOV RIG CENSUS “Drilling contractors have indicated that more rigs could be active if they were able to staff them adequately, further highlighting the challenge of crew availability and retention.” removed per the census rules. While still less than the number of reactivations in 2019, it is a sharp increase compared with the number of rigs added to the fleet in 2020 and 2021. More reactivations would likely have occurred had it not been for inflation and supply constraints on things like frac sand and crews. Four offshore rigs were added to the US fleet: One drill- ship, one jackup and two semisubmers- ibles entered the US GOM. This number is likely to increase further this year after the census period as the drillship market in the US GOM is basically sold out and will soon see the first eighth-generation unit. US rig attrition A total of 61 rigs were removed from the available fleet in the 2022 census, partly offset by the addition of 38 rigs that were either newbuilds, reactivated or moved into the region. Therefore, the total fleet size was reduced by 23 rigs. This is a much smaller number than what was seen in the previous census, when 276 rigs were removed. It is also well below the average fleet reduction of 210 rigs per year seen over the past five years, mainly due to large reductions in 2018 and 2021. Of the 61 rigs removed, 30 were scrapped, includ- ing 25 land rigs and five old jackups from the ’70s and ’80s, and 31 were removed per census rules. US drilling activity There were 893 active rigs in the US in the census period – 851 land and 42 offshore. This reflects an increase of 40% compared with 2021 but is still 61% fewer than the 2,269 active rigs in 2014 before the start of the global downturn. Overall, land saw 55% utilization while offshore had 43% utilization. Not surprisingly, the Permian led with 370 active rigs, representing 56% utiliza- tion for the region’s fleet. The Permian fleet decreased from 759 to 656 available rigs, likely due to stacked rigs now hitting their third year not working compared with high-spec rigs quickly returning to work. Although having a smaller fleet of 114 rigs, the ArkLaTex region saw the highest utilization rate of 75%. 5000 Canadian fleet and activity The Canadian rig fleet decreased by approximately 12% to 358, a new historical low. The offshore fleet remained at seven rigs: three platforms, three semisubmers- ibles and one drill barge. Although one drillship left the region, it was offset by the entrance of a semisubmersible. As for the land rig fleet, six were added, while 54 were removed according to census rules, netting 351 available land rigs. Fleet utilization hit 51%, the highest since 2006, although the available fleet now is less than half the size of what it was in 2006. Still, 51% is a healthy uti- lization rate as the census period often coincides with the spring breakup. The number of active rigs increased for the second consecutive year, reaching 184 in 2022. This is up from 140 active rigs in 2021 and far more than the 2020 low of 29. Drilling contractors have indicated that US Available Rigs and Utilization Rates US Available and Active Rigs 6000 This year, land rigs capable of drilling 20,000 ft or more (839 rigs) led with 61% utilization. Rigs rated between 16,000 and 19,999 ft (312 rigs) increased to 184 active, or 59% utilization. Rigs with drilling depth capacities between 6,000 and 9,999 ft saw 52% utilization. It should be noted that there are only 135 rigs in this segment. Offshore, jackup utilization increased from 33% in 2021 to 46%, with six rigs active out of 13 total. Semisubmersibles had no active rigs last year but had two active rigs this year, representing 67% utilization. Finally, drillships are nearly tapped out with 95% utilization of the 20 available rigs. 6000 Available  rigs Active  rigs 100% 90% 5000 4000 4000 3000 3000 80% 70% 54% 2000 1000 0 1640 893 1955 1957 1959 1961 1963 1965 1967 1969 1971 1973 1975 1977 1979 1981 1983 1985 1987 1989 1991 1993 1995 1997 1999 2001 2003 2005 2007 2009 2011 2013 2015 2017 2019 2021 2022 60% 50% 40% 2000 30% 1640 20% 1000 Available  rigs Utilization  rate 0 1955 1958 1961 1964 1967 1970 1973 1976 10% 0 1979 1982 1985 1988 1991 1994 1997 2000 2004 2007 2010 2013 2016 2019 2022 Figure 1: The US available fleet, land and offshore, had a net decrease of 23 rigs for a total 1,640 available rigs. Of that total, 893 rigs worked during this year’s census period. Figure 2: Utilization in the US continued its positive developments from last year, going from 38% in 2021 to 54% in 2022. 32 NOVEMBER/DECEMBER 2022 • DRILLING CONTRACTOR NOV RIG CENSUS TABLE 1: US RIG FLEET, 2007-2022 Previous Year's Fleet for each year 2022 2021 2020 2019 2018 2017 2016 2015 2014 2013 2012 2011 2010 2009 2008 2007 1663 1939 1960 1952 2690 2791 3064 3254 3055 3006 3081 3153 3169 3076 2817 2298 REDUCTIONS TO FLEET Removed from service -31 -185 -11 -37 -805 -215 -302 -373 -177 -182 -386 -315 -212 -164 -59 -77 Moved out of the country 0 0 0 -1 -11 -5 -18 -24 -6 -22 -23 -16 -45 -49 -29 -14 Destroyed -30 -100 -16 -6 -2 -2 -4 -1 -5 -3 -1 -3 -2 -5 0 -4 Subtotal Deletions -61 -285 -27 -44 -818 -222 -324 -398 -188 -207 -410 -334 -259 -218 -88 -95 ADDITIONS TO FLEET Newly manufactured 6 6 6 29 22 42 48 185 187 147 223 158 131 237 202 349 Reactivated or assembled from parts 32 3 0 22 55 73 0 10 194 100 100 98 96 44 132 260 Moved into the country 0 0 0 1 3 6 3 13 6 9 12 6 16 30 13 5 Subtotal Additions 38 9 6 52 80 121 51 208 387 256 335 262 243 311 347 614 NET CHANGE -23 -276 -21 8 -738 -101 -273 -190 199 49 -75 -72 -16 93 259 519 TOTAL AVAILABLE RIGS 1640 1663 1939 1960 1952 2690 2791 3064 3254 3055 3006 3081 3153 3169 3076 2817 TOTAL ACTIVE RIGS 893 640 440 1187 1273 1121 548 1106 2269 2055 2248 2059 2024 1264 2541 2402 UTILIZATION 54% 38% 23% 61% 65% 42% 20% 36% 70% 67% 75% 67% 64% 40% 83% 85% OVERALL 95% 85% 91% 81% 70% 71% 77% 88% 62% 71% 73% 95% 85% 91% 81% 70% Table 1: 38 rigs were added and 61 were deleted, for a net change of 31 fewer rigs in the US fleet this year. Figure 3: While the US available fleet decreased this year, it was at a much lower rate than last year – only by 23 rigs com- pared with 276 rigs in 2021. Net Change in US Fleet 1500 1000 500 more rigs could be active if they were able to staff them adequately, further highlight- ing the challenge of crew availability and retention. Offshore saw four active rigs: three plat- forms and one semisubmersible. This is up from just one drillship and one platform active during the last census period. International land rig utilization The number of active international land rigs is estimated at 2,254, with a 73% utili- zation rate, including Russia and China. In every region except Europe, the active rig count rose. -23 0 -500 -1000 1955 1960 1965 1970 1975 1980 1985 The Ukraine count dropped following the Russian invasion, declining from 39 active rigs in January to only five rigs three months after the war began. Elsewhere in Europe, Turkey has remained 1990 1995 2000 2005 2010 2015 2022 flat since before the pandemic, with rough- ly 20 active rigs. South American leaders Argentina and Colombia have reached pre-pandemic lev- els of activity, with approximately 50 and DRILLING CONTRACTOR • NOVEMBER/DECEMBER 2022 33 NOV RIG CENSUS TABLE 2: CANADIAN RIG FLEET, 2007-2022 Previous Year's Fleet for each year 2022 2021 2020 2019 2018 2017 2016 2015 2014 2013 2012 2011 2010 2009 2008 2007 406 427 458 464 591 627 612 796 777 747 774 795 852 875 871 799 REDUCTIONS TO FLEET Removed from service -51 -22 -29 -21 -146 -47 -24 -206 -38 -52 -67 -63 -94 -17 -24 -6 Moved out of the country 0 0 0 -3 -6 -3 0 -10 -11 -21 -33 -11 -17 -42 -19 -10 Destroyed -3 0 -2 -1 0 0 0 0 0 0 0 0 0 0 -1 0 Subtotal Deletions -54 -22 -31 -25 -152 -50 -24 -216 -49 -73 -100 -74 -111 -59 -44 -16 ADDITIONS TO FLEET Newly manufactured 2 1 0 6 4 5 21 10 24 64 35 8 15 29 47 86 Reactivated or assembled from parts 4 0 0 12 20 8 18 8 32 33 34 35 35 2 1 2 Moved into the country 0 0 0 1 1 1 0 7 12 6 4 10 4 5 0 0 Subtotal Additions 6 1 0 19 25 14 39 25 68 103 73 53 54 36 48 88 NET CHANGE -48 -21 -31 -6 -127 -36 15 -191 19 30 -27 -21 -57 -23 4 72 TOTAL AVAILABLE RIGS 358 406 427 458 464 591 627 612 796 777 747 774 795 852 875 871 TOTAL ACTIVE RIGS 184 140 29 160 194 206 91 163 352 289 329 369 334 191 406 371 UTILIZATION 51% 34% 7% 35% 42% 35% 15% 27% 44% 37% 44% 48% 42% 22% 46% 43% Table 2: Utilization continued to climb in Canada, reaching 51% in the new census period. This is partly because of a reduced available fleet; however, the number of active rigs also increased significantly. TABLE 3: GLOBAL OFFSHORE MOBILE FLEET, 2007-2022 Previous Year's Fleet for each year 2022 2021 2020 2019 2018 2017 2016 2015 2014 2013 2012 2011 2010 2009 2008 2007 621 655 680 700 711 751 825 847 789 753 794 745 705 675 650 654 -56 -43 -49 -40 -67 -99 -72 -13 -14 -30 -7 -2 -11 -7 -26 REDUCTIONS TO FLEET Removed from service -22 Destroyed 0 -1 0 0 0 0 0 0 -2 -1 -2 0 -4 -3 0 0 Subtotal Deletions -22 -57 -43 -49 -40 -67 -99 -72 -15 -15 -32 -7 -6 -14 -7 -26 ADDITIONS TO FLEET Newly manufactured 8 17 18 24 24 21 20 48 64 44 45 47 40 43 28 11 Reactivated or assembled from parts 9 6 0 5 5 6 5 2 9 7 6 9 6 1 4 11 Subtotal Additions 17 23 18 29 29 27 25 50 73 51 51 56 46 44 32 22 NET CHANGE -5 -34 -25 -20 -11 -40 -74 -22 58 36 19 49 40 30 25 -4 TOTAL AVAILABLE RIGS 616 621 655 680 700 711 751 825 847 789 753 794 745 705 675 650 TOTAL ACTIVE RIGS 470 436 437 468 452 448 498 649 721 702 636 559 572 571 592 574 UTILIZATION 76% 70% 67% 69% 65% 63% 66% 79% 85% 89% 84% 70% 77% 81% 88% 88% Table 3: The global MODU utilization rate continued to increase, reaching 76% in the 2022 census. As opposed to recent years, this year’s increase was driven by more active rigs rather than a decrease in fleet size. 30 rigs, respectively, in June 2022. Mexico has also recovered with 25 active rigs. In the Asia Pacific region, India’s rig count has been consistently in the 60s 34 since mid-2020. Indonesia and Australia each saw a 50% bump in active rigs since last year and ended the 2022 census period with 29 and 18 rigs, respectively. China continues to dominate the active count in the region by a huge margin. The highest active rig counts in Africa were previously Algeria and Libya, but NOVEMBER/DECEMBER 2022 • DRILLING CONTRACTOR NOV RIG CENSUS TABLE 4: US FLEET BY REGION OWNERSHIP REGION Alaska Northern Rockies Southern Rockies POWER SOURCE RIG TYPE YEAR AVAILABLE ACTIVE UTILIZATION DRILLER OPERATOR MECHANICAL SCR/ LAND ELECTRIC 2022 25 28% 1 24 7 12 13 PLATFORM BOTTOM SUPPORTED TOTAL OFFSHORE 12 12 1 13 12 1 2021 24 3 13% 11 13 9 15 11 2022 77 44 57% 77 0 11 66 77 BARGE FLOATING 13 0 2021 78 23 29% 78 0 11 67 78 0 2022 116 61 53% 115 1 20 96 116 0 2021 110 38 35% 110 0 19 91 110 0 Northeast States 2022 125 71 57% 118 7 32 93 125 0 2021 123 61 50% 121 2 40 83 123 0 Permian Basin 2022 656 370 56% 655 1 117 539 656 0 2021 759 292 38% 759 0 158 601 759 0 Gulf Coast ArkLaTex California Southeast States Mid- Continent TOTAL 2022 260 150 58% 222 38 54 206 180 16 23 29 12 80 2021 206 82 40% 185 24 24 182 126 18 20 31 11 80 2022 114 86 75% 112 2 19 95 114 0 2021 105 63 60% 103 2 15 90 105 0 2022 40 10 25% 34 6 22 18 35 5 5 2021 40 13 33% 35 5 23 17 35 2022 10 3 30% 1 9 5 5 10 5 5 0 2021 30 7 23% 1 29 11 19 30 0 2022 217 91 42% 217 0 82 135 217 0 2021 188 58 31% 185 3 80 108 188 2022 1640 893 54% 1563 77 363 1277 1542 16 23 46 13 98 2021 1663 640 38% 1588 78 390 1273 1565 20 48 12 98 Table 4: The Northern Rockies region had the biggest increase in utilization, going from 29% in 2021 to 57% in 2022. Figure 4: Approximately one-quarter of all MODUs globally are in the Middle East. This number will likely increase with the influx of jackups heading there in 2022 and 2023 to work for NOCs. 0 18 Global Active Offshore Mobile Fleet By Region Middle East, 25.8% Far East, 14.1% NW Europe, 11.5% Indian Ocean, 8.5% SE Asia, 7.5% Mexico, 7.2% South America, 6.8% US GOM, 5.8% West Africa, 4.7% 2022 sees Libya dramatically down to just two rigs, while Algeria is up from 25 rigs to 33. Nigeria now takes second place with eight rigs. The Middle East reached its bottom in November 2020, after which the rig count rose as restrictions were intention- ally relaxed. Of note is the acceleration of active Iraqi rigs to almost match Saudi lev- els, at 55 and 56, respectively, in June 2022. Oman sits in the third position with 48. Global offshore mobile fleet The global mobile offshore drilling unit (MODU) fleet is finally seeing positiv- ity, as eight years of attrition and the recent uptick in activity have created Med/Black Sea, 3.4% Australia/New Zealand, 1.7% Caspian, 1.3% Russian Arctic, 0.6% Central America, 0.4% Baltic, 0.4% Canada East, 0.2% US Alaska, 0.0% a tight market for drillships and jack- ups. Several stacked rigs were reacti- vated, including some that had been cold stacked for more than five years. The trend of stranded rigs finally being deliv- ered from shipyards continued in 2022 and should continue in 2023. NOCs like Saudi Aramco and ADNOC are driving up jackup demand in the Middle East, while the tight Golden Triangle drillship markets seek to add incremental rigs, especially in Brazil. A total of 22 offshore mobile rigs – nine semisubmersibles and 13 jackups – were removed from the fleet. This was partly offset by 17 rigs entering the fleet, includ- DRILLING CONTRACTOR • NOVEMBER/DECEMBER 2022 35 NOV RIG CENSUS TABLE 5: US RIG UTILIZATION BY DEPTH RATING DEPTH RATING BY REGION STATUS Available Active Alaska Idle Utilization Available Active Northern Rockies Idle Utilization Available Active Southern Rockies Idle Utilization Available Active Northeast States Idle Utilization Available Active Permian Basin Idle Utilization Available Active Gulf Coast Idle Utilization Available Active ArkLaTex Idle Utilization Available Active California Idle Utilization Available Active Southeast States Idle Utilization Available Active Mid-Continent Idle Utilization OVER 20,000 16,000 TO 19,999 13,000 TO 15,999 10,000 TO 12,999 6,000 TO 9,999 3,000 TO 5,999 TOTAL 10 5 5 50% 49 29 20 59% 38 22 16 58% 52 33 19 63% 368 235 133 64% 158 106 52 67% 65 47 18 72% 0 0 0 0% 4 1 3 25% 95 35 42 37% 1 0 1 0% 19 12 7 63% 43 23 20 53% 16 12 4 75% 138 81 57 59% 31 17 14 55% 21 21 0 100% 4 1 3 25% 0 0 0 0% 39 16 23 41% 2 1 1 50% 1 1 0 100% 17 8 9 47% 12 8 4 67% 64 24 40 38% 21 11 10 52% 11 9 2 82% 1 0 1 0% 5 2 3 40% 19 6 13 32% 2 1 1 50% 1 0 1 0% 13 6 7 46% 19 6 13 32% 33 9 24 27% 20 6 14 30% 10 5 5 50% 5 2 3 40% 0 0 0 0% 9 4 5 44% 0 0 0 0% 5 2 3 40% 5 2 3 40% 14 9 5 64% 38 20 18 53% 17 7 10 41% 7 4 3 57% 9 3 6 33% 1 0 0 0% 39 23 16 59% 10 0 10 0% 2 0 2 0% 0 0 0 0% 12 3 9 25% 15 1 14 7% 13 3 10 23% 0 0 0 0% 21 4 17 19% 0 0 0 0% 16 7 9 44% 25 7 18 28% 77 44 33 57% 116 61 55 53% 125 71 54 57% 656 370 286 56% 260 150 110 58% 114 86 28 75% 40 10 30 25% 10 3 6 30% 217 91 108 42% 13 3 10 23% 23 21 2 91% 776 476 300 61% 14 7 7 50% 1 0 1 0% 0 0 0 0% 307 183 124 60% 4 1 3 25% 1 0 1 0% 0 0 0 0% 149 68 81 46% 3 1 2 33% 0 0 0 0% 0 0 0 0% 110 38 72 35% 2 1 1 50% 0 0 0 0% 0 0 0 0% 134 70 64 52% 1 0 1 0% 1 0 1 0% 0 0 0 0% 66 16 50 24% 22 2 20 9% 16 3 13 19% 23 21 2 91% 1542 851 691 55% 46 12 34 26% BY RIG TYPE Available Active Idle Utilization Available Active Floating Idle Utilization Available Active Land Idle Utilization Available Active Offshore Platform Idle Utilization Inland Barge Bottom Supported TOTAL Available Active Idle Utilization AVAILABLE ACTIVE IDLE UTILIZATION 13 6 7 46% 839 513 326 61% 0 0 0 0% 312 184 128 59% 0 0 0 0% 153 69 84 45% 0 0 0 0% 112 39 73 35% 0 0 0 0% 135 70 65 52% 0 0 0 0% 89 18 71 20% 13 6 7 46% 1640 893 747 54% Table 5: Utilization for the US fleet increased to 54% in 2022. Rigs with a drilling capacity greater than 20,000 ft led with a utiliza- tion rate of 61% in 2022 compared with 43% in 2021. The last two years were unusual as the most capable rigs were not the highest utilized in 2020 and 2021. 36 NOVEMBER/DECEMBER 2022 • DRILLING CONTRACTOR NOV RIG CENSUS TABLE  6:  INTERNATIONAL  LAND  RIG  UTILIZATION  RATES,  2012-2022 2022 2021 2020 2019 2018 2017 2016 2015 2014 2013 2012 Europe/FSU/Russia 67% 70% 54% 74% 75% 73% 72% 96% 96% 75% 94% Africa 60% 53% 54% 84% 79% 55% 53% 75% 87% 83% 96% Middle East 69% 59% 80% 85% 84% 77% 75% 99% 100% 94% 100% Asia/China 84% 83% 75% 76% 78% 79% 77% 67% 86% 96% 96% Latin America 69% 55% 18% 73% 72% 42% 41% 67% 84% 80% 88% OVERALL 73% 71% 62% 88% 77% 71% 70% 81% 91% 85% 95% Table 6: Relaxation of OPEC+ cuts and a buoyant oil price increased interna- tional land fleet sizes and utilization everywhere except in Europe, where the war in Ukraine had the opposite effect. Figure 5: Utilization continues to in- crease as the offshore fleet reached 76% utilization in the 2022 census. ing nine reactivations and eight new- builds, six of which were jackups and two were stranded drillships. This brings the total number of available MODUs to 616. The largest MODU region was the Middle East, with just over one-quarter of the fleet – all jackups. The Middle East is expected to add incremental rigs, with several jackups already preparing to move into the region to begin contracts in late 2022 and early 2023. The Far East was the second-largest region, with 14.1% of the fleet, mostly jackups. Northwest Europe had 11.5% of the fleet, with a more even split between harsh-environment jackups and semisub- mersibles. This is the largest region for semisubmersibles in the world. The US GOM remains the largest region for the drillship segment, with 20 drill- ships counted during the census period, or 5.8% of the global MODU fleet. Global offshore mobile activity In the 2021 census, utilization had increased mainly due to attrition. This year, the 6% increase in utilization – to 76% – can be attributed to more rigs going to work. Active MODUs went from 436 in the 2021 census to 470 this year, the highest level of activity since 2016, when most rigs were still working on contracts handed out before the downturn began. With increased activity, drilling con- tractors are regaining some much-need- ed pricing power, especially in the drill- ship market. Several drillships have been awarded contracts with dayrates of more than $400,000. The US GOM leads in dayrate increases as the drillship market is essentially sold out. Brazil and West Africa are looking to increase activity and see dayrates grow. The jackup segment has also seen dayrate increases as Middle Eastern NOCs, most notably Saudi Aramco and ADNOC, are increasing production and bringing in jackups from outside the Middle East. This includes rigs that had been cold stacked for years and rigs that had been stranded in shipyards. While utilization for semisubmers- ibles is improving year over year, it is not increasing at the same pace as the other MODU segments. The Norwegian Continental Shelf, normally a driver for dayrates in the semisubmersible segment, had a slower year. This market is expected to stay soft until mid-2023. Offshore industry trends While current dayrate levels do not yet support ordering newbuilds, more rigs are being reactivated, including cold-stacked and stranded rigs. Drilling contractors are waiting for firm contracts before consider- ing reactivation. This discipline is likely to continue, but with fewer rigs available, operators will likely have to pay for partial or all reactivation and mobilization costs. The increase in tendering activity in the Middle East has resulted in several jackups being picked up from shipyards through bareboat agreements as seen in the past couple of years and outright sales. Despite this, there are still 26 jackups wait- ing for delivery, although most of these are not of the designs currently favored by rig contractors. Twenty of the 26 jackups DRILLING CONTRACTOR • NOVEMBER/DECEMBER 2022 37 NOV RIG CENSUS Canadian Available and Active Rigs 1000 Available rigs Active rigs 900 800 700 600 358 500 400 300 184 200 100 0 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 Figure 6: The number of active rigs in Canada continued to increase for the second year in a row, reaching 184 in 2022. This is 31% higher than in 2021 and 534% higher than the lows in 2020. Fig- ure 7: There were 470 active rigs in the global offshore mobile fleet in the 2022 census, the highest number since 2016. Figure 8: The number of individual rig owners in the US stayed the same after two years of significant decreases. Global Offshore Mobile Fleet, Available and Active Rigs more semisubmersibles were scrapped relative to its fleet size since the down- turn began than the other two MODU segments. 900 800 700 600 US industry trends 500 400 300 Available rigs Active rigs 200 100 0 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 Number of rig owners in US 800 700 600 500 400 300 200 38 2021 2022 2019 2020 2017 2018 2015 2016 2013 2014 2011 2012 2010 2009 2007 2008 2005 2006 2003 waiting for delivery have a scheduled date in 2022 or 2023, but many will likely be postponed. The drillship segment has 15 rigs still waiting for delivery, all ordered pre-down- turn. Of these, 13 have scheduled delivery dates for this year or next; however, several of these are likely to be postponed. With a tight market in some regions, a few deliv- eries will come over the next two years as the preference for reactivations over newbuilds will not be enough to cover the demand. Supply chain issues and inflation 2004 2001 2002 1999 2000 1997 1998 1995 1996 1993 1994 1991 1992 1989 1990 1987 0 1988 100 have increased the time to reactivate a cold-stacked drillship from 9-12 months to 12-18 months, and prices for reactivation are likely to exceed $100 million in many cases. The semisubmersible segment is dif- ferent as only seven semisubmersibles are currently under construction, three of which are scheduled for delivery this year, another three next year and one in 2024. However, most of these will likely be pushed out further, and there were no new deliveries last year. Comparatively, The number of individual rig owners holding available rigs barely changed this year, dropping to 171 from 172. The wave of bankruptcies has ended, and high ask- ing prices have stifled mergers. A total of 77 rigs are considered operator-owned, or roughly 4.7% of the US available fleet of 1,640 rigs. Increasing dayrates was the primary trend for the year, a welcome change for drilling contractors that have faced finan- cial hardships for some time. Tier 1 rigs have reached the mid-$30,000 dayrate range. The struggle to crew rigs going back to work has also been a common thread. Drilling contractors have indicated that some operators are choosing to wait to contract a hot Tier 1 rig with an experi- enced crew versus attempting to upgrade and reactive a stacked rig and be forced to use green drilling crews. Operators con- tinue to ask for technology that can lower carbon emissions and meet growing ESG demands. Forecast for next year As generally expected, the world has now learned to live with the impacts of a global pandemic. Except for inflation fears and the effects of the Russia-Ukraine con- flict creating an increase in potential vola- tility in the oil price, things have settled down. The oil price should average high enough that forecasting rig activity with a bit more confidence is possible. Oil prices are expected to average just under $91 in 2023, and countries world- NOVEMBER/DECEMBER 2022 • DRILLING CONTRACTOR NOV RIG CENSUS Figure 9 (TOP): Resilience may be seen in the small bounceback of Ukrainian rigs after the dramatic drop as war en- gulfed the country early this year. Fig- ure 10 (2ND FROM TOP): The census captured a distinct drop in Libya’s ac- tive rig count this year. Figure 11 (2ND FROM BOTTOM): Argentina and Colom- bia both appear to be recovering from prior rock-bottom rig activity. Figure 12 (BOTTOM): The Iraqi active count has quickly accelerated to nearly the same level as the Saudi rig count as of June 2022. wide have taken steps to counteract the spike seen earlier in 2022. Rig count and utilization are likely to increase, but the availability of qualified personnel, sup- ply chain constraints and minimal spare capacity will keep this at a muted pace. Consequently, drilling contractors, service providers and OEMs will likely have more pricing power in negotiations. The world needs sustainable, afford- able and secure energy, and all projec- tions predict a growing need for energy. While the world works on transition- ing to more sustainable energy sources, the oil and gas industry continues to take tremendous steps to reduce car- bon emissions. Oil and gas remain two of the most affordable and transferable forms of energy and are subsequently critical to any country’s energy security. The Russia-Ukraine conflict has shown the vital importance of energy security, which adds up to favorable times ahead for oil and gas. DC NOV’s 69th Annual Rig Census was prepared by Tarjei “TJ” Myklebust, Senior Analyst; Karl Appleton, Business Development Director; and Kevin Scherm, Business Development. IHS Markit is the primary source for the global offshore fleet, while Enverus has provided the source material for the US and Canadian onshore fleets. Information for the international land fleet was found using both Baker Hughes data and Spears and Associates information collected and analyzed by NOV personnel. US Rig Census historical data, 1955-2022. Note: Data for 1953, 1954, and 2002 are not available. DRILLING CONTRACTOR • NOVEMBER/DECEMBER 2022 39 NOV RIG CENSUS YEAR AVAILABLE UNIT CHANGE % CHANGE ACTIVE UTIL. RATE IDLE DRILLER OWNED OPERATOR OWNED 1955 1956 1957 1958 1959 1960 1961 1962 1963 1964 1965 1966 1967 1968 1969 1970 1971 1972 1973 1974 1975 1976 1977 1978 1979 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 3206 3277 3076 2971 3057 3077 2774 2555 2781 2752 2614 2524 2408 2111 2060 1898 1859 1768 1767 1894 2028 2204 2482 2851 3182 3672 4803 5644 5273 4580 4409 3993 3331 2752 2542 2320 2251 1996 1853 1841 1729 1649 1665 1705 1644 1636 1722 n/a 1719 1988 2026 2298 2817 3076 3169 3153 3081 3006 3055 3254 3156 2882 2778 - 71 -201 -105 86 20 -303 -219 226 -29 -138 -90 -116 -297 -51 -162 -39 -91 -1 127 134 176 278 369 331 490 1131 841 -371 -693 -171 -416 -662 -579 -210 -222 -69 -255 -143 -12 -112 -80 16 40 -61 -8 86 n/a -3 269 38 272 519 259 93 -16 -72 -75 49 199 -883 -274 -104 - 2% -6% -3% 3% 1% -10% -8% 9% -1% -5% -3% -5% -12% -2% -8% -2% -5% 0% 7% 7% 9% 13% 15% 12% 15% 31% 18% -7% -13% -4% -9% -17% -17% -8% -9% -3% -11% -7% -1% -6% -5% 1% 2% -4% 0% 5% n/a 0.0% 16% 2% 13% 23% 9% 3% -1% -2% -2% 2% 7% -3% -9% -4% 2654 2836 2519 1909 2476 2150 2064 1835 2002 2048 1934 1714 1573 1508 1649 1331 1308 1381 1473 1769 1877 1979 2399 2785 2874 3542 4703 3225 2539 3090 2625 1052 1388 1532 1444 1677 1485 1192 1279 1221 1232 1263 1447 1305 860 1215 1593 n/a 1334 1674 1920 2200 2402 2541 1264 2024 2059 2248 2055 2269 1139 577 1150 83% 87% 82% 64% 81% 70% 74% 72% 72% 74% 74% 68% 65% 71% 80% 70% 70% 78% 83% 93% 93% 90% 97% 98% 90% 96% 98% 57% 48% 67% 60% 26% 42% 56% 57% 72% 66% 60% 69% 66% 71% 77% 87% 77% 52% 74% 93% n/a 78% 84% 95% 96% 85% 83% 40% 64% 67% 75% 67% 70% 36% 20% 41% 552 441 557 1062 581 927 710 720 779 704 680 810 835 603 411 567 551 387 294 125 151 225 83 66 308 130 100 2419 2734 1490 1784 2941 1943 1220 1098 643 766 804 574 620 497 386 218 400 784 421 129 n/a 385 314 106 98 415 535 1905 1129 1022 758 1000 985 2017 2305 1628 2806 2911 2796 2735 2848 2874 2606 2406 2672 2644 2531 2472 2359 2067 2033 1869 1832 1741 1739 1881 2014 2180 2451 2818 3144 3626 4762 5606 5241 4553 4386 3961 3299 2716 2508 2294 2209 1956 1806 1789 1680 1597 1606 1640 1599 1557 1643 n/a 1648 1896 1962 2191 2511 2698 2729 2702 2626 2567 2625 2782 2706 2448 2441 2019 2020 1960 1939 8 -21 0.4% -1.1% 1187 440 61% 23% 773 1499 1735 1878 2018 1952 -826 -30% 1273 65% 679 1680 DEPTH RATING 16,000 TO 19,999 400 366 280 236 209 203 168 149 109 108 83 52 49 44 27 29 27 27 28 13 14 24 31 33 38 46 41 38 32 27 23 32 32 36 34 26 42 40 47 52 49 52 59 65 45 79 79 n/a 71 92 64 107 306 378 440 451 455 439 430 472 299 294 323 OVER 20,000 104 110 111 141 184 210 193 218 272 305 322 350 375 372 366 343 361 397 413 425 448 498 577 693 872 1059 1405 1717 1639 1408 1332 1220 991 771 704 399 380 315 303 326 317 311 339 376 375 392 424 n/a 390 424 375 394 453 471 478 517 498 514 706 782 884 873 883 225 51 832 850 229 769 221 210 175 152 147 148 139 137 142 134 134 161 n/a 205 230 251 287 347 378 449 472 523 589 561 645 589 552 523 13,000 TO 15,999 445 453 425 405 424 378 356 307 298 251 242 206 199 185 188 219 198 171 164 214 225 239 274 313 350 419 595 717 662 591 570 496 427 365 329 313 304 267 240 245 239 221 230 238 232 231 254 n/a 274 295 311 384 508 605 670 662 646 606 551 567 562 509 484 10,000 TO 12,999 613 562 553 487 520 477 399 471 479 463 449 461 435 381 352 322 329 301 318 339 380 366 461 565 631 704 950 1104 993 933 894 789 637 529 515 488 491 441 420 411 393 384 387 391 368 355 373 n/a 368 473 472 562 658 741 754 721 667 616 600 599 544 449 409 6,000 TO 9,999 1237 1256 1075 1067 996 1033 937 823 964 1029 936 863 776 680 626 580 535 490 517 529 579 633 628 723 783 885 1080 1285 1233 1077 1084 971 841 751 700 623 603 553 513 499 453 435 421 412 395 381 371 n/a 359 435 474 521 609 621 577 555 552 496 469 480 295 254 227 3,000 TO 5,999 807 896 912 871 933 979 889 736 768 704 665 644 623 493 528 434 436 409 355 397 396 468 542 557 546 605 773 821 746 571 529 517 435 336 294 276 263 245 225 213 179 159 151 146 140 143 139 n/a 123 131 143 150 242 260 241 226 195 185 168 181 116 108 92 264 387 174 226 98 129 128 164 99 63 359 264 196 64 2021 1663 -276 -14.2% 640 38% 1023 1591 72 781 357 177 111 145 92 2022 1640 -23 -1.4% 893 54% 747 1563 77 839 312 153 112 135 89 AVG. 2639 -36 0 1825 70% 814 2499 134 565 318 357 498 649 401 US Rig Census historical data, 1955-2022. Note: Data for 1953, 1954, and 2002 are not available. 40 140 NOVEMBER/DECEMBER 2022 • DRILLING CONTRACTOR NOV RIG CENSUS POWER SOURCE RIG TYPE MECHANICAL SCR/ELEC. 30 34 52 49 54 73 66 63 106 113 138 164 206 189 177 154 170 176 164 159 164 192 217 283 420 490 656 896 851 771 748 815 681 561 498 408 438 395 380 418 414 408 456 497 499 520 582 n/a 592 627 603 826 1104 1170 1211 1316 1386 1499 1601 1814 1646 1591 1580 DIESEL 1039 1092 913 1027 1040 1051 964 955 882 952 895 937 955 1007 1200 1339 1535 1943 2309 2521 3023 4000 4647 4344 3747 3621 3139 2626 2167 2025 1891 1798 1589 1460 1402 1305 1234 1471 GAS STEAM LAND 1864 1549 1525 1600 1577 1404 1376 1239 1037 928 847 750 637 596 535 525 476 321 259 241 159 146 100 77 61 40 39 24 24 19 21 15 12 13 21 10 7 285 247 195 158 113 101 67 54 48 22 21 20 8 3 3 2 2 0 0 0 0 1 1 0 0 0 1 1 1 1 0 0 0 0 0 0 0 0 0 0 0 0 2996 3025 2793 2715 2811 2837 2535 2300 2514 2479 2343 2259 2114 1825 1827 1662 1592 1551 1570 1715 1839 1964 2186 2524 2802 3255 4316 5139 4832 4102 3940 3573 2956 2429 2249 2061 2006 1809 1660 1613 1500 1425 1428 1449 1384 1370 1452 n/a 1488 1736 1813 2100 2598 2871 2971 2938 2885 2828 2877 3062 3005 2742 2623 INLAND BARGE 162 175 184 185 190 178 173 178 179 162 144 128 121 114 98 106 124 77 71 66 74 76 77 91 109 115 161 157 128 131 121 90 91 63 63 54 51 47 46 45 45 46 44 47 46 47 38 n/a 43 51 48 47 55 52 51 55 50 37 35 45 21 21 22 1769 1819 22 18 1209 1208 1145 1116 1140 n/a 1127 1361 1423 1472 1713 1906 1958 1837 1695 1507 1454 1440 1163 971 898 345 22 BOTTOM SUPPORTED 10 14 32 37 34 39 28 41 50 50 67 58 72 77 50 55 62 60 59 54 58 81 120 123 144 34 32 25 31 51 58 70 53 48 40 30 24 20 19 21 19 22 28 35 37 33 37 n/a 36 45 37 42 43 41 43 41 38 41 47 57 50 42 33 OFFSHORE PLATFORM 38 63 67 34 22 23 38 36 38 61 60 79 101 95 85 75 81 80 67 59 57 83 99 113 127 149 155 167 129 123 107 89 77 62 60 46 48 41 36 39 43 39 42 45 45 42 43 n/a 34 41 31 28 38 39 39 34 31 35 38 43 70 70 66 26 26 63 60 FLOATING 31 66 119 139 156 153 173 183 171 154 150 130 129 122 79 92 123 122 117 123 129 132 144 152 n/a 118 115 97 81 83 73 65 85 77 65 58 47 22 22 20 OFFSHORE STATIONARY 38 63 67 34 22 23 38 36 38 61 60 79 101 95 85 75 81 80 67 59 57 83 99 113 127 268 294 323 282 296 290 260 231 212 190 175 170 120 128 162 165 156 165 174 177 186 195 n/a 152 156 128 109 121 112 104 119 108 100 96 90 n/a n/a n/a SUBTOTAL OFFSHORE 210 252 283 256 246 240 239 255 267 273 271 265 294 286 233 236 267 217 197 179 189 240 296 327 380 417 487 505 441 478 469 420 375 323 293 259 245 187 193 228 229 224 237 256 260 266 270 n/a 231 252 213 198 219 205 198 215 196 178 178 192 163 155 141 17 16 n/a n/a 128 120 17 n/a 136 1183 1523 509 416 1273 390 1565 18 20 48 12 n/a 1277 363 1542 16 23 46 13 n/a 98 2385 84 45 63 98 130 253 616 1667 531 32 DRILLING CONTRACTOR • NOVEMBER/DECEMBER 2022 98 41 IADC CONNECTION • EDITORIAL To help the public understand essential role oil and gas plays, we must each become advocates FROM THE CHAIRMAN To achieve energy security, reduce energy poverty and meet the needs of a grow- ing worldwide population, the world must responsibly and efficiently embrace and develop all energy sources. Despite what some people may think, attaining energy reliability and security demands a height- ened investment in the production of oil and gas. As such, the drilling industry is, and will remain, essential to ensuring access to affordable, reliable energy sourc- es that support shared prosperity, growth and innovation globally. While we will undoubtedly see dispro- portionate growth in renewables, OPEC projections indicate oil will continue to have the largest share of the global energy mix until at least 2025, when its market share is forecasted to decline to about 28% from 30% today. During this same period of time, volumetric demand for oil is expect- ed to increase by 13.8 million bbl/day to 104.4 million bbl/day, and by as much as 17.6 million bbl/day to 108.2 million bbl/ day in 2045. In a recent “Intelligence Matters” pod- cast by CBS News Radio, Daniel Yergin, the Vice Chairman of S&P Global, pointed out that oil, which was discovered in Pennsylvania in 1859 and Texas in 1901, didn’t overtake coal as the world’s No. 1 energy source until the 1960s. Even so, in 2022, the world uses three times as much coal as it did in the 1960s. Mr Yergin highlighted that while the political focus is clearly a transition toward global decarbonization, what we are actually seeing occur is an energy expansion, where all sources are essential to create a sustainable energy economy. He pointed out that if net zero goals are pushed too quickly, severe economic disruptions are likely. In the context of strong demand for oil and gas across most regions of the world, there is a vital appreciation for the impor- 42 tance of energy reliability and security. Therefore, the recent, and sharp, increase in marketed rig utilization and dayrates are unsurprising; and, given the underly- ing fundamentals, it is clear that the drill- ing industry, and particularly deepwater offshore drilling, is in the vanguard of a sustained market recovery. That said, challenges remain. A funda- mental misunderstanding of the impor- tance of oil and gas could lead to irrespon- sible and, potentially, detrimental regula- tion, bureaucracy and funding deficits that ultimately impede investment in technol- ogies needed to achieve carbon footprint reductions, while delivering vital servic- es. That’s why the advocacy of everyone working within our industry to further the public’s understanding of the benefits of oil and gas, and the essential role energy plays within national and global econo- mies, is essential to ensure that we attract the next generation of talent, as well as the funding required to develop and deploy the technology needed to propel our industry forward. The bottom line is straightforward: Investment in new technologies is, and will continue to be, essential if our indus- try is to provide more energy with lower emissions. At Transocean, we continue to invest in and deploy new technologies to sup- port safer, more reliable and more efficient operations, from our Smart Equipment Analytics “SEA” system to our HaloGuard personnel safety system. Beyond technol- ogy, we are also investing in our people by offering opportunities to expand our team members’ knowledge and expertise as careers grow and evolve. While our industry possesses the dis- tinct advantage of already employing some of the best and the brightest, this is an opportune time for us to attract even more smart, creative, committed and Jeremy Thigpen, IADC Chairman ambitious individuals to join us. The skill set required on rigs, for instance, has changed. Due to technological advances, robotics, remote operations, etc, opportu- nities on drilling rigs have become less physical and more technical than in the past. The technical competencies of our crews is and will be key as our rigs become more advanced. For instance, at Transocean, we recently took delivery of one of two new eighth-generation drill- ships – the Deepwater Atlas – and we are approaching the delivery of the sec- ond, the Deepwater Titan. These will be the industry’s only two eighth-generation drillships, set apart by their ability to drill and complete 20,000-psi prospects with an industry-leading net 3-million-lb hoisting capacity. It is undeniable that the drilling busi- ness is changing in exciting ways and the future is bright for those who are perpetual learners interested in joining a dynamic, versatile and innovative indus- try. I’m excited for what’s ahead for our industry. We are just scratching the sur- face of what’s possible as we continuously advance as technical leaders, and work toward producing more energy with lower emissions. As an industry, we must keep inno- vating, we must keep advocating, and we must keep educating to attract new talent and the necessary capital for the future. Moreover, we must keep drilling to meet the global demands of a world whose economies and people rely upon the oil and gas we help produce each day. DC NOVEMBER/DECEMBER 2022 • DRILLING CONTRACTOR IADC YEAR IN REVIEW • IADC CONNECTION IADC spearheads efforts to communicate the value of our industry FROM JASON MCFARLAND, IADC PRESIDENT F or IADC and its members, 2022 has been a year of progress. There has been a sense of hope and connection as the world slowly and steadily reopens. This has been a year of looking forward while also taking the time to consider difficult questions about industry challenges and actions we can take to meet those challenges, together. One common theme woven throughout a variety of IADC efforts and events this year is a crucial question – how do we adequately express the importance and necessity of our industry in providing essential services and resources that allow the world, as we know it, to operate? In the January/February issue of this magazine, 2022 IADC Chairman Jeremy Thigpen stated, “Our industry provides a higher standard of living for billions of people around the world, in so many different ways, but the public doesn’t always understand or appreciate that.” Advocacy and changing the public narrative around oil and gas will also be key to addressing the industry’s next big challenge: attracting and training new talent, he added. I couldn’t agree more with Mr Thigpen’s sentiments. Raising awareness of these issues at the beginning of his time as Chairman has served as a guiding force, and I’m pleased to say that IADC and its members have made considerable strides in this area over the past year. The challenges our industry faces are not necessarily new, but they will require innovative solutions and unparalleled collaboration. It takes a certain level of willingness to confront these concerns head on and really ask ourselves, “So what will we do about this?” The first example that comes to mind is IADC’s Industry Value Initiative (IVI). The IVI workgroup, comprised of nine individu- als from member companies, was formed this year and began the difficult task of turning an abstract idea into a discernible mission with tangible goals. The purpose of this project is to find effective and impactful ways to communicate the value of our industry, with special focus on talent recruitment and engage- ment, capital markets and investors, and public and government affairs. The ultimate goal is to deliver valuable findings and practical resources for our members to use. This project is still in its infancy, and I’m looking forward to seeing how it develops throughout 2023. A couple of months ago, attendees of the IADC Drilling Engineers Committee’s Q3 Tech Forum, titled “The Future of Drilling: Brain Drain Manifesto,” had a very similar conversation. Working in breakout groups, participants devised a list of specific actions that can be taken around key issues like industry branding and perception, using technology to advance industry ambitions and efficiency, engaging the next generation of talent, and more effec- tive collaboration across companies and disciplines to achieve industry’s collective goals. The results of this collaborative effort are being compiled to create a “manifesto” that can be utilized to discern substantial next steps. IADC’s Accreditation and Credentialing team has also been hard at work creating ways for industry to engage with the next generation. In August, IADC launched WellSharp University, which gives colleges and universities the opportunity to offer to their students the same high-quality well control training found in the WellSharp accreditation program. This program will allow young professionals to set a strong foundation for their careers before they even graduate. IADC’s advocacy efforts have also played a part in changing the narrative around our industry and informing others of the importance of what we do. IADC’s Government & Industry Affairs and International Development teams have been busy advocat- ing for drilling contractors around the world through a variety of projects and initiatives. For example, in the US, IADC coor- dinated a Washington, DC, fly-in to facilitate member dialogue with federal regulatory agencies and legislative policymakers. Outside the US, IADC has developed broader engagement with the International Regulators’ Forum member countries, along with the International Association of Oil & Gas Producers, in discus- sions regarding digitalization and data performance framework concepts. Projects like these help to ensure the highest standards of health and safety, which are crucial aspects of advancing industry and, more importantly, of protecting the people who make up this industry. When it comes to industry’s “big questions,” I know a few things for certain – IADC will continue to advocate for the best interests of its members and provide a forum for collaboration and innova- tion. We will remain focused on our mission, facing toward the future and relying on the invaluable involvement and input of our members every step along the way. I am proud of the progress that has been made this year, and I’ve only covered a fraction of what this association and its members have accomplished in 2022. Please read on in the following pages for more details. DC DRILLING CONTRACTOR • NOVEMBER/DECEMBER 2022 43 IADC CONNECTION • IADC YEAR IN REVIEW BY KATIE CARR, IADC SENIOR COORDINATOR – EXTERNAL COMMUNICATIONS Accreditation and Credentialing IADC’s Accreditation and Credentialing (ACD) group provides globally recognized, gold-standard accreditation programs that aim to elevate personnel safety in the industry and create an efficient, competent workforce. ACD offers a variety of accredita- tion programs, which are developed, maintained and regularly updated by IADC members working through technical commit- tees, advisory panels and goal-oriented workgroups. IADC’s ACD initiatives have obtained ISO 9001:2015 certifica- tion for the 16th straight year, which confirms that they meet the quality and consistency of internationally recognized standards. IADC’s ACD department is the only accrediting body in the drilling industry to hold this certification. Accomplishing this recertifica- tion includes rigorous audit reviewing procedures, processes and records, as well as management, quality assurance, organiza- tional resources and product development. This year alone, the ACD group accredited 57 new training providers, and 32,382 trainees have passed an IADC-accredited course. Starting in January 2022, new employees entering the industry in the Permian Basin have been required to complete the Fundamental Safety Orientation for Basin United, the new univer- sal safety orientation program for the region. IADC’s WellSharp accreditation program provides comprehen- sive well control training standards for the global drilling indus- try, emphasizing rigorous training for every person with well con- trol responsibilities. WellSharp University – the newest iteration of the WellSharp program – launched in August. Through this program, the same high-quality training of the WellSharp pro- gram will now be accessible to universities and colleges. Students will be able to take the WellSharp exam at no cost and will receive a custom student certificate upon successful completion. Other projects have been taking place in the WellSharp arena, as well. Additional security features were added to WellSharp Live this year to ensure the integrity of the program’s online exams. IADC and its members are continuing to find other ways to evolve accreditation programs in order to continue meeting the shifting needs of the industry. Much of this work is accom- plished through member-based workgroups. This year, a variety of WellSharp workgroups made progress toward their respective goals: WellSharp Well Servicing: The goal of this workgroup is to review and revise courses to stay current with new industry guidelines around well control and make content less equipment- focused and more focused on pressure control. Workgroup mem- bers have recently completed reviewing a course for coiled tubing and are now reviewing the Oil and Gas Operator Representative course. WellSharp Test Question Review: This workgroup met for the first time this year and convenes monthly to review the test questions in English. The group is projected to start working on translations in early 2023. WellSharp Simulator Assessment Revision: This workgroup has completed reviewing the Supervisor Level Assessment guide- 44 lines and have started reviewing the Driller Level Simulator Assessment. MPD Course Accreditation Workgroup: The IADC Underbalanced Operations and Managed Pressure Drilling (UBO and MPD) Committee secured funding to build a three-course MPD program and assessments into the WellSharp database. A workgroup is developing test questions throughout the end of the year. Government and Industry Affairs IADC is the voice of the drilling industry, facilitating impactful advocacy on behalf of drilling contractors. IADC’s Government and Industry Affairs (GIA) team maintains an ongoing dialogue regarding issues critical to the industry and advocates for fair and sensible regulatory practices. Earlier this year, IADC launched a new way to participate in the association, via the Advocacy Membership, which is available to individuals who wish to engage directly with IADC’s Political Action Committee, DrillersPAC. Funds from DrillersPAC are used strategically to advance IADC’s advocacy efforts with policymak- ers who support the industry. Throughout the year, the GIA team has been busy engaging with government officials and regulators, maintaining discus- sions and participating in joint actions with allied trade associa- tions and entities, and keeping members informed. Examples of this work include: Continuously advocated for the interests of drilling contractors regarding the federal leasing bans in the US Gulf of Mexico and elsewhere by vocalizing IADC’s stance via media releases and statements, joining allied energy industry trade groups in filing a lawsuit challenging the US Department of the Interior, sending a joint trades letter to the Bureau of Ocean Management, etc. Held IADC’s annual Washington, DC, federal fly-in to facilitate dialogue between executives from both onshore and offshore IADC President Jason McFarland (left) and ABESPetro Presi- dent Rodrigo Ribeiro formalized a collaboration agreement between the two organizations at this year’s OTC. NOVEMBER/DECEMBER 2022 • DRILLING CONTRACTOR IADC YEAR IN REVIEW • IADC CONNECTION IADC sponsored students from the University of Louisiana and the University of North Dakota to attend the 2022 IADC Ad- vanced Rig Technology Conference in Austin, Texas. drilling companies and over 30 members of Congress, the Biden Administration and industry allies. Continued engaging with key industry groups, including ongo- ing participation in the Federal Lands Coalition, which met with the US Department of Energy’s Deputy Secretary David Turk. Sent letters and submitted comments with allied trade groups/ organizations to a variety of entities regarding an array of con- cerns. Contributed to Rep. Fred Keller’s resolution (H.Res.1101) suggest- ing the federal government increase production of domestic oil and natural gas via drilling. Used DrillersPAC funds to support 22 federal and state can- didates in both parties, creating dozens of interactions between IADC member company executives and key policymakers. Met with members of the Texas Railroad Commission to dis- cuss state-level issues affecting drilling contractors. Kept members informed of Congressional matters with month- ly updates in IADC’s DrillBits Newsletter. Played a key role in organizing onsite visits with IADC mem- bers and key policymakers. Examples include a Transocean offshore rig visit to increase general knowledge and awareness of how the industry operates and provides energy to the world, and a facility tour and policy discussion hosted by Cactus Drilling with Oklahoma Congresswoman Stephanie Bice. Participated in a land rig visit with 100 elementary and middle school teachers, facilitated by the Oklahoma Energy Resources Board. Continued involvement and leadership in safety through par- ticipation in the Onshore Safety Alliance Executive Steering Committee and presenting to the National Institute of Occupational Safety and Health. Attended an event with US Secretary of Energy Jennifer Granholm and Houston Mayor Sylvester Turner announcing a government program to promote geothermal energy development. Sponsored the 2022 Guyana Basins Summit with partner trade organizations and participated on an SME regulatory panel and moderated an “operator insight” panel. International Development The primary purpose of the IADC International Development team is to represent IADC and the interests of our members around the world. This is made possible by a network of regional repre- sentatives who serve as local advocates and foster connection and collaboration amongst members in Europe, the UK, Brazil, the Middle East, Asia Pacific, Australasia and Latin America. Another core component of IADC’s international network is the association’s 10 regional chapters outside the United States. Chapter activity has been steadily increasing in many regions, and some chapters held in-person meetings this year for the first time since before the pandemic. IADC’s International Development team focused on advocating for drilling contractors via a variety of projects and initiatives, while continuing to develop relationships with local government officials, regulators and other industry organizations. Recent examples of such efforts include: Hosted part three of cyclone/hurricane webinar series, in con- junction with the IADC South Central Asia (SCA) Chapter. Attended by 125 participants, including IADC SCA Chapter Chairman and DRILLING CONTRACTOR • NOVEMBER/DECEMBER 2022 45 IADC CONNECTION • IADC YEAR IN REVIEW Managing Director of ONGC. Moderated by members of IADC stu- dent chapters based in India. Partnered with British Rig Owners Association to address con- cerns related to the UK Civil Aviation Authority’s standards for offshore helicopter landing areas. Continued participation in International Maritime Organization working group on Best Environmental Practices for Underwater Noise by representing industry perspective and providing insight on offshore drilling activities pertaining to this issue. Continued monthly status calls with COVID-19 joint trades group to facilitate global movement of essential upstream person- nel. Renewed Southeast Asia Chapter’s membership with the Indonesian Petroleum Association for 2022. Continued joint industry project addressing oil spill prevention, preparedness and response in the Wider Caribbean. Developed broader engagement with the International Regulators’ Forum (IRF) member countries, along with the International Association of Oil & Gas Producers (IOGP), in discus- sions regarding digitalization and data performance framework concepts. Continued development of joint IRF/IOGP/IADC suite of learning statements: Enhancing Incident Investigation Protocols, Building on “Left Side Bow Tie” and Considerations for Well Control. IADC’s Latin America Chapter partnered with the Mexican trade association AMEXHI to hold a virtual Offshore Security Workshop. Signed MOU with ABESPetro, Brazilian trade association rep- resenting oilfield service companies, formalizing collaboration to foster education and communication among stakeholders in Brazil’s upstream sector. Young Professionals Subcommittees were formed for both the SCA and Australasia chapters. Committees Committees continue to provide a forum for members to col- laborate and take considerable action toward various industry- driven initiatives. Two committees merged into one this year – Health, Safety & Environment combined with Workforce Development to create the Health, Safety, Environment & Training (HSET) Committee. The mission of the HSET Committee is to provide a forum to exchange best practices of committee members and to dissemi- nate those practices to the IADC membership. HSET committee members have been working on new Terms of Reference to assist with committee scope and goals. The Incident Statistics Program (ISP) Subcommittee was also formed under the HSET Committee this year. The purpose of the ISP is to assist in the industry’s efforts to improve safety on oil and gas drilling rigs by providing data on incident trends and rates. The ISP Subcommittee reviewed and rewrote the ISP reporting guidelines document line-by-line, which is the first time this document has been updated in its entirety in 12+ years. The revised document is now available in an evergreen format on IADC’s website. IADC currently has 17 committees in total. Recent examples of 46 committee activities and updates include: Advanced Rig Technology: held testing workshop for updated bit dull grading system; issued V1.0 of the IADC Rig Sensor Stewardship Guidelines, produced through more than 18 months of collaborative effort with the Maintenance Committee and with nearly 100 drilling industry professionals. Cybersecurity: working to establish a priority list of functional elements for cybersecurity risk mitigation, which will be utilized to provide revisions to IADC’s Cybersecurity guidelines. The revised guidelines are intended to provide for easier application of IADC cyber principles throughout the upstream supply chain. Drilling Engineers: hosted two hybrid technology forums, “Drilling Workforce of the Future” and “Future of Drilling: Brain Drain Manifesto.” Q4 Tech Forum, “Designing & Delivering Wells to Maximize Value Throughout Their Lifetime,” is scheduled for November. HSET: The H 2 S workgroup, functioning under the HSET Committee, began work in mid-2022 with the main goal of devel- oping an industry-recognized standard for H 2 S that is applicable and specific to the drilling industry. This workgroup is focused on developing training courses that are role-specific, with special focus on exposure risk. A draft curriculum is expected by Q1 2023. Jackup: continuing to revise several ISO 19000 series stan- dards addressing offshore site-specific conditions, including enhancing subsea foundation assessment criteria for the safe operation of jackups and stationkeeping systems for offshore structures. Maintains a continuously active role on matters concerning Subcommittee 7 (Offshore Structures) within ISO Technical Committee 67 (Oil and Gas Industries Including Lower Carbon Energy). Rig Moving: held first in-person meeting in over two years; formed subcommittee to address regulatory issues relating to DOT/FMCSA compliance. Assembled a workgroup to initiate an industrywide safety standdown addressing the increase in severe injuries and fatalities related to rig moving. Created and distrib- uted a document to IADC members to promote safety/awareness/ prevention regarding rig moving. Sustainability: produced IADC ESG position statement that has been published on IADC’S website; new officers will be elected in November. Technical Publications: published 11th book in its Drilling Encyclopedia portfolio, “Fundamentals of Horizontal Wellbore Cleanout: Theory and Applications of Rotary Jetting Technology”; developed first “DrillingIn” podcast. Well Control: focused on issues such as enhancing “safety shares” and maintenance of drill string tripping log standardiza- tion. Engaged with a joint industry effort to coordinate an indus- try response to the recently proposed BSEE Well Control Rule “3.0” revision that aims to address well integrity and blowout preven- tion provisions on the US Outer Continental Shelf. Young Professionals: held “Luncheon with Leaders,” the first event of its type, which was capped at 40 participants to ensure a more intimate networking setting. Underbalanced Operations & Managed Pressure Drilling: com- pleted work on API 16RCD 3rd Edition Specification Document, which was published in June. Work continues on the Influx NOVEMBER/DECEMBER 2022 • DRILLING CONTRACTOR IADC YEAR IN REVIEW • IADC CONNECTION Management Annex to API 92S and 92M specification docu- ments. Student Chapters The IADC Student Chapter Program was created in 2017 as a formal means of engaging with the industry’s next generation. In 2022, several schools met the requirements for Student Chapters, and IADC welcomed King Fahd University for Petroleum & Minerals in Dhahran, Saudi Arabia, and Marietta College in Marietta, Ohio, to the program. With these latest additions, the program now consists of 14 active student chapters worldwide. IADC student chapters allow participants to supplement their academic educations with real-world industry experience and connections. Over the past year, student chapters held meetings, organized and hosted events and attended industry conferences. Here are some highlights: The Student Chapter at the University of North Dakota jointly organized two virtual events with the Society of Petroleum Engineers student chapter. The first integrated virtual workshop covered carbon capture, utilization and storage; the second work- shop discussed geothermal drilling. Students at Maharashtra Institute of Technology and Pandit Deendayal Energy University held a collaborative five-day HSE conference and webinar series. The conference consisted of guest webinars from industry professionals discussing various HSE topics; three competitions, including a paper presentation competition, digital poster presentation competition, and HSE video-making competition; a well control workshop and a subsea lab visit; and a panel discussion where industry professionals emphasized the importance of HSE. The Texas A&M Student Chapter organized an ESG Summit with the goal of educating the public about the oil and gas indus- try’s ESG operations from the perspectives of academic, regula- tory and industry representatives. The first IADC student chapter in Australia was established last fall at Curtin University and was officially inaugurated into the Bentley (Perth) Curtin Student Guild in late July 2022. Student chapter members participated in a university event for student organizations to increase awareness and participation. So far this year, IADC has sponsored more than 250 students and several faculty members to attend various conferences, including OTC, Drilling Africa and World Drilling. Communications One integral way IADC serves its members is by keeping them informed and connected through an assortment of communica- tions channels. Drilling Contractor, the official magazine of IADC, continues to exclusively focus on drilling and completions, providing in-depth coverage on topics impacting members’ day- to-day operations. Examples of articles published this year are: One-on-one Q&A’s with key industry leaders from Patterson- UTI, Unit Drilling, Shelf Drilling, IOGP and IHS Markit. Using digital technologies to support new workflows in drill bit forensics How low-carbon technologies for drilling rigs are moving from concept to reality The art of data science in the drilling industry How offshore asset integrity is evolving in the new digital ecosystem Autonomous drilling at scale: How close are we? Drilling Contractor magazine also delivers in-depth reporting in digital formats: The DC Digital Reader is a digital mirror of Drilling Contractor, providing the same high-quality content as its printed coun- terpart. It includes digital-exclusive content, such as additional articles, video/audio interviews and links to additional resources. The DrillingContractor.org news site currently includes more than 7,000 articles and videos, as well as a growing collec- tion of virtual panel discussions (VPDs). In 2022, DC hosted “Upgrading the Grading,” a VPD focused on the IADC Advanced Rig Technology Committee’s ongoing project to modernize the IADC bit dull grading system. Leaders from the workgroup, repre- senting Noble, ExxonMobil, NOV, Shell, among other companies, participated in this 90-minute session. DC launched 14 issues of eNews from DrillingContractor.org in 2022, featuring video interviews from key IADC and industry conferences. A few examples of the videos are: With Petrobras’ Andre Alonso Fernandes from the SPE/IADC MPD & UBO Conference With Maersk Drilling’s Rune Loftager and Precision Drilling’s Stu Ross at the IADC Advanced Rig Technology Conference With Nabors’ Ram Murthi and D-WIS’ Mark Carrier at the IADC World Drilling Conference With Oil States Industries’ Tom Robertson, Baker Hughes’ Dan Barton, and Drillmec’s Hadi Mustapha and Leonardo Bori at OTC DrillBits is IADC’s monthly digital newsletter that focuses on IADC news and initiatives and reaches over 22,000 readers monthly. Articles discuss IADC regional and student chapters, conferences and events, committees, accreditation programs, and global legislative and regulatory activities that may impact drill- ing contractors. Examples of articles published in DrillBits this year include: IADC North Sea Chapter Gives Back to the Community WellSharp University Now Available! DuBose: IADC Student Chapters Provide Indispensable Opportunities for Connection IADC Hosts Washington D.C. Onshore and Offshore “Fly In” Social Media Influencers Tell the Industry’s Story at Drilling Onshore Panel IADC maintains four websites that receive close to 40,000 aver- age monthly visitors combined. Each website serves a unique purpose: DrillingContractor.org: the official website of Drilling Contractor magazine. IADC.org: the official website of IADC. Lexicon.org: a glossary of more than 10,000 oilfield drilling terms that have been defined in legislation, regulations, stan- dards and/or guidelines. DrillingMatters.org: an educational website demonstrating the value of hydrocarbons to humanity, as well as the fundamentals of drilling operations. DC DRILLING CONTRACTOR • NOVEMBER/DECEMBER 2022 47 IADC CONNECTION • NEWS CUTTINGS IADC DEC forum tackles industry’s ‘brain drain’ challenge, explores actionable steps On 21 September, the IADC Drilling Engineers Committee (DEC) hosted a forum featuring a panel discussion with Eric van Oort of UT Austin, Blaine Dow from Schlumberger and Scott Beautz from the National Energy Technology Laboratory, discussing challenges in attracting and recruiting the next generation of workers. Participants then worked in breakout groups to brain- storm specific actions that the industry can take to better posi- tion itself for the future. The ideas discussed during the forum will be used to draft a document with recommended actions for the industry. Click here to watch a video with Blaine Dow on the IADC DEC Q3 Tech Forum. IADC South Central Asia Chapter hosts technology meet On 17 September, the IADC South Central Asia Chapter (SCAC) hosted its 35th technology meet in Mumbai, India. The event saw 220 people attending in person, more than 250 attendees on YouTube, and more than 50 attendees on Zoom. Members of the IADC Maharashtra Institute of Technology Student Chapter and IADC SCAC Young Professionals Subcommittee were in attendance. The inaugural address was given by Pankaj Kumar, Director Offshore – ONGC, and the keynote address was given by O.P. Singh, IADC SCAC Chairman, Director (T&FS) – ONGC. Dynamic Drilling and Resolve Marine gave a presentation on jackup rig salvage, Shelf Drilling pre- sented on technical innovations, and Schlumberger presented on directional casing while drilling. IADC’s Warren honored with OEC Hall of Fame induction At the 2022 Oilfield Energy Center (OEC) Gala on 17 September, Bob Warren, VP of Government and Industry Affairs at IADC, was inducted into the OEC Hall of Fame as an Industry Champion. The OEC established the Industry Champion award in 2016 to recognize individuals “whose fortitude and dedication created positive change in the workplace or cul- ture of the offshore industry.” Honorees have typically championed a cause, poli- cy, program or project that helped shape the industry for the better. In addition to his distinguished career in the oil and gas industry, Mr Warren has been a member of the OEC Board for more than 20 years. 48 Ohio’s Marietta College forms IADC student chapter The IADC Marietta College Student Chapter was officially formed on 15 September. The chapter, which became the 14th entry into the IADC Student Chapter program, elected the following officers: David “D.J.” LaRosa (Chairman); Thomas Caserta (Vice Chairman); Marvin Moore (Secretary); Garrett Nicol (Treasurer); and Cullen Dennis (Marketing & Recruitment Director). The chapter held an initial officer’s meeting to discuss plans for the year. Potential upcoming events may include a tour of a top-hole air drilling rig, a tour of a drilling equipment testing facility, and a clay shoot outing jointly organized with Marietta College’s American Association of Drilling Engineers student chapter. IADC student chapters serve as a supple- ment to academic instruction, offering stu- dents a chance to learn about the practical side of the industry. Scan me to learn more Bob Warren, IADC’s VP of Government and Industry Affairs, was inducted to the OEC Hall of Fame on 17 September as an Industry Champion. Mr Warren is pictured with wife Anne. NOVEMBER/DECEMBER 2022 • DRILLING CONTRACTOR about the IADC Student Chapter program. bit.ly/3RY131o WIRELINES • IADC CONNECTION ExxonMobil, Oceaneering recognized with Safety Leadership Awards from COS ExxonMobil and Oceaneering each received Safety Leadership Awards from the Center for Offshore Safety (COS). The awards recognize companies for outstand- ing leadership in developing safety man- agement and performance practices and projects that advance the offshore indus- try’s culture of safety. ExxonMobil was honored for its Enhancing Process Safety (EPS) program, which was developed as part of a multi- year effort. The program includes identi- fication of higher-consequence scenarios, defined ownership of critical safeguards and field-based safety and environmen- tal management system (SEMS) assess- ments. EPS assessments involve in-field demonstration of the health of personnel and equipment safeguards that prevent or mitigate higher-consequence scenarios. Oceaneering was recognized for a sub- sea, remotely operated vehicle system called Liberty E-ROV that the company designed and deployed. It is a self-con- US Interior Department to update Well Control Rule The US Interior Department has announced proposed revisions to the 2016 Well Control Rule. These revisions include: Requiring blowout preventer systems (BOPs) to be able to close and seal the wellbore to the well’s kick tolerance design at all times; Removing the option for operators to submit failure data to designated third parties and instead require the direct submission of failure data to the US Bureau of Safety and Environmental Enforcement (BSEE); Requiring failure analysis and inves- tigations to start within 90 days instead of 120 days; Requiring independent third parties to be accredited by a qualified standards development organization; Specifying that surface BOPs on exist- ing floating facilities must follow the dual shear ram requirements when replacing an entire BOP stack; Requiring that remotely operated vehi- cles be capable of opening and closing each shear ram on a BOP; and Requiring the operator to provide test results to BSEE within 72 hours after completion of the tests if BSEE is unable to witness testing. The Well Control Rule was developed from recommendations from investiga- tion teams following the 2010 Macondo incident. Members of the public may submit comment on the proposed rule- making until 14 November. Scan me to read BSEE’s proposed revisions to the Well Control Rule. on.doi.gov/3MnZNUf API comments on proposed US offshore leasing program API submitted comments in early October urging the US Interior Department to open offshore acreage to development. Responding to the 2023-2028 National Outer Continental Shelf Oil and Gas Leasing Proposed Program and Draft Programmatic Environmental Impact Statement, API highlighted the impor- tance of offshore leasing to US eco- nomic strength and energy security. It also called on the Interior Department to uphold its statutory responsibility to take current and future energy needs into account by promptly issuing a final program that includes 11 lease sales. In the comments, API expressed con- cern over the proposed program’s option to issue a final program with zero lease sales, which would jeopardize domes- tic production and weaken American energy security. According to a recent study conducted by API and the National Ocean Industries Association, a two-year lapse in fed- eral offshore leasing could lead to a drop in production of nearly 500,000 bbl/day, cost nearly 60,000 American jobs and sacrifice billions in lost state and local revenues by 2040. tained, battery-powered remotely operated vehicle (ROV). The Liberty E-ROV is oper- ated from a remote onshore location and can conduct subsea work missions for up to two months without a surface support vessel. The combination of the Liberty and an onshore remote operating center elimi- nates the need for vessels and personnel to travel to and from offshore, reducing exposure to high-risk environments, as well as offshore injuries and environmen- tal incidents. BOEM reinstates top bids from 2021 GOM lease sale On 14 September, the US Interior Department’s Bureau of Ocean Manage- ment (BOEM) announced reinstatement of the 307 highest valid bids from Gulf of Mexico Lease Sale 257, in accordance with congressional direction in the Inflation Reduction Act (IRA). After months of postponement of the sale’s intended date, the lease sale was held by BOEM in November 2021, bringing in a total of $189,888,271. In February of this year, a federal judge invalidated the results of oil and gas Lease Sale 257. In a statement, IADC said that, while BOEM’s announcement is encouraging, it continues to monitor related factors that may ultimately have an impact on its members. More specifically, IADC is cur- rently working with members and counsel to identify how IRA provisions detailing lease sales 258, 259, 261 and other related policies may or may not be affected by ongoing litigation concerning federal oil and gas leasing. “BOEM’s reinstatement of Lease Sale 257 Act is a positive step forward for energy production in the Gulf of Mexico, which has lacked new oil and gas leases for almost two years. With the region being responsible for over 15% of all US oil pro- duction, the importance of holding robust and timely offshore lease sales cannot be understated. As nations around the world experience rising energy costs and height- ened geopolitical tensions, development of all forms of energy in the Gulf will be criti- cal to ensuring lasting energy security for the US and its global partners,” said IADC President Jason McFarland. DRILLING CONTRACTOR • NOVEMBER/DECEMBER 2022 49 IADC CONNECTION • UPCOMING IADC EVENTS CASPIAN 2023 IADC DRILLING CO N F ER EN C E & E X H I B I T I O N 7-8 FEBRUARY 2023 FOUR SEASONS HOTEL BAKU, AZERBAIJAN 2023 IADC HEALTH, SAFETY, ENVIRONMENT & TRAINING IADC Drilling Onshore Conference & Exhibition C C O O N N F F E E R R E E N N C C E E 18 MAY 2023 18-19 APRIL 2023 H YAT T R E G E N C Y HOUSTON WEST H YAT T R E G E N C Y HOUSTON WEST H O U S T O N , & & E E X X H H I I B B I I T T I I O O N N HOUSTON, TEXAS T E X A S IADC HSE AND S U S TA I N A B I L I T Y ASIA PACIFIC CONFERENCE & EXHIBITION 23-24 MAY 2023 GRAND HYATT KUAL A LUMPUR IADC International Tax SEMINAR 8-9 JUNE 2023 SEMINAR G R A N D H YAT T S A N A N TO N I O R I V E R WA L K S A N A N T O N I O , T E X A S KUAL A LUMPUR, MAL AYSIA To register for these and other conferences please visit us online at www.iadc.org/conferences/upcoming. 50 NOVEMBER/DECEMBER 2022 • DRILLING CONTRACTOR DRILLING CONTRACTOR • IADC CONNECTION DON’T MISS OUT ON OUR NEXT ISSUE! EDITORIAL PREVIEW January/February Critical Issues in Drilling & Completions: One-on-One with Executive Leaders Deepwater Drilling Markets & Technologies Managed Pressure Drilling Interview with 2023 IADC Chairman DISTRIBUTION: IADC Drilling Caspian Conference & Exhibition [7-8 FEBRUARY, BAKU, AZERBAIJAN] OFFICIAL MAGAZINE OF THE INTERNATIONAL ASSOCIATION OF DRILLING CONTRACTORS SPE/IADC International Drilling Conference & Exhibition [7-9 MARCH, STAVANGER, NORWAY] AD CLOSING: 6 JANUARY MATERIALS DUE: 13 JANUARY DRILLINGCONTRACTOR.ORG IADC.ORG News Visit DrillingContractor.org for the latest drilling industry news and videos Russia, supply chain issues will drive energy production, demand over the next few years Post-downturn bankruptcies enable oilfield services sector to reset financial balances IOGP report finds virtual, in-person well control training to have equal performance Halliburton, ONGC advance MPD remote operations through automation Despite recovering market, MPD growth could be hindered by capital discipline Kinetic blowout stopper relies on pyrotechnics to improve shearing/sealing capability DRILLING CONTRACTOR • NOVEMBER/DECEMBER 2022 51 D E PA R TM E NT S • H S E&T CO RN ER Safety-critical task analysis is not a silver bullet, but it can help improve procedural integrity Undertaking systematic process to identify human factors issues can lead organizations to focus on major accident hazards BY VARUN SARPANGAL, MAREX The term “human factors” has been in use for over four decades in the drilling indus- try. However, even today, there can be lim- ited understanding in the field about what the term actually covers. Often, there is a misconception that it is just about human behavior. While that is certainly part of the remit, human factors is mainly about engineer- ing (or re-engineering) the tasks, work equipment and work environment in order to get the best out of the people who are carrying out the tasks. The overall aim is to minimize the like- lihood of accidents and improve safety in the workplace. The drilling industry has seen some turbulent times of late. While companies continue to look to optimize their opera- tional costs, the costs associated with human factors integration might appear to be a deterrent for companies. While it can be difficult to quantify the long- term financial benefits of human factors integration, the true benefit lies in what it can offer in terms of major accident prevention. It is arguable that with all the cost- cutting measures the industry has seen over the past few years, the risk of human failure causing major accidents is now considerably higher. Organizations should remind themselves that the cost of car- rying out these assessments and imple- menting improvement measures would be substantially lower than the cost of major accidents. 52 Safety critical When “human factors” is used in the context of major accident hazards, it concerns the severe consequences that human failures can bring about in safety- critical industries, such as drilling. It is a statistically validated fact that a vast majority of major accidents have some level of “human error” as part of their root cause. “Lack of situational awareness” is one example of human failure that appears in incident investigation reports. For instance, the driller not gleaning crucial information about certain changes in the well at the right time could result in a blowout that has catastrophic outcomes. However, digging a bit deeper, it can be seen that there are underlying human per- formance influencing factors (PIFs) that lead to such human failures. Examples of PIFs that might affect the driller’s situational awareness are fatigue, distractions or a high cognitive workload due to a poorly designed human-machine interface. The best way to prevent human factors issues from leading to costly accidents is to proactively and pre-emptively carry out a systematic study to identify and under- stand the PIFs, and make sure they are brought to their optimal states and main- tained during ongoing operations. Safety-critical task analysis Safety-critical task analysis (SCTA), a process that encompasses human reli- ability analysis (HRA), can help achieve this objective. The process consists of four key steps: 1. Identification of safety-critical tasks Safety-critical tasks are defined as those tasks where human factors could cause, contribute to, or fail to reduce the effect of a major accident. The first step of an SCTA involves iden- tifying all safety-critical tasks. One of the primary sources of data that could be used for this step is the bowtie major hazard analyses for the drilling installation. Its output can be qualitatively analyzed to identify all the associated tasks that are required to make sure major accident haz- ard control and mitigation barriers remain in place and are effective. The resulting information will be a list of safety-critical tasks for further assessment and screen- ing. 2. Prioritization ranking of safety-critical tasks As task characteristics and the sever- ity of consequence of human failure in carrying out the task correctly vary, some safety-critical tasks can be more critical than others. These need a more in-depth assessment. A process for allocating a priority ranking to each task has to be established. There is guidance from the UK Health and Safety Executive (HSE) on assessment of safety-critical tasks and the Energy Institute’s guidance on SCTA, which could be used for the prioritization exercise. This guidance would have to be appropriately modified and tailored to suit the opera- tions of the drilling installation. Providing scores for the two aspects of task characteristics and the severity of consequence for each safety-critical tasks allows the tasks to be ordered by overall priority score. This can then be used to group the tasks into high, medium and low. The organization can then start by ana- lyzing the high criticality tasks, before moving on to the lower priority ones. The scoring and prioritization of safety-critical tasks should ideally be completed in a workshop setting with members of the workforce who have a detailed operational understanding of the tasks. NOVEMBER/DECEMBER 2022 • DRILLING CONTRACTOR H S E&T CO RN ER • D E PA R TM E NT S 3. Development of hierarchical task analysis diagrams In order to assess the levels of human interaction with systems and equipment, a suitable assessment tool that uses a systematic approach is needed to identify potential for human failures within tasks. Task analysis methods are used to understand what is being carried out, where hazards may be present and where errors may occur. Hierarchical task analysis (HTA), as the name suggests, places a hierarchy on the order of the tasks to be analyzed. It breaks down a given human-performed activity into goals, tasks and task steps. The goal (the main task) is represented at the top level, and the sub goals (task steps) are represented at the next subordi- nate level. The task steps, in turn, may be broken into more detailed actions that per- sonnel could take (sub-steps) represented as nested boxes below each task step. The method produces a tree structure, along with an additional output being a list of tasks outlining their sequencing in order to meet the overall task goal. This allows work procedures to be analyzed, and various human errors and their sub- sequent consequences can be identified. Alongside the official company proce- dures and work instructions for the safety- critical tasks, other information gathered from the worksite by the crew, such as completed walk-through talk-through (WTTT) templates, can be used as sources of input toward building the task steps. The WTTT process consists of an expe- rienced person demonstrating how the task is carried out onsite. It helps to under- stand task steps, identify likely error traps and aids discussion of how the operator might typically deal with them. It also helps in capturing and recording any devi- ations from or gaps between how the offi- cial procedures have been written (work as imagined) and how work is actually done on the ground (work as done). 4. Human reliability analysis HRA is a process that uses a set of “guide words” similar to those used in a hardware HAZOP. The review team (similar to the one formed for the safety-critical task prioritization exercise) applies the guide words to the lowest level of the developed Driller Driller Driller Driller Driller Driller Driller Driller Driller Driller Driller Driller Senior Toolpusher Driller Driller Driller Figure 1: An example of a hierarchical task analysis diagram. hierarchical task analysis in order to iden- tify the possible errors that could arise. The guide words and questions should be developed in line with established methods, such as predictive human error analysis and the systematic human error reduction and prediction approach. This exercise ensures that any devia- DRILLING CONTRACTOR • NOVEMBER/DECEMBER 2022 53 D E PA R TM E NT S • H S E&T CO RN ER 2023 IADC HEALTH, SAFETY, ENVIRONMENT & TRAINING Conference & Exhibition 18-19 APRIL 2023 H YAT T R E G E N C Y HOUSTON WEST H O U S T O N , T E X A S PLATINUM SPONSOR SILVER SPONSOR www.iadc.org/event/ 2023-iadc-hset-conference For more information, contact IADC by phone at +1.713.292.1945 or via email at iadcconferences@iadc.org 54 tions or suggested improvements in the task design are identified and either cor- rected or incorporated. When potential human errors are high- lighted using the guide words, the team needs to identify the underlying PIFs, the likely consequences and the possibilities for recovery. The consequences of these human failures are then explored, along with existing prevention or mitigation measures in place. If the resulting residual risk is still con- sidered to be high, that is where the exist- ing safeguards or recovery measures iden- tified are deemed as inadequate. If none are identified, appropriate error prevention strategies are developed. So, is SCTA a magic bullet that can pre- vent all human failures on drilling instal- lations? Can human reliability on drilling installations be guaranteed by carrying out a desktop analysis such as the SCTA? The answer is definitely no. Human reli- ability on an installation can only be opti- mized by implementing a complete human factors integration program. Going through the SCTA process will naturally help in achieving improved pro- cedural integrity, which plays a key role in optimizing the task design. Beyond that, however, the process may not provide solutions to human factors issues. What it will do, though, is highlight the various existing human factors problems in the workplace, including those at the organizational and management levels. For any organization in the drilling industry looking to make a start with human factors, the SCTA exercise is an ideal stepping stone toward full human factors integration because: 1. It focuses on major accident hazards. It is common to see several safety pro- grams and statistics with focus on person- nel safety on drilling installations, which are talked about virtually on a daily basis. The reason for this could be that they are related to events which have higher prob- abilities of occurring. However, process safety – which is about low probability but significantly higher consequence events – tends to get sidelined in the process. While the SCTA process can also be used to improve personnel safety and pre- vention of injuries, the resource-intensive nature of the study means that it is a better investment for prevention and mitigation of major accidents. It can help in moving the focus equally over to the larger picture – matters that might be gradually building up toward a sudden release of hazard with catastroph- ic consequences. This also means that the organization can have a sharp focus on a manageable list of tasks while embarking on human factors integration. 2. It can shed light on the next steps an organization needs to take in its human factors integration journey. The SCTA pro- cess will identify significant human PIFs that are not in the optimal state for each safety-critical task. When a group of these tasks have been analyzed, a pattern may emerge that highlights significant areas of concern in the overall workplace, such as level of supervision, human-machine interface or training. Any identified pat- tern can then be explored and assessed further using other methods, such as workload assessments or control room ergonomics assessments. What you can do The IADC North Sea Chapter published “Human Factors – Guidance on MODU/ MOU Safety Case Content” in July 2019. The document provides a well-rounded picture of the various aspects of human factors that a drilling contractor would need to consider. Human Performance Oil & Gas also has a dedicated website with a multitude of tools, techniques and guidance to help duty holders begin to address human fac- tors on their assets. While it would be ideal for organizations to have in-house human factors capabil- ity as part of their office-based and onsite teams, this could take time to build. A short-term solution could be to begin by using specialist external consultants who would be in a position to guide and support by using their expertise, as well as present an unbiased view of where the organiza- tion currently stands. DC NOVEMBER/DECEMBER 2022 • DRILLING CONTRACTOR Scan me to visit the IADC North Sea Chapter resources page. bit.ly/3MnAams AUTOMATION & SAFET Y Uptake of automation, remote operations enhances need for systematic alarm management Panel: False alarms can sow human distrust in automation, while lack of interoperability is still leading to pain points for end users BY JESSICA WHITESIDE, CONTRIBUTOR Disciplined alarm rationalization helped Murphy Oil cut alarm notifications from its Eagle Ford Shale production sites from 10,000-plus a week to just approximately 100. The key to this dramatic result? “Brute force methodology,” said Dale Bradford, Murphy’s Vice President, Global HSE. Speaking on a panel about automa- tion and safety systems at the 2022 IADC Advanced Rig Technology Conference in Austin on 31 August, Mr Bradford said the company used the International Society of Automation Alarm Management Standard 18.2 to guide the process of rationalizing each alarm in a given facility. Alarms that indicated an abnormal situ- ation requiring an immediate response from the operator, that had a defined action for the operator to take within a given time, and that would lead to a defined consequence if the operator ignored the alarm, were maintained. Alarms that did not meet this criteria were eliminated. This rationalization process was not com- plicated but was “very brutal,” Mr Bradford said. “You’re sitting in rooms with a group of folks that manage this every day and banging away at every alarm and rational- izing and changing and recoding systems to eliminate the issue,” he added. So far, the company has conducted more than 17 facility reviews in the Eagle Ford Shale. Only a small fraction of the thousands of alerts and alarms assessed during the rationalization process were real exceedances that required action. Many turned out to be information that was useful or needed for various purposes but that was not truly an actionable, prob- lematic issue to deal with, Mr Bradford said. “We’ve just gotten started, and we’ve already seen some pretty incredible results.” Managing alarms for remote operations Murphy has been pursuing sensors and automation primarily to monitor process- es and provide data for predictive mainte- nance at its upstream production facilities (e.g., monitoring conditions such as pres- sure, vibration, temperature, fluid rates, fire and gas) to ensure that they are oper- ating within the guardrails for safety, Mr Bradford said. Managing alarms was not a significant problem when field-located management was the norm, with crews dedicated to each field and facility. However, as Murphy Oil began concentrating its onshore pro- duction in the Eagle Ford and Canadian shale fields with sites scattered many miles apart, the company moved to an “operated by exception” model that uses a remote operations center and dynamic, data-driven crew routing to manage a large number of sites across vast dis- tances. “We simply must rely more on instru- mentation and automation to keep track of everything,” Mr Bradford said. Under the remote operations concept, information, alarms and data from multiple facilities, pads and wells are routed to one center – concentrating the alarms and information on a small group of people who were deal- ing with “a ridiculous number of alarms,” Mr Bradford said. The volume of alarms made it challenging for people to focus on their work, and the situation was not sustainable. “In the past, frankly, we could get away with less-than-wonderful alarm manage- ment because we had people there to look at it and to understand it,” he said. “That’s not the case anymore.” There’s a school of thought that when an alarm occurs, it’s already too late for safety: Something has already gone wrong, and it’s a very reactive mode to be in, Mr Bradford said. While talking about alarm management can, therefore, feel “old school,” getting a handle on alarm man- agement is a precursor to “a world where we can be more proactive and actually be ahead of the situation,” he said. “We must sort out this reactive alarm management situation so that we can have reasonable data and have people be able to pay atten- tion to the right things – and then we may be able to develop the trust in the system.” “Nobody trusts 10,000 alarms a week. If we can move beyond that and develop that trust, then we can start considering actual automation.” Building trust in automation Distrust of automation is one of the key challenges the drilling sector must overcome if it is to use automation to deliver higher standards of process safety, said Rafael Guedes de Carvalho, Project Manager, Schlumberger, another panelist from the same session at the conference. Mr Carvalho noted that a 2021 International Association of Oil and Gas Producers report found that three-quarters of incidents leading to a well control event were related to human factors, and at least half of those were people not follow- ing procedures. Automation could help the humans in the equation make better decisions and, where possible, enable sys- tems to make those decisions instead of humans, he said. In this case, validation of data quality is critical. If the data that automated sys- tems are collecting is not good, “we some- times have the risk of overwhelming the operators with alarms that are not actually accurate,” he commented. “Every time we have a false alarm, we have the conse- quence of lack of trust in the system.” DRILLING CONTRACTOR • NOVEMBER/DECEMBER 2022 55 AUTOMATION & SAFET Y TOP: The Automation and Safety Systems panel session at the 2022 IADC Advanced Rig Technology Conference on 31 August in Austin, Texas, included (from left): Mark Anderson, Ensign Energy Services (moderator); Don Bartusiak, Collaborative Sys- tems Integration; Rafael Guedes de Carvalho, Schlumberger; Dale Bradford, Murphy Oil; and Andy Westlake, Seadrill (modera- tor). BOTTOM LEFT: Disciplined alarm rationalization has helped Murphy Oil cut its alarm in the Eagle Ford from 10,000-plus a week to approximately 100, Mr Bradford said. BOTTOM RIGHT: Validation of data quality is critical so that automation systems do not lead to false alarms, which erode human trust in the systems, according to Mr Carvalho. To help build trust, there also needs to be a balance between generating sophisticat- ed analytics and presenting those through an interface in an easy way for the user to understand. Finding better ways to com- municate what the machine is actually doing could help get buy-in from the drill- er, Mr Carvalho said. “Trust only comes from understanding.” Addressing multi-vendor challenges Contributing to potential distrust of automation is that, even on a single rig, there may be a variety of different sys- tems that were not designed to commu- nicate with each other, Mr Carvalho said. Fellow panelist Don Bartusiak, President of Collaborative Systems Integration and Co-Chair of the Open Process Automation Forum, asserted that the closed, propri- etary nature of control and information- 56 using systems is a root cause of many of the asset owner’s pain points in multiple industry sectors. “I know from first-hand conversations with drillers you guys have a particularly acute problem in terms of the number of different companies that are performing work or providing services on those rigs. So if every company that wants to use a control system or any information-using system brings a closed proprietary solu- tion, you’re going to have a problem,” he said. One initiative that could aid integra- tion of automated systems in a multi- vendor environment is the Open Process Automation Standard, facilitated by The Open Group, which is working to transi- tion the process control industry away from proprietary solutions toward a stan- dards-based, open, secure, interoperable process control architecture. “Just because we use the phrase ‘open’ does not mean we’re asking anyone to give valuable intellectual property away,” Mr Bartusiak said. “The whole point of it is about standardizing the interfaces between the components that make up the system.” “This should influence what this com- munity is thinking about in terms of what the future of automation looks like in your world.” Mr Bartusiak pointed to the Institute of Electrical and Electronics Engineers networking standards as one example of industries achieving a common goal for interoperability. “Take Wi-Fi for example. How much economic value has been created by that industry standard that has allowed solu- tions providers to bring products to the marketplace and how big that pie has grown,” he said, calling it a “compelling case for openness.” DC NOVEMBER/DECEMBER 2022 • DRILLING CONTRACTOR PEOPLE, COMPANIES & PRODUCTS • DE PAR TM E NTS Noble Corp completes merger with Maersk Drilling The business combination between Noble Corp and Maersk Drilling has been completed, and the companies are operat- ing as a single organization as of 3 October. “Today marks an exciting new chapter as we bring together these two exception- al companies,” Noble President and CEO Robert Eifler said. Additionally, Noble has closed on the sale of five jackups (Noble Hans Deul, Noble Sam Hartley, Noble Sam Turner, Noble Houston Colbert, and Noble Lloyd Noble) to Shelf Drilling. Baker Hughes streamlines 4 product companies into 2 segments Baker Hughes is restructuring its four product companies to focus on two report- ing business segments and streamlin- ing its corporate structures. The Oilfield Services & Equipment (OFSE) segment integrates the current Oilfield Services and Oilfield Equipment product companies. The Industrial & Energy Technology (IET) integrates the current Turbomachinery & Process Solutions and Digital Solutions product companies. As part of the restruc- turing, Maria Claudia Borras was named Executive VP of OFSE. Rod Christie was named Executive VP of IET, and Jim Apostolides took over as Senior VP of Enterprise Operational Excellence. New Welltec test flow loop facility to focus on CCS projects Welltec has opened a new test flow loop facility in Esbjerg, Denmark, to provide corrosion testing for carbon capture and storage (CCS) projects. This will include Project Greensand – the most mature proj- ect of its kind in Denmark, with the poten- tial to store up to 1.5 million tons/year of CO2 by the end of 2025, and up to 8 million tons/year of CO2 by 2030. Schlumberger to partner with Aramco, Wintershall Schlumberger and Aramco will col- laborate on the development of a digital platform that will provide sustainability solutions for hard-to-abate industrial sec- tors. The proposed platform will enable companies to collect, measure, report and verify their emissions, while also evaluat- ing different decarbonization pathways. Separately, Schlumberger was named as Wintershall Dea’s preferred partner on the acceleration of its Terra Nova subsurface transformation program. The contract will focus on deploying the OSDU data platform in Wintershall’s Microsoft Azure cloud and integrating it with petrotechnical work- flows and data science tools. Vallourec wins inaugural NOIA ESG Excellence Award The National Ocean Industries Association (NOIA) recently named Vallourec as the winner of the NOIA ESG Shane McArdle named Kongsberg Digital CEO Kongsberg Digital has appointed Shane McArdle as its CEO, succeeding Hege Skryseth. Mr McArdle previously served as Head of Digital Energy at Kongsberg Digital. Wael Sawan to succeed Ben van Beurden as Shell CEO Ben van Beurden will step down as CEO at the end of 2022 after a 39-year career with Shell; he will be succeeded by Wael Sawan, who will also join Shell’s Board of Directors. Mr Sawan is currently the Director Integrated Gas, Renewables and Energy Solutions. Matt Lyne assumes role as Senior VP, COO at Valaris Matt Lyne has commenced his role as Senior VP and Chief Commercial Officer at Valaris. Mr Lyne previous- ly served as Chief Commercial and Strategy Officer of Seadrill, where he held senior marketing and commercial roles for more than 12 years. Bishop Lifting Products acquires Westech Rigging Excellence Award. The company was hon- ored for its ESG roadmap, which prioritizes measurable, third-party validated impacts and targets, communication with employ- ees and stakeholders, building trust with communities, teamwork and innovation. The NOIA ESG Excellence Award compe- tition is open to any offshore service or supply company that is in good standing with NOIA.  Cole Ramsey named API Vice President of Upstream Policy API has promoted Cole Ramsey to Vice President of Upstream Policy. Mr Ramsey previously served as Counsel in API’s Office of the General Counsel. He joined API in 2018 as Policy Advisor and Project Coordinator for The Environmental Partnership. Prior to joining API, he spent six years working in ExxonMobil’s US exploration and production, gas and power marketing, and refining and supply groups. Bishop Lifting Products, a provider of wire rope, slings, rigging and related products, completed its acquisition of Westech Rigging Supply. This marks Bishop’s 10th acquisition since 2012. Talos expands in deepwater GOM with EnVen acquisition Talos Energy has acquired EnVen Energy, a private operator in the deep- water US Gulf of Mexico, for $1.1 billion. The transaction adds approximately 24,000 BOED of production – a 40% increase – and doubles Talos’ operated deepwater facility footprint. BSEE names Paul Huang as Deputy Director Paul Huang has joined the US Bureau of Safety and Environmental Enforcement (BSEE) as the new Deputy Director. He previously served as the Assistant Administrator of Federal Insurance for the National Flood Insurance Program at the Federal Emergency Management Agency. DRILLING CONTRACTOR • NOVEMBER/DECEMBER 2022 57 DE PAR TM E NTS • PEOPLE, COMPANIES & PRODUCTS Salunda, Transocean agree to licensing deal for safety system Salunda has signed an exclusive license agreement with Transocean to make, develop and sell HaloGuard, a safety system that integrates camera and sensor technology with drilling equipment and machine controls. The system combines real-time loca- tion technology with a machine vision system. It is designed to locate personnel on the drill floor during operations. When a crew member comes within a certain distance of working equipment, he or she is notified by an alarm through a wearable device. HaloGuard leverages robotics percep- tion techniques that are responsive to the dynamic environmental conditions of an offshore drilling operation. ADC Energy wins contract to assess semi, drillships ADC Energy has secured a contract worth more than $1 million to deliver baseline condition assessments for five vessels for a North American com- pany. As part of the scope of work, ADC Energy will conduct baseline condi- tion assessments of all five rigs, uti- lizing historical data to identify areas of potential risk to safety and perfor- mance. The assets comprise a sixth- generation ultra-deepwater semisub- mersible and four sixth-generation ultra-deepwater drillships. Products Automated tubular makeup reduces personnel needs Expro has launched the iTONG system, a push-button tubular makeup solution that allows the operator to control, exe- cute, verify and validate every connection makeup via a tablet or the control chair. It ensures joints of casing and tubing can be made to a specific torque, or broken out in an automated sequence, with the push of a button. iTONG is coupled with Expro’s iCAM torque-turn tubular connection makeup system, which uses AI to deter- Halliburton expands data visualization platform Halliburton recently updated its HalVue data visualization platform to incorporate wireline data visualization. Previously, the application allowed customers to visualize mudlogging, MWD/LWD and cementing. The platform is real-time data monitoring application that gives users a consistent view of data across operations as it comes in from the rig to maximize asset value. Austenitic stainless steels offer improved OCTG durability N’GENIUS Materials Technology has developed a new series of high-strength austenitic stainless steels. The N’GENIUS Series was designed to supplement the majority of existing grades in the 300 Series, the corrosion-resistant alloy line pipe grades currently available for selec- tion in the API Specification 5LC and the 58 mine whether the makeup is successful. The new technology, which has under- gone field trials on a jackup rig in the North Sea and taken part in 22 jobs, can save an estimated 50 hours of rig time per year, according to Expro. Further, with a reduction in the number of personnel required for tubing operations, a rig using the technology can reduce annual emis- sions from rig time, travel and accom- modation by an estimated 146 tons a year. DNV-ST-F101 standard, plus the CRA oil country tubular goods (OCTG) in the API Specification 5CT for casing and tubing. It can address challenges associated with elevated temperatures, high pressures and higher mechanical loads, as well as cor- rosion. New thermoplastic composite bearing reduces friction Trelleborg Sealing Solutions has launched its latest lightweight thermo- plastic composite bearing, the HiMod Advanced Composite Bearing Plus. It is an enhanced dual-layer bearing with a low- friction modified PEEK layer that reduces friction and increases wear performance. Manufactured using Trelleborg’s patented Automated Fiber Placement technology, a thin low friction liner is bonded to the inner diameters and can be added to the outer diameters of the bearing. Real-time comms system designed for RSS and MWD Enteq Technologies’ XXT-Hop is a communications system that allows drilling contractors to access real-time data during live operations. The system can be configured to work with exist- ing rotary steerable systems (RSS) and MWD systems. It utilizes drop-in mod- ules, consisting of a transmitter fitted above the RSS, which connects with a receiver in the MWD string to send real- time drilling data to the surface. It also removes the need for physical connec- tors and dedicated collar lengths and enables logging while drilling (LWD) to be run below MWD equipment rather than above. A version of the XXT-Hop series is also currently in development with a range of 25 m, which would allow MWD to run above the motor. NOVEMBER/DECEMBER 2022 • DRILLING CONTRACTOR AD INDEX API............................................................................62 Oil States.............................................................. 17 GD Energy Products......................... DIGITAL HMH..........................................................................61 IADC IADC Drilling Caspian 2023 Conference & Exhibition...........................6 Kim Heng Marine & Oilfield Pte Ltd..... 15 Parker Wellbore.................................................11 TSC Drill Pipe...................................................... 21 Universiti Teknologi PETRONAS.............. 13 M-I SWACO...........................................................2 Noble Corporation........................................49 Weatherford.........................................................5 Global Sales Manager Drilling Contractor / IADC Houston HQ For all sales inquiries regarding Drilling Contractor, official magazine of the International Association of Drilling Contractors, please contact: BILL KRULL Phone: +1-713-292-1954 Cell: +1-713-201-6155 bill.krull@iadc.org LINDA HSIEH - Vice President, Editor & Publisher linda.hsieh@iadc.org STEPHEN WHITFIELD - Associate Editor stephen.whitfield@iadc.org BRIAN C. PARKS - Creative Director brian.parks@iadc.org ANTHONY GARWICK - Director – Web & IT Services anthony.garwick@iadc.org Find us online Stop by our LinkedIn page to join the conversation, keep up with news and conference updates on Facebook and Twitter, then check out our YouTube video channel! 8,565 + Followers 30k+ Followers 5,345+ Followers 2.73K Subscribers 2,272,320 + Views DRILLING CONTRACTOR • NOVEMBER/DECEMBER 2022 59 DEPARTMENTS • PERSPECTIVES Martyn Parker, Pruitt: Technical safety, working to industry’s recommended practices are both non-negotiable BY LINDA HSIEH, EDITOR & PUBLISHER While the oil and gas industry is often seen as the domain of engineers, it’s less recognized that there can also be ample opportunity for technically oriented peo- ple even if they don’t hold a university degree. Martyn Parker, who acknowledges that he didn’t excel academically because he found school learning to be “generic,” proves that you can build a strong oilfield career – and make an impact – as long as you are motivated and able to quickly learn on the job. “I was the kid who couldn’t learn in school because most of what they taught didn’t interest me,” said Mr Parker, who currently serves as Vice President at Pruitt MPD Services. “But I always had a lot of curiosity about how things worked. And if I found something that I was interested in, I’m all in.” For example, he would earn A+ in physics, a subject he liked, but “fail in other areas miserably.” In the late 1980s, after completing high school and short stints in the UK’s Royal Navy and as an offshore roustabout for Rowan Drilling, Mr Parker found himself working for Schlumberger in his home- town of Great Yarmouth. At the time, the town was still a busy service hub for the gas field of the Southern North Sea. Although he was a maintenance tech- nician, he put himself through offshore survival training, believing the certifica- tion would come in handy when the right opportunity came along. His instinct soon panned out, when he got the chance to go offshore with a well-testing team as a 60 last-minute substitute. On-the-job, hands- on learning proved particularly effec- tive for Mr Parker, and through his work with Schlumberger over the next 12 years, he soaked up vast amounts of technical knowledge around drilling and comple- tions. It was also during this time that he was exposed to underbalanced drilling operations (UBO), which then led to oppor- tunities over the next two decades manag- ing projects for Shell, designing systems for Halliburton, and serving as a company- man for TAQA Energy. By the early 2010s, Mr Parker had start- ed thinking about starting his own MPD company. He had a business plan and con- ceptual designs for MPD equipment but knew he needed a partner. So he turned to Pruitt, a company that already manu- factured high-pressure rotating heads but lacked specific MPD expertise. A meeting during an IADC conference in 2014 helped to advance the collaboration, which even- tually resulted in Pruitt MPD Services. However, by the time the company had built its first MPD package in 2016, the industry was in a full-blown downturn. Just as the company was in the final stages of readying its equipment for opera- tions, Mr Parker even recalls having to turn down a contract because he realized the equipment was not yet ready to deploy. “When I take on a job, I want to deliver success,” he said. “So we decided not to do it, even though industry was in a down- turn and Pruitt had already invested a lot of money. But we knew that if we couldn’t do it right, we would rather not do it at all.” While it would be six more months before Pruitt got another job, Mr Parker said he knows it was the right decision. In the seven years since, Pruitt’s MPD Services department has grown from a handful of employees and one MPD pack- age to 50+ employees and 17 MPD pack- ages. Mr Parker attributes this success to how the company is managed, which aligns with Simon Sinek’s Golden Circle concept. “People don’t buy what you do; they buy why you do it” is an oft-cited statement from that 2009 Ted Talk. “I make every person who joins my team watch the Golden Circle,” Mr Parker said, adding “my ‘why’ is just to be recognized as a really high-quality service company providing MPD services.” As Chairman of the IADC UBO & MPD Committee, Martyn Parker is leading the group to develop MPD software testing guidance. The group is also finalizing the Influx Management Annex for API RP 92M and 92S. Once customers buy into this “why,” it’s up to the Pruitt team to find the “how” – which for Mr Parker means hav- ing “technically safe” equipment for his employees, as well as proper risk manage- ment processes in place. Another key tenet of Pruitt’s “how” is to always work in accordance with the industry’s recommended practices (RPs) for MPD and UBO, no matter if they’re working on US land or in the Gulf of Mexico. The same practice of operating at or above industry standards is non- negotiable, Mr Parker said. Too often, he added, he sees companies trying to apply MPD without first reading and understanding those industry RPs. Failure is a common result, which can put rig crews’ safety at risk. To address this challenge, the IADC UBO & MPD Committee, which Mr Parker is chairing this year, has created guidance tools that are freely available on the IADC website. “You can lead the horse to water, but you can’t make it drink. I hope that companies will hear this message and make use of the tools that we’ve provided as a committee.” DC NOVEMBER/DECEMBER 2022 • DRILLING CONTRACTOR Scan me to access free IADC guidance for UBO and MPD techniques. bit.ly/3VnEgPC what we do Though the HMH name may be new, we have been manufacturing industry-leading equipment what we do for more than 125 years, delivering advanced performance products, integrated services, and Though the HMH name may be we have been well manufacturing industry-leading for renownedindustry expertise. HMH new, delivers all key control components, ranging equipment from derricks than 125 years, delivering to more wellheadconnectors, on land, advanced jackups, performance platforms and products, floating integrated drilling rigs. services, and renowned industry expertise. HMH delivers all key well control components, ranging from derricks to wellhead connectors, on land, jackups, platforms and floating drilling rigs. latest products We are pleased to highlight two of our latest offerings specially developed for land and jackup operations. Introducing our XTRM Gate Valves and our Hydril Sentry RAM BOP. Hydril Sentry RAM BOP The Hydril Sentry RAM BOP has the highest shearing capacity in the industry and meets or exceeds API 16A 4th Ed. PR2 requirements. Its rapid-ram block swapping enables any land or jackup rig to operate efficiently and reliably even when fluid conditions approach 350F and 35% H2S. The Hydril Sentry is offered with innovative commercial models to meet your CAPEX and OPEX requirements. Scan the code to get in touch with our regional sales leaders, who will walk you through our special market entry commercial terms and bundled packages. LIMITED TIME ONLY XTRM Gate Valves HMH XTRM products offer robust pressure control solutions at a competitive price. Designed for extended life and use in extreme service, and with a default operating temperature range of -20° F to 350° F, our XTRM valves are suitable for multiple environments and are API 6A PR-2 certified. ACCELERATING SAFETY AND ENVIRONMENTAL PROGRESS API Energy Excellence ® is our members’ commitment to enhancing the integrity of operations across the industry, while meeting global demand for affordable, reliable and cleaner energy. API members commit to 13 core elements by applying standards, implementing workforce training and participating in performance initiatives. Learn more about our pledge to supply energy and protect the environment – today, tomorrow and in the future. Visit us at www.apienergyexcellence.org © Copyright 2022, all rights reserved. API Global: Marketing & Communications: DM2022-236 | 10.22 | PDF