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Every executive must decide when new technology adds top value to a company.
Over the span of the last 30 years there has been a continuous stream of technological innovations in the oil and gas business. Such technologies as horizontal wells, deepwater wells, measurement while drilling (MWD), logging while drilling (LWD), extended reach wells, and 3-D seismic are but a few technologies that somehow broke through an undefined barrier to become part of companies' accepted repertoire of technology processes or tools. Yet some technologies sputtered, faltered and finally faded. In fact, many of the successful technologies of today were potential failures in the making early in the life of the technology.
If an analysis were done, for example, around the early 1980s about extended reach drilling, no one would have predicted not only the number of wells drilled, but the actual reach that was attained. Nor would anyone back in the early 1980s have predicted the evolution of horizontal and multilateral technologies and how quickly they became staples for many field developments. And what about the biggie: deepwater exploration and production (E&P)? No one ever could have guessed what would have happened over the last dozen years, both in the numbers of wells drilled and the increasing depth of water industry was capable to operate.
For decades the debated question amongst most management teams is when do we take the risk and start bringing a new technology into the company, and how aggressive should we be with the technology: a champion, a serious or a passive follower, or a curious by-stander? Or when does a provider of a product or service start investing in a so called emerging technology? Some companies have processes to do this, and some companies do not. And probably, of the companies that do have a process, they are more than likely different. Confusing the debate even more, over the last 20 years the way new technologies are spawned and then metamorphosed into a new commercial technology is constantly changing. What was a model back in the '80s was not valid in the '90s, and for sure is not valid in current times.
There are many new emerging technology examples to consider: ultradeep offshore wells, the expandable tubular, the new tele-pipe system, casing drilling, the monobore well, just to name a few. The big question is: a few years from now, which technologies will sputter and fade and which ones will become a new staple technology?
As previously mentioned, casing drilling, or casing while drilling (CWD) is a possible emerging technology, with some interesting applications for both onshore and offshore. As of this year over 1 million ft (305,000 m) of casing drilling has been achieved. Yet there are only a handful of E&P companies using the technology, and far fewer service companies, contractors and manufactures that are significantly investing in casing drilling research and development (R&D).
The big question is: will casing drilling launch and emerge as a staple of the industry, or will it fizzle and die? If you were a manager or a vice president for an E&P company, a service company, contractor, or manufacture how would you prepare a position strategy for this technology? Would you wait and see and do nothing, or would you test the water and actively get involved with the technology, or would you become one of the champions and get heavily engaged with casing drilling?
Casing drilling reflects more than a new technology of how to drill with casing. It is part of a system that is somewhat of an archetype of any emerging technology. What will be discussed for casing drilling could be applied with some variations to most new technology initiatives.
At first blush, Figure 1 could be too confusing to make any sense, partly because most of our educational training relies on more of a linear approach to viewing problems. Causality diagrams could be considered a rough draft of some system in question which is any thing but linear. Like anything it takes practice both to construct and understand such diagrams. However, once understood, causality diagrams are an extremely effective way to visualize complex systems.
The most important point in the system is a key measurable outcome(s). In this case it is simply the casing footage drilled. Already over 1 million ft has been drilled over the last few years. This also could be on a yearly basis and reflect change per year. One way or another, the system either promotes or limits the casing drilling footage.
With any system some loops are more important at the beginning than others. For example, the loop: casing drilling champions is critical for any casing drilling to occur. At the beginning there is almost nil footage drilled. The more champions, the bigger the push to kick start the initiative and get some initial footage drilled. That is probably why multiple company consortiums (when they get formed) tend to move the technology faster than single company champions. One of the reasons champions are so necessary is overcoming the hurdle of the risk to do something new. It's also the champions who find the first applications that have the best chance for success.
Once there is some footage drilled the other loops on the left side start to contribute, still some earlier than others. In fact some of the loops early on can work against more footage being drilled. This might explain why some initiatives flame out before they gain some traction. Example, say that the first casing footage drilled has high finding and development and/or well costs (see the loops with finding and development costs and well costs for casing). This causes poorer overall economics for casing drilling and leads to the perceived attractiveness for casing drilling being low. This, in turn, supports the concern of higher risk for doing casing drilling and deters the desire to search for more applications for casing drilling. With reduced applications the total casing footage drilled becomes less. During this early period the loop knowledge of casing drilling is low and has limited impact to offset bad experiences (which generally come from a poor selection of first applications).
Usually, in the early genesis of a technology, there is a dynamic between the loops on the left hand side, where the perceived overall economics is either increasing or decreasing the attractiveness for casing drilling. The information and experience loops that help to reduce the perceived risk for doing casing drilling heavily rely on papers, articles, presentations, and strong person-to-person communication to moderate early poor performance by citing the learning that leads to an improvement of the learn curve, and hopefully the overall economics.
Probably the single two most important loops at the beginning are the information and drilling champions. As time goes on, and if there are positives in the overall economics, the economic loops start to gain importance over the champion, and information loops and drive the improved overall perception of casing drilling which, in turn, helps reduce the perceived risk. This could lead to more interest in finding new applications. But that's only part of the story.
Casing drilling support
On the right hand side are loops associated with the actual doing of the casing drilling, including the necessary equipment, services and products. Many times in the early periods of a new technology existing equipment is modified to try (alpha test) the idea or concept. Such was the situation with casing drilling. This makes sense because no one wants to commit significant dollars to a first venture. Inherent in this approach is the predictable outcome of sub-optimal performance of the concept that contributes, many times, to higher well costs.
There is a critical juncture where there needs to be champions on the provider side to cause some investment in the technology. On the upper right hand side is a critical loop called contractor's desire to do casing drilling which leads to rigs with capacity to do casing drilling, and leads to rigs available to do casing drilling. At the beginning there would be little incentive for the contractors to do casing drilling since most contractors would either see it as competitive or requiring additional investment. And unless some operator wanted to pay the investment to do casing drilling, it is doubtful the contractor would have much early interest. Without early contractor interest there needs to be another venue to do casing drilling. This is reflected in the loop: purpose built casing drilling rigs which can provide some early rigs available to do casing drilling.
Casing drilling limits
Always, the limits to growth of casing drilling will be caused by a number of variables. For example, rigs available to do casing drilling, applications for casing drilling, and casing drilling equipment, services, and product development. This is why there is such a lag time for many new technologies to get into the market place. This, by the way, can be an advantage for companies who decide to jump into a new technology and help champion the technology. They could have early access to the technology over other companies. If a company has a strategy to leverage this advantage, it could provide a spurt of some type of improvement or position - like production growth or lower than peer well costs.
Once there is some level of casing drilling footage drilled, whether it be 2 million ft or 5 million ft (610,000 m or 1.5 million m), most contractors will see the need to get part of the market share and start investing so they will have rigs with capacity to do casing drilling. However, the opposite could happen where there are not enough purpose built rigs and conventional rigs capable to do casing drilling, and the casing footage drilled does not increase at a rate to interest the contractors to invest. This can cause the technology to sputter and slow down, and unless the left side loops are strong enough, casing drilling could be another good idea before its time.
Another critical sector in the casing drilling system is represented by the right lower side of the causality diagram which accounts for companies supplying products, services, equipment for casing drilling and equipment, and products used for casing drilling. At the beginning there is very little equipment and products specifically designed for casing drilling, and early applications rely on adapting or building one-of-a-tools and equipment. Again, the service companies and manufactures are very conservative to make heavy investments in R&D of products and services during the championing part of the CWD technology evolution. When more casing footage drilled occurs and the perceived attractiveness of casing drilling from the left side of the casual loop diagram increases this causes the companies supplying products, services and equipment to increase. Also, as the perceived attractiveness of casing drilling increases so does the desire to create consortiums, and other monies for casing drilling, and for more company investment in R&D. All of these cause more monies available for casing drilling which lead to more casing drilling equipment, services and product development. Also, as more knowledge of casing drilling occur this helps reinforce casing drilling, equipment, services and product's development. This helps make more rigs available to do casing drilling and directly impacts casing footage drilled.
Casing drilling drivers
The three major sectors of operators, drilling contractor, and service and manufacturing drive the casing drilling total system. Any one of these sectors could slow down or kill casing drilling. These same sectors at some point could also start reinforcing each other and the CWD will take off. This is what is usually necessary for a new technology to gain enough momentum to emerge. If only one sector is growing, like the operators sector, and the contractors and service, manufacturing, products sector do not respond at the same level of growth, there is a strong probability that the technology will sputter and not emerge as a major technology. Generally, if two sectors catch on, like the operators sector and the service manufacturing, products sector there is enough strength in the system to force the other contractor sector to eventually grow. If all three sectors start growing together, you have what might be called a major technology emergence. This can be shown for such areas as deep water, MWD, horizontal drilling, extended reach, 3-D seismic, etc.
The example for CWD shows that if there are some insights to the majority of the system and its causalities, a consensus understanding can start to emerge about a number of things about casing drilling. Is casing drilling still in the champion phase? So far what are the economics? Are the applications for casing drilling going up or down? How many papers have been written? Are they by the same company or are there new players constantly emerging? Are the contractors waiting on the sidelines still watching or are there some champions emerging? And what about the service, manufacturing and new products, are they increasing, staying the same or decreasing? By asking these questions and seeking the trends a management team can better access what casing drilling means to them and whether its time for action, or is it better to keep monitoring, or to dismiss using casing drill as not relevant for the foreseeable future?
There is no easy way to predict the future of any emerging technology and what you should direct your company to do about it. However, by using more of a systems approach and understanding the important variables (issues) it is possible to improve the strategic planning of how to manage your technology or R&D portfolio.