The negative general trend of the past two years of the oil price has put a considerable strain on the upstream side of the oil and gas industry, generating a Darwinist market consolidation. E&P investments fell by 30% in 2015 and will reveal similar numbers in 2016, posing some serious doubts on the structure of the existing business model. The overall drilling rig count is down, though it is growing at a slow pace, counterbalancing the industry’s overreaction to the downturn. The volatility of the oil price could endure indefinitely since there is no clear model that indicates a consistent positive pattern despite an overall growth in oil demand.

Necessity for technology improvement

Therefore, the industry is once again facing restructuring through cuts and adjustments, losing talent and resources to keep going. A long-term solution needs to encompass a reevaluation of the downfalls of the system in place and the allocation of investments to actuate the required changes and find a way to match the current market. Reducing the breakeven point is the main objective and is realistically achievable only through the development of new technology. However, the companies that managed to survive need positive cash flow and low-risk investments to start reducing their accumulated debt. In the past decade the most important performance and efficiency improvements through technology advances have been reached in onshore activities, while the investments in the offshore segment presented difficulties and unsatisfactory results. Onshore drilling also requires less financial exposure for a relatively shorter time period when compared to offshore projects given its cash flow structure and therefore looks like the best path out of this slump.

The industry is once again facing restructuring through cuts and adjustments, losing talent and resources to keep going. 

Looking at the existing drilling rig fleet, there undoubtedly still are several underperforming land drilling rigs, while many others have been stacked, have not been maintained properly, or are simply obsolete and not able to perform at economically feasible rates. All of these factors should give birth to more efficient and high-specification newbuilds with more room for automation, better data management and overall performance improvements.

Burden of the investment

The underlying issue arises when seeking investment allocation for drilling technology development in such an unpredictable period. Innovation should surely fall onto equipment manufacturers, the main stakeholders at a first glance. The R&D expenditures would then fall on the final user, the drilling contractors, which are in fact currently unable to make conspicuous longterm financial commitment. High-tech drilling rigs come with a premium, and the contractors are not in any position to invest during a period in which their contracts’ lengths and daily rates are at their lowest in quite some time. The oil companies, therefore, seem to have the upper hand, being able to choose from a variety of contractors and service companies willing to work at lowered fees. Nevertheless, to achieve a better final price point, the changes need to be promoted by a joint effort between manufacturers, contractors, oil companies and, ideally, service companies. While the funding and risk remuneration would appear to be complex to split, the integration on the planning side is surely the way to improve overall efficiency. Designing new drilling rigs and equipment focusing on coinciding objectives of overall performance in total safety and improved efficiency is the path to follow.

Drilling automation

Drillmec has responded to this need with the creation of the Drillmec Automatic Tripping System (DATS), the first system for fully automatic tripping. The company has been pushing drilling automation since the 1990s and has released numerous new technologies such as the first hydraulic hoisting system, the first totally unmanned automated pipehandling system and the first super singles land drilling rigs. 

The HH-300 hydraulic hoist 600,000-lb hookload capacity drilling rig has been performing operations with DATS for the past year. (Source: Drillmec)

DATS is the result of the joint effort between a drilling rig manufacturer and its client, an integrated operator also performing the drilling operations. This latest automatic configuration of the Hydraulic Hoist (HH) Series Rigs represents a huge step toward complete automation and human errors reduction. The company worked closely with its client to develop the DATS technology, also comparing performance data gathered from some of the 200 HH Series units across the globe. The cooperation worked for a number of reasons, with the common goal of improving performance in a cost-effective and repeatable pattern based on direct and transparent feedback from the client. It was a joint effort in both technology development and financial risk. Indeed, the client covering both the operator’s and the drilling contractor’s roles proved to be instrumental for this achievement.

Drillmec was able to develop and sell its technology with the opportunity for further improvement through a tight cooperation that guaranteed access to the well and to the rig mainly for tracking purposes.

With the introduction of DATS, Drillmec’s HH Series Rigs can perform both the trip-in and trip-out operations automatically. DATS The system is a package that comprises software and hardware that enables secure, efficient and stable runin- hole and pulling-out-of-hole movements under the passive supervision of a driller.

The intelligent tubular management system automatically records each pipe’s length, hours spent in the hole and hours of rotation in a precise way without the aid of any external device, contributing to simplifying the operation as well as enhancing safety and tracking the tubulars’ working lives.

Another aspect that contributes to safety and efficiency is the DATS’ human machine interface. This intuitive new system includes different alerts and security verifications that work both as safety gates to the start of the operations and preferential paths throughout the drilling process. It gives a just-in-time operational assessment through a complete display of the most important key parameters combined with an algorithm that automatically provides different prearranged options for the driller to pick.

DATS is applicable to any configuration of Drillmec’s pipehandling systems and symbolizes another step toward the reduction of human error, increase of personnel safety and the complete automation of drilling rigs. The system has been shown to guarantee consistent and improved average performance and also is effective in terms of the utilization of the drilling crew. In fact, during the automatic trip-in and trip-out phases, rig floor personnel might be used for other activities while the driller is only supervising all of the operations.

Since the beginning DATS has shown to be efficient and reliable as well as providing repeatable rig performance and predictable operation times. The next frontier for DATS is the application of part of this technology to add and rack back stands during drilling operations. This new development together with the HH Series auto-driller supervision will enhance the performance level in terms of safety, efficiency and rig utilization.

The system also can be accessed remotely by Drillmec’s dedicated service, the Drillmec Diagnostic System, which improves safety and support and dramatically reduces equipment downtime through predictable maintenance parameters and a built-in troubleshooting diagnostic system.

An evolution of the upstream section of the industry is due and necessary to continue to represent the world’s main energy source. 

An evolution of the upstream section of the industry is due and necessary to continue to represent the world’s main energy source. The industry might never reach the 3,670 global drilling rigs registered in November 2014, but production levels can rise with new high-specification rigs with improved performance, efficiency and safety and a lowered breakeven point. Efficient innovation resulting from cooperation between the different stakeholders of the industry are examples to follow.