Factory Drilling and the Quest for Oil Field Automation

Factory Drilling and the Quest
for Oil Field Automation

Insight by Gabriel Trevino

October 6, 2014


Driven by the demand for horizontal and directional wells, the U.S. directional drilling services market (on land) is currently worth 3 billion dollars. Competition is fierce for new business, especially as loyalty runs high between operators and dependable directional drilling (DD) partners.

Nevertheless, there are many wells to be drilled, and only so many firms to do it. In 2014, almost 20,000 wells will be drilled, and that number should rise if the trends hold up.

Another trend worth noting: well costs have steadily inched up, perhaps due to rising equipment costs.

As operators wind down the land grabs that have characterized the last few years, the focus has shifted to new cost cutting measures. It’s one thing to build an economy of scale with large swaths of productive land, quite another to overcome the staggering cost of bringing an individual well online. (A well that may very well decline by 50-60% in output after its first year, as in the Eagle Ford).

To thrive in this new landscape, directional drillers must be fast—or at least fast enough to match the performance of competing independents. Furthermore, in this environment where efficiency is king, an unforeseen complication may have serious ramifications. After all, some operators now expect 12,000 feet without a trip out.

But is drilling speed alone, devoid of any supporting initiatives, the answer to lower costs?

A new efficiency model

The answer may lie outside of oil & gas, specifically in the manufacturing industry, where efficiency models such as Lean have been applied for decades. Obviously, O & G poses a unique challenge, specifically the coordination of a number of supporting services, e.g., logging, casing, etc., as well as automating processes that have been historically reliant on human expertise and on-the-spot decision making.

Lean style techniques, often lumped under vague terms like “factory drilling” or “manufactured wells” in the media, are quickly gaining momentum in the industry. A general keyword search for “Lean Manufacturing” on OnePetro, the SPE repository for conference papers, uncovered over 400 hits alone.

We must ask: Is this approach a solution to rising costs, or simply a passing vogue for an industry that is barely learning the new rules of the unconventional game?

In essence, Lean methodology espouses the elimination of anything that does not add value—deemed waste—in order to reduce costs. In this context, value is something the customer is willing to pay for.  A Lean framework prioritizes a manufacturing flow with no interruptions and no leftover inventory, with an emphasis placed on automation.

Lean style principles

Of course, exploration and drilling are not necessarily manufacturing operations in the strict sense; however, various organizations have adopted (or working at adopting) some of the following principles:

  • Accept that a drilling rig is a large multipurpose machine—a de facto bottleneck—and designate it as a pacemaker, a point of active management to improve the flow.
  • Employ specialized fit-for-purpose rigs, like the ones described in this piece, that are highly mobile and include modern drive systems, superior hydraulic capacities and top drive torque.
  • Map out an organizational workflow that is focused on customer value, and eliminate the common causes of waste, e.g., defects, wait time, over production, etc.
  • Rethink the current business model, including contracts, relationships, and duration. The awarding of contracts should be based on collaboration and total value, and not on the lowest bidder. Also, contracts should be viewed as long-term partnerships so that real improvements can be continuously made.
  • Automation of drilling process—from excavation to assembly of the well, including the use of MWD/LWD to control the machinery at the surface.

Although some of the technology for full automation does not yet exist, such as single-purpose well bore machines and multiple, movable work centers to replace the bottleneck caused by multi-purpose drilling rigs, many of the principles discussed here have been applied already to varying levels of success.

In the next part to this series, we will take a look at the risks and challenges of the factory drilling approach.


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