Despite low prices, there are a number of intriguing technologies on the drilling market. InnovOil and Lux Research analyst Colleen Kennedy take a look at a few of them
As costs continue to be shed across the industry, drilling operations are a prime target. For some operators the solution may simply be to cancel well programmes and not drill at all, but for many others it will involve drilling smarter. Refracking is catching on in the US, new shale gas exploration is continuing in places like Argentina and Australia, and field development programmes are pushing on in Eastern Iraq and even in the North Sea.
To meet that demand, small companies and innovative start-ups continue to bring products to market. But whereas in years past these firms may have focused their efforts on offering improved drilling accuracy or production, now more than ever the dialogue centres on reducing costs and increasing uptime.
Colleen Kennedy, research analyst with Lux Research – and lead author of its report on ““Identifying Ways to Reduce Drilling Budgets in the Low Oil Price Environment,” – comments: “For the most part, the biggest trend this year has been on streamlining operations, cutting down drilling days and improving operations in the field as much as they can.”
In preparing the report, Kennedy says that her and her colleagues “chose technologies we had seen, which have potential or companies that are attempting to position themselves in that sense.” The result has been a number of interesting companies and start-ups assessed by qualities such as maturity, size and revenue, and then charted on the Lux Innovation Grid (pictured). The resulting score indicates their potential to disrupt, as well as their commerciality.
“The major trend is for anything that reduces NPT time,” Kennedy states. This has naturally shifted the industry’s priorities away from other areas of interest, she continues, noting: “Downhole telemetry has been a major focus in the past, but some of the companies even that we ranked highly in this report have been a little slower to get their operations up to speed.” Start-ups which a few years ago would have found solid support from major firms are now having to work harder to gain a toehold.
“With telemetry, the technology is particularly challenging. A lot of operators want to move away from mud pulse and to something more advanced,” Kennedy says. She cites companies such as Cold Bore Technology and OPI Downhole Technologies. The former is working on a sonic telemetry tool which, it claims, can send data thousands of times faster than mud pulse and electromagnetic telemetries, while the latter’s iMEC™ technology aims to capture energy via magnetostrictive alloys, while downhole. However, both remain in very prototypical stages.
“These innovations are great in theory,” Kennedy says. “But it’s very expensive to deploy these tools for testing, and they haven’t quite got their innovations proven in the field yet.” With few operators willing to devote time to such early stage equipment, these may remain in the development stage for the medium term.
Conversely, Hungary and Texas-based ZerLux offer laser solutions which tap into greater needs, and more immediately. Featured in the June edition of InnovOil, the company can take on a range of oilfield tasks, including lateral drilling, scale removal and perforations, with small, high-powered lasers. The company’s position is that these can often perform these tasks faster and at a lower cost.
“I could easily see a company like ZerLux catch on,” Kennedy posits, “Because their technology is twofold – both for perforation and for removing scale using lasers. I think a company like that is well-positioned, especially as operators focus on corrosion and maintaining infrastructure.”
From a more futuristic perspective, commercial robotic rigs appear to be well on their way to market. “Maybe not in 2016, but further down the road robotic drilling systems and some of the other automated drilling rigs are going to be taking over the landscape,” Kennedy assures. Norway’s Robotic Drilling Systems, an innovative start-up backed by Odfjell Drilling, brings equipment one might usually associate with manufacturing to the drilling floor.
The kit consists of four separate machines – the Drill-Floor Robot, Robotic Pipe Handler, Electric Roughneck and Multi-Size Elevator – which work in tandem to lift and move pipes into position while drilling.
As a general trend, Kennedy says, this should be a revolutionary proposition to operators: “You’re removing people from the rig floor any time you have an automated system. Some also pick up on anomalies and reduce kicks and NPT, but ultimately a more robotic autonomous drilling system would be the way to reduce human error and increase safety.”
Another firm charted on the grid is Dynamic Tubulars, a company using elastic recovery of high-strength steel pipe layers to line wells and create high-pressure seals, ideal for HP applications. Yet despite the appeal, the method does not appear proven enough to catch the wider eyes of the industry, especially given its “long history of funding and field tests,” she notes.
But even those firms with a sound pedigree and case histories may find it difficult gain traction with their innovations. “Right now is really not a viable time for those companies,” Kennedy explains. “Deploying a completely new casing method is very expensive and time-intensive,” she adds, something which is unlikely to hold mass-market appeal in times such as these.
Instead, she concludes, opportunists in the M&A market may mean that the technology is taken on by a larger company with a longer horizon: “I think there is definitely a future for those… I can see that technology easily being picked up by a major, especially in these low prices.”
An awesome wave
The seismic field has been hit particularly hard by the downturn, but, as this issue will hopefully illustrate, still shows promising signs of innovation. Waveseis, seen in the top left quadrant of the Innovation Grid, is formed of a two-person team using proprietary Revolutionary Imaging Technology (RIT) to provide high fidelity images using Reverse Time Migration (RTM), even under very challenging conditions.
According to the firm, it is currently developing “a complete velocity estimation and imaging workflow based on the two-way wave-equation to solve imaging challenges,” in particular for use in sub-salt fields in the Gulf of Mexico and Brazil. CEO Mark Roberts experience with BP’s Advanced Seismic Imaging R&D Team suggests the company is well-placed to take advantage of the relatively undiminished interest in surveying these regions.
Kennedy agrees, noting: “I think there’s high potential, they’re using some different techniques. When you look at the company overall, it’s two people using cloud computing to process data, so I think one of the only hurdles for them right now is getting data to test from potential clients.”
Waveseis’ business model is also an indication that small-scale companies still have the potential to weather the proverbial market storm with good business and good ideas. “For start-ups,” Kennedy says, “companies on the smaller side which aren’t running high expenses will be able to weather it.” What has had a negative impact is the lack of support for trialling innovations in the field, either as a result of conservative outlook on production, or a lack of funds. “Maybe 70% of the companies we’ve talked to said that they might have been in discussions about field trials or potential technology partnerships and that once prices fell, they fell through. Many are now recovering from that and still trying to get a foot in the door,” Kennedy adds.
With predictions appearing to converge on an outlook for 2016, at least the relative calm in the medium term should make for a stable market – if a somewhat depressed one. But what is perhaps most interesting about Lux’s findings is that that the greatest hurdle for start-ups right now may simply be the same hurdle they have always encountered – getting their innovation recognised and proven in the field. For those which can succeed in doing so, the future is likely to be as bright as ever.
Lux’s report “Identifying Ways to Reduce Drilling Budgets in the Low Oil Price Environment” is available here [https://portal.luxresearchinc.com/research/report_excerpt/20085 ]. For more information, contact Carole Jacques at Carole.email@example.com