Comments: The Drilling Boom

Abstract

The state of the drilling industry is a good barometer for the overall health of the oil and gas business. And by all accounts, the drilling sector is doing just fine. Worldwide rig counts are up year on year and have risen sharply since 2002. The outlook for a continued tight global oil and gas supply/demand balance going forward has strengthened rig rates, and there is little chance of an oversupply of rigs, something that has cut into profits in the recent past. In fact, the industry is flush with cash, which is allowing drillers to replace aging equipment and invest in new technology. While the future looks profitable, it also looks challenging. Reservoirs increasingly will be in deeper water, in mature wells, and under the difficult conditions of extreme high-pressure/high-temperature, tighter-permeability, or underpressured wells. More emphasis will be placed on drilling for unconventional hydrocarbons such as tight gas, extra heavy oil, and shale. The recent Jack discovery in the Gulf of Mexico is attracting great interest in exploring Lower Tertiary rock. What is driving growth in drilling is the tremendous burden operators are under to produce more hydrocarbons, often in difficult environments, and to do it profitably, efficiently, and safely. Much of the rig fleet, especially in the US, looks tired and in need of replacement. Twenty-five years ago, half of the rigs in the US were only 5 years old. Today, many of those rigs are still working but drilling twice as many wells. And US drilling activity has been surging with the emphasis on developing gas in tight formations, coalbed methane, and shale. Healthy oil prices should allow drillers to reinvest and replace older structures. A need also exists for technologies that improve drilling efficiency. Strides are being made onshore in fracturing, in extended-reach drilling, and with multilaterals. Offshore, as the industry moves into ever-deeper waters, the industry is focusing on upgrades in real-time operations, increasing the reliability of downhole tools, and improvements in monobore drilling. Attendees at the recent SPE/IADC Drilling Conference in Amsterdam and at last month's Offshore Technology Conference in Houston were quick to come up with a laundry list of other advancements that would boost productivity—automated rigs, improvements in managed-pressure drilling and rotary steerable systems, combining casing drilling with expandables to reach inaccessible reserves, and using under-balanced operations to exploit underpressured reservoirs. Many believe that the potential of real-time operations has not been fully realized and that the future will see more high-bandwidth connection to rigs and more real-time controls onshore. Future rigs may be lighter and may require fewer people. More real-time capability and automated rigs should improve safety and also address the pressing issue of staffing. As with other sectors of the oil and gas industry, the drilling side finds itself short of skilled workers. The recent surge in global demand has strained the system. Drilling contractors are responding by expanding their rig fleet both onshore and offshore, and the service sector and operators are experimenting with new technologies. But new equipment and better technology go only so far; a boom in drilling means a need for more people.