Musings: The Impact Of Rig Efficiency On Drilling And Production

Another goal of the increased focus on rig efficiency is to improve safety at the rig site. A step forward would be to get men off the rig floor and away from the heavy equipment involved in drilling, which means figuring out how to change the “heavy” equipment of a drilling rig – the pipe hoisting equipment and the machinery to handle fluids. Equipment manufacturers and drilling contractors are hard at work attempting to eliminate these problems, but automated drilling systems still must be prepared for manual intervention.

There was a time when the most prized capability of drilling rigs, besides how deep a well they could drill, was their speed in moving between drilling locations.

Improving rig efficiency will also mean that drilling costs can be lowered with or without increased rig automation through the application of technology that can lead to improved exploration expertise. A producer commented that the greatest value of new technology is that which can be used company-wide. The least useful are technologies that are proprietary to the service company or contract driller. As an indication of the improvements that are coming from improved rig efficiency, a representative from Anadarko Petroleum (APC-NYSE) discussed his company’s exploration and development efforts in the shale formations of the southern region of the United States where the company operated 30 rigs and drilled 600 wells in 2013. Specifically in the Eagle Ford, Anadarko has 10 rigs and drilled 200 wells in 2011, but it is on a pace to drill 400 wells this year. In 2011, the average well required 12 days to drill but today that average well only needs eight days. In 2011, the record well (based on the time from spud to rig release) had been 8.5 days, which is now down to 4.5 days. It is this improvement in drilling rig efficiency that “is why the rig count no longer matters,” he said.

During the open discussion period of the conference, a question was posed to the panel of producers that brought an interesting response relative to rig efficiency. The question was: “Twice the time, or a third of the cost?” The point the questioner was raising was what was more important to the producer – the time required to drill a well or the cost to drill it? In order to cut the cost of drilling by one-third, it is necessary to drill twice as fast. But as another questioner pointed out, drilling faster doesn’t mean it is the most efficient process. Besides, drilling faster may ignore the issue of production. Yes, the production would start earlier if the well is drilled faster, but the ultimate recovery (total well production) and the well’s production profile could be damaged by drilling too fast. The point that several of the producers on the panel made was that there are many considerations in drilling wells that do not necessarily translate into the need for ever-increasing speed. The direction of the discussion mirrored those we heard years ago of the different objectives and financial incentives within oil companies for the people responsible for drilling wells and those in charge of completing and producing them. The staffs in the drilling departments of oil and gas producers historically were incentivized to drill wells at the lowest cost possible. That meant hiring the lowest cost contract driller and using the least costly drilling supplies. When the drillers were successful, the staffs of their company’s production departments often complained about the lousy condition of the wellbores and how the process of drilling the well damaged the formation making it more expensive to complete the well and often limited the volume of hydrocarbons that would be recovered from the well.


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