Oil & Gas Drilling Industry Business Processes
The Drilling Industry Business Processes lesson consists of the following topics:
- Learning Objectives
- Typical E&P Drilling Organization
- Drilling: Technical Disciplines
- Managing 24/7 Global Lifestyle
- Drilling Operations – Onshore
- Drilling Operations – Offshore
- Managing Drilling Operations
- Well Plan – Philosophy
- Well Plan – Details
- Well Permit
- Driller – Operator Contracting Options
- Operator Rig Site Organization and Performance
- Contractor Wellsite Organization and Performance
- Managing Drilling Problems
- Work Permits
- Health and Safety Considerations
Drilling Industry Business Process: Typical E&P Drilling Organization
When exploratory and development wells are committed, the drilling department oversees all drilling activities.
Most E&P companies no longer possess the technology, manpower or equipment to do their own own drilling, and most wells are drilled by drilling contractors.
However, the E&P drilling department (via the onsite the drilling supervisor) is ultimately accountable for the safety and performance of wellsite personnel and operations for wells operated by drilling contractors.
Drilling Technical Disciplines
Drilling department organizations are as unique as each E&P company.
Often this function might be part of the production department or the exploration department. Best practice today is that drilling is independent and centralized.
Drilling includes the following key technical disciplines and roles:
- A Geologist helps assure the protection of the reservoir and borehole against geological damage as the well is drilled and the field is developed.
- A Drilling Engineer is trained in Petroleum Engineering, and is primarily involved in the design and drilling of the most efficient penetration track by a wellbore to the target depth. Drilling engineers also become advisors on production and injection wells, as well as the design of the completion equipment needed to get the hydrocarbons to the surface.
- A Reservoir Engineer also is trained in Petroleum Engineering, and is typically concerned with maximizing the economic recovery of hydrocarbons from the subsurface reservoir. Typical studies include: reservoir modeling, production forecasting, well testing, well drilling and (later) workover planning, economic modeling and analysis of produced reservoir fluids. Reservoir Engineers are responsible to generate accurate reserve estimates used in financial reporting to the appropriate regulatory bodies.
Managing a 24/7 Global Lifestyle
A common shift-work pattern for offshore rig personnel is to be on the rig for two weeks, working 12 hours per day, 7 days a week. Operators then have 14 days off the rig to return home.
Adjusting to this lifestyle which can require international travel as well as shift-work can be difficult on rig personnel. Most shift-workers have some difficulty adjusting their sleep patterns to minimize the negative effects when operations require working around the clock. As a result, job performance, safety, health and family life can suffer; with a corresponding impact on operator and driller productivity and profits.
Today, most operators and OFS companies provide training to their staff on how to deal with shift-work challenges.
Drilling Industry Business Process: Drilling Operations – Onshore
Onshore wellsite characteristics which drive drilling complexity and cost, include:
- geography, i.e., terrain or topography and/or prevailing severe weather conditions,
- the region and country where a well is located as it relates to applicable government regulations and permits,
- the maturity of the infrastructure and support services available from the OFS industry as measured, for example, by the number of rigs operating in the area, and the knowledge and experience of the operators and OFS contractors, relative to the geography, regulations and expected formations
Drilling Industry Business Process: Drilling Operations – Offshore
For offshore environments, the water depth at the site and the distance from the well to the nearest onshore services are the most important drivers of planning complexity and drilling cost.
Water depth, expected weather conditions, and vessel availability are primary determinants in rig selection. As water depth increases and expected conditions become harsher, larger and more robust rigs are needed with extra hoisting capacity, high capacity mud circulation systems, stronger mooring systems, etc.
Weather downtime can impact offshore drilling operations in various ways:
- Weather too severe for supply boats to operate may lead to delays if stock levels on the rig decline to a critical level.
- Weather may impact anchoring and moving time.
- Weather could be too severe to continue drilling operations.
- Extreme weather may result in damaged or lost drill strings and risers.
Offshore drilling rigs must be temporarily abandoned when weather conditions warrant.
Drilling Industry Business Process: Managing Drilling Operations
The objective of drilling a well is to make hole as quickly as possible subject to the technological, operational, quality, and safety constraints associated with the process. These objectives are frequently conflicting and interrelated.
Comprehensive engineering planning, coordination, execution, and management, including defined contingencies and options, help the drilling program to be executed in the shortest possible time. Most of the day-to-day activites of the drilling programs are executed by drilling contractors (contract drillers) with oversight by the E&P operator.
Drilling performance has a high degree of visibility to E&P operator management. Over the past few decades, various quantitative methods have been developed to evaluate drilling cost and complexity, which are discussed in the Business Drivers Lesson.
Subjective factors such as well planning and execution, team communications, leadership, and project management skills will also impact drilling performance.
Drilling penetration rates are often constrained by factors that the drilling contractor does not control and in ways that cannot be documented, leading to extended contract negotiations
Well Plan – Philosophy
Once the geoscientists map a target reservoir and pick potential well locations, the prospect is handed over to Drilling Operations.
The first step in planning any well is to design the wellbore path to intersect a given target. A multidisciplinary operational team is usually the most efficient to deal with drilling and well construction objectives. Careful planning and evaluation are required to complete a project successfully:
- whether drilling easy, normal-pressure wells with a shallow target, in shallow water, and in benign environments
- or difficult, complex geometry wells that could encounter salt, rafted shale, high angles, deep water, and contaminated environments
Most exploratory wells are not horizontal. Today, most development and extended-reach wells are horizontal. Two factors drive horizontal well complexity:
- the aspect ratio which is a measure of the curvature of the well trajectory
- the extended-reach ratio, which is defined as the ratio of total depth to total vertical depth
Well Plan – Details
After the well site is selected, drilling engineers then work with drilling and OFS contractors to do a detailed plan for the well, including all the technical components needed to get to the target reservoir, such as:
- target depth and deviation
- pipe, mud and cement programs
- directional drilling
- multilateral borehole options
Tradeoffs in the well design are constantly analyzed. For example, operators generally prefer the final production string to be as large as possible to maximize production, but large production casing requires a large wellbore, which is typically more complicated and expensive to drill.
The resultant well plan is also called a drilling prognosis. In the US, the drilling prognosis is then submitted to the appropriate regional authority with responsibility for the lease or field for approval. Final well completion designs and costs are also submitted to the regional authority and become part of the public record as indicated in the chart.
Today, a lot of attention is paid to the environmental impact of the well location and the wellbore, as well as proper treatment and disposal of all the drilling fluids and cuttings from the well.
Various oil and gas laws require drillers to apply sound environmental principles, returning areas affected by development to a condition that allows continued productive use of the land .
A well permit is required before site preparation and drilling can begin on an oil and gas well of any depth.
To protect the environment during and after oil and gas extraction, well permit requirements specify ways to:
- ensure there are no oil spills,
- prevent ground water contamination and
- properly dispose of highly saline brines and other drilling wastes.
The permits also require that land impacted by drilling be properly reclaimed for productive use after drilling and/or production operations have ceased.
Regulatory compliance firms constantly monitor drill sites for adherence to these conditions.
Driller – Operator Contracting Options
There are three common types of drilling contracts used between drilling contractors and E&P operators.
In a Turnkey Contract the contract driller assumes all the risk of the project completion by;
- providing specified services at a set price,
- furnishing all services and required supplies,
- making decisions for the most economical approach.
Thus, the E&P operator easily manages its costs.
A Footage-Rate Contract gives fluctuating revenues for the contract driller, because the depth of deposit is unpredictable. Typical footage contract rates include;
- the driller furnishing the rig, crew, services and certain materials and supplies
- a specified fee per foot of hole drilled
- allowing costs to increase as the depth of the well increases
The E&P operator arranges the services for core samples, running various tests, logging, well equipment and drilling mud.
A Day-Rate Contract provides stable revenues for the contract driller. Here, the driller gets a specified amount for each day worked, regardless the number of feet drilled and furnishes the wellsite rig and crew
The E&P operator furnishes materials, supplies and other well services.
Drilling Industry Business Process: Operator Rig Site Organization and Importance
As the chart indicates, the primary point of contact at the rig or wellsite for the E&P operator is the Drilling Supervisor. There is a Drilling Supervisor for each rig/well location and an operator can be running from 20-40 rigs at any one time
Rig/well performance is monitored hourly (or even real time) at the rig. Daily reports of progress, called the daily drilling report, are sent from all operating rigs to the E&P Operations Manager.
These reports are often called the morning report because of their need to be on the Operations Manager’s desk when he/she arrives first thing in the morning.
Drilling Industry Business Process: Contractor Rig Site Organization and Performance
As the chart indicates, the primary point of contact at the rig or well site for the contract driller is the Rig Superintendent and/or the Tool Pusher.
Contractor drilling performance is measured by the time it takes to drill a well. It is often described by the number of dry-hole days which is defined as the number of days from the spud date to final well depth, plus any time pre-setting the conductor casing.
Dry-hole days include time for all operations essential to well construction, such as:
- tripping drill pipe
- running and cementing casing
- interrupt and weather time
- time spent on sidetracking
- time needed to set a whipstock in multilateral wells
Time spent coring, logging, or performing other evaluation techniques is excluded from the calculation, because it is decided by the E&P operator – not the contract driller.
For offshore rigs, the total number of days from rig arrival on location until the rig is released is the called total site days. This includes the time for mooring and de-mooring, completion and testing, and any plug and abandonment activities.
Drilling Industry Business Process: Managing Drilling Problems
Many problems can occur while drilling a well, requiring suspension of the activity.
Most drilling contracts specify a certain amount of free downtime (24 hours per month is typical). Outside of this allowance, the contractor does not receive payment for the time the rig was inactive.
Delays that are not directly accountable to the drilling contractor are usually charged at a reduced rate.
Trouble time is the term used for common drilling problems, which include: fishing, stuck pipe, lost circulation, formation damage and abnormal pressure encountered. Rig equipment failure, lost circulation, weather, and stuck pipe are the main causes of trouble time in the Gulf of Mexico.
Trouble time is closely monitored by both the E&P operator and the contract driller and is highlighted in the morning report.
Work permits are issued to qualified personnel on the rig when non-routine work is needed to continue drilling operations. A permit must have the signature of the person with signature authority at the wellsite before any work can be performed.
Typically a permit will have the necessary work description, all related safety precautions, and how long the permit is valid.
One common permit is the hot work permit. This permit is needed if any welding, cutting, or grinding is to take place on the rig. This permit specifically calls for a gas monitor or detection device to test the air for a possible explosive mixture in the work area, and a trained person standing by the work site with a fire extinguisher.
Health and Safety Considerations
Rigs (and platforms) are dangerous places to work and involve a very high level of risk.
- There is constant movement around the rig floor and over head.
- Drill pipe is constantly being maneuvered into place by active hoisting equipment.
- High pressure hoses and power lines lie all over the rig floor.
- There are many hazardous chemicals and substances found on rigs that could impact the safety of the staff and the environment.
Running a rig operation requires that everyone be attentive and work closely together. There is a great amount of trust and camaraderie exhibited in the more effective drilling crews.
Additionally, many governmental agencies require constant monitoring of the working and environmental conditions on rigs, to continually strive to improve the safety of rig operations.
Audits are routinely performed to ensure that drilling contractors, OFS providers and E&P operators alike are adhering to the regulations put in place.