Recruiting talent is key challenge

Critical D&C issues with Rustom Mody, Baker Oil Tools

Rustom Mody is director of technology for Baker Oil Tools.

DC: From your perspective at Baker Oil Tools, what do you see as the most critical issue facing the drilling and completion industry today?

Mody: Talent. In order to sustain growth in our industry, we need to recruit, hire and retain talented engineers – both recent graduates and those with experience. This is a real challenge because the negative perceptions of our industry created during the “hire and lay off” years are still prevalent, particularly among children of “baby boomers,” who witnessed what their parents endured. On top of that, the Internet and global business practices have spawned myriad new job opportunities and sources of income for talented young graduates.
We need to prove to prospective employees that our industry is better managed than in the past. They need to know that we can offer not only monetary compensation but also a challenging environment where even beginning engineers can “get their hands dirty” and be actively involved in designing tools and applying technologies that are crucial to supplying our world with the energy it needs. We need to focus on our ability to work safely and with minimal environmental footprint. And, we need to show young graduates that the energy industry offers opportunites in advanced technology in an enjoyable working environment.

DC: What are some downhole breakthroughs that Baker Oil Tools is working towards making in the next 1- 2 years?

Mody: We’re working at both ends of the application and cost spectrum to meet the industry’s needs for high-cost, high-pressure deepwater development on the one hand, and low-cost access to mature or isolated reservoirs on the other. In some instances, the same technologies can be applied to both. Smart technology is one example. We are expanding the use of electronics, logic and wireless communication in downhole tools and systems to enhance safety and reliability in all applications. We are working on next-generation gravel- and frac-pack completions to improve production and well screen performance. At the same time, we are adding intelligence and enhanced adaptability to our EQUALIZER Reservoir Optimized Completion systems.

Another area where we are trying to address both ends of the cost/application spectrum is cutting, milling and casing exits. We are working on highly efficient, low-horsepower cutting and milling technology that could become a significant catalyst for margin improvements for operators who want lower-cost, through-tubing access to isolated reservoirs that are uneconomical to drill directly. We’re also working in high-end deepwater wells that require more sophisticated cutting, milling and casing exit technology.

Over the next couple of years, I think the industry will also see breakthroughs from Baker Oil Tools in completion fluids, wellbore cleaning, HPHT completions, smart intervention, cement-less wellbore isolation, and expandable solids and screens. You’ll also see more offerings from us in the area of solutions based on our technologies, for example: insert recommendation service for milling and casing exit applications, and severity categorization and selection service for HPHT completions.

DC: What is your interpretation of a smart well?

Mody: Most simply, an intelligent well is one that senses and transmits parameters such as downhole pressure and temperature, differential pressure, and flow rate in real time, and can be adapted to the changing wellbore environment with little or no on-site human involvement. A smart well can enable the operator to monitor and control flow and inject fluids from a remote location, using downhole components as simple as passive or active inflow control valves, or as complex as multi-phase fiber optic sensors and infinitely variable hydraulic or electronic chokes. The current state of the technology provides active inbore sensing and control. The goal is to provide active formation sensing to provide field / reservoir optimization through predictive and diagnostic capabilities across multiple wells.

DC: How far are we from achieving a truly intelligent well?

Mody: I think we have already achieved some truly intelligent completions, but what we are not yet seeing is truly intelligent wells on a regular, ongoing basis. There are three bottlenecks preventing this: reliability, cost and operator acceptance.

The industry has achieved a very high rate of reliability with intelligent completions, and we can offer customer-specific configurable systems at virtually any cost. But, we work in a very risk-averse industry. Many oil and gas companies prefer to work with proven technology because they view the risk of using new technology as outweighing the potential reward. Very few want to be first at using new technology. Similarly, service companies are averse to taking on risks that might result from insufficiently defined requirements or poorly understood system configurations.

The amount and complexity of testing that must be performed on intelligent well equipment prior to field use adds cost. Until intelligent well systems become widespread, customers should help service providers offset the cost of development.

DC: What are some of the biggest challenges you’re seeing in deepwater? In HPHT? ERD? How is Baker Oil Tools meeting those challenges?

Mody: From our perspective, one of the biggest challenges facing all of the extreme conditions you mentioned is materials that can withstand extremes of pressure, temperature and fluid composition. Other than the typical API grade steels, chrome and nickel alloys still appear to be the primary metallurgical options for dealing with high pressures and temperatures.

The yield strengths of these materials have been the same for years – 125,000 to 140,000 psi maximum – which limits tool string depth due to surface hang-off weights and stresses incurred. There have been some discussions about revisiting titanium, but it has its own downhole environment limitations. Similarly, seal chemistry does not appear to have changed dramatically, and the primary options are still Nitrile (standard and hydrogenated), Viton, Aflas and high-end / high-cost specialty compounds such as Kalraz and Chemraz. New metallurgy and sealing solutions will require extensive testing. One example is metal to metal seals to address HPHT applications.

Baker Oil Tools is addressing these issues in our new Houston Center for Technology Innovation, which we will officially inaugurate early in 2008. For this facility, which is the first – and currently, only – one of its kind in the industry, we have built vertical and horizontal test cells capable of testing equipment to 40,000 psi and 700°F. This testing capability will take us a long way toward meeting the extreme equipment demands brought on by extreme operating environments.

Another challenge that we are addressing in our new Center for Technology Innovation involves fluids for deepwater work. The industry needs a clean, safe completion fluid system that is stable above 250°F for gravel and frac packing. We are investigating our Diamond FRAQ system for this opportunity. We are also investigating fluids that make it easier and safer to conduct large-scale gravel and frac packing without having to carry water onboard.

With respect to ERD, our EQUALIZER reservoir-optimized completion technology has been helping operators maximize reservoir contact and balance inflow to produce less water, more oil and greater asset NPV in long horizontal wells for several years. Thus far, operators worldwide have run 1.75 million ft of EQUALIZER systems in 20,000 production units, in 400 wells, with zero sand control problems.

Expandable technology is another enabler for ERD. An example is our EXPress expandable screen system, which enables the operator to expand the screen, set a liner hanger and set multiple isolation packers with a single trip into the wellbore. Recently, the company installed 1,043 ft (318 m) of the screen system for an operator in the Caspian Sea. Another example is the TORXS expandable liner hanger system, which can be run like a conventional liner, allows the hanger to be set independently of the packer, before cement is pumped, and allows high torque to be applied to the liner for liner drilling applications.

We’re also nearing the culmination of a collaborative development project with an international oil company to meet the need for multilateral completions in extended-reach wells. As the oil industry continues to push the limits of horizontal drilling and demand grows for multilateral wells in horizontal applications, one of the biggest challenges is simply getting the liner to bottom. Continuous forced rotation of the liner assembly is often used to break friction and get the liner down. Baker’s latest multilateral system is the first – and, thus far, only – multilateral system that allows continuous rotation of the lateral liner while simultaneously and reliably landing a completion system that can mechanically support the lateral junction.

DC: The Lower Tertiary plays have gained quite a bit of momentum. What are some challenges specific to that, and what are some possible solutions?

Mody: The challenges of the Lower Tertiary trend are related to high pressures and temperatures and extended-reach operations, and so are similar to those in the previous question. The same is true of solutions, which include developing materials capable of functioning for extended periods of time at extremes of temperature and pressure; metal-to-metal sealing technologies; locating accurately in extended-reach applications; and counteracting drag to get equipment to bottom.

These conditions also represent challenges for fluids. Baker developed its Diamond FRAQ viscoelastic surfactant fluids to address friction, horsepower and temperature, and the quality of production after the fracturing or gravel pack treatment is completed. Diamond FRAQ can be prepared in weighted brines and with a friction reducer that reduces the quantity of hydraulic horsepower needed to complete the well. The systems can be stabilized for high-temperature wells, which extends their longevity at temperature.

DC: Have there been improvements in the way operators and service companies cooperate on developing and implementing frontier technologies?

Mody: Both operators and service companies realize that failure to implement breakthrough technology could result in significant loss of economic benefits. But, incorrect implementation of new technology could result in serious economic, safety or environmental risks. So we need to collaborate more, and we need to do it with more informed technical strategies.

In many instances, operators are taking significant and positive steps by partially funding new technology development. Another positive step would be a mindset change to view new technology content as a positive metric, like insurance, rather than a project risk. For this to happen, the operating company must have technological understanding and competence to ask correct questions of technology providers, understand risks and rewards of implementing technology, and be able to sell the corporation that the potential benefits are worth the risks.

Actually, this “weak technical backbone” syndrome exists in both operating and service companies. To reverse it, we need technically knowledgeable staff with sufficient operations, technical and R&D lab experience in the right positions in both types of companies. This doesn’t mean that the CEO must understand the details of every proposed new technology. What it does mean is that he must surround himself with advisers with operational responsibilities who understand the technology and can explain its strategic application and value proposition. It also means that the senior management team must understand the profitability, function and potential risks of a host of technology options.

The second and more crucial element is a champion at the very top. Visionary concepts can come from any place within an organization, but they can’t be implemented without a champion at the top. It is up to senior management to establish and nurture the culture, process, organization and staffing plan to assure that the technical backbone enables the goals of the technical strategy to be attained.
Whether technology collaboration is among or between companies or part of a joint technology program, certain elements are crucial to success. These include:

• a stage-gate-type development process that allows development review at key milestones and has active involvement from key users of the technology;

• good communication between end users and technology developers;

• a framework that facilitates teamwork between and among technology user and developer personnel;

• control over changes to technical specifications that are a part of every new technology development project;

• alignment of goals and objectives among key players; and

• mutually agreeable resolution of intellectual property issues.

DC: As a service company, what kind of cost increases have you seen over the past 1-2 years?

Mody: Material and outside manufacturing costs continue to be high; supply-demand economics is a key factor. The costs of building prototypes has gone up almost four-fold in the last couple of years. Beyond cost, there is an additional problem for service companies, and that is the inability to get needed materials in a timely manner.
DC: Some operators have expressed growing concerns with completion costs. How is Baker Oil Tools working to keep that cost down?

Mody: Baker Oil Tools does a number of things to try to help keep completion costs down. For example, all of our technology solutions are engineered to reduce rig time, bring a well into production in less time, enhance ultimate recovery, or provide any combination of these. We constantly try to find new, innovative ways to use standard materials. We also provide value in the way that we design and manufacture products. We use rapid prototyping, finite element analysis and computational fluid dynamics analysis to help us design products economically and at the same time reduce total development time. And we have always tested our products to simulated downhole conditions, which is critical to building in reliability.

DC: Is the industry learning to take the more long-term views advocated by service companies when investing in new technologies? Or are you seeing more interest in keeping costs down?

Mody: It depends on the operator. Some companies definitely take a long-term view, and the number of companies who do that is growing. Too often, though, the industry wants “new and innovative” solutions at reduced costs. It’s unrealistic to expect more and better solutions without increasing R&D investment.
On the whole, I believe that the service sector is doing its part to provide short- and long-term solutions while keeping costs down. We do a tremendous amount of testing, but we can only test so much. Operators need to provide wells for final testing of new technologies. They also need to allow service companies to have direct working relationships with asset teams. And, they need to see new technology development as an opportunity rather than a risk.