To reduce system costs, industry must look to collaboration, digitization, integration

By Linda Hsieh, Managing Editor

Although the industry has been working to reduce costs in this downturn, few structural changes have been introduced, particularly toward total system costs. In the face of not just low oil prices but also competition from renewable energy sources, “if we don’t manage to reduce our finding and development costs, we will be out of market in 50, 60, 70 years because other industries are consistently reducing costs,” Rajeev Sonthalia, President of Integrated Drilling Services for Schlumberger, said at the 2016 IADC/SPE Asia Pacific Drilling Technology Conference on 22 August in Singapore.

He urged the industry to look further at collaboration, noting that earlier collaboration between supplier and operator is necessary in order to engineer solutions that are lower cost in the longer term. “The other area that I see is integration, because once you collaborate early, you can integrate a better solution,” Mr Sonthalia said. He referred to what he described as the industry’s stand-by costs, noting that’s something that can be eliminated. For example, an operator might pay to have a wireline hand on stand by for one to three days in advance, waiting for the wireline job while drilling or cementing operations are still ongoing. Such stand-by costs can be eliminated with just-in-time workflows or by having employees with multiple skill sets, he said.

Digitization is another area where structural changes are needed. “I think we are behind the eight ball in terms of other industries,” Mr Sonthalia said. “We are not digitizing, and there’s too much manual interface as a model. By digitization, you can improve workflow efficiencies and get consistency in performance. On the whole, I would say the ecosystem needs to encourage this through business models.”

In particular, Mr Sonthalia urged the industry to change its traditional procurement model. “The standard procurement model existing in the industry today doesn’t encourage integration,” he said, adding that integration doesn’t necessarily mean bundling different services together. “It’s about integrating work processes with your partner and your customer.”

In some parts of the industry, different models are already being found, he said, where some companies take risks on drilling performance or on production performance. “We share the pain and share the gain. Unfortunately, that’s something that the procurement model restricts to take on in a large manner.”

People and competency is another area that the industry must look at, he said, and continuing investment is needed despite the economic difficulties in this downturn. “I think we need to look at what skills are going to be required in the future,” Mr Sonthalia said. “To give you an example, whoever thought that in Pittsburgh you can get driver-less taxis? It’s happening. Uber is renting out taxis without drivers. Can we imagine a situation of the future of a rig without a driller? That’s what we have to think about. That’s the kind of mindset we have to think about.”