Onshore Drilling & Technology Briefs: Unit Drilling launches new rig design; China preps for large-scale shale development

Unit Drilling launches advanced-technology BOSS rig design

By Linda Hsieh, Managing Editor

Unit Drilling has put the first of its newly designed BOSS series, Rig 401, to work in the Texas Panhandle for Unit Petroleum. The 1,500-hp, AC-powered walking rig incorporates several features aimed at reducing the number of loads and increasing mobility, including a ram-raised box-on-box substructure. “What makes it unique is the top sub fits down over the lower sub for transportation,” John Cromling, Executive VP for Unit Drilling, explained. “It’s all hydraulically controlled – the raising, the pinning, etc. There’s not another substructure like this one.”

Excluding tubulars and camp facilities, the rig has 32-34 loads. However, the design of the rig was underpinned not just by a desire to have fewer loads but to manage the loads better, Mr Cromling said. For example, the BOSS rigs have been designed so that rig-up can begin with any part of the rig. “You could begin with the mud pits. You could begin with the substructure. You could begin with the engines. It can rig-up no matter which load arrives first. That facilitates a faster rig-up,” he said.

Throughout the design process, significant focus was also placed on engineering each component and load to minimize the weight, height and width. “When you keep every load under 12 ft wide, that adds to the overall efficiency of the rig,” he said. The rig-up does require crane assistance, although it’s minimal, Mr Cromling added. Overall, he believes the BOSS rig can achieve a 15% quicker rig-up compared with other advanced-technology, fast-moving rigs and up to 40% quicker compared with conventional box-on-box rigs.

The new rig also features two 2,200-hp quintuplex mud pumps, which Unit Drilling opted over triplex versions for higher pump output. “This means we can truly drill most of the horizontal wells with one mud pump, with the second as a standby,” Mr Cromling said.

The company also chose to outfit the rigs with diesel engines with bi-fuel capability, rather than natural gas engines. “We felt like going all gas would limit us in places where field gas isn’t available. Another environmental feature is that the skids underneath the engines and pumps are enclosed and can trap any fluid that might spill. Any fluid is contained within the system to be pumped away to a disposal area,” he commented.

The first BOSS rig began operating in the Granite Wash in Texas’ Hemphill County at the end of March, drilling horizontal wells with 14,500- to 16,000-ft MDs. Since Unit Petroleum is a sister company, Mr Cromling said, it has provided greater flexibility to work out problems throughout the assembly and testing process.

The company is now building four more BOSS rigs, and all but the last one has two-year contracts in place. As of early June, the first of these four was near completion and being prepared for mobilization to North Dakota. The second rig will go to work in the Niobrara in Colorado, and the third unit will operate in North Dakota. “Right now, the goal is to have one rig out every two months,” Mr Cromling said, adding that he hopes to build between eight to 12 new BOSS rigs in the coming year.

In the meantime, the company is investing heavily in training. Unit sees this as a critical aspect to the success of the new rigs, especially because they represent the first advanced-technology rigs in Unit’s 119-rig fleet. “For Rig 401, we had the crews do a mix of hands-on and classroom training for about 60 days, and we expect to continue that for all of these rigs as they go out,” Mr Cromling said. “We see a significant focus from the operators on training, and we’re prepared to invest the time necessary to make sure our people are well prepared for these new technologies.”

IADC Onshore Advisory Panel to tackle land contractors’ critical issues
IADC recently established the Onshore Advisory Panel, which will address issues and initiatives specifically concerning the onshore drilling industry. In this video, Ed Jacob, a member of the IADC Executive Committee and Executive VP/COO at Independence Contract Drilling, speaks with Drilling Contractor at the 2014 IADC Drilling Onshore Conference about the group’s goal and efforts to engage onshore drilling contractors. Click here to watch the video.

Honghua highlights natural gas solutions for shale industry

By Linda Hsieh, Managing Editor

Comparing the state of the Chinese shale gas industry today to the state of the US market back in 2005 to 2006, Honghua Group Chairman and CEO Zhang Mi said he believes the Asian giant is at a turning point. Industry is ready to step up the scale of shale development in terms of technology and equipment, but a good government policy will be needed to support operations, he said. “Today’s China is like the US was 10 years ago. It’s at the cusp of a shale gas boom – or actually, I think it’s already booming,” Mr Zhang told DC during an interview at the 2014 Offshore Technology Conference (OTC) in Houston in May.

At the conference, Honghua also signed a three-year agreement for GE Power & Water’s Distributed Power business to supply its Waukesha VHP gas engines to power shale drilling rigs in China.

“We think it’s really going to be a trend in China to provide much more cost-efficient and cleaner power-generation solutions, and we want to become the pioneer in the Chinese market,” he said. The Waukesha gas engines will be fueled by on-site field gas or with commercial-grade gas to generate 2.8 to 3 megawatts of on-site power. The engines provide options to run almost any gaseous fuel from 950 to 2,600 BTU, including hot field gases, commercial-grade gas, LNG, CNG and up to HD-5 propane, according to GE. Waukesha units are being shipped to China, and the company expects the first pilot rig to begin operations in September.

Mr Zhang said he believes that as many as 100 rigs will be drilling for shale gas in China by year-end, mostly in the Sichuan Basin. This development will be critical as natural gas takes on a greater role in the worldwide energy mix and has been a significant motivator for Honghua to develop natural gas-supplied power-generation technologies.

For example, in 2012 the company introduced the design of its integrated shale gas drilling system that replaced diesel with gas. “The core objective is to eventually establish centralized natural gas power-generation solutions and to provide much cleaner energy to the field and the drilling site,” he explained. Such centralized systems would be able to power 10 to 20 pad-drilling sites simultaneously, he added.

Similar to the switch to natural gas for drilling, Mr Zhang also foresees the same trend for hydraulic fracturing equipment in China. “Our design will be using gas engines to drive those equipment so the whole application will become much more environmentally friendly and more cost-effective.” Honghua said it would rely on outside technologies, through partners such as GE, to realize the centralized power distribution system.

In the US, as well, he sees the switch to natural gas for drilling applications as inevitable, with bi-fuel kits being a good bridging solution. “Right now the reason that a lot of existing drilling applications are using bi-fuel instead of replacing their current existing diesel engines with gas engines is the cost is very high. It’s also a step-by-step process – you can’t replace everything at once. But with the growth in the natural gas supply, eventually natural gas providing power generation will be the final solution.”

Lawler: Independents led US shale revolution, will play key role globally

By Linda Hsieh, Managing Editor

Under a new corporate strategy focused on financial discipline, Chesapeake Energy expects to stay at an operational level of approximately 60 to 80 rigs per day, CEO Doug Lawler said at the 2014 IADC Drilling Onshore Conference in Houston in May. Although this is a significant change from previous years – when the operator was running as many as 175 rigs – Mr Lawler said he still expects to achieve a strong 9-12% production growth rate. “From 2012 to 2013, we reduced our operating expenses by about 15% and are expecting continued improvements there by about another 10%,” he added.

As of mid-May, Chesapeake was running between 60 to 65 rigs per day in the US. Capital expenditure for the year was expected to range from $5.2 billion to $5.6 billion. “In 2013, we significantly reduced our capital and brought that down to a level that was much closer to our cash flow. We’re very pleased with the progress that has been made,” Mr Lawler said.

He emphasized that Chesapeake continues to maintain leading positions across the US shale market, with approximately 13 million net acres of leasehold. “That leasehold position gives us a significant amount of opportunity to grow and develop in our oil and gas plays,” he said, noting that the industry will be supported by increasing demand for natural gas. LNG exports alone could reach 8 bcf/day by 2020 in the US, and overall natural gas demand could be double that if you factor in natural gas vehicles, power generation and other industrial demands.

This means the US would need another Marcellus-size development, he said, highlighting both opportunities for growth and the need to capture more efficiency gains. “Think about the significant amount of money that has been invested in the Marcellus and how the industry has grown the infrastructure and services provided there, and the learning curve we’ve traveled on the operations side, the safety side and the environmental side.”

Around the world, too, significant opportunities exist for replicating the North American shale boom. Mr Lawler reiterated Chesapeake’s interest in unconventional development in the international arena. In fact, he said he expects US independents and drilling companies to play key roles outside the US as they have at home.

“It’s very important to note that the independents have been the key contributors to US energy production growth… In my mind, it will be those independents that lead the rest of the world as well,” he said. “We believe we have the expertise and the experience to participate in the energy growth in the rest of the world.”

Peterson: Horizontal drilling continues to drive Permian growth

By Linda Hsieh, Managing Editor

Under a growth plan called “2×3,” Concho Resources is expecting to ramp up its drilling activities in the Permian Basin in order to double its production by 2016. Further, most of this expected growth will come in the form of horizontal-drilling rigs, Ray Peterson, VP of Drilling for Concho, said at the 2014 IADC Drilling Onshore Conference in Houston in May.

“All in all, we expect to end the year with 35 rigs and 31 of them drilling horizontal wells. This is a big change for Concho. If we look back about a year and a half, you would see just a handful of horizontal and some 30-odd vertical rigs that were drilling at the time,” he said.

The horizontal trend is not limited to Concho, however. Mr Peterson noted that the Permian Basin has gone from a total of 360 rigs in Q1 2011, when only 13% of the fleet was drilling horizontally, to 551 total rigs now. “About 58% of the rigs are horizontal. That’s where the growth is coming from,” he said, adding that the phenomenal comeback the Permian is making is only expected to continue over the next few years. Daily oil production has already passed 1.5 million BOE this year and could reach 2 million BOE in a few more years, he said. “It’s an oily basin, but what’s so surprising is it’s still got a lot of places to drill for gas, too. It’s a great place to be.”

Concho continues to stake out a leading position in the play, with 605,000 net acres and 503 million BOE in estimated proved reserves as of year-end 2013, all in the Permian. “Concho has drilled 347 horizontal wells since the first quarter of 2011. We are definitely a leader in horizontal drilling in the Permian Basin. That’s the only basin where we work, and everything we do in Concho is in the Permian.”

Mr Peterson attributed part of his company’s success to the drilling efficiencies that have been achieved. In the Northern Delaware Basin of Southeast New Mexico, for example, Concho has been able to reduce its horizontal drilling days from 28 to 22 and, in the Texas Permian, from 27 to 23.

“We are doing more with fewer rigs. That’s a good thing for us,” he said, adding that drilling contractors shouldn’t perceive this as a negative. “I think there is still plenty of opportunities. Fewer days on the well and better efficiencies are things that are going to benefit all of us in the long term.”

Concho is using a variety of rig types, including older mechanical rigs, across its four major operating areas within the Permian, Mr Peterson said. In the New Mexico Shelf area, where the company is drilling shallow TVDs and 1-mile laterals, “a 750-hp mechanical kelly rig is taking care of us and doing a very good job.” In the Northern Delaware Basin, “we’re seeing 1,600-hp pumps on 1,000-hp rigs, and that is working for us. Some have top drives, and some don’t.”

For some extended-lateral wells where the MD reaches 20,000 ft, 1,500-hp SCR and AC rigs with top drives are brought in. These newer-type rigs are also used in the Southern Delaware Basin, where 1.5-mile laterals are the standard. Finally, in the Midland Basin, Concho uses a mix of 1,000-hp mechanical rigs and 1,500 SCR/AC rigs with top drives. “We have enjoyed a wide variety of rigs. That’s what has made it work.”

Concho is also working with 16 different drilling contractors for the 33 rigs it currently has under contract, including several of what Mr Peterson called niche players. “It’s nice to be able to have that variety, but we still want everyone that works for us to focus on safety… This is still a people business. Anybody can buy iron, but it takes people to be a contractor.”

Panel: Cross-learning may improve deepwater, shale operations

By Linda Hsieh, Managing Editor

The unconventional resources revolution continues to change the global energy landscape, with its impact reaching the offshore segment as well. In a panel session at the 2014 OTC, a Statoil executive noted that more cross-learning could take place between the unconventional plays and deepwater projects, while an expert from Shell highlighted the reputational impact that one segment has on the other.

Statoil, which has historically been an offshore operator, has invested significantly in the US onshore – the Marcellus, the Eagle Ford and the Bakken. “My view is that we can take a lot of good learnings from the offshore business to the onshore activities,” Torstein Hole, Senior VP, US Onshore for Statoil North America, said. While the technologies and challenges differ, he noted the same underlying factors in many of the incidents and near-misses onshore and offshore.

“It has to do with risk understanding and managing the risk. It relates to competence in the workforce,” he said. “It also has a lot to do with cooperation at all levels, especially between operator, contractor and subcontractor to make sure we are working toward the same standards.”

Mr Hole noted that Statoil has taken its systematic approach to safety from its offshore experience and applied it to its onshore business. “I’m seeing very good results of that so far and no reduction in efficiency.”

He noted that industry must more efficiently use its resources, “both to compete for capital and to deliver the long-term mission to respond to the world’s energy needs… The more we can cross-learn between the two segments, the faster we can improve.”

Mr Hole noted the significant amount of experience Statoil has already built up from its North American operations – experience the company can use to develop unconventional resources in other parts of the world. “We have exploration positions in Australia and Russia now, and these would not have been available to us unless we could use the skills and competence we have acquired by building up the North American unconventionals.”

Greg Guidry, Shell Executive VP, Upstream Americas Unconventionals, shared a different perspective that focused on engagement with the public, noting that he sees more overlap between the unconventionals and deepwater in terms of public acceptance than in terms of technology. “If we don’t get it right in terms of the acceptance of our activity, then it gets very tough for the technology to have the opportunity to work,” he said.

“On the reputational side, I can’t think of any major incident in deepwater that wouldn’t have a dramatic impact on what we do in the onshore, and I can think of a number of incidents we could have on the onshore that would have an impact on the acceptance of what we do offshore,” Mr Guidry commented.

The two segments do have different risk profiles, he continued, where onshore incidents typically have lower consequence but higher frequency. “A rancher cares about how you treat their land in a very particular way. There’s a much greater chance of upsetting that landowner than it is having a high-impact industry event.”

However, the principles associated with a company’s willingness to be transparent applies equally onshore or in deepwater. “There’s a substantial overlap on reputational or license to operate elements that we need to continue to mature and advance,” Mr Guidry said.

He cited a 2011 report released by the Natural Gas Subcommittee of the Secretary of Energy Advisory Board, which found that the industry will not succeed using the argument that hydraulic fracturing has been performed safely for decades. “We can’t just rely on the kinds of approaches we’ve had in the past even though fracking has been around for 65 years,” he emphasized.

One example of the efforts that Shell is undertaking to engage with the public is the Rational Middle Energy Series, which are educational videos intended to generate discussion of the energy business. “Let’s create some information so that we can have a much more rational dialogue around seeking a win-win for an activity that actually fulfills the needs of the community and of society but also allows economic development to take place,” Mr Guidry said.

So far, 21 videos have been generated, such as “Realities of Drilling” and “Shale Gas 101.” “Anyone can use these because they’re free. You can pull them right off the website, and you can use these to actually create a dialogue with those who are uncertain about whether they like or dislike the activity,” he said. “You’re not going to appeal to the bottom 10% who are campaigners or who absolutely will never accept it, but what we found is it creates quite an interesting dialogue with those who are influenceable one way or the other.”

Click here to watch the videos.