Personnel is acute global challenge

Critical D&C issues with Dennis Smith, Nabors

Dennis Smith is director of corporate development for Nabors Industries.

DC: With E&P activity at one of its highest levels worldwide, what do you consider to be the greatest obstacle that drilling contractors and other companies are facing?

Smith: I think the greatest obstacle continues to be people. I think it always has been and always will be the biggest obstacle. Whether you are talking about building rigs – skilled welders, electricians and pipe fitters – or whether you are talking about operations – roughnecks, drillers, rig managers – the higher the skill set required, the tougher it is to attract and retain good people.
Even with the North American land markets flattening out, we still view finding good people as the biggest challenge we face. The situation is particularly acute internationally, especially technical people who are familiar with the software and new technology that go along with the new AC and PLC systems.

Then there is the challenge of field management personnel – the drillers, the toolpushers, the superintendents and rig managers. Here, again, it is most visible internationally, where the markets for both land and offshore drilling are ramping up sharply. If you have been to the Middle East, you see the infrastructure buildup that is going on over there. It’s the same in India, China and Russia. That is the labor pool that we must compete in. It is not just the oilfield that is strained; it is the whole global economy demanding people with operational, technical and project management skills. It is a critical situation.

DC: What is Nabors doing to help alleviate the personnel situation?

Smith: First, we have increased our human resources staffing in virtually every area worldwide. We also have established several training schools throughout the world. We are spending a ton of money on training because we have to grow our own workforce, both domestically and internationally. We have three training rigs in the US. We have portable schools with drilling simulators similar to what the airlines use to train pilots. We are using them to train drillers on the new A/C – PLC control systems.

In our international operations, we have schools staffed with our own instructors that train mechanics, electricians, drillers, derrickmen and roughnecks. In an area like Saudi Arabia, for example, where we employ over 2,600 people, almost 50% of our workforce is composed of Saudi nationals who have been trained by our in house Saudi staff.

DC: Where do you recruit?

Smith: Internationally, we are recruiting in many new venues such as Eastern Europe, Russia, even China, in addition to our traditional areas. With Canada being as slack as it is, we can pull some highly experienced and skilled people out of there.

In North America, we have an active recruiting effort in the local high schools. We have an advertising campaign on some of the local radio stations in our various operating districts. We have also been conducting job fairs at high schools in these different districts as well. We have had success working with a couple of outplacement firms in recruiting exiting military personnel.

DC: Is it tough to recruit because people want to work in other industries?

Smith: I don’t think that is the case anymore. Wages have come up a lot in our industry.  In our US Lower 48 operations, we are paying entry level roughnecks over $60,000 per year. Wages just had to come up to compete, and as a result the wage gap has closed. The industry had to raise wages substantially to attract the right people to the industry. That is what turned the key. For a kid just out of high school with little or no prospects, desire or aptitude for college, that is a pretty good starting wage.

The work schedule is also a positive factor. Rig hands work a 12 hour day for seven days, then have seven days off. For entry level people, that has fixed the problem. It is a little tougher for the positions which require more specific skill and experience.

DC: What are the main challenges facing the industry in terms of drilling performance and efficiency of equipment?

Smith: The overall driver from our customers’ perspective is that commodity prices have improved but drilling costs are also up. Increasingly, prospects are characterized by either unconventional resource plays like the shales. We are also seeing smaller pockets of potential gas that are more difficult to exploit. It really has put the focus on rig efficiency and technology. Even though the US market is a little softer, it is still at a very high level of rig activity.

The increased focus on efficiency to mitigate costs is not only true of US natural gas. It is also true globally now that many of the world’s larger oil finds are hitting their decline curves. We have been seeing for some time an increasing proportion of more complex wells, more horizontal drilling, more multilateral drilling, and some pretty sophisticated, complex well patterns in challenging formations. In summary, the nature, complexity and sophistication of the wells we are drilling in many mature producing venues are increasing as we continue to exploit harder-to-recover resources.

The biggest increase in rig parameters in the last 5-7 years has been increased hydraulic horsepower, in many cases 2 ½ to 5 times the HHP (pressure times volume) we used to pump. This is needed to fully exploit the advances in drill bits and downhole motors. The industry added a lot of new and upgraded rig capacity, as well as efficiency and safety enhancing equipment, but there are also a multitude of challenges any time you adapt rigs with newer and more complex technologies and automation systems.

The AC / PLC technologies have a learning curve for field personnel and require an increase in the rig operational skill sets, particularly on land rigs, which have seen limited use of such systems in the past. This new technology facilitates a number of efficiency improvements. More finite control over drilling settings such as weight on bit, torque, etc., remote diagnostics capability, satellite communications and data monitoring are just a few of the advantages.

Increased drilling efficiency resulted in a reduction in the time required to drill a well. As we saw drilling times come down, it put an increasing focus on improving rig moving times, so we modified a lot of our existing rigs to reduce the moving time anywhere from 20% to 33%. However, the new-built rigs were able to incorporate mast and substructure designs that further reduced moving times, sometimes by as much as 66%. All of these enhancements allow the customers to drill more wells per rig per year. As a result, they are willing to pay more for that efficiency and productivity.

Between early 2005 and mid-2008, Nabors will have constructed almost 140 new rigs worldwide. This total includes 13 coiled tubing/stem drilling rigs that can switch quickly from coiled tubing drilling to pipe drilling. Most of those rigs are in Canada, with a couple in the US. We are able to make the switch over in about 40 minutes, so when you run into a problem with coil, you can go to pipe drilling easily. The top drive swings out of the way when you are using the coiled tubing injector head. When you want to drill with pipe, you park the injector head and swing over the top drive.

Coiled tubing capabilities have expanded with technology improvements in both the rigs and mud motors, and we expect they will continue to do so. It will likely be gradual refinements, though, rather than a wholesale change.

DC: Are there any other equipment performance or equipment efficiency enhancing developments your company or its subsidiaries are developing?

Smith: Our Canrig and EPOCH subsidiaries have been developing a number of new applications, one of which we call our K-Box system, short for Knowledge Box. This allows older SCR and even mechanical rigs to accommodate certain functionality aspects of the digital control systems found on the newer AC / PLC controlled rigs. It provides touchscreen control of many drilling functions. It also includes an advanced automatic driller and facilitates the collection and transmission of rig and drilling data. The system also brings an advanced crown and floor saver system as well as remote monitoring and diagnostics capability for other rig systems.

Other automation systems are being introduced on both new and existing rigs as well. There are some new pipe-handling systems for land rigs that have been developed and are smaller inexpensive versions of the automated pipe systems that are on many offshore rigs. The onshore systems are simpler and are really more of an assist system. But they significantly limit crew exposure to tubulars on the rig floor, which can really reduce fatigue and injuries, and that is the most valuable aspect.

There are also new rig technologies that are being developed by our Canrig subsidiary that are not ready to roll out yet. Earlier in the decade, we moved to AC drives for their superior torque characteristics, simplification and improved maintainability. We now have remote diagnostics on our top drives, which is leading to better performance and reliability and significantly less downtime. There is a constant stream of improvements in the area of remote diagnostics. I would characterize most of these as refinements in the overall technology and not a step change in the systems.

DC: Are there any developments aimed specifically at the offshore market in terms of rig performance and efficiency?

Smith: A couple of years ago we took our Super Sundowner platform rigs and our larger platform rigs and upgraded them to accommodate the dynamic characteristics of deep water SPAR and TLP installations. We have had a large market share for these rigs on TLPs and SPARs. Our Super Sundowner and our MODS rigs are also readily adaptable to these platforms, and we are likely to build more of them in the future. With the MODS rig, which stands for Mobile Offshore Drilling System, it can be either a purpose-built rig or a kit that can be installed on an existing rig that reinforces the derrick so the rig can handle the motion characteristics of a floating platform.