2018November/DecemberSafety and ESG

Risk aversion shouldn’t be used as excuse not to innovate

By Linda Hsieh, Managing Editor

The drilling industry stands at the doorstep to a vast digital transformation. Yet, in many ways, it remains hesitant to fully cross the threshold. On the other side is Industry 4.0, characterized by things like smart machines, artificial intelligence, data-enabled efficiency and decentralized decision making. To take that great leap, it’s become apparent that leadership commitment to change will be key.

So it was exciting when the head of an onshore drilling contractor stood up at a recent IADC conference and delivered a definitive call to action: Let go of old mindsets; don’t be a “smart follower” but an “early adopter.”

Not only that, but he also laid out a path forward to Drilling 4.0 – where “every foot drilled incorporates all the lessons learned from all the prior feet drilled,” Precision Drilling President and CEO Kevin Neveu said at the 2018 IADC Advanced Rig Technology Conference.

Lagging Other Industries

The drilling industry has historically lagged the rest of the world in technology adoption, Mr Neveu noted in his speech. This lag can be traced all the way back to the adoption of steam and electric power into drilling, up more recently to the adoption of digital controls and automation.

In fact, he noted, Accenture rated the oil and gas industry dead last on the consultancy firm’s digital maturity index in a 2017 analysis, behind 16 other industries.

The reasons behind the drilling industry’s risk aversion are clear. First, we work in extremely complex environments where we are running a machine operation but never get to see either the work face or tool face in real time. “You’re making decisions based on your experience to operate this machine remotely,” Mr Neveu said. “On top of that, the risk of failure is extremely high – potentially catastrophic.”

And yet, he urged, companies must move beyond this risk aversion. “We have to remove the legacy mindset of ‘if it’s not broke, don’t fix it.’ We have to think hard about centralized decision making and look at how we reduce the multiple levels of oversight and push decisions closer to the work face. And we have to understand that early failures are a risk of the business. We can’t let that stop adoption.”

A second major challenge is the highly fragmented structure of the industry, where there might be 30-50 contractors at one location, all working to drill and complete one wellbore. This means that collaboration is absolutely critical.

3 Key Enablers

The industry needs three things in order to navigate the journey ahead, Mr Neveu asserted. First, it needs an enabling mindset. This encompasses complete buy-in from senior leadership to change their organizations’ cultures, as well as higher levels of collaboration among operators, drilling contractors and all suppliers. “We need to have effective and empowered project management,” Mr Neveu continued, adding that the entire organization must be engaged in this change.

Further, the industry must have well-aligned objectives to the process – but this doesn’t refer to performance-based contracts. Those tend to drive lower cost, not new technologies, he said. “So when thinking about how you align objectives, back away from ‘drill faster or we’ll pay you less.’ I don’t think that really helps us to drill faster.”

Next, the industry needs enabling technologies. This includes real-time data systems, sensor data and analytics-driven intelligence. “Apps are going to be a great enabler,” he said, noting the potential to have different apps for different parts of the drilling curve, different customer profiles or different operating performance characteristics.

Finally, to enable implementation, companies must think about the central role of the driller. Automating the repetitive tasks they do will be essential. “Allow him to become a higher-level, more skilled worker on the rig,” Mr Neveu urged. “They will be involved in real-time analytics, real-time decision making. If you can move those decisions away from the remote center and closer to (the driller), you’ll be faster and more efficient.” DC

About the author

Linda Hsieh is a graduate of the journalism program at the University of Texas at Austin, where she also completed the Business Foundations program at the U.T. McCombs School of Business and minored in Asian Studies. She has been writing for Drilling Contractor since 2005.


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