Oil Country Tubular Goods

Managing OCTG supply and delivery

The last things that an operator wants are people and rigs waiting on pipe. But it happens all too often in a process that has hardly been altered for decades.

Brad Hoffman, Tenaris Oilfield Services

Managing tubular supply and delivery is a logistical headache for oil companies. It is also crucial for efficient use of equipment and manpower. This article describes the benefits to an oil company that outsources the managing of supply, delivery and logistics of Oil Country Tubular Goods (OCTG).

THE STATUS QUO

The usual way that companies try to avoid pipe-delivery logistical problems and the resulting expensive downtime is to purchase and stock a sizeable volume of various pipes and accessories somewhere near the location. This results in oversupply, a stockyard, unnecessary transport of pipe and all the other problems of owning and operating a stockyard. Also, unless a truly broad array of pipes are stocked, including pup joints of various sizes, subs and other accessories, wellsite contingencies cannot readily be met.

The wrong selection of pipes, connections and accessories, along with any mishandling that can damage pipe or connections, can have serious consequences, including accidents, leaks and considerable downtime, all of which are magnified in an offshore environment.

INTEGRATED SUPPLY CHAIN MANAGEMENT

For supply chain management to work efficiently and be of benefit to the operator, it is necessary that it work in a hassle-free, seamless process that delivers a wide range of services. These can include management of a full inventory with the ability to handle most contingencies, just-in-time delivery to the rig, procurement of accessories, preparation of subassemblies, and even casing-running crews prior to cementing.

Two alternatives are available for oil companies to accomplish full integration of supply chain management. One is a do-it-yourself approach, to build an internal supply chain management team comprised of highly qualified personnel with tubular experience. The other alternative is to hire a company specialized in supply chain management. This does not necessarily mean abdicating decisions of pipe selection and specification, which can still be done by the operator. Oil and gas companies that prefer to delegate tubular supply chain management while retaining full control of the overall well operation are better off selecting manufacturers of tubulars that provide highly specialized supply chain services.

There are several companies that provide supply chain management services. Some of these companies manage inventories and delivery process, and may handle other aspects of the drilling project as well. However, if they lack the ability to control manufacturing schedules, then, in general, they add limited value, as they mainly transfer to themselves the client's supply chain management costs and risks.

Other companies offer turnkey packages, which include handling supply chain management as well as drilling and production activities. By going this route, operators are able to remove themselves completely from the process, but at the expense of relinquishing control of the final result.

Just-in-time installed column services exemplify the most innovative approach. By taking full control and responsibility for the whole supply chain management process, just-in-time providers enable their customers to deal with a single entity for a suite of services that are usually performed by different suppliers. In addition, some suppliers, including the author's, allow customers to track the progress of their orders on the Internet, from the planning stage through final delivery and installation – a major asset in building confidence that the job is on course.

The benefits for oil and gas companies using such a fully integrated tubular supply management process include: a single invoice and a single source for tubular supply, inspection, installation and remnant management; reduction of logistical complexities; shorter planning periods; improved coordination; customized solutions; risk sharing; virtually zero downtime due to pipe supply/ logistics; no shortages; surplus inventory management through resales or buy-back options; safety and cost reduction with the ability to quickly stop, change and reschedule pipe manufacturing, as required; and a single source for preparation of sub-assemblies and pre-installation of equipment.

FIELD EXAMPLES

Tenaris is providing a type of full pipe-management services for Kerr-McGee's offshore activities from its Tanggu service yard at Bohai Bay, China. Through this new service base in Tanggu, Tenaris' Chinese employees manage and coordinate all activities including integration of local suppliers. As part of the pipe management service for Kerr-McGee in China, the company maintains 24-hour ready-to-run inventory that is dispatched offshore as the client requires. The full-pipe management program covers delivery of pipes, joints and accessories, according to Kerr-McGee's very dynamic drilling plan. The program relieves the operator from performing multiple logistics tasks. Tenaris coordinates the preparation of float shoes and float collars for cementing in coordination with COSL (China National Offshore Oil Co Services Ltd.) and the manufacture of the pup joints. All invoicing is detailed on a well-by-well basis.

Fig. 1. Inventorying pipe at Tanguu, China, pipe yard.

Unique services from the mill to the well are provided that far exceed the simple delivery of pipe. Material is delivered to the docks for Kerr-McGee boats with 24-hour notice to ensure there are no delays or stoppages of rig operations. Local expertise in customs, languages and procedures contributes to meeting these operational challenges. Kerr-McGee provides Tenaris with its drilling schedule, pipe specifications and the required daily quantity of pipe. From that information, tables of monthly quantities are developed. Weekly meetings are held between the company's personnel in China and Kerr-McGee regarding changes that may occur either in the type or quantity of pipe needed. Coordination of the production and shipping timetables must be accurate and worked out long in advance to avoid any possible mishaps. For example, in the case of tubes manufactured at the Siderca mill, the supply process must be planned four months in advance, taking into account that the shipment itself to Tanggu takes about 40 days.

An additional example of the benefits that O&G companies can derive from delegating supply chain management to a third-party entity is the Penglai 19-3 field in Bohai Bay, on the Northern Sea, ConocoPhillips' largest offshore discovery in China. There, one of the key challenges was constant supply of prepared 13-3/8 -in. and 9-5/8 -in. casings to satisfy the rapid batch drilling activities, as some wells were drilled in two days. By training and coordinating the workforce and activities of several local service providers, the supply chain manager was able to craft a suite of tailored services that enabled ConocoPhillips to satisfy its core logistic requirements for this project. 

THE AUTHOR
	Brad Hoffman has been working in the oil and gas business for the past 20 years. He has diverse oilfield experience working for operators as well as Schlumberger. He holds a BSc degree in petroleum engineering from Texas A&M University.