DEEPWATER TECHNOLOGY

Static drilling efficiency threatens the US Gulf of Mexico

Non-productive time harms operators' drilling economics, while government and insurance constraints limit new technology.

James K. Dodson and Ted Dodson, James K. Dodson Co., Grapevine, Texas;
Victor Schmidt, Drilling Engineering Editor

Operators and contractors that work in the Gulf of Mexico have a serious problem—static drilling performance. By monitoring drilling performance using days-drilling and rate of penetration, drilling over the last five years (2001–2005) shows no improvement in drilling efficiency. This static performance now threatens the economic life of the GOM's remaining oil and gas reserves at present exploration and production costs, even with prices at $60 for oil and $8 for gas.

The rate of drilling efficiency is the aggregated result of a complex interaction of government, operating companies, contractors and supporting industries.

The interacting elements include:
� Technologies allowed by the Mineral Management Services' Technology Assessment Group
� Operator policies of technology application
� Limitations placed on drilling contractors
� Limitations imposed by risk insurance on all parties
� Regulations governing health, safety and environmental issues.

The effect of these interacting forces can be seen in the declining numbers of active GOM operators and in the expanding demand from other world areas for the constrained drilling rig supply. This demand is pulling drilling rigs from the Gulf. According to ODS-Petrodata�s Offshore Rig Locator, in early 2002 GOM competitive supply was over 190 rigs. This supply dropped to 143 rigs in late 2005 and continued to fall to 128 rigs in December 2006.

DATA

Over the 2001�2005 period, annual drilling efficiency was measured using average days drilling, average daily measured drilling footage: Below Mudline Total Depth (BMLTD) and average daily rate of penetration (ROP). The data were aggregated in 1,000-ft increments below 10,000-ft BMLTD for wellbores drilled by jackup rigs (Table 1) and floaters, both semisubmersibles and drillships, Table 2.

These data are remarkable for their consistency. Close examination of the jackup numbers show expected patterns: average drilling days increase with increasing depth, while average ROP declines as depth range increases. ROP variation for a given depth range is relatively small from year to year, clustering close to the average ROP for a given depth range.

The industry knows how to drill on the GOM Shelf and prefers to drill to total depths less than 16,000 ft, although it continues to drill deeper targets. The average GOM well takes 33 days to drill, and drilling advances at an average 339 ft/d.

Moving to the floater data (Table 2), the total number of wells drilled has been dropping steadily over the last five years, to 77 wells in 2005 from 171 wells in 2001. No wells were drilled in the 19,000-ft to 20,000-ft range in 2004 and 2005. While floater data is more scattered, the average drilling days needed are higher and the ROP is less overall. An average well requires 49 days to drill and drilling progresses at 246 ft/d.

RESULTS

What is not seen are any trends showing drilling efficiency progress, even with improving technologies and techniques. One of the key issues is the industry�s application rate of new technologies offshore. Regulatory oversight is oppressive to any step-change in technology for improving drilling efficiency. Operators, contractors, industry are dogged by risk-insurance coverage caveats.

What is the industry�s response? Where can an operator go to escape a conflicted exploration and production environment?�except to go global, beyond the GOM. The quickest way for an independent operator to go global is to expand by merger.

The long-lived reserves in global territorial waters provide a bigger petro-dollar than drilling the GOM Shelf. The GOM may be technology challenged for even its deepwater development.

So the �big dollars� go for the global �bigger dollars,� looking for easier prospects with longer-lived reserves, which compensate for the higher costs. In the meantime, GOM drilling efficiency remains static. The GOM remains in production decline on the shelf and the deepwater is lagging in development.

RECONSTITUTING GOM ECONOMICS

So what is the first step to improving GOM economics�increased drilling efficiency! To save the GOM, drilling efficiency must increase and the Gulf�s economic culture of conflicted interests among government, service industry, and operators must change. Operationally, GOM drilling economics can best be improved by decreasing non-productive time (NPT), exclusive of flat-time due to weather delays from named storms.

For a study group of 260 wellbores drilled during the January 2004�October 2006 period, NPT averaged 24% of total drilling days (measured in hours), Table 3. Major NPT incidents added significantly to flat-time hours. Total drilling cost for the study wells was $3.43 billion and the associated cost for NPT was $822 million. NPT incidents were caused by both geological and operational incidents and included:

� Stuck pipe (3%)
� Cement squeeze (3%)
� Lost circulation (3%)
� Rig failure (3%)
� Equipment failure (3%).

These incidents accounted for 15% of the 24% overall NPT, or 63% of the NPT lost from total drilling days. If NPT could have been cut in half (a 12% reduction in drilling cost), $411 million could have been saved, reducing total drilling cost to about $3 billion. The money saved could have lowered capital costs and improved the economics of many wells. Alternatively, the $411 million difference could have been used to drill additional wells or drill the existing wells deeper to test new zones.