Welcome to all of our participants. Could you briefly describe the rig fleet that you are operating in Russia?
LLC Integra-Drilling: A part of rig fleet of Integra – Drilling (Integra Group) is presented by 320 ton Drilling Rigs BU 3D designed mainly for exploratory or single well drilling. For pad drilling, mainly in Western Siberia, we use 200 ton Drilling Rigs BU 3000EUK-1M. The key advantage of these rigs is a Skidding System which makes it possible to move Drilling Rig fast enough. Besides, our rig fleet includes Drilling Rigs BU 3900; 4500 / 270 EK-BM; F-400 и F-500; Mobile Drilling Rigs АRB-100, MBU-125 and TZJ-20 designed for sidetracking.
EDC: EDC owns and operates the largest onshore rig fleet in Russia and the CIS with 258 drilling rigs, including 44 mobile drilling rigs used primarily for well sidetracking and off-pad drilling. We also own and operate 330 well service and workover rigs on land, plus 2 offshore jack-up rigs. Approximately 50% of our drilling fleet is less than 10 years old which is significantly younger than the industry average.
Our drilling rigs feature a wide range of technical capabilities, tailored for varying requirements in the major Russian oil provinces. More than half of our rigs are designed for cluster drilling on multi-well production pads. Our rigs are capable of drilling wells up to 6,500 meters in depth as well as complex horizontal and extended reach wells. One the most advanced rigs in our fleet is the 450 metric tonne high-spec “YERMAK”, our first rig fabricated in-house, which features a “Quadra” walking system and a separate fixed mud block.
Nabors Drilling International Limited: Nabors Drilling International Limited operates 5 rigs in Russia: Two 1500 HP and one 2000 HP drilling rigs are working in Western Siberia, Irkutsk Region and a 1500 HP drilling rig and 1000 HP workover rig are in Komi.
LLC Integra-Drilling: Today the expansion of our rig fleet is a priority. The current oil market dictates its requirements to drilling rigs. Integra – Drilling participates in quite different projects – from sidetracking in 2,000 m wells using 100 ton Mobile Drilling Rigs to high-tech projects of drilling the extended-reach wells with the depth exceeding 7,000 meters using 500 ton Drilling Rig. Integra – Drilling plans not only continue its participation in such projects but also cover by its rig fleet all range of drilling projects in the market. In this regard the company has planned to upgrade and renew its rig fleet.
EDC: Growth and enhancement of our rig fleet has always been a strategic priority for EDC. Since we became independent we have purchased and/or upgraded 98 drilling rigs (including our SGC subsidiary), growing our drilling rig fleet from 178 rigs in 2005 to 258 rigs in 2011. The type of rigs added to our fleet has also evolved during this period. Since 2010 we have mostly added heavier rigs of 320 metric tonnes and above, in response to market demand for deeper and more complex wells. We intend to continue to pursue our aggressive rig modernization strategy to improve the efficiency and range of application of our fleet. Depending on market conditions and customer demand, we expect to purchase 10 to 12 new rigs per year for the next several years.
Nabors Drilling International Limited: We are planning to expand the number of rigs in areas where we are already operating as well as stepping into new areas, such as Yamal and Orenburg.
We hear a lot about “milestones” & “new drilling records” having been achieved in the industry. What would you describe as your “best success” to date, in Russia?
LLC Integra-Drilling: We participate in quite different projects in many regions of Russia. Integra – Drilling is successfully engaged in exploratory drilling and well testing, sidetracking, directional and horizontal drilling of the wells of different designs and categories of complexity. And for us the most significant success is our vast and successful experience in each area of drilling, where we have approved ourselves. From a professional point of view, I believe that our major achievement is the completion of exploratory well construction by running in a production casing at a depth of more than 6,700 meters in Kalmykia in 2011 and also participation in the construction of horizontal wells over 7,000 meters with a displacement of over 1,000 meters in the Yamalo-Nenets Autonomous Okrug.
EDC: EDC has achieved numerous drilling records and project successes spread over many different fields and regions, yet we are most proud of our overall improvements in drilling efficiency since the company’s inception. In our view, single well/rig/crew records are laudable, but what our customers’ most value is consistently strong performance across all of their projects. In our first year as an independent driller, the average well EDC drilled on land in Russia was just over 2,600 meters deep and required 38 days to construct on average. Within 5 years that same average well required less than 25 days to construct; a 35% improvement. Since these averages include wells from all across Russia, including many hard drilling formations, deeper reservoirs and even exploration wells, our improvements are much more dramatic in primary production areas such as Western Siberia, where our efficiency improved by more than 60% over the same period.
Nabors Drilling International Limited: We started our operations in Russia in 2007 in Western Siberia with one rig. Now we are operating 5 rigs and success can be seen by our improved performance: we have decreased the number of days to drill a well by almost 50%, and our average downtime is less than 1%. Rig 520 drilled the fastest well in the area, and Rig 588 performed rig move between pads in 17 days.
LLC Integra-Drilling: As of today our order book for 2012 has significantly increased compared to 2011. And a number of our drilling crews in operation has grown accordingly. We plan to increase significantly our total drilling volume in 2012, mainly due to a pickup in activity of oil companies, including the companies operating in the Eastern Siberia. The trend in the Russian drilling market clearly indicates the increase in drilling scope within the next 5 years. Integra – Drilling, of course, will not stand on the sidelines.
EDC: 2012 is forecast to be a strong year for EDC, and we expect to drill more wells than in any previous year by a significant margin. Our drilling activity, measured as meters drilled, is projected to increase by 15% this year as compared to 2011, and we have planned for a 14% increase in our active drilling crew count. Much of our growth this year is organic, and we also benefit from a full year’s contribution from SGC drilling assets acquired from Schlumberger in April 2011.
Last year the growth of meters drilled overall in Russia was 9% compared to 2010 according to CDU TEK, and we expect drilling activity to increase at similar rates (mid-to-high single digits) over the next several years. Declining production from Brownfields, which account for 85-90% of total oil production in Russia, continues to be the main driver of drilling growth in this market.
Nabors Drilling International Limited: The level of activity is steadily growing as Operating companies are getting new license fields for development.
LLC Integra-Drilling: Of course, each new project, which appears in the drilling market, is of interest for Integra-Drilling and is treated as promising. Integra Group evaluates the possibility of its participation in the Arctic offshore development project, and we as well as the other Russian oilfield service companies will be able to make our positive contribution to this national project.
EDC: EDC is the only independent offshore drilling contractor in Russia and the CIS. We currently own and operate two jack-up drilling rigs in the Caspian Sea (ASTRA and SATURN), we provide drilling services on LUKOIL’s ice-resistant production platform in the Yuri Korchagin field, and we are building our third and fourth jack-ups for the Caspian which will be active from early 2013 and early 2015, respectively. As we continue to accumulate offshore operating experience and expand our support infrastructure, we are uniquely qualified and positioned to play a part in the upcoming Arctic developments offshore Russia. We believe it may take some time for these developments to get up to full speed, but when the time comes we believe EDC is in a good position to participate.
Nabors Drilling International Limited: Nabors Drilling has good international experience for working offshore in Arctic and of course we are ready to step into this challenging area as we have both modern equipment and experienced team.
In previous issues of ROGTEC Magazine, regional Operators have discussed how they are moving towards Western style drilling contracts, where the operator is responsible for the well planning and risk and the Drilling Contractor is there to supply the equipment and the well. This, it is claimed, reduces drilling costs and increases drilling rates. Have you experienced this in the market and what is your opinion on the change?
LLC Integra-Drilling: Yes, we’ve got such experience and today several drilling rigs are providing such services. Every project for us is very important and we try to satisfy contractor’s requirements as best as we can. For example, recently one of our key Customers (TNK-BP) has awarded us HSE Partner Certificate and acknowledged one of our drilling crews as the best drilling crew of 2011. We are ready to follow the drilling market trend to segregated services, when the operator acts as the key customer of all services and the drilling contractor provides only drilling rig and crew. We, of course, expect to increase the scope of work under such type contracts.
EDC: We have recognized a trend toward more day-rate drilling contracts in Russia, with many of our customers actively evaluating the pros and cons of migrating toward this type of arrangement on a larger scale. For higher-risk wells, management of the supply chain and full responsibility for risk by the Operator is quite appropriate in our view. On more conventional production wells in known areas, however, comprehensive Well Construction or “turnkey” drilling contracts are often better suited to the unique logistics challenges encountered in Russia. By design, Well Construction contracts incentivize drilling contractors to deliver wells as quickly and inexpensively as possible. Large drilling contractors like EDC are able to spread drilling services, materials supply, equipment and personnel transportation and support costs over a large number of operating rigs, and we pass these savings along to our customers. Whichever contracting approach our customers decide to utilize for drilling services in the future, however, EDC remains flexible to meet their needs.
Nabors Drilling International Limited: In Russia we work under day rate contracts. At first sight it seems complicated for an Operator to supervise different service contractor at one pad, but at the end of the day the results which are brought by good teamwork and cooperation between contractors are impressing.
With “easy oil” harder to find and more complex wells being drilled, we are seeing more horizontal and side tracking operations undertaken in the region. How is your company meeting the drilling challenges of today?
LLC Integra-Drilling: We try to prepare for the changes that occur in the drilling market, and today we are successfully delivering sidetracking and horizontal drilling projects, using the up to the minute drilling equipment. We understand that with the increase in drilling scope, the number of “old” wells will also increase. Today well reactivation by sidetracking is of great demand and this is especially true for the Western Siberia. We focus on continuous improvement of our horizontal drilling and sidetracking performance, as we understand that this business is the most promising in the oilfield services market.
EDC: As mentioned earlier, EDC has been actively modernizing our rig fleet over the past several years to meet our customers’ changing needs. In just the last 3 years, we’ve added 19 new rigs of 320 metric tonne or greater hook load, most of which are cluster rigs for drilling horizontal and extended reach wells on production pads. We have also added 23 sidetrack rigs through the acquisition of SGC from Schlumberger last year, plus another 5 heavy mobile rigs for both sidetracking and in-fill drilling. In addition, EDC has undertaken a program of upgrades to its existing rigs to make them more capable of drilling the more challenging wells, including 4 stage mud cleaning systems, top drives (or power swivels) and VFD triplex mud pumps.
Nabors Drilling International Limited: We are drilling horizontal wells in both areas that we are working in, our rigs are designed to drill horizontal and straight wells.
In Issue 23 of ROGTEC we discussed the latest offerings from the leaders within the steel and aluminum drill pipe industry. Do you use standard or premium connectors on your drilling operations? How do you select which pipe or connector to use and what benefits do you find with the different types?
LLC Integra-Drilling: On our drilling operations we mainly use drill pipes with GOST or API tool joints. Today about 60% of the drilling tools used by Integra – Drilling meet API standard. Drilling tools and threaded connections are being selected based on engineering design. The drill pipe selection depends on type and capacity of the drilling rig, type and design of the well, well profile and dogleg severity (DLS). The decision on drill pipe selection is made solely based on mathematical calculation and drilling simulation, based on design solutions of the customer. Every type of the threaded connection has got its constrains, but the premium connector is surely the leader.
EDC: EDC uses standard connectors in our drill strings for most of the wells we drill. On extended reach, horizontal and certain other types of wells, however, we utilize premium drill pipe connectors. Our choice between standard and premium connectors is based on the well programs for a particular project; for higher torque applications, premium connectors reduce pipe-related failures and allow for flexibility in downhole assembly and drilling parameter adjustments. Another important consideration in our drill pipe selection is availability of extended tool joints, which can increase the life of drill pipe and justify the additional expenditure required for premium connectors.
Nabors Drilling International Limited: We do not use aluminum drill pipe, we do however use premium connections on our standard drill pipe.
Hardbanding is used extensively around the world and is starting to take off in Russia. How regularly do you use hardbanding in your drilling operations? Do you recommend using this technology to the operators to prevent tubing wear and tool joint damage?
LLC Integra-Drilling: This is the issue of the day for us. We are increasingly facing with the problem of drilling tool wear during turbine and rotary drilling. We have already placed the orders for tool joint OD restoration and hardbanding. In future we plan to purchase hard-banded drilling tools. We expect to increase the drilling tool life and reduce the repair cost. We apply a very cautious approach to the selection of the hardbanding type for our drilling tools. We do not want our customers to have a problem with casing ID wear due to our hardbanding. The application of wear-resistant coating for tool joints will be our main recommendation for the oilfield service companies.
EDC: For the most common type of conventional production wells being drilled in Russia currently, very little drill string rotation is required so hardbanding is of limited benefit. As discussed above, however, the trend toward longer and more complex wells is changing this dynamic. EDC is ordering more and more hardbanded drill pipe as a result, and we expect application of this technology to continue increasing going forward. Unfortunately, hardbanding has not been readily available from local suppliers, and re-hardbanding facilities are also scarce and scattered In Russia. As demand for this technology increases, local tubular suppliers and pipe repair service providers have a good opportunity to expand their businesses.
Nabors Drilling International Limited: It is standard for us to do hardbanding, and yes we do recommend it, on average we hardband every two years, depending upon the wear that we encounter on the drill pipe. We do find it to be very expensive here in Russia.
A drill bit manufacture once said “you don’t buy a bit you buy a quality hole”. Who is responsible for bit selection on the wells you drill? How do you select the appropriate bit for the formation you are drilling and would you alter the bit as you drill?
LLC Integra-Drilling: For drill bit selection and drill bit program performance we use the services of the specialist drill bit companies. Our main requirements to the drill bit program are decrease in a number of runs for bit replacement and the maximum ROP. But that does not mean that we blindly trust the choice and experience of our contractors. We often make adjustments to the proposed drill bit programs, insist on the experiments and discuss the results, i.e. we are directly involved in the drill bit program drafting. The starting point for each subsequent well is the best result achieved while drilling the previous wells. This approach enables us to improve our drilling performance in terms of a number of runs for bit replacement and the average ROP in each subsequent well.
EDC: Responsibility for bit selection depends on how drilling services are contracted. Under integrated well construction terms, which pertain to the majority of the wells we drill in Russia, EDC is responsible for bit selection and supply. Regarding hole quality, the referenced bit manufacture may have overstated the role of the drill bit; while bit choice does impact hole quality to a certain extent, other factors (notably BHA design, the mud program and drilling & hydraulic parameters) are far more influential. When selecting a drill bit, EDC focuses on drilling speed and durability. Many of our drill bit procurement contracts are performance based such that they align with the mutual objectives of EDC and our customers.
Nabors Drilling International Limited: As we work under day rate contract the Operator is responsible for the drilling and bit programs. We regularly hold workshops involving operator and other service contractors to discuss the results and problems and exchange experience. The decisions made during the workshop are always put into practice and bring improvements in performance.
In Issue 25 of ROGTEC, RN Bureniye, compared the performance increases between the use of complete solids control systems and a reduced system. The full system discussed, delivered a 1.5 fold decrease in drilling waste and a 15-20% reduction in chemical reagent usage. Which type of solids control systems do you utilize in the fields and why?
LLC Integra-Drilling: Undoubtedly, as the volume of solids so as the volume of the used drilling mud and/or chemical reagents depends on a number of stages of the solids control system. We mainly use the complete solids control systems and at some projects we use drilling mud cleaning units. This approach has made it possible to decrease the average consumption of chemicals by 20-25%. Correspondingly, the volume of the conditioned mud has also decreased. Fundamental truth – the right selection of the solids control system and its efficient operation guaranty the successful well drilling.
EDC: EDC employs complete solids control systems on the majority of our rigs. A typical solids control system on our rigs includes two to three shakers, a mud cleaner (desander/desilter stages) and at least one centrifuge. We do occasionally utilize reduced solids control systems, but the trend is definitely toward the more comprehensive schemes. We find that improved mud cleaning benefits overall drilling performance as well as contributing to efficient mud usage. Fewer suspended solids also reduces erosion of bottom hole instrumentation (e.g. MWD, LWD, etc.), which is becoming more complex and valuable as well complexity increases.
Nabors Drilling International Limited: We run a full system on all our rigs, it is normally required by the customer.
Director, Technologies and Supervising Department, LLC Integra – Drilling
In 1999 Alexander graduated from Nefteyugansk Industrial College with a specialization in Oil and Gas Wells Drilling, and in 2007 he graduated from Tyumen State Oil and Gas University with a degree in Oil and Gas Fields Development. Alexander started his career at Siberian Service Company. From 2002 to 2011 he held different positions (including management positions) at SGK-Burenie. In 2006 he managed Supervising Service at Nefteyugansk Branch, SGK-Burenie. In 2008 he held the position of Project Management Department Director at Strezhevsky Branch, SGK-Burenie. From 2009 he held the position of Deputy General Director for Well Construction Technology and Supervising, SGK-Burenie. Since 2011 – Director, Technologies and Supervising Department, LLC Integra – Drilling.
Kim L. Kruschwitz
Vice President, Marketing and Investor Relations for EDC
Mr. Kruschwitz joined EDC in April 2008 as Vice President, Marketing, taking on the additional role of VP Investor Relations in July, 2008. Prior to joining EDC, he was employed by Baker Hughes Inc. and its forerunners from 1981 to early 2008. Most recently Mr. Kruschwitz served as Country Director for Baker Hughes in Nigeria, followed by an assignment as Global Account Manager for ExxonMobil worldwide. Mr. Kruschwitz has extensive management, marketing and operational experience on a global basis, including postings in the Middle East, the Far East, Central Asia, Europe, North Africa, West Africa and North America.
Area Manager for Nabors Russia
Denis Ivanov has a PHD from the Russian State Aerospace University, and joined a major service company while still a student that provided him with the his oil industry training. He has 3 and a half years of experience with Schlumberger in both Russia and the US. He started as an application engineer in the efficient stimulation group, gaining unique experience at oilfields in the US and in Siberia. Following that he spent 4 years with Weatherford, again both in the US and in Russia, holding various positions. Denis is currently Area Manager for Nabors Russia.
* Additional input was supplied by Cecil Davidson