Module Code: BD415024S MARKETING DESIGN & INNOVATION

A Critique of Directional Casing While Drilling Tools

Prepared by: S.I.D. 1031424 Word Count 2948

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A critique of directional casing while drilling

List Of Abbreviations

1. BHA Bottom-hole assembly 2. DCwD Directional Casing While Drilling 3. DLA Drill-Lock Assembly 4. LWD Logging while drilling 5. MWD Measurement while drilling 6. PDM Positive displacement motor 7. R&D Research & development 8. RSS Rotary Steerable Systems 9. SDL Steerable drilling liner

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A critique of directional casing while drilling

TABLE OF CONTENTS

TOPICS Page

PRODUCT SELECTION & REASONING WHAT IS DCwD? DCwD DEVELOPMENT DCwD COMPARISON DESIGN ELEMENTS OF DCwD VALUE & BENEFITS OF DCwD BRAND APPEAL CONCLUSIONS & RECOMMENDATIONS APPENDICES REFERENCES BIBLIOGRAPHY

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A critique of directional casing while drilling

Product Selection and Reasoning

Not to innovate is to die Freeman (1982). The product that I have selected to critique is the innovative Directional Casing while Drilling (DCwD) tools initially developed, marketed and patented by Schlumberger in association with Tesco Corp. under the sponsorship of ConocoPhillips. Baker Hughes, Halliburton and Weatherford have followed and are currently offering a similar product under different trade names. This product targets energy companies who earn revenue by exploring for, producing and fiscalizing oil and gas. This is a huge global market and the ability to capture and retain market share is based on affordable technological advancements. DCwD is still a relatively new technology that won World Oil 2008 Best Drilling Technology Award. The business enterprise has two and only two basic functions Marketing and Innovation. Marketing and Innovation produce results: all else is cost Drucker (1953). This product was chosen since it is a prime example of how cobranding impacts both marketing and innovation. Marketing is defined by the American Marketing Association (AMA) as "the activity, set of institutions, and processes for creating, communicating, delivering, and exchanging offerings that have value for customers, clients, partners, and society at large." Innovation is defined as a change in the thought process for doing something, or the useful application of new inventions or discoveries. McKeown (2008) The product was also chosen because it is a continuous innovation in the energy (and specifically drilling) industry. As a Petroleum Engineer new technological developments in the industry make my work easier. DCwD will greatly enhance success rate of finding new and previously inaccessible reserves. Drilling is a complex process especially in these times where all the easy oil and gas has been found. Wells are now being drilled in deeper waters, under harsher conditions than ever before, both offshore and on land.

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A critique of directional casing while drilling

Innovative technologies such as DCwD are required to overcome new and existing problems and challenges. Oil and gas is what currently drives and maintains industries and is hence very critical to countries worldwide. The worlds energy consumption is almost totally based on petroleum. In 2008, total worldwide energy consumption was 474 exajoules (4741018 J) with 80 to 90 percent derived from the combustion of fossil fuels. (Source: Statistical Review of World Energy 2009, BP. Oct 24, 2009). Since hydrocarbons are not renewable, any innovation or technological advancement that can assist in finding and producing them economically is of great importance both on a personal and global level.

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A critique of directional casing while drilling

What is DCwD?
DCwD uses a combination of rotary steerable systems (RSS) to provide directional drilling capabilities with casing as the drillstring. Directional/Horizontal Drilling: This involves deviating a wellbore to a target given lateral distance and direction from the vertical. Vertical drilling takes place until a planned depth (kick-off point) where the well begins to deviate. Special bottom-hole assemblies (BHAs) known as RSS which incorporate measurement-while-drilling (MWD) and logging-while-drilling (LWD) are used to allow directional/horizontal drilling with continuous rotation from surface. Directional/horizontal drilling is used where vertical access into the reservoir is difficult or not possible. Casing Drilling: This involves using standard oilfield casing as the drillstring instead of drillpipe/collars to drill the well. Once the casing point is reached, the casing is left in place to case the well. 80% of casing drilling jobs involves running a nonretrievable bit to the bottom and leaving the bit in the hole after the casing is set. The bit is drilled out (lost) when the next set of casing is to be run. The other 20% allows bits and other downhole tools to be lowered and retrieved via wireline inside the casing and latched to the bottom-most joint of casing. Casing drilling is mainly used to reduce hole problems when drilling into difficult formations. DCwD: This innovation combines both the directional RSS BHA with casing instead of drillpipe. DCwD allows deviated wells to be drilled using casing as the drillstring. The RSS BHA is retrievable when the casing is set for all drilling jobs and this allows the operator to use the drill bit of choice.

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A critique of directional casing while drilling

DCwD Development
DCwD developed as a result of ConocoPhillipss vision and Schlumbergers and Tescos commitment to research and development (R&D) and their strategic alliance. This is an agreement between two or more partners to share knowledge or resources, which could be beneficial to all parties involved Vyas, Shelburn & Rogers (1995). Morrison and Mezentseff (1997) suggest that strategic business alliances will only achieve a sustainable competitive advantage if they involve learning and knowledge transfer. This is exactly what occurred, with Schlumberger bringing their expertise in the directional and measurement area and Tescos proficiency in casing drilling.

On December 17th 2007, Tesco Corporation ("TESCO") announced that it has entered into a non-exclusive Marketing Agreement with Schlumberger. The agreement provided that the two companies will work together to identify opportunities to create value for customers by combining the use of their respective proprietary drilling technologies, including TESCO's CASING DRILLING and the Schlumberger (patented PowerDrive) directional drilling, rotary steerable, MWD and LWD systems. For this purpose, each company promoted the other's equipment and services, and made approved use of certain specified trademarks belonging to the other company. (Source: PRNewswire-FirstCall,
HOUSTON, TX, Dec 17, 2007)

As hydrocarbons become increasing difficult to find due to harsher environments both downhole and offshore, innovations and technological advancements are needed to assist operators in finding new reservoirs and producing the hydrocarbons economically. Appendix 1 shows a timeline of how drilling tools evolved over the years to suit market needs. In the early days of the petroleum industry (late 1800s), cable tool drilling was the preferred method of drilling since oil was shallow and easy to find. This method was percussive and utilized a chisel. As wells became deeper, a combination of rotary drilling 7

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A critique of directional casing while drilling

with bits were developed to drill harder rock (early 1900s). Logging tools were also developed around this time to determine what formations were drilled into and what fluids were contained in them. The early 1900s also saw the development of cementing processes to hold casing strings in place to protect wells integrity. When it was realized that petroleum could be found offshore, new rigs and platforms were developed in the 1930s to go offshore. Directional/horizontal drilling with mud motors resulted in the 1970s, due to reservoir inaccessibility and a realization that increasing the contact area of a reservoir with the well (either by deviated or horizontal drilling) increases flowrate and production, but this method had wellbore stability problems. In the 1980s LWD/MWD evolved from logging since real-time data was needed on drilled formations and their fluid content. In 1998, the mud motor was eliminated completely and RSS was developed. In 2001, casing drilling was developed due to lost circulation and wellbore stability problems associated with problem formations. As a result of well stability problems, long thin reservoirs and time, ConocoPhillips saw a need and tested a unique combination in 2007. Upon successful testing, they assisted Schlumberger and Tesco with full-scale development and DCwD was innovated. Even though petroleum companies are competitors, technologies and innovations are shared. As a company develops a product, another company innovates and pushes the technology further resulting in consecutive progressive technological advancements within the market. Technology transfer is the application of technology to a new use or user. It is the process by which technology developed for one purpose is employed either in a different application or by a new user Langrish et al., (1982). This promotes healthy competition within the global village of the petroleum industry.

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A critique of directional casing while drilling

DCwD Comparison
Since Schlumberger and Tesco were first to market this new innovation, they gained a competitive advantage within the oilfield. Grant (2003) refers to first-mover advantage as the advantage gained by the initial occupant of a market segment in terms of resources, market share and profit-margins. Their communications strategy was through public relations, web site, seminars, conferences and trade shows, downloadable material, case studies and in-house presentations to energy companies. The other service companies consequently had to react to suit the market needs. They should however, be able to benefit from second-mover advantages which analyses how (the product) is launched, its reception by customers and the continuing attention given to its improvement. Trott (2008) and adapt their product to suit. Halliburton, after seeing Schlumbergers success with the DCwD partnered with Tesco to combine their Geo-pilot patented RSS and provide DCwD to operators. The main difference between the brands is Schlumberger has more experience (in terms of footage drilled and hours run) in using the DCwD than Halliburton since they were the innovators of the technology. This experience leads to fewer problems, less downtime and faster drilling. In 2010, Baker Hughes developed a DCwD patented as Steerable Drilling Liner (SDL). It combines their patented Autotrak RSS with their patented HRD-E setting tool and incorporates liners instead of long casing strings This is the natural progression from DCwD, however since the application is new on the market, teething problems will still have to be worked out.

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A critique of directional casing while drilling

Weatherford developed a cheaper nonretrievable system whereby casing drilling can take place but the casing and bit is cemented in place. The bit is drilled through and the process continues. However, Weatherfords systems are not steerable and are mainly used for vertical or deviated wells where an RSS is not required. The main difference between Weatherfords system and Tescos system is in the area of logging and data collection. This information is vital and Tescos system allows full logging to be possible. Weatherfords system only provides limited logging options which affects drilling success.

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A critique of directional casing while drilling

Design Elements of DCwD

The following is the design of the DCwD tool combination. Figure 1: DCwD

DLA Connecting BHA to Casing Profile Nipple Internal Tandem Stabilizer

PDM Casing Shoe Vibration Sensor Sub

Under Reamer

Roller Reamer

LWD & MWD System

RSS Bit

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A critique of directional casing while drilling

1. Shape The tools that make up the DCwD are all cylindrical in shape. This is due to the rotary drilling process. The cylindrical shape allows easy rotation and reduces friction thereby increasing rate of penetration (ROP). Increasing ROP increases drilling rate and decreases total cost since well will be completed sooner. 2. Colour The tools are mainly silver due to their metallic nature; however colour plays no part in the tools performance. Operators main concerns are functionality and benefits. 3. Tool Combination: Bit Polycrystalline diamond compact (PDC) cutters used to cut rock together with the rotating drillstring. This sees the most pressure, since the bit does the drilling. If bit becomes dull, ROP decreases. Bit selection is very important depending on formation to be drilled. RSS A fully steerable rotating tool that allows bit to be directed from surface with LWD / MWD to ensure precise well placement. LWD & MWD system Gives real-time information for geosteering and formation evaluation. Transmits information about the formations types being encountered and fluids contained. Data is transmitted from the bottom of the drillstring through the drilling fluid, to surface for interpretation in real-time. These 3 tools are the heart of directional/horizontal drilling. PDM Transmits and converts hydraulic energy by the drilling fluid to rotary motion to increase ROP. Drill Lock Assembly (DLA), the soul of DCwD Casing is used as drillstring and DLA is situated close to bottom of string. Rotation of casing is

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done via a top-drive system (at surface). DLA connects BHA to casing and plays an important part in BHAs retrieval. BHA is set and retrieved by a mechanical land-and-lock profile. This is the main feature that makes the DCwD so effective. Once the depth is reached for the casing to be set, the DLA can release the BHA and it can be retrieved. 4. Imagination DCwD was a combination of 2 different drilling technologies that were previously conceptualized and perfected by separate companies. Schlumberger and Tesco entered into a marketing agreement to co-brand, to create marketing synergy. ConocoPhillips had already benefitted from these companies individually, but with vision and imagination, seeing the benefits that could be derived from the 2 companies, initially tested an application of DCwD. Once it proved successful ConocoPhillips sponsored the full development of DCwD. 5. Relevance and usefulness DCwD is extremely relevant in todays economic environment. In 2008, with the economic downturn, many companies reduced their exploration activities since the energy prices also plummeted from heights of >US $100/bbl to < US$40/bbl. However, increases in oil price to >US $80/bbl is a sign that economies are recovering and oilfield activities will resume. As countries further develop, there will be an associated increase in hydrocarbon consumption. There will be a need for further exploration and production activity to satisfy the energy requirements. The usefulness of DCwD will be described in the following section.

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Value & Benefits of DCwD

Since DCwD features a combination of directional/horizontal and casing drilling, the following are values and benefits that operators can derive: 1) Allows access to reservoirs where vertical drilling is not possible/economic Vertical drilling may not be possible and/or economic in: environmentally sensitive areas, areas just offshore, mountainous areas. Due to economic expense that operators would suffer to prepare the wellsite for vertical drilling, DCwD can be used to enter the reservoir while drilling from a previously (or cheaply) prepared wellsite. 2) Deviated/horizontal wells increases productivity A deviated well will make more footage contact in a reservoir than a vertical well (from trigonometry). Due to the increase in reservoir contact, a significantly greater surface area of the reservoir will be drained and hence increase productivity. Figure 2: How footage increases with deviated and horizontal wells (D1<D2<D3)

D1

D2

D3

Source: www.horizontaldrilling.org

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3) Access thin reservoirs Where oil and gas reservoirs are wider (longer) than they are thick, vertical wellbores are only able to extract oil and gas from a small area surrounding the wellbore. However, horizontal wells use lengthy lateral arms to extend into these long, flat reservoirs and drain a significantly larger area.

4) Reduced trip time During normal drilling operations with drillpipe, after a section of hole is drilled, the drillpipe must be pulled from the well (tripped) and the hole must then be conditioned (ensure drilling fluid in hole has correct weight and viscosity). Casing is then run into the hole (tripped) to bottom and cemented in place. With DCwD, since the casing is the drillstring, once the section of hole to be drilled is completed, the BHA can be removed and the casing can be cemented at once. This greatly reduces the trip time and saves on drilling costs since the well will be completed in less time. Less time means less rig rental which leads to cost savings. The majority of nonproductive time in any drilling operation comes when you are tripping pipe. That is when most well control problems show up and when wellbore stability issues really become evident. If you can avoid tripping pipe, you can sidestep much of the typical nonproductive time. (John Boyle, VP Casing Drilling, Tesco 2008) 5) Improved personnel and equipment safety Since there is reduced trip time and reduced casing strings, there will be reduced pipe handling by personnel. This will reduce the risks involved and hence improves overall safety. DCwD also reduces the risk of a blowout which again improves safety.

6) Prevents drillstring sticking In deviated/horizontal wells, there is a problem of proper hole cleaning. Hole cleaning occurs when the cuttings made by the bit is not brought to surface efficiently. Cuttings can fall back unto the BHA and cause the BHA to pack-off, and the drillstring to stick. This is a major problem since 15

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A critique of directional casing while drilling

stuck pipe can eventually lead to blowouts. With DCwD the casing is already in the well keeping the hole open and allowing the annulus size (distance between drillstring and openhole) to be minimized. 7) Mechanically strengthens wellbore Reservoir productivity is enhanced by the plastering effect (smearing) that results from smooth, continuous contact of casing as it rotates against wellbore wall. Because DCwD minimizes annulus size, casing rotation and contact with wellbore wall reduce or eliminate fluid losses to the producing horizon and mitigate mud invasion through permeability. Drilled solids are packed into the porous and permeable portions of the formation as drilling fluids carry the cuttings up the annulus. Figure 3: Diagram showing how casing strengthens wellbore

Source: http://www.slb.com/~/media/Files/drilling/brochures/drilling_applications/directional_casing.ashx

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8) Reduced well construction costs Well construction in fields with troublesome formations and/or well stability problems sometimes require extra casing strings to be run. These extra strings increase the total cost of well construction. With the use of DCwD, wellbore stability is not an issue since the casing is in place, holding the wellbore open and stable. This reduces the number of extra casing strings needed and hence reduce the overall cost of well construction. Combining all these benefits will result in more trouble-free wells being drilled economically to find and produce oil and gas. This will lead to increased worldwide energy and consequently sustainability of countries in terms of development and progression.

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Brand Appeal

Aaker (1991) states that Brand equity is a set of assets (and liabilities) linked to a brand's name and symbol that adds to (or subtracts from) the value provided by a product or service to a firm and/or that firm's customers. The major asset categories are: 1. Brand name awareness 2. Brand loyalty 3. Perceived quality 4. Brand associations" The companies involved in the development of DCwD are considered brands in their own right. Their names are synonymous with competency, credibility, innovation, expertise and results. ConocoPhillips is the third-largest integrated energy company in the United States, based on market capitalization, oil and natural gas reserves. They are known worldwide for their technological expertise in reservoir management and exploration & 3-D Seismic. Schlumberger is the leading oilfield service provider of technology, project management, information solutions and consulting services to oil and gas exploration and production companies worldwide. Tesco Corporation is an industry leader in the development and commercialization of innovative drilling technologies and services. They have 3 main divisions: Top drives, tubular services and casing drilling. DCwD was first tested in 2007 on the offshore well 2/7B-16A drilled in the North Sea from the Eldfisk Bravo platform, operated by ConocoPhillips. Approximated 11,000 was successfully drilled and correctly positioned. After this success, other operators worldwide have utilized this innovative technology with much success. 18

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The technology was recently used in 2010 by PETRONAS in a project from a producing platform in Malaysia. The project was completed successfully in terms of increasing ROP and lowering the time and cost to drill the top-hole section of the well. The successful operation led to several records: Worlds deepest 13 3/8-in. DCwD job Worlds highest-angle directional well with 13 3/8-in. DCwD Worlds fastest rate of penetration for a 13 3/8-in. DCwD Worlds first application of Gyro MWD with DCwD

(Source: http://drillingcontractor.org/directional-casing-while-drilling-applied-to-improve-high-angle-tophole-drilling-from-producing-platform-6383)

Due to the companies involved in the DCwD development, it would have initially appealed to the oilfield market based on Aakers (1991) brand equity definition. However the success of DCwD thus far in various environments under different conditions serves to strengthen its brand appeal. Numerous papers and case studies have been written about this innovative technology and it has even won the World Oil 2008 Best Drilling Technology Award.

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Conclusions & Recommendations

DCwD has clearly been an innovative technology that resulted out of a need for solutions to previously unsolvable problems. ConocoPhillips due to their vision (and sponsorship) allowed Schlumberger and Tesco to combine their technologies successfully and develop the DCwD. The brand combination has a great appeal within the oilfield and its success for various operators only serves to strengthen its brand. The features of the DCwD include: PDC bit RSS LWD/MWD system PDM DLA

DCwD provides the following benefits: Allows access to reservoirs where vertical drilling is not possible/economic Deviated/horizontal wells increases productivity Access thin reservoirs Reduced trip time Prevents drillstring sticking Mechanically strengthens wellbore Reduced well construction costs Improved personnel and equipment safety

Even though downhole conditions are getting increasingly difficult, the market for DCwD is expected to grow since countries are resuming their activity after the economic downturn. This activity will have a corresponding need for hydrocarbons and will push

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energy prices up. The increasing energy prices will make drilling for new oil and gas deposits worth pursuing. Roussel et al. (1991) defines R&D: To develop new knowledge and apply scientific or engineering to connect the knowledge in one field to that in others. A recommendation that can be made is for Schlumberger and Tesco to continue their R&D. R&D programmes arefocused on the business aspirations of the company and its future markets Trott (2008). This will ensure that even better technologies can be innovated to assist operators in tackling the downhole environment in the most efficient, effective and economical way possible.

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Appendices

1. Drilling Innovations Timeline Year 1859-1920 1900s Innovation Cable Tool Drilling Rotary Drilling Function/Benefit First method of drilling Percussion: used rods & chisel Drilling method changed from percussion to rotary 1906 1930s 1946 1970s 1980s 1998 2001 2007 2010 2 cone rotary rock bit Offshore drilling Diamond bits Directional drilling w/ mud motors LWD/MWD Rotary steerable systems Casing drilling DCwC SDL Logging developed

Cementing developed Able to drill through hard rock More oil and gas to be found, jack-up, submersible rigs Stronger bits for tougher formations Able to deviate from vertical and drill many wells from one platform or where reservoir is inaccessible Allowed logging and measurements while drilling to be taken in real-time Eliminated the use of a mud motor. Can steer bit while rotating Allowed casing to be used as the drillstring to prevent holes collapsing and drillstring sticking Combined casing & directional drilling Replaces long casing sections with short liners. New technology to be further tested

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References

1. Aaker,D.A.(1990),Brand extensions: the good, the bad, the ugly, Sloan Management Review 2. American Marketing Association "Definition of Marketing". http://www.marketingpower.com/AboutAMA/Pages/DefinitionofMarketing.aspx. Retrieved 2009-10-30. 3. Boyle, J. (2008) VP Casing Drilling, Tesco 4. Drucker, P.F. (1953) The Practice of Management, Harper-Collins 5. Freeman, C. (1982) The Economics of Industrial Innovation, 2nd edition Frances Pinter, London 6. Grant, Robert M. (2003). Cases in Contemporary strategy analysis, Blackwell. 7. McKeown, Max (2008). The Truth About Innovation. London, UK: Prentice Hall. 8. Morrison, M and Mezentseff, L. (1997) Learning alliances a new dimension of strategic alliances, Management Decision, Vol 35 9. Roussel, P.A., Saad, K.N. and Erickson, T.S. (1991) Third Generation R&D, Harvard Business School Press, Boston, M.A. 10. Vyas, N.M., Shelburn, W.L, and Rogers, D.C. (1995) An analysis of strategic alliances: forms, functions and framework, Journal of Business and Industrial Marketing, Vol. 10

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Bibliography

Textbooks: 1. Kotler, Philip; Gary Armstrong, Veronica Wong, John Saunders (2008). "Marketing defined". Principles of marketing (5th ed.) 2. Langrish, J., Evans, W.G. & Jerans, F.R. (1982) Wealth from Knowledge, Macmillan, London 3. McKeown, Max (2008). The Truth About Innovation. London, UK: Prentice Hall. 4. Roussel, P.A., Saad, K.N. and Erickson, T.S. (1991) Third Generation R&D, Harvard Business School Press, Boston, M.A. 5. Trott, P (2008) Innovation Management and New Product Development, Prentice Hall (4th ed.) Websites: 1. http://www.offshore-technology.com/features/feature52912/ 2. http://www.epmag.com/Magazine/2009/4/item33845.php 3. http://drillingcontractor.org/directional-casing-while-drilling-applied-to-improvehigh-angle-top-hole-drilling-from-producing-platform-6383 4. http://www.slb.com/~/media/Files/drilling/brochures/drilling_applications/directi onal_casing.ashx Other: 1. Statistical Review of World Energy 2009, BP. Oct 24, 2009

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