How Drilling Risks Fool You!

Last month (April 10) was the 13th anniversary of the BP Macondo accident that killed 11 oil workers. We could recall in that incident, the operator budgeted $100 million for a well, but ended up spending $65 billion to recover from an accident that was considered preventable. Worse still, the accident occurred at a time when everyone thought the well was almost delivered. In the Niger Delta, a minimum of 150 wells are drilled yearly. Majority of these suffer preventable cost overruns caused by drilling project teams lacking the skills of well delivery processes management, drilling and well design and not recognizing the risks inherent in the well operations.

The List of Significant Drilling Risks Are not Infinite

In short, in the Niger Delta, only 4 events are responsible for 80% of the non-productive times, viz Wellbore Instability, Rig Equipment Unreliability, Well Control and Human Errors. These events repeat themselves in every drilling project. They have known mitigations. Yet they occur frequently.

Not Giving Thoughts to Drilling Risks?

A gentleman waited four months to resume work as a senior drilling engineer after a successful interview. Only 3 days to spud, he was called to start. Only to discover, on resumption, very minimal planning had been done - no offset wells study, only a scanty wells proposal, and no draft drilling program. The drilling engineer was required to issue a drilling program in 3 days, because the offshore rig was arriving location in 3 days! The rig contract had been hurriedly put together, without the rig properly evaluated for the assigned wells.

The first well was planned for 35 days but finished in 74 days. This was considered a success as, in the Niger Delta, such wells took more than 85 days to deliver. On the second well, there were several rig equipment failures, leading to a non productive time of more than 100 days, and the operator loss alone was higher than $6 million!

Taking risks for granted is the first sin that decision makers often commit. Are you guilty?

The Place of Competence

A project campaign required four wells to be drilled. The surface hole was successfully drilled on the first well. However, the surface casing did not get to planned depth. Getting the program back on track cost a non-productive time of 3 days, at a cost of $1 million. To prevent a recurrence, the drilling team organized an After-Action Review (AAR) to find out the root cause of the failure. After much deliberations, "mitigations" were put in place. Unfortunately all subsequent wells wells encountered the same failure, and the same losses in cost and time. A total preventable cost of $4 million was incurred.

Though the drilling team have a the right process to stop and investigate cause of failure, the it was just a tick-he-box exercise. The team lacked the right competence (Knowledge, skills & Experience) to identify the failure sources.

Mitigation To "Expensive"

This is by far the most baffling handling of drilling risks that I have experienced. We are planning a series of new wells in a mature field. Offset wells review showed that all thirteen existing wells experienced wellborn instability, in spite of being either vertical or very slightly deviated. In short, each existing well in the field had, at least, a sidetrack costing a minimum of 14 rig days. For these offshore operations, the spread rate was $300,000 per day. Therefore the minimum expected loss was $4.2 million per well. It was estimated that a comprehensive wellborn stability study would cost $200,000. Yet a proposal made to management for a wellborn stability study was considered "too expensive", with an excuse that the offset wells were drilled with unidentified obsolete technique. Did the wellborn instability risks go away? No.

Conclusion

The average drilling and completion time for a Nigerian well is 83 days. However, prior to drilling, the duration estimate would most likely be much less than that number. For the majority of these wells, the cost and duration were underestimated because drilling risks have not be properly identified and assessed. The result is a 40% average cost overrun on drilling projects.

Here are five suggestions to improve outcomes:

1) Management should give great thoughts to drilling risks by leading the identification and mitigation of drilling risks.

2) It is always cheaper to spend a little bit of project budget upfront, to elucidate risks and mitigate them.

3) Drilling projects benefit a lot from quality front-end well planning driven by right-experienced drilling professional. Offset wells studies, formal project appraisals, engineering design documents, technical challenge sessions and drilling-the-well-on-paper exercises, and the like, can bring big savings up to 40% to project budgets. The activities also speed up learning curves.

4) External consultants should be used to support internal efforts. This should be compulsory for critical projects such as HPHT wells, New Technology implementation, Exploration wells, unusually deep wells, wells in offshore terrain characterized by high daily spread rates.

5) Finally, a senior leader within the company, with the right authority, is highly needed in most projects. Wells projects are high value capital projects and one is often surprised at the absence of senior management ownership of well delivery processes. The other extreme of senior management getting too involved and micro-management drilling teams, is as costly.