S06 ORME 5 2021 Energy Efficiency_Layout 1 27/07/2021 15:00 Page 22
Drilling Services
A new drilling service model for a
new era? The prevailing uncertainties of the global market mean drilling companies are having to make careful judgment calls on the extent to which they keep their assets primed for work. And, says Leon Bickerstaffe of Sparrows Group, the growth trend in short-term contracts means a long-term outlook could help them get the balance right. HERE IS NO uniform way of summarising current activity levels in the international drilling market. Volatile prices and the pandemicassociated restrictions have of course created a backdrop of considerable insecurity for oil and gas operations, and in many parts of the world the watchword is still caution. But in others – in particular, the Middle East and Asia – the drilling sector is very much back in business. In April, for example, the drilling group ADES International Holding announced renewals for seven rigs under contract in Saudi Arabia and recorded a total estimated backlog of US$950mn. And we have witnessed a marked rise in demand for our drilling support services in these regions over recent months. While this activity surge is by no means universal, the overall trend globally is still a positive one, as new contracts begin to materialise and rig reactivation programmes get underway as a consequence. The rig services sector seems set for growth this year and beyond, spurred not only by the recovery in activity levels – offshore and onshore – but also by the associated need to address the maintenance backlog arising from the implications of COVID-19.
The evolution of the short-term contract There are signs too that these trends are likely to be matched by another characteristic of the drilling market in recent years: the growth of short-term contracts. They have always been part of the industry environment, of course, but there is certainly a sense that they are becoming more prevalent. That presents a variety of challenges for drilling operators, but also opportunities for those who succeed in striking the right balance when it comes to investing in asset availability. For many it will be a careful calculation: do they spend potentially millions of dollars to get a rig up to specification, for
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Issue 5 2021
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Moving towards a more streamlined supply chain model can benefit drilling operators in the long term.
perhaps only six months’ work? That is unlikely to make commercial sense, but at the same time they need to have assets primed if they are to vie for short-term contracts materialising at short notice. And keeping a rig in a state of readiness in the hope of securing work inevitably means taking a commercial hit if the targeted contract does not come your way. As I say, fine strategic judgments are involved. So, how to address these challenges? In an already tough financial environment, drilling operators are routinely looking around for efficiencies across their operations – without undermining safety or quality performance – and that extends to their practices for keeping rigs ready for the market. One area that is currently subject to greater scrutiny is the supply chain community
around individual drilling companies. There is evidence of operators moving to more consolidated models – it has definitely been apparent in our Middle East and South East Asia operations in recent months, where we have delivered package-based projects covering crane, drilling and hoisting equipment for clients – as a means of streamlining vendor support.
Choosing the long-term proposition It certainly makes sense from several perspectives to move towards the concept of an end-to-end solution for support services. It applies greater control to project delivery: with one primary service provider, there is a simplified communications channel and the elimination of potential delays caused by
