MPD commoditization: What’s the real price?

MPD commoditization: What’s the real price?

By Signa Engineering Corp.
©2018

Operators have traditionally used experts from several disciplines to implement Managed Pressure Drilling (MPD). Subject matter experts (SMEs) and drilling engineers create a drilling program. MPD engineers were generally utilized for design and process application. They examine objectives, determine functional requirements, and evaluate pros and cons of each MPD variation. Risk mitigation is always at the forefront. After determining the optimal MPD equipment spread, operators rent equipment from large oilfield providers, and rely on qualified service personnel to install and operate the spread onsite. The end result has historically been successful application of complex technology.

The recent downturn, however, has changed how some operators view and apply MPD.
The sharp reduction in oil prices led to significant pay cuts for some, while others were laid off or retired early. Some left the industry for greener pastures. Some banded together to start their own MPD service companies, usually by making an MPD manifold or two. The owners of these companies typically have some experience in MPD operations.

However, they often spend most of their time in marketing or management, not overseeing wellsite operations.
This shift in roles and responsibilities has resulted in a reduction of trained, experienced personnel. And it presents a possible major risk for our industry. Just because someone is listed as an “MPD expert” doesn’t always mean they have the necessary skills to apply MPD. And if a catastrophic HSE event occurs, the “MPD” name could be tarnished (especially to those outside our industry). This could lead to increased regulatory restrictions, a stall in MPD prospects, or even a setback in MPD technology.

The commoditization of MPD means cheaper prices for operators; this much is undeniable. It’s convenient to have a “cradle-to-grave” company that can provide every component that appears to solve the MPD equation. However, a large portion of these companies have limited engineering capabilities to provide complete wellbore analysis.
Equipment hands may be capable of performing computer simulations to evaluate a range of pressure scenarios. However, they might not know how to react to unknown pore pressure/frac gradient variances. They operate surface equipment to manage backpressure, but might not understand the actual implications downhole. In MPD, new formations are constantly being exposed. It might be a fracture, fault, sandstone, or tight rock.

To fully mitigate these risks, an experienced and qualified MPD engineer should be involved in every MPD project. The engineer anticipates everything downhole. They analyze formations and test their conclusions against engineering principles, then specify parameters and equipment settings.

Many operators now believe they don’t need engineering to apply MPD. They will forego hazard identification/hazardous operations (HazID/HazOP)s and downhole investigations. They don’t think about switching from conventional to MPD and back again. They don’t consider crucial elements like:

• How to kill a well during trips
• How to handle a hole in the drillstring high in the wellbore
• What to do if pipe gets stuck
• Breaking down a shoe with too much backpressure
• Rotating Control Device (RCD) pressure ratings

The real danger is operators that don’t understand (or don’t want to know) the importance of doing application engineering prior to spudding an MPD well. One anomaly feeds this misconception: Most current domestic prospects are shale, which is tight rock. Shale plays allow for limited engineering analysis because they are typically “tight” and may not flow when slightly underbalanced. Combined with a self-healing type of formation, the need for precise ECD management is greatly reduced. Since the formations are relatively passive and forgiving, these techniques and limitations will provide satisfactory results in a large majority of land-based shale projects, perhaps even 85-90%. However, the remaining 10-15% presents issues like well control (kicks), severe mud losses, and other non-productive time (NPT).

MPD is typically useful when fractures exist, but may not be really applicable for tight rock. However, many operators are running an RCD to keep gas off the rig floor. Since an RCD is being used, many consider this to be “MPD,” which leads to a false sense of security. The truth is that they have gotten lucky by avoiding negative incidents. They might not have experienced lost circulation or kicks. And even if they were underbalanced, the well typically didn’t flow because the rock was so tight. But when drilling a real MPD candidate well, many won’t know how to react to the dynamic (and potentially dangerous) environment. At the very least, operators are setting themselves up for disappointment in the technology.

Without professional engineering, service companies might try to make the drilling program fit the capacity of their equipment. This presents a significant risk. The equipment should always be made to fit the drilling program, not the other way around.

Some smaller service providers have limited equipment spreads and will try to utilize these for all their projects. Typically, they’re designed to suit the majority of passive, land-based MPD projects, but may not be the best solution for complex MPD well programs. Financially, it wouldn’t be in the best interest for the MPD service company to acknowledge any shortcomings that the equipment spread may have.

Conversely, equipment operators may bid on every MPD job that comes available, and attempt to get their entire equipment spread on the job, regardless of the application. A “complete” MPD package consists of many parts, which might be overkill.

So what’s the solution? As with most risk mitigation, the easy answer is training and use of SME MPD engineers for project design and execution. All involved personnel should have an in-depth understanding of MPD operations, both surface and downhole. They need training on the MPD process as well as equipment operation. MPD personnel need to be more than just “equipment hands.” They need to be application savvy. They should understand how to manage dynamic problems that occur during MPD. Training, combined with engineering, will result in optimal equipment and personnel placement and application engineering. The savings will easily cover the cost of the training and engineering.

For an MPD drilling program, all MPD elements should be addressed, including: planning and design, advanced hydraulic design, hole cleaning and cuttings transport, required equipment, MPD variations (Constant Bottomhole Pressure [CBHP], MudCap, etc.), hydraulic simulation, pore pressure and frac gradient variations, fluid selection, connections and tripping, and completions.

In a commoditized market, goods that have economic value – and are distinguishable by uniqueness or brand – end up becoming simple commodities. Hence, the pricing power of the manufacturer is weakened. When products become more similar from a buyer’s point of view, they will tend to buy the cheapest.

By commoditizing MPD, we are entering a dangerous phase that may ultimately hinder its adoption. MPD has been confirmed to manage difficult wells, and has become somewhat familiar to the “rank and file” of our industry. In so doing, manufacturers and service providers can provide equipment and personnel at a reduced rate.
But at what price? Is the risk reasonable?

For further information, contact Signa Engineering Corp. at 281.774.1000 or signa@signa.net

2018-06-26T15:34:45+00:00 June 21, 2018|Uncategorized|0 Comments

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