By Sharon Dunn | The Greeley Tribune, Colorado
Henry Ford was on to something 100 years ago when he ramped up his operations with the assembly line.
It was Dec. 1, 1913, and workers, who had been trained in one of 84 separate steps to build the Model T, lined up for the first time to mass produce Ford’s invention in a way that would reduce production time tenfold.
What used to take workers 12 hours to build would soon only take two and a half hours.
The move revolutionized the industry, born out of the need to drive down costs, while driving up efficiency — the backbone of the automobile business we know today. A year later, Ford introduced the moving assembly line, which sped times up even more.
Not unlike this precocious thinker, those in the oil and gas industry have continued to seek improvement, using the assembly line concept to shave days — and millions of dollars — off of the drilling process.
Batch drilling — which morphs multi-pad drilling into the assembly line concept — has been around for years in older fields, especially offshore drilling. It’s relatively new in the Wattenberg Field.
After some early positive results, some smaller companies in the field are adapting the method to their operations, shaving days off the drilling process, and subsequently saving them millions of dollars.
Anadarko Petroleum and Noble Energy have been using a version of batch drilling in the Wattenberg for a couple of years. Smaller companies are now buying into the idea — albeit with a slightly different recipe — to bring its crude and gas bubbling to the surface.
Batch drilling will not change the industry, officials say. But it does bring small efficiencies that add up over time.
“I remember when directional drilling was huge,” said Ed Pilcher, drilling superintendent for Integrated Petroleum Technologies of Golden, which is running the drilling operations for Tekton Energy, Bayswater Exploration and Production, Synergy Resources and Mineral Resources Inc. “It was very expensive and time consuming, and people didn’t do it because it was so expensive. Now, we’re still directional drilling but we have much better technology.
“Most of the innovations I’ve seen are small efficiencies that are garnered here and there,” Pilcher said.
The method, when coupled with other efficiencies, such as increasing frac stages and longer lateral lengths, continues to drive down overall costs of drilling in the Wattenberg, while pushing up returns on investment.
“Because horizontal drilling has become pretty new to the DJ in recent years, the evolution of all that combined adds to efficiencies, so it continues to evolve and the tools developed in all those areas, continues to make this a better process,” said Steve Struna, president of Baywsater Exploration.
HOW DOES IT WORK?
Simply, batch drilling allows companies to assembly line their wells. The drilling rig is placed on rails, or skids, and can move side to side, with drilling pipe still attached. The concept usually works like this:
Drill the surface on one well, then slide to the next, then the next and the next, all using the same drilling mud, instead of changing out to the next formula for the middle section.
Then the rig moves backward back over the wells and drills the middle portion of each well. Then it reverses back, to drill the laterals one at a time.
Skating the rig back and forth — done by a hydraulics system rather than pulling it with a truck — has eliminated several steps and created a ton of efficiencies, operators say. Simply eliminating the build-up and take down of a rig, as it’s moved to each wellhead, represents an enormous savings, officials said.
And it works best with multiple wells, at least three at a minimum.
“If you bring a rig like that in for just one or two wells, batch drilling won’t save you enough,” he said.
There’s also something to be said for keeping rig crews — which can experience high turnover at any given time — on one step at a time, a allowing them to retain what they learn.
“When the rig hands are doing the same thing over and over, they’re not switching operations from one day to the next,” Pilcher explained. “They do the surface on five wells so all the equipment is lined up. They know what they’re doing next, then you start the intermediate section. You don’t have to retrain for that. … The crews are more used to doing the same operation every day.”
The risk is that the upfront costs are much higher than most have ever seen. Most operators, Pilcher said, are used to spending less than $100,000 to bring a rig in to start drilling. The batch drilling rig takes five days to set up and is much more expensive.
“Rigs capable of batch drilling are bigger, they have more equipment and require at least one crane to rig up,” Pilcher said.
But the method eliminates the move time of rigging up and tearing down after each well is drilled.
“When you look at it, if you have a five-well pad, and it takes five days to rig up, but you’re staying on the pad, if you spread the move time over all five wells, you’ve taken one day off per well,” Pilcher said of not having to tear down and rig up at each wellhead.
“Some of the smaller operators would say, ‘Five days to rig up? I used to drill a well in five days.’ We’re saying yes, it takes five days to rig up, and you drill all five wells before you move again.”
The planning piece is a large factor. With this method being most useful on multi-well pads, it takes extra planning because all the wells need to be permitted. In the “old days,” Pilcher said, they’d permit a well, drill it, complete, and go back to the permitting process to start the next well.
“It’s getting harder and harder to permit wells and it takes longer,” Pilcher said. “Companies have to start planning six to eight months ahead” if multiple wells are involved.
But, invariably, the sticker shock of batch drilling is the biggest hurdle, Pilcher said, sometimes so much that operators will not abandon the methods that got them where they are today.
“When we brought the Frontier Rig 8 in (for Tekton), the initial move in and rig up was $500,000,” Pilcher said. “Some of these little operators here in the DJ have never paid more than $80,000 in their lives. You tell them you’ll bring a rig in and it will only be a half million dollars to rig it in, you better have the paddles ready.”
TEKTON CASE STUDY
Pilcher brought the idea of batch drilling last fall to Jerry Sommer, CEO of Tekton Energy.
“When he came to us and said he was going to do a horizontal project, we told him, this is the way we’d like to do it, and it’s going to save you a lot of money,” Pilcher said.
“He said, ‘How many times have you done it?’
Pilcher answered: ” ‘Zero, and by the way, it’ll cost a ton of money to get the rig in here. And oh, by the way, we’re sure it’ll work.’
“For some reason, we were able to talk him in to it,” Pilcher said. “Not only did it work as well as we thought, it worked better. … We saved more money per well than we thought.”
A normal approach to drilling would be to do one well at a time, or some modified version, all with built-in contingencies, such as adding extra time or money to handle problems that have a tendency to come up in the process.
Sommer, whose small, three-year-old startup is now on its 26th horizontal well in the Windsor area, said he was more surprised with the lack of problems on his drilling sites under batch drilling.
“In a normal well, you’re drilling surface casing, and there are certain steps, mud and technology and tools to drill that part. Then you stop, and wait and wait and wait, then you change mud and people, technology bits, then you drill intermediate casing and wait and wait and wait for the cement. Then you change people, and mud again,” Sommer said.
Sometimes, the problems that can arise in that process end up doubling the cost of a well, he said.
“We’ve not had one of those,” Sommer said. “This process has a lot to do with it, because everyone on the rig, the real workers who are doing this stuff, they can focus on one task and do it again and again. … It’s not that we’re genius. This rig encourages efficiencies.”
Sommer said he expected to shave a couple of days off each well to save maybe a quarter of a million per well.
“That may not sound like a lot, but we’ve got 90 wells permitted in just Windsor and hundreds of wells on acreage outside of Windsor,” Sommer said. “If you could save a quarter of a million on 400 wells over time, it’s a lot of money. But I think it was a surprise that we got that on the first pad.”
Normal drilling takes 13 to 14 days, Sommer said.
“So when you can get a well drilled in nine to 10 days, that’s really good performance. We used to take twice that long to drill the vertical ones 20 to 30 years ago,” Sommer said.
Most companies in the Wattenberg build in costs of $4.2 million to $4.5 million per well from drilling to completion. But early on, Tekton was already saving money.
“Our first seven wells averaged just over $3.7 million each,” Sommer said.
THE CASE OF BAYSWATER
Officials at Bayswater Exploration, have been looking into the sites of Tekton and Mineral Resources to decide their next move, and they had also participated in batch drilling with Anadarko and Noble. The move was a pretty simple decision, officials said.
“It seems to make a lot of sense, efficiency wise, to pursue that process,” said Don Barbula, senior vice president of operations for Bayswater.
Added Struna, “It is promising from a cost and efficiency standpoint, and from a surface footprint standpoint. Batch drilling, and keeping the wellheads close together minimizes our surface footprint, and the long-term impact of our operations on the local” areas.
The 10-year-old company had just started its first batch drilling project in mid-April, was not even five days in, and had already decided its efforts were on the money.
“We’re pretty impressed at least with the early indications of how it is proceeding. Time will tell, but we’re off to a great start,” Barbula said.
Bayswater has about 30,000 acres in the Wattenberg on which to drill, with plans to finish 20 wells this year, followed by 60 next year, with a second rig.
Struna said he expects the drilling method will take a couple of days off the drilling process on its first drilling project, saving his company on the order of $300,000.
“The batch drilling is the way we’re going to drill going forward,” Struna said.
The majors do their own thing when it comes to drilling, but smaller operations usually have some leeway to try something new.
“There are certainly other people who will see it, and generally the smaller the company, the more open they are to change,” Sommer said. “All he had to do was call me. That was as complicated as his sales pitch had to be. There’s no committed, no entrenched people saying that for 20 years, we’ve done it this way. It was just Ed talking to me and off we went.”
Word gets out, as with any proven method in a field of several players. There’s a finite number of batch-drilling capable rigs, but existing rigs can and have been converted, Pilcher said.
“More and more, contractors will start putting rail or walking systems under their rigs and make them more batch drilling friendly because there is a demand,” Pilcher said. “If there’s a bigger demand, the contractors will see that.”
“So when you can get a well drilled in nine to 10 days, that’s really good performance. We used to take twice that long to drill the vertical ones 20 to 30 years ago.