Last week, drilling contractor Helmerich & Payne bought Motive Drilling Technologies for up to US$100 million. The deal passed without much fanfare because of its size, perhaps, but it certainly deserves attention as a harbinger of what direction the oil industry is taking: automation—and further down the road, autonomy.
Motive is the creator of the Bit Guidance System, which uses algorithms to guide the process of directional drilling, effectively taking charge of drilling decision-making. According to the two companies, the technology enhances drilling efficiency, which lowers costs and improves output rates once a well is drilled.
Drilling efficiency is the latest focus in the post-crisis oil industry, but for the most part, industry players have been talking about it only in general terms. The Bit Guidance System is a pretty specific example of this efficiency, as is Schlumberger’s Rig of the Future project.
The idea of an autonomous machine needing no ongoing input or manipulation by a human has garnered a lot of attention in recent years with a focus on self-driving cars, and more recently, trucks, which some argue will make a bigger splash than self-driving cars as their economic benefits outweigh those of cars.
The idea of a self-driving—or more accurately an “autonomous”—drilling rig sounds more far-fetched, but that’s probably because it’s not being talked about so much. This is about to change, and likely sooner rather than later.
Last year, McKinsey released a survey that showed the adoption of digital technologies could save oil and gas operators about a fifth of their capital expenditures and between 3 and 5 percent of their upstream operating expenses. That was at a time when the rush to cut costs was particularly intense. Now international prices have improved somewhat, but oil and gas companies are eager to continue lowering their breakeven point—something that service providers are only too happy to help them with—for a fair price.
One oil analyst, Richard Zeits, suggested in an analysis of the Helmerich & Payne/Motive acquisition that the deal may be the first of many of this kind, where smaller oilfield service providers partner with software development firms to gain a competitive advantage in an increasingly competitive industry. Also, these partnerships will make smaller players better positioned to take on the big boys such as Schlumberger, Halliburton, and Baker Hughes.
The taking-on will likely be mostly in the area of pricing—the big boys are not sitting idly by. They are also going digital and automated. Yet as a rule they charge more for their solutions, so prices will be the playing field. As Zeits points out, Schlumberger’s Rig of the Future sounds very attractive, but the fact that the company has control over the prices may push some potential clients away. Smaller, independent contractors, on the other hand, would be more flexible with pricing, forcing Schlumberger and its peers to adopt some of that flexibility themselves eventually.
Drillers will, as usual, be the ones to benefit most from this emerging competition on autonomous rigs. They will be able to further lower their costs and continue growing production. A future of autonomous rigs will very likely be a future of cheap oil.
By Irina Slav for Oilprice.com
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