Demand for service will grow but only for quality service

Only a dozen years ago members of one of the first conferences on coiled tubing technologies, eminent scientists and heads of ministries and departments fiercely argued on the Russian name for innovation technology with the use of flexible steel tubing. They agreed on the term of “Koltubing” (“Coiled Tubing” in English). Although still not all linguists agree with such transliteration, somewhat contrary to linguistic rules, the word lives. It produces many results with Google and Yandex, which points to its undoubted active existence in the language. It even could acquire a symbolic value. As the word ‘digital’ in the twenty-first century came to mean a wide range of different devices based on modern digital technologies (cameras, recorders, TVs, music players, etc.), so the word “Koltubing” represents the most advanced equipment for the modern petroleum service. Coiled tubing develops both as a separate branch, and as an important component of directional drilling, and as a ‘companion’ to hydraulic fracturing.

Every year coiled tubing technologies become increasingly more popular in Russia. There is a growing number of units in service of petroleum production and service companies, their number is approaching 140, the range of operations is expanding and new possibilities are explored for well service with economical and reliable flexible tubing. For example, Gazprom Podzemremont Urengoy LLC, the biggest company in the structure of Gazprom which specialises in well repairs, performed in the period from 2001 to 2008 with coiled tubing units supplied by NOV Fidmash over a thousand of repairs, including such unique operations as selective injection of waterproofing sealants using inflatable packers landing on a flexible tube. Experts of service sales divisions of Bashneft SOC OJSC for the first time using a coiled tubing unit performed operations on removal of a liquid column from the bottom and stimulation of gas inflow. Before the treatment the gas production rate was 4,000-6,000 m³ per day and after the treatment it increased to 12,000 m³ per day. Also Bashneft has developed and successfully implements a comprehensive program of operations with the use of coiled tubing on producing wells equipped with sucker rod pump units. Within the program an upgraded special unit MK10T was purchased and well repair technology was introduced with coiled tubing equipment at annulus without well killing and lifting the downhole pumping equipment. Coiltubing-Service LLC succeeded in using MK20T and specially developed solvent to commission a well that was dormant for twenty years, and Tatneft- AktyubinskRemServis LLC used MK20T to perform operations from a barge for re-abandonment of a well located in the waters of the river in the flooding area. Of course, the simplest operations remain most wanted: cleaning of producing tubing from asphalt, resin and paraffin depositions and treatment of bottomhole zones. Such repairs are performed in thousands. But sometimes even they become unique. Experts of Integra-Services LLC once had to finish a washover at −42°C. They started treatment at -27 °C, but the weather changed and the three-reservoir well of a depth of about 3000 m needed a complete washover. Both people and the coiled tubing unit MK20T won this extreme situation.

Currently well service and workover segment accounts to 25% in the total services volume. The petroleum services market showed a steady growth (22.0% to 24.5 % from 2002 to 2008), and one of the reasons for this growth was the change in the portfolio of services to which coiled tubing technology was more and more extensively added. However, although promotion of advanced technology in petroleum service was always progressive, the rate of this progress slowed down somewhat in the last year or a year and a half. The global economic crisis that resulted first in a significant drop and then in unpredictable (albeit with a positive increase) crude oil and gas price fluctuations ultimately resulted in a slowdown in the growth of petroleum services. In Western Siberia, a key petroleum production region of Russia, the rate of production declined during two consequent years. In 2008 the decrease was 1.2 %, and in 2009 it was already 2.5 %. The decline in production in old regions was largely offset by commissioning of new oilfields such as: Vankor (by Rosneft), Timan-Pechora (by Lukoil), Talakanskaya group (by Surgutneftegaz), Verhnechonsk (by TNK-BP), as well as intensive development of Sakhalin and its shelf. However, insufficient development of infrastructure in Eastern Siberia and Far East can in the foreseeable future significantly limit the pace of development of petroleum services in these regions.

In 2008 in Russia as a whole there was a 5.5 % decline in the number of operations for well repair and workover. In 2009 a decline was 6% to 129.8 operations in absolute terms. Against the background of the decline in the number of current repairs the share of workovers, including those with coiled tubing, continued to grow in the past year due to the increasing demand of customers in increasingly complex operations. At the same time average duration of workovers in 2009 fell to 302.7 hours, and the total number of team hours of workovers to 10.3 million hours. The capacity utilisation by workover teams rose last year to 23.8 overhauls per one team. It seems that these figures could not appear without introduction of advanced technologies.
In the previous issue (No. 32 ) our magazine published an extensive material summarizing the experience with coiled tubing in complicated conditions of the Vankor oilfield. The authors deem the complicated conditions not only and not so much engineering issues as operational problems, primarily limited communications: lack of roads that could be used throughout the year, unpredictable behavior of winter roads that are suitable for use only at sub-zero temperatures. During all other periods delivery of cargoes requires helicopters or barges where there are rivers. The authors of the article also note that coiled tubing bundles to Vankor oilfield is profitable only if made by winter roads.

We can assume that operational problems are similar for all new petroleum production regions. Therefore, even with their successful development the old regions will not lose their value. A developed network of roads and other utilities, cozy towns and villages of the oil and gas industry workers built by pooling resources from the entire Soviet Union, all this infrastructure justifies economically the use of the old wells, especially under conditions of rising crude oil prices. Forecasts here are encouraging. Experts suggest that next year oil prices can overcome the mark of USD 100 per barrel. The engine of growth will be China, whose economy continues to gain momentum. If these forecasts come true Russian oil industry will have additional income. Rise in oil prices will increase the demand for hydrocarbons, which in turn will stimulate the development of the entire petroleum industry. Under these conditions a significant increase in demand for petroleum services for quality repair of wells is inevitable because it can give quick payback because of exploration and drilling being much fussier and more expensive! It is much more logical and cheaper to increase production by quality service.

The trend is clear, however, such a course of reasoning often overlooks some “buts”. In this case the keyword is quality. The modern petroleum service means highly productive equipment, advanced technologies and skilled personnel. Customers will mostly demand the companies that have all these components. And those who used to work after the old fashion and care little about intellectual component of provided services and about furnishing appropriate equipment, in the inevitable increase of demand for high-tech operations may well lose their market shares.

Introduction of new technologies based on coiled tubing and directional drilling systems guarantees sustainable development of service companies the competition between which will increase. Under these conditions the popularity of side-tracking is predicted to grow. The side-tracking market will increase over the next five years more than three-fold: from USD 466 million in 2009 to USD 1.3 billion in 2015, when the annual number of operations can be more than 2500. Relevant, especially for the new wells, will be hydraulic fracturing. Very good prospects are for operations for optimization of production regimes, for various treatment of the bottomhole zone. The old fields will show more demand for repair and insulation works. A rapid growth (from 36 thousand in 2009 to 56 thousand in 2015) is expected in cementing operations, especially in cementing during well workovers. Well repair and workover market by 2015 will also grow substantially to USD 5.6 billion.

Oil and gas service is to become high-tech industry. The need for highly productive equipment, trained personnel and advanced knowledge of new technologies is steadily increasing. It is understood by clients, contractors and equipment manufacturers. Hence,the black gold has bright prospects.