Vol. 58 No. 11

November 2006

Rick Fontova, Senior Vice President, Enventure Global Technology

When was solid-expandable-tubular technology commercialized? In what regions has it had the most acceptance?

Enventure itself was commissioned in November 1998 as a joint venture (JV) between Halliburton and Shell, so that was the genesis of the commercialization. The technology itself has evolved over time, but solid expandable technology came through Shell’s R&D efforts in their laboratory. Then Shell approached Halliburton to help commercialize it.

Enventure originally was commissioned to work in the western hemisphere, so it was several years before we were licensed to work internationally. The western hemisphere, primarily North America, is the place where we have performed the most installations, but we are growing very rapidly. The biggest growth region outside the U.S. has been the Middle East, both in terms of installation and revenue. We also have a major project in China, which is based on a smaller-cased hole, where we are doing approximately 8 to 10 installations a month. So if that continues, that will become one of our most active areas.

New technologies sometimes face hurdles in winning acceptance and widespread application. What is the story of expandable’s growth and success, and are there any lessons for the industry in this?

We have engaged other companies to try to help us understand what the barriers are to introducing technology and how you expedite the acceptance of technology in the oil and gas industry. This industry is really slow in introducing technology compared to industries such as telecommunications, pharmaceuticals, or even manufacturing. Those industries can develop, introduce, commercialize, and then penetrate the market much faster than the oil and gas industry. But in our industry, solid expandable tubulars has been one of the most quickly accepted technologies of the past 15 to 20 years.

What is the reason for that?

We latched on to the early adopters. Shell, being one of our shareholders, was an early adopter, and Saudi Aramco was as well. Both of them used the technology from a strategic standpoint, and, of course, both of those are highly credible companies. So we were able to use the example with those two companies to continue to gain acceptance.

Today our major customers are Aramco and some of the smaller independents, which are quicker in making decisions about using new technology. Majors continue to use us, but they are not as quick to find the applications, see the value proposition, and then implement the technology.

Expandables seem to have started as a technology for last-minute contingencies but since have grown to broader applications. How did this evolve?

What happened was if an operator had gotten in a bind and had run out of alternatives to fix his well, then it said, “Why not? We are already at the end of our rope.” By being able to come in on those last-minute, very challenging situations and perform, we were able to get a good foothold in the industry as a salvager of wells. Then engineers, as they typically do, started thinking about the technology’s application in a broader sense, and the technology increasingly became more integral in the design of the well.

In the last 2 years, its use has gone from 70% contingency and 30% planned to about 50%/50%. For example, all of the China work I mentioned is planned. We have done another 25 installations this year in Saudi Arabia, and those were planned. So it is heading in that direction.

Is that how you envisioned the technology eventually being used when it was developed?

The genesis of the technology came with the drilling of some ultradeepwater wells in the Gulf of Mexico that, because they required so many strings of casing to get to a certain depth, could not handle enough conventional casing strings to get to total depth, so expandable technology was needed. So, very early on, it was the need for something different to reach total depth in these wells. Over time, people started using it to fix a problem because it was a new technology. There was no risk because you were going to possibly lose the well anyway. That has been one of the barriers in the use of new technology—the risk profile. Now, after 550 installations worldwide, it is becoming thought of increasingly as just another tool and not necessarily as a new technology.

What has been the most unusual application of the technology?

There have been several. There was a well that had a hole worn in the casing. The operator did not have the rig properly aligned over the well and, after drilling for some time, discovered that they had worn a hole in the casing just a few feet below the surface. They had lost integrity just underneath the rig to the point where they had actually seen water. So we ran an expandable to get the integrity back in the well to the point where we were expanding pipe above the rig floor. We got the call at 2 a.m. on a Tuesday with that one, and by Thursday, we had finished the job and allowed them to go back to drilling the well.

We have had other instances in which we have flown a string of pipe half way around the world for a situation that was an emergency. Some of the applications we had early on in Oman were what we call openhole clad—it was actually just placing an expandable liner to shut off or isolate a water fracture. They used it to straddle the fracture, expanding it with the combined technology of a swellable elastomer and then running it in the hole to isolate the water shutoff, which then allowed them to produce more oil. We have done quite a few of those.

As more and more companies look to re-enter old fields or to do redrills, this technology becomes a way to bring the integrity of the well back almost to the level established when the well was drilled initially and at a fraction of the cost of drilling another well. So it opens up a value that was not available before.

What are some of the lessons learned in applications of expandable-tubular technology?

There is a lesson learned every time we install one. We do a lot of peer review and post-job review so that we learn from every application. The most important thing is to work closely with the operator to understand exactly what the need is, to work with the operator early in the planning phase, and to share information early—we have found that all of these give us the best opportunity to be successful.

Enventure is unusual in the sense that it is a JV company between Shell and Halliburton. Why are there not more JVs of this kind? Is this a good model to emulate in trying to develop new technology and get it to market?

Enventure was actually a strategic approach by Shell to invest in technological companies through their Shell Technology Ventures. When you have that engine or capability, you act like venture capitalists, taking opportunity that has been identified by your R&D department and bringing those technologies into a commercial application. And the operating companies within Shell can benefit from the technology. So you get a commercial benefit from the technology and a greater benefit from its use.

Why others have not done that, I am not sure, although I do know that many of the R&D departments in operating companies have been reduced, so that is an issue. And it takes a unique relationship, because an operator and a service company usually do not have the same view. You really need to have aligned goals and objectives, and that is not easy to do when you bring an operator and a service company together.

What technological advancements are you working on?

We are working on several technology additions all around the solid expandable technology. What we have today is our main product that is used in an openhole or cased-hole environment. We are very close to a monodiameter technology, which is the same idea of expanding a piece of solid pipe but, in this case, without losing any diameter. We are also looking at applying the same technology in the pipeline business to repair pipelines. We currently have some initiatives with Shell and with some other companies to make that a viable product.

One of the weak points in the expandable string is the connection between joints of pipe. Are there plans to develop expandable coiled casing?

We have engaged with a couple of customers on this but do not see much demand for it. We looked at that, but that never really progressed because you still must have the basic components of running it together and connecting it. That would require a whole new set of running procedures for running strings, whereas running the expandable as a liner or as a casing is the conventional part of the technology. If you require too many additions to an existing technology, it becomes more difficult to win acceptance. What we are trying to do is make our technology look and feel very much conventional so that it can be applied with existing technology and equipment.

Regarding conformable expanded pipe, how does Enventure test or check the expanded pipe to be certain that it seals against the borehole wall?

In very much the conventional way that it is done, with a conventional liner. Once we exit the top of our liner we have some elastomeric bands that are compressed into the base casing. Once that is done, the operators will test that overlap in the same way they would test any liner. In more than 550 applications, we have yet to have a leak.

What are the problems or limitations in horizontal vs. vertical settings?

We use a combination of pressure and tension to move the cone through the pipe. In a vertical well, it is a little simpler because you have gravity helping you with the liner. If the well is horizontal, you have to rely almost exclusively on pressure. But a high percentage of our systems are run in horizontal wells; in fact, most of the applications in Saudi Arabia are horizontal wells. The running procedures are the same. Sometimes, we compensate with pulling our tension, but other than that, the same principles and the same properties are involved.

How have you been affected by the shortage of technical personnel in the industry?

That is a challenge that we face just like the rest of the industry. What has been interesting is that, due to the nature of our business and our technology we have been successful in attracting high-quality people because of the interest in what we do. Our technology is a bit of a novelty. But we must hire people with experience because of the complexity of the technology.

How do you view the recent upswing in oil demand and oil prices—a temporary boom or something more lasting?

Because our technology is relatively new, we have growth rates that are going to be high no matter what is going on in the industry. But we have expanded our supply chain to ensure that we can keep up with our customer demand.

The current state of the industry certainly has opened up additional opportunities for technology because, at the end of the day, it all comes down to economics. Because this technology has not really been through a bust cycle, it is hard to tell exactly how that would affect things. You could argue that during a bust cycle an operator really needs to come up with a different approach to drilling a well, so our technology may actually get a better look than at a time when conventional approaches at high commodity prices give operators more of a margin to be successful. I am not predicting that or hoping that it happens, but the argument could be made that demand for our technology would be higher.