Category description

Electrical Logging (E-logging) services are used to acquire geological and geophysical information to allow a more detailed evaluation of the reservoir. Various techniques and tools are used to measure the size, shape and flow dynamics of the reservoir in order to calculate volumes of hydrocarbons. Used in open-hole conditions, E-logging tools are lowered into the well from the surface via an electrical wire-line ( E-line). Tools used are very basic in principle - detecting, recording and measuring signals/waves that change its nature, depending on the variation in physical properties of the earth rock . The table below describes the tools used in more detail: 

Type of logging
Measuring Principle
Evaluation Parameters / Output

Resistivity Logging

Electrical sensitivity of rock formation
  • Permeability & Saturation 
  • Identification differences between hydrocarbon and water


Density Logging
Radioactive isotope emits gamma rays that enter the rock around, where they are absorbed and interact with electrons that result in loss of energy of the gamma ray. The detector(s) installed on a tool, would catch the reflected gamma rays survived
Porosity & Mineralogy


Sonic / Acoustic Logging
Measure the time it takes an acoustic wave / sound to travel from the transmitter to the rock formation and back to a receiver.  As the sound / acoustic wave travels through the formation rock, various types of waves are produced and reflected back to the receiver. Analyzing the wave's amplitude vs. time and type of waves (P or S), allows engineers to calculate rock porosity. 
  • Porosity & Lithology
  • Identification of gas -bearing intervals
  • Cement evaluation


Neutron Logging
Uses interaction of neutrons with rock formations. Americium-Beryllium as a radioactive element is used, by emitting neutrons that enter into the formation rock and interact with atoms' nuclei (in particular with hydrogen ones). The detector(s) installed on a tool would catch the neutrons that have been slowed

Mineralogy, Porosity & Indicator of Gas

Acoustic Imaging
Also known as borehole / acoustic televiewer tool, it is a method that measures the time it takes an ultrasound pulse to travel from the transmitter to the wellbore wall and back to a receiver and its reflected amplitude
Provides picture / images of the borehole

Optical Imaging
Down-hole cameras are used. This method has a limitation that required transparent fluid to be pumped ahead of the camera, which is not always possible
Provides pictures / images of the borehole

Electric Imaging
Also known as microresistivity imaging, it uses electrodes on a tool that emits electrical current to penetrate the formation. Receiving sensors on the tool detect and record the density of the current that changes depending on the formation resistivity

Gamma Ray Logging
Measures natural radioactivity of the formation. A gamma ray logging tool has no source and do not emit any signals. It has a detector(s) to measure and record high-energy electromagnetic waves which are emitted by atomic nuclei of the formation
Bed definition and computation of the amount of shale

Spontaneous Potential Logging (SP)
Records a small electric potential (voltage) produced by the interaction of shale, formation water and drilling fluid. Fluids must be conductive in order for this method to work. Hence, this type of logging is not used when oil based drilling fluid is used. 
  • Formation-water resistivity
  • Permeability

Nuclear magnetic resonance (NMR)
The NMR measures petrophysical properties of the rock and formation fluids, using nuclear-magnetic resonance technology.Helps to understand volumes and properties of the fluids in the formation



Perforation is a process creating holes in casing (or liner) to connect the reservoir with the well-bore and allow hydrocarbons to flow into the well. Perforating guns with charges are used to punch holes in well casing. In the open-hole environment, guns are lowered into the well using electric-line (E-line) or tubing. Guns are run to the desired depth, after which a perforation job starts.  A number of different gun systems are available for selection, depending on subsurface and perforation requirements. 


Gun systems fall into two distinctive categories: 1) Exposed (Capsule) guns and 2) Hollow carrier guns. All guns are triggered electrically at the surface and come in a range of sizes to suite the well-bore requirements.

There are 3 major conveyance methods to lower the guns to the well, as below.  

  • Through-Casing Perforating is used prior to the well completion in order to accommodate larger diameter guns. The size of guns is normally between 3” and 5” in diameter and is run using a wire-line. This perforating method is used to provide greater penetration due to  larger size of guns. As well, so called "tractors" may also be deployed to allow guns to be run into deviated wells. One of the major restrictions of using this method is well inclination and pressure requirements, e.g. when under-balance is required. 
  • Tubing Conveyed Perforating (TCP) uses guns that are attached to the tubing (drill pipe, coiled tubing or production tubing). The major advantages of this method is that it allows leaving production tubing in the well, after perforating is completed (running together with a completion string), long and widely spaced intervals, and application in highly deviated and horizontal wells. Major drawback of TCP guns is until the completion is retrieved (full work-over) guns cannot be retrieved. Hence, the reliability of TCP guns is of utmost importance, as any misfire will result in poor perforating job and significantly affect future production profiles. 
  • Trough-tubing Perforating Guns are guns, small in size, used in completed wells and run through production tubing. The system is low cost and allows under-balanced perforation, however provides limited penetration.

Risks & Opportunities

Value opportunities and risks are features or requirements that may add or detract from the overall value offered. To ensure value is maximized attention should be given to the following areas:

  • Personnel - Quality of obtained geological and geophysical data is of utmost importance. Hence experience and qualification of personnel is a key
  • Wire-line with tractors - Companies are go away from TCP perforation towards deploying an E-line with tractors, as it provides faster deployment time and can be used in directional wells.  
  • Perforation deferral - A common practice of deferring partial or complete perforating job to Well Intervention stage, due to lower costs of deployment tools, e.g. perforating from a drilling rig vs. perforating from a work-over rig

Supply & Demand Dynamics

Demand

Demand for E-logging and formation evaluation is heavily driven by exploration and appraisal activities around the world, as well as field development, reappraisal or redevelopment. Around 80% of E-logging services are required during exploration and appraisal activities, with 20% being done during development or reappraisal phases, when E-logging is used where more data accuracy is required. E-logging is considered to be a much more accurate data collection method, than Logging While Drilling (LWD) and used when data precision is critical.

Demand patterns for Perforating services exhibit different dynamics and a number of variables affect the segment. Services are used during appraisal, development and well intervention (re-perforation) stages. Depending on the reservoir (when open-hole completion is used) or pre-perforated liners are used, the demand for services is very insignificant, during appraisal and development stages. On the other side, if the subsurface conditions require perforating each well, then the volume of perforating activities is significant.  Hence, the key demand driver for perforating services is the type of reservoir and the number of wells that are part of well testing requirements, field development and well intervention.  (Re-perforation is described as part of Well Intervention in Remedial and Repair Services).

E-Logging and perforating (open hole) has been traditionally a small market in terms of volume of jobs, but significantly high in revenue side of it, due to very costly and proprietary equipment. Over the last several years, the segment has been growing at a very slow pace of less than 3%. Due to limited exploration activities in the Middle East and current oil price environment, E-logging services have very limited growth opportunities, except new technology introduction, that result in better reservoir data obtained.  However, perforating services as part of Well Intervention have a larger potential for growth. In addition, for many years, Middle East have been the smallest market in this segment, due to discoveries being made in the last century.


Supply 

Supply of E-logging, formation evaluation and perforating services is composed of personnel and equipment.  Due to complexity, financial and technical risks of the category, a great deal of planning is required, whereby engineers from various domains work together to design logging and /or perforating programmes.

Around 70% of equipment is proprietary to major service providers, with the rest being manufactured by 3rd party companies who do not provide the services directly. Manufacturing facilities of E-logging, formation evaluation and perforating equipment are concentrated in key hubs in North America, North Sea and South East Asia. Due to high risk operation, the integrity, reliability and accuracy of equipment requires a significant QA/QC process. 

Key services companies historically dominating the segment are Schlumberger, GE Baker Hughes, Halliburton and Expro, with many more providers in the lower-tier segment where the temperature and pressure regimes are less severe and down-hole tools are widely available in the market. The lower-tier segment is highly competitive, since a significant amount of logging equipment is manufactured by 3rd parties, whereby free market access to the tools creates a highly competitive environment. With recent GE / Baker Hughes deal, the access to tool manufactured by GE may be limited or not available at all for smaller service providers, which may shift completive environment on the supply side. 

External Scanning

This is a strategic category with highly complex market structure. With a very limited competition in the higher-tier segment and virtually no room for new players to break the market, and buyers' reliance on service companies' expertise, power balance lies with suppliers and represents a high risk to operators. Yet, the lower-tier segment is highly competitive and represents a great opportunity for developing domestic companies.



 
New Entrants is Low 
  • High CAPEX required 
  • R&D Intensive 
  • High-end technology
 
Supplier power is High
  • Very high tech equipment 
  • Few providers
  • No alternative for buyers 


Competitive Rivalry
  • Very limited competition 
  • Proprietary technology
  • Product differentiation is important
  • Less complex guns and logging tools are available to many providers  


Buyer Power is Low 
  • Very high tech equipment
  • Quality is critical 
  • Few suppliers 
  • In some applications, only 1 capable supplier  is available 


 
Substitution 
  • Does not exist
 


Portfolio Positioning

Portfolio positioning is essential in guiding strategy within the category. The category is positioned based upon three factors; 1) supply risk, 2) profit/value risk, and 3) power structure.

Based upon a detailed analysis the sub-category is positioned as a Strategic 

  • Medium to High Supply Risk is supported by:
    • Extremely limited competition in high-tier segment
    • High entry barriers and R&D intensive 
    • Quality and reliability are the issues
  • High profit/value risk is determined by:
    • High levels of expenditure
    • Acquired data quality impacts decisions  for field development plans 
    • High value generation for future production and reservoir  management 
  • Power balance favors Suppliers in the high-tier segment, although lower-tier segment exhibits a larger power shift toward Buyers. 



  • STRATEGIC


High
Low
High

Cost & Price Analysis

Price Analysis

During the last several years, prices for E-logging and perforating services have been showing conflicting trends on a global basis. Price trends in certain areas went negative year on year basis. In particular for certain product segments, rates went down post 2008 oil price crash, but never recovered back.

This category is highly known for market share battles between service providers. What is also evident in this segment is irrational bidding - service providers may, especially bigger integrated companies, provide lower or breakeven pricing, in order to protect its market share or a particular client.

Price skimming is a very common approach by service companies, i.e. a service company would charge a premium for a high technology tool that produces significant benefits for an operator. Due to high R&D and G&A costs, integrated companies tend to price their services higher than smaller or niche service providers.  Historically, this category has been dominated by bigger and integrated service providers. 


Cost Analysis 

The cost basis in this segment could be of two different natures, i.e. integrated companies with R&D capabilities and in-house assembly of the tools and service providers who source the tools from manufacturers. While the later is very dependent on the cost to purchase and maintain the tools, the cost structure of fully integrated companies is different and much more complex. There is a possibility that profit margins may exist in two instances, i.e. on a corporate level and on a business unit level, which result in double dipping. One of the possible ways for it to work is headquarters would loan to a business unit a tool at a fixed price and require a fixed pay-pack period. Business unit, in turn, will act as a separate business entity and mark up the tool and add all business unit specific costs.


Below are the cost elements and their impact.



    • Manufacturing & assembly costs. This category is known as a high precision and high quality segment and requires a significant amount of highly qualified & trained personnel. Very lengthy manufacturing processes could be compared to those of space industry and require very detailed and comprehensive QA/QC processes, to ensure tools reliability. 
    • Research & development costs. Manufacturers spend significant amount of capital on R&D to be competitive and meet the challenges.  Time to market becomes very critical for manufactures and pay-back period of R&D costs is usually heavily accelerated at the early product stages, i.e. when introduced and during the growth ( up to 5 years).
    • Pricing strategy. Manufacturers of logging tools and perforating guns tend to provide better pricing to those service companies, who provide larger revenue for them. Hence, smaller and niche service providers would incur a higher purchasing cost of the tools.
    • Steel prices & materials. Steel (and its variations) is a major component of the tools. Non magnetic steel and corrosion resistance make the tools more costly and longer to manufacture.   Electronic components used in the tools are in demand primarily by non Oil & Gas industries, hence it limits the purchasing power of service companies. 
    • Maintenance costs. Reliability of logging tools and perforating guns is of utmost importance; hence maintenance plays a key role. Due to exposure to high temperatures down-hole and other critical conditions, electronic components of the tools are prone to failure. Following manufacturer QA/QC processes and inspection requirements is vital.  Any repair of the tools must be done by OEM.
    • Personnel costs. Since the segment is comprised of numerous service providers of various sizes, call out nature of the services, employment patterns are mixed between permanent staff and temporary personnel pool.  Over the last several years personnel costs have been going up. However, due to oil price slump and massive redundancies in the industry, manpower rates should stay flat, even showing a downward trend for non-critical roles.

Value Chain Analysis

Logging and perforation tools manufacturers, in addition to major service providers. 

  • Hunting
  • Scientific Drilling International 
  • IFG Corporation
  • Probe Technology Services
  • CBG Corporation
  • Guardian Global Technologies
  • Hotwell Ges.m.b.H.
  • Xi'an Landau Petroleum Technology Co., Ltd
  • Geotron
  • GE Oil & Gas 
  • TSL Technology's
  • Delphian Ballistics 
  • Dyna Energetics 
  • G&H Manufacturing 

Total Cost of Ownership

Procuring E-Logging and perforating services is complex and having the right balance in the compensation mechanism is important. Knowing and understanding the price structure can help optimize the costs. The total cost of a job is the sum of separate charges: 


E-Logging charges

  • Set-up charge / Rig up charge / Service Charge - this is similar to a mob/demob fee
  • Standby charge / Daily Rental, per day
  • Depth charge: A fee to run a drum and lower a tool. It reflects the maximum depth that a tool reach
  • Logging / Run charge - A per-foot charge for each tool run that covers the length of actual interval logged 
  • Lost-in-hole / Damaged Beyond Repair 

Perforating charges 

  • Set-up charge / Rig up charge / Service Charge - this is similar to a mob/demob fee
  • Depth Charge - charged for gun assembly, per ft / m 
  • Shot Charge - varying price for explosive / gun charge,  priced per shoot and depend on the length of penetration
  • Minimum Charge
  • Personnel Rates 


Important considerations 

  • Assess the requirement of primary and back-up equipment, as it costs more
  • Cost to change from one contractor to another, specifically when units are stationed and require installation work that may result in excessive standby costs for wire-line units and installation (e.g. drilling rig). 
  • Consider a minimum charge per job to give more visibility to a service provider, thus reducing financial risk for them and ability to offer better pricing
  • Shot charges for perforating services would vary with the length of penetration
  • Utilize footage charge compensation model for logging services, to encourage more efficient utilization of tools by the service company

Strategy


Technical Insights

A few important things to know:

  • While modern days technology is available to acquire data while drilling (logging-while-drilling (LWD)), in many instances logging must be done after drilling is completed and a well is not cased. One of the main reasons to do it is no obstruction between a logging tool and formation rock, which in turn provides more precise and accurate data.


Videos on how the technology works