Remedial and Repair is a category comprising a diverse range of activities carried out using a number of different tools deployed in to the well, to repair the well in order to resume, sustain or enhance production. The services may be carried out either as a proactive planned activity or as a reactive intervention.
- Fishing and Milling are the services used to remove a fish (i.e. junk) from a well. The fish could be a piece of equipment that has fallen into a well or an existing down-hole packer that cannot be easily removed. There are a number of tools and techniques available to conduct fishing or milling jobs, including Catch tools, Jarring equipment, Junk baskets, various Milling tools, Whipstocks, Bumper subs and Magnets. The key element of Fishing and Milling operations is to understand the size of a problem, i.e. how big the fish is and what the wellbore conditions are, in order to select the appropriate tool and deployment method.
- Cementing (remedial cementing) is used to rectify problems with a primary cement job or to deal with cementing issues that were caused during production. Remedial cementing utilizes cement plugs and squeeze cementing, where the cement plug is a rubber plug that prevents other well fluids mixing with the cement slurry, while squeeze cementing is a process where a cement slurry is injected into a zone in a well.
- Perforation is a process of creating a hole in casing (or liner) to connect the reservoir with the wellbore to allow hydrocarbons to flow into the well. The most widely used method is to use Perforating Guns with explosive charges, which are used to punch holes in the casing. The guns are lowered into the well using a wire-line (e-line or slick-line) or Coiled Tubing (in highly deviated wells) to a desired depth, to perforate the well. There are a number of different type of guns available, such as a casing gun, retrievable gun, high-density gun and expendable gun. Utilization of each particular type of gun is driven by the technical requirements and down-hole conditions. Getting the perforation job right is very important as it has a direct impact on production. In the well intervention environment, the primary purpose of perforation services is to remedy any inefficient flow of hydrocarbons to the well, due to clogging or such like problems.
- Repair/replacement of tubing, plugs, packers and gauges is one of the key activities in well intervention and involves removing old plugs, packers and gauges and replacing them with new ones. If technically and practically possible, plugs/packers should be designed and placed in such a way that allows the quickest and most cost-efficient way to change them.
- Pipe recovery is the process of retrieving a pipe, be it completion tubing or any other pipe down-hole. There are a number of techniques available to conduct a pipe recovery operation, including jet and chemical cuttings tools and proprietary tools, such as a Radial Cutting Torch and Free Point Tools.
- Through tubing services are used in zonal isolation, fishing operations, wellbore departures, perforation and stimulation and in pulling jobs. As the name says, through tubing is a way to access the wellbore.
- Circulation and Pumping are used as part of a well intervention in a number of applications. Namely, they are used for well clean-out, well killing, restoring the well flow and for preventing hydrates from entering the well. Kill fluid, nitrogen, foam, inhibitors, methanol and other speciality chemicals may be pumped into the wellbore, depending on the down-hole requirements. Coiled tubing is the most frequent deployment method for these services.
- Zonal isolation is a method to isolate a zone with different pressure and/or fluids and prevents fluids communication between different parts of the reservoir. Water shut-off is another very common application in mature fields. Poor zonal isolation may result in fluids and gas migration that result in additional costs and complexity. Inflatable and swell packers are used primarily for stimulation, production segmentation, gas and water shut-off, plug and abandonment, cement replacement and fluid loss prevention in multi-zone wells.
- Sand Control is a process to control the production of sand in sand-prone fields. Sand production damages down-hole tools, and blocks tubular elements and such like. Various methods are available to minimize sand during production, varying from adjusting operating practices to installing complex completion equipment (screens or gravel packing). However, these completion methods can undermine production profiles later on. As such, completing the well but leaving formation sand in the reservoir might be more effective.
- Plug and Abandon (P&A) is an operation conducted after a well is no longer producing or is economically not feasible to produce anymore. During a P&A job, a well is plugged and abandoned with cement and heavy mud. The wellhead is removed and the casing is cut off underground. Some P&A jobs may require the removal of all down-hole equipment, wellbore clean-out and the plugging of perforated zones. There are a number of P&A kits available that are provided by various suppliers. P&A activities can be done either from an existing facility or by using a drilling rig. In an offshore environment, the former can be very complex due to space issues and logistics, whereas the latter could be too costly, due to rig rates. The requirements of P&A are heavily regulated by governments; as such the relevant regulations in place will influence the technical requirements.
Supply & Demand Dynamics
Due to continuous investment by NOCs in the Middle East and due to the increased technological challenges, Middle East growth is likely to witness a steady increase in demand for well intervention services in general. The Middle East is considered to be the market with one of the highest penetration rates for well intervention, both onshore and offshore. Remedial and repair services constitute a significant share of the well intervention market, with a worldwide spend of between US$ 5B and US$6B.
With the shale oil revolution, the demand for remedial and repair services will be driven by markets outside of North America, in areas with long conventional oil production history and where the old generation equipment is still used and has not yet been replaced. Hence, GCC is one of the key growth areas due to the higher number of old wells (conventional) that require remedial and repair services.
Due to the relatively low entry barriers, the market is very competitive, with a large number of players of various sizes fragmented around the world and across the value chain. While some companies will be fully integrated to provide the full spectrum of well intervention services, others specialize in small segments and on a regional basis. The majority of the equipment used in remedial and repair services are manufactured by third parties who do not provide the services directly.
The GCC market is composed of national/domestic service providers and international players, with the former being dominant. In addition, there is a large number of small and medium-sized international players and local outfits, who are active in the region and may provide a significant part of this category.
The balance of power is almost equally spread between buyers and sellers, as the suppliers might have unique technologies that are critical to buyers. However, coupled with highly completive environment and a small potential for new players, the buyer is in a stronger position.
New Entrants is Medium
- Equipment manufactured by 3rd parties
- Some proprietary tools
- Low to Moderate CAPEX required
- Highly congested
Supplier Power is Low
- Low / Mid tech equipment
- Many providers
- Need volumes
- No alternative for buyers
- A highly competitive environment
- Technology is available to many players
- Low switching costs
- Battle for marker share
Buyer Power is High
- Fairly low tech equipment
- Many providers
- Spend could be significant for suppliers
- Low switching cost
- Not an option
Cost & Price Analysis
This category is known for battles for market share between the various service providers. What is also common in this category is irrational bidding. Service providers may, especially bigger integrated companies, provide lower or break-even pricing in order to protect their market share or to gain or retain a particular client.
Price skimming is also common, whereby a service company will charge a premium for a high technology tool that produces significant benefits for the clients. Historically, this category has been dominated by smaller and niche service providers. However, in more complex applications, bigger integrated companies may be the only source. Due to the high R&D and G&A costs, integrated companies tend to price their services higher than smaller or niche service providers.
Overall, this category has a very low price volatility for buyers and expected to show an inflation level increase in 2018 and 2019.
The cost models in this segment could be of two different natures, i.e. integrated companies who R&D capabilities and in-house assembly the tools in-house (SLB, GEBH, HAL & WRT) and service providers who source the tools from manufacturers. The majority of the tools is manufactured by third parties and available to many service providers.
Key cost drivers are:
- Maintenance costs. The reliability of remedial and repair tools is of high importance; hence, maintenance plays a key role. Following manufacturer QA/QC processes and inspection requirements is key. Any repair of the tools may require OEM facilities and engineers. The frequent calibration of equipment is critical, and on many occasions is very costly. Companies, especially smaller ones, can be tempted to compromise on recommended calibration intervals, but this, in turn, could lead to equipment failure.
- Pricing strategy. Manufacturers of intervention remedial and repair tools tend to provide better pricing to those service companies that provide bigger revenue to them. Hence, smaller and niche service providers can incur a higher purchasing cost for remedial and repair tools.
- Chemicals and other pumping consumables. The majority of products that are pumped into a well are commodities. Hence, those products are price volatile. Service providers tend to hedge on these products when providing the services on a long-term basis.
- Steel prices. The prices for steel, which is the major component of the majority of the remedial and repair tools, has been going down over the last five years, hence manufacturing costs have followed this trend.
- Personnel costs. Since the segment is comprised of numerous service providers of various sizes, and due to the call out nature of the services, employment patterns are mixed between permanent staff and a pool of temporary personnel. In addition, skill differences in the category are evident, whereby some jobs may require more specialized expertise, which is less prone to fluctuations. Overall, there is little cost volatility related to personnel.
Total Cost of Ownership
Procuring remedial and repair services historically has been uncomplicated with a clear market structure and no hidden risks and costs. Common charges for services as below:
Important considerations for TCO evaluation:
- Shot charges for perforation services would vary with the required penetration length
- For milling and fishing services, utilizing a per foot ( depth rate) mehcanism makes a service company more efficient
- Rates would be affected by the level of hostility in operating environment
- Competitive Tender
- Scope segmentation and aggregation
- Use standardized products and optimizing inventory and utilization.