Category description

Tubular Running, Casing Running, Tubular Handling and TRS are all interchangeable names for a generic process of handling tubulars on the rig, lowering tubulars to the well and installing casing accessories.

Tubular Running takes place during drilling operations with different types of casing being used at different predetermined depth intervals - conductor, surface casing, intermediate casing, production casing and production tubing, at well completion. Tubulars are stocked up on the rig (and replenished as required) prior to being run into the well. Various tubular handling tools are used to pick up, suspend, move and run tubulars into the well with the size and capabilities of these tools primarily determined by the well depth and well trajectory. Tubular handling tools include thread protectors, hydraulics power units, tongs to tighten connections, elevators and slips. These tools may be powered hydraulically, pneumatically or manually.

Casing accessories are installed when casing is run into the well. Casing accessories can include centralisers, scratchers, float collars and guide shoes. Some of the accessories (mainly shoes) may be preinstalled onshore (when drilling offshore wells) to save rig time.

This category is a high safety risk operation due to the frequent human contact with tubulars and handling equipment. As a result alternatives to manual/conventional setups have been developed to automate and minimise human contact in the operation. Whilst addressing obvious safety risks these solutions have helped drive greater efficiency and reductions in cost. There are number of systems available in the market including proprietary names such as Automated Casing Running Tool (ACRT)™, OverDrive™ and Casing Drive System™.

Tubular Running Services typically represents less than 2% of the well cost.

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;

  • Casing/Tubular bucking is a process of connecting single joints of casing/tubulars into doubles or triples at an off-rig location. This allows for fewer lifts from the supply vessels/trailers to the rig, fewer from the rig floor to the derrick and fewer connections to be made at the rotary table. Overall the operation is more efficient however requires additional resources to be set up at dockside or offsite locations.
  • Conventional vs. non-conventional - Choosing between conventional and non-conventional equipment lies in the reduced personnel safety risk and improved efficiency gaining that result in overall lower cost (depending on the drilling rig spread rate). The price difference between conventional and non-conventional equipment can differ up to 10x, but the timing saved may outweigh this price difference.
  • Maintenance of equipment is important to ensure the operation remains safe and efficient. Operators should ensure strict quality management systems are followed as to avoid unnecessary downtime or safety incidents.

Supply & Demand Dynamics

Demand 

Demand for Tubular Running Services is driven by exploration, appraisal, field development, reappraisal and redevelopment activites. Accordingly the best indicator of demand is drilling activity - best shown by rig count. Since late 2014 there has been a dramatic decline globally in rig count with similar seen in the GCC albeit to a lesser extent. 


The large decline in rig count represents a significant reduction in demand for Tubular Running Services placing strong downward pressure on prices. However, second half of 2017 proved to add rigs, hence imporving demand for TRS services. 


Supply 
Supply of the Tubular Running Services is ample, with a large number of service companies available. This is further amplified in the current market conditions with demand significantly lower as compared from recent years. Weatherford, Frank and Tesco are leader in this market, with Weatherford being the most dominant player. With the Tubular Running Services equipment available for procurement from 3rd party manufactures numourous smaller companies exist alongside the larger international service companies.

External Scanning

The market for Tubular Running Services is highly competitive market. This is driven by the numerous suppliers in the market and the ease at which new companies may enter. This coupled with the high standardisation of the services places buyers' in a strong position control the sub-category profit margins.


 
New Entrants is Medium
  • Low CAPEX required 
  • Many equipment manufactured by 3rd parties
  • Little differentiation 


 
Supplier power is Low
  • Low tech equipment 
  • Many providers
  • Need to maintain revenue generation


Competitive Rivalry
  • Highly competitive 
  • Basic technology
  • Many providers  of various sizes
  • Economies of scale are required  
    Buyer can integrate 


 


 


Buyer Power is High 
  • Low tech equipment 
  • Little to No product differentiation 
  • No switching cost
  • Many suppliers 
  • Can easily integrate 
 
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 ROUTINE sub-category (ie. low supply risk, low profit/value risk).

  • Low supply risk is supported by; 1) the large selection of suppliers, 2) the ease of switching, 3) the standardization of equipment and services, 4) low competitive demand with regional buyers.
  • Low profit/value risk is determined by; 1) the low levels of expenditure, 2) low value generation.
  • Power is strongly favored towards the Buyer (See External Scanning section)
  • Power is strongly favored towards the Buyer (See External Scanning section)


  • ROUTINE

High
Low
High

Cost & Price Analysis

Cost and Price Analysis

Due to the competitive nature of the sub-category suppliers rates typically consist of a significant portion of cost. This would include:

  • Personnel costs (including mobilisations, visas and the likes),
  • Equipment maintenance (including depreciation, spare parts, specialist labour),

The majority of Tubular Running equipment is manufactured by third parties making it available to the general market to purchase. Worldwide multiple manufacturers exist offering similar equipment ensuring a competitive market for Tubular Running equipment.

The composition of the equipment itself is more than 90% steel. The rest is made up of hydraulic and electrical components and systems. Accordingly steel is a key cost driver directly affecting the purchase price of the equipment.

The services demand relatively low skilled labor. As such the cost of personnel has remained stable over proceeding years although is likely to see downward pressure following the fail of oil prices in 2015. As of mid 2017, personnel rates dropped by 20%-30% from 2014 levels. 

Due to the competitive nature of the category profit margins of service providers are unlikely to exceed 10%.

Total Cost of Ownership

The total cost of ownership generally consists of:

  • Personnel costs - usually provided on daily rates basis
  • Equipment rental - usually provided on a daily basis
  • Mobilisations and demobilisation - Lump sum basis or cost plus

Other less obvious factors to consider are:

  • Switching costs (demobilisation fees)
  • Efficiency of systems (learning curves, uptime, conventional vs. non-conventional)

Strategy

Localization

Given the ease at which equipment may be procured in the general market place and the relative low skilled labour required the sub-category presents an ideal sub-category to be tendered as part of a local company only strategy.