Category description

Wire-line is one of the methods of deploying various down-hole tools into a well. A cable on a reel on the surface is used to lower the tools to the wellbore. Two major types of wire are used: Slick Line and Electrical Line (E-Line). Slick Line is a standard cable wire that is used to lower tools down-hole and / or retrieve tools and equipment. Electrical Line is a cable that can be utilised to lower the tools and transmit data to the surface and to the tools deployed. While Slick Line is mainly limited to ‘mechanical' operations only, E-Line can do the Slick Line job and can also help to evaluate (log) the formation, when the data must be sent to the surface. E-Line is a more value-added deployment method, as it covers both requirements, i.e. it can intervene on a mechanical level and collect data about well conditions too.

As a conveyance/deployment method, wire-line services are used in a number of areas, starting from basic down-hole jobs to milling, as part of a well intervention programme. In highly deviated or horizontal wells, a tool called a wire-line tractor is used when the wire cannot not progress any farther in the horizontal section. The tractor pulls the wire-line forward. In various applications, wire-line tractors have resulted in significant efficiency gains when compared with other conveyance methods, such as coiled tubing or snubbing. Onshore, wire-line units are truck-mounted, whereas in offshore applications, the units are skid-mounted and can be installed on and removed from a drilling rig on a lift-boat fairly efficiently and quickly.  

  • Wireline
    • Slickline
      • Light fishing jobs
      • Memory Production
      • Logging Setting or removing plugs
      • Deploying or removing valves, plugs, packers & gauges
      • Production logs
      • Tagging
      • Zonal Isolation
    • E-line
      • Heaving fishing
      • Logging & data collection
      • Perforating
      • Pipe Recovery
      • Zonal Isolation
      • Access deviated wells when used with tractor
Advantages

Low cost & basic technology

Successful cost efficient in horizontal wells, when used with wire-line tractors


Disadvantages

Not able to do heavy and complex interventions

Supply & Demand Dynamics

Demand 

Demand for deployment tools is growing worldwide, as a direct result of the steady increase in well intervention activities brought about by the continuous efforts needed to maintain and maximise production within existing oilfields. In parallel to that, the number of ageing wells is increasing; hence more intervention must be conducted. Over the last few years, unconventional resources have been the primary driver for the ever-increasing demand for wire-line services globally. 

The continuous investment in the GCC by NOCs along with the ever-increasing technological challenges means that, in the long run, the region will witness a steady growth in demand for well intervention services, hence wire-line services.

Revenue-wise, the market for wire-line services is dominated by North America and Asia Pacific. The Middle East represents the smallest proportion. The wire-line services market in the Middle East is expected to reach around US$ 1.5b by 2020 with an annual CAGR of circa 6.5% (source: MarketsandMarkets.com).

In GCC the market for the Slick Line has been experiencing a decline, owing to its being a lower-value-adding activity because of both its technical limitations and the advancements made in other techniques. E-Line wire-line services, on the other hand, have been growing, owing to there being a higher number of old wells (conventional) that require intervention and monitoring. In addition, a number of down-hole tools that were previously deployed by coiled tubing can now be deployed using E-Line, which is more cost-effective.

In addition to well intervention levels, demand for wire-line units is affected by exploration and appraisal activities within which open-hole wire-line logging is used. 


Supply 
Owing to the relatively low entry barriers and simple technology, the market is very competitive with a large amount of players, of various sizes, fragmented around the world and across the value chain. While some companies are fully integrated to provide all the services, others are likely to specialise in Slick Line only. As a result of that, acquisition of small companies by bigger counterparts is expected for the foreseeable future, as part of the growth strategy. 

Almost all wire-line equipment is manufactured by 3rd parties who do not provide the services directly.

External Scanning

The market for wire-line services is highly competitive with relatively large number of players, technology that is simple and available to all, with power lying within buyers. 




 
New Entrants is High 
  • Equipment manufactured by 3rd party
  • Personnel available 
  • Low CAPEX requirements 


 
Supplier Power is Low 
  • Low tech equipment 
  • Many providers
  • Need volumes 
  • Dependent on Oil industry only 
  • Buyer can integrate backwards 


Competitive Rivalry 
  • A highly competitive environment
  • Technology is available to many players 
  • Low switching costs 


Buyer Power is High
  • Low tech equipment 
  • Many providers


 
Substitution 
  • Higher Cost
 



Portfolio Positioning



  • ROUTINE 

High
Low
High

Cost & Price Analysis

Price Analysis

Owing to the relatively simple technology behind wire-line units, the price of steel and the competitive environment, prices of wire-line services have stayed flat throughout the last several years  till 2015, in some instances exhibiting a price decline. Prices for personnel, however, have exhibited a mixed trend depending on the region and the application.

Yet, the prolonged postponement of well intervention jobs in the region, the demand for equipment is about to go up, as more jobs needs to be conducted and the backlog of jobs must be cleared. Overall, this category has very low price volatility for buyers. 


Cost Analysis 
Most of the equipment is manufactured by third parties, with service companies building up their fleet based on requirements. With the exception of a few instances seen with integrated companies, the equipment in this category is fairly simple and standard with more than 20 manufacturers available worldwide.

Below are specific costs that drive the category. This category is a high fixed cost segment; hence sustained revenue generation for contractors is of the utmost importance. In addition, manufacturing costs of wire-line equipment and consumables are highly driven by steel prices and other commodities used in cable manufacturing.


Major cost driver:

  • Purchase cost- This is one of the biggest costs for service companies, in particular smaller, non-integrated players. High down-hole temperature and H2S applications affect material selection, hence the purchasing cost of the wire-line units. The average prices of units are:
    • Slick Line: US$ 100k-US$ 500k 
    • E-Line: US$ 100k-US$ 2m.
  • Maintenance costs - Wire-line equipment is easy to maintain and mostly requires routine maintenance, with the cable being the most critical part of it. 
  • Personnel costs - Since the segment comprises numerous service providers of various sizes, the call-out nature of the services means that employment patterns are mixed between permanent staff and temporary personnel pools. Personnel rates are exhibited a downward trend globally and expetced to stay at the same levels, until the demand for services picks up in the major markets.  

Total Cost of Ownership

Procuring wire-line services is reasonably straightforward and generally the value driver lies outside of the wire-line services itself. The standard rate structure that is common in the industry is:

  • Mobilisation/demobilisation fees
  • Daily operating rate and standby rate
  • Daily rate for the crew.

Some companies may charge ZERO rates for the wire-line unit when using it in conjunction with other, more value-adding services, such as perforation, logging and other well intervention services. 

Important considerations are:

  • Assessing the necessity for primary and back-up equipment, as it costs more. With multiple rigs operating in the vicinity, back-up units may be shared among the rigs, if required;
  • Calculating the cost of changing from one contractor to another, specifically when wire-line logging units are stationed and require installation work that may result in excessive standby costs for wire-line units and a drilling rig offshore;
  • Understanding that wire-line is a conveyance method, meaning that the actual value driver is the down-hole tool/service.

Strategy

  • The most sensible strategy is to use standardised products and to optimise inventory of units and utilisation. Buyers should also use their buying power to tender the services frequently and to test the market to ensure that the Routine position is maintained.
  • Buying vs. renting might be an option, when a large utilisation of lower-tier segment is expected. Equipment could be bought from major manufacturers with maintenance agreements put in place with appointed local service providers.
  • Wire-line is a conveyance method; as such, the actual value driver is the down-hole tool/service. We could also consider combining this with other categories, such as data acquisition (cased-hole logging) and e-logging services.