By Yvonne Fletcher, Senior Vice President, Finance and Investor Relations and Greg Garcia, Executive Vice President, Sales and Marketing
Solaris Oilfield Infrastructure
Innovation in the U.S. oilfield has been both a blessing and curse for the oil industry over the last several years. On one hand, innovation in shale drilling and completion efficiency has helped fuel the industry’s impressive growth of more than 50% in U.S. oil and gas production.
This prolific production has greatly benefited the U.S. economy by creating jobs, generating tax and royalty revenues for the government, and allowing the U.S. to start exporting oil. During the same time period, oil prices have remained range bound and the increased production has been accomplished using less equipment and personnel to produce each incremental barrel than prior cycles.
While lower prices are a benefit for consumers and the global economy, they are also a headwind for energy producers that have recently pivoted their strategies to maximize returns and cash flow over production growth by focusing on increasing efficiencies and minimizing costs in a “lower for longer” environment.
In response, service and equipment companies have developed new solutions and technologies that provide efficiency gains for oil producers (i.e. lower the cost of production) and created an environment where less equipment and service is needed.
NEW EQUIPMENT DESIGNS
An increase in high-spec, built for purpose drilling rigs with increased automation, safety and reliability is one example of drilling innovation. This technology has allowed U.S. oil producers to achieve record levels of oil and gas production despite having only about half the number of rigs running compared to several years ago. Similar advances in completion technologies drive efficiencies and lower costs. For example, when operators first began increasing sand volumes per well for better production results, the legacy wellsite sand management equipment was not able to keep up with the increasing volumes.
The industry’s need for a better product was how Solaris was born as a company. Solaris’ technology originated from the batch cement industry, which had already developed commercial solutions to process large amounts of cement and handle the associated dust fines.
Solaris leveraged that technology and tweaked the design for oil and gas use, which included enhancements such as delivery automation, advanced system controls and new software for remote tracking of inventory. The resulting solution allowed for efficient storage and handling of large amounts of sand on the well site.
Another example of completion innovation was the introduction of new frac manifolds to allow continuous consecutive fracs, known as “zipper fracs,” which helped increase leading edge fracturing or pumping time per day from 14-18 hours to 22 hours.
We expect the industry to continue innovating and evolving because the integration of new technologies is still in its infancy, particularly for the hydraulic fracturing or completion portion of well development.
We also expect to see continued adoption of digital solutions in the oilfield, an area that has typically lagged other, non-energy industries but is quickly catching up.
As oil companies analyze ways to improve reservoir recovery and returns, they are hungry for as much data as they can get about their wells and the details involved in every part of the cost curve. Many are investing in artificial
intelligence, machine learning and other types of software to address these digital needs.
One such technology offers real-time integration of sand and chemicals inventory data on the well site, on the road and at the vendor, and they are quick to communicate expectations when a connection is lost.
Our customers consistently emphasize how valuable this information is to them. Data has become indispensable to the modern generation. Providing data to customers is a
key part of doing business in the oilfield that didn’t exist in prior cycles and should only continue to grow in importance.
Automation goes hand-in-hand with digital adoption and is another trend that we believe will continue to propagate. Automation allows for less human interaction, which lowers the risk for error, speeds up processes and lowers potential safety risks, all of which contribute to lower costs.
We’ve initially saw automation on the drilling side with advancements such as automated pipe handling, automated “walking” or mobilization capability, and the ability to control drilling operations remotely.
We are now seeing the completions area follow suit as equipment companies on the high-pressure side of the frac continue to work towards automation of the other components of the fracturing process.
Recently introduced patented automation technology uses machine learning to automatically control the delivery rate of sand to the blender based on consumption rate. One of the key benefits is that the labor required to operate a system is essentially zero, as the individual running the blender in the frac van or on top of the blender is now running our system as well.
We’ve also engineered an automated solution to our new chemical systems that by reducing the need for employees to connect multiple hoses, turn valves and manually check inventory levels of chemicals used in hydraulic fracturing
FRAC FLEET ELECTRIFICATION
Despite the current oversupplied frac equipment market, we believe there will be continued investments in electric frac fleets.
The traditional benefits of running any equipment on an all-electric basis include:
- Improving reliability, which reduces required time to complete an operation
- Reducing carbon emissions
- Eliminating hydraulic fluid on site, therefore fewer drips and spills
- Lowering noise level impact
In particular, electric motors are known for their reliability, lower required repair and maintenance, and lower emissions during operations. We’ve also seen their adoption in the move towards AC-powered drilling rigs, which are capable of drilling faster than their mechanical counterparts.
The last several years have been a great example of how innovation can greatly reduce cycle times and the resources required for oil and gas development. In our view, the industry’s latest focus on innovation is just getting started.