Red all over

Russell McCulley
Wednesday, September 1, 2010

On the heels of strong 2Q earnings, including a revenue boost of 11% from international markets, Halliburton executive Tim Probert talks to OE about oilfield technology trends, the Deepwater Horizon disaster and how ‘Big Red' is positioning itself as a truly international company. Russell McCulley reports.

At first glance, Tim Probert's dual title – president of global business lines and its chief health, safety & environment officer – might seem an odd fit. But the former field geologist insists that the two mesh well. ‘I'm a geologist by background. That's how I got my start in the industry, as a field geologist, and took a progression of roles both internationally and here,' he says in his Houston office. ‘I've had the opportunity to work in a broad range of places around the globe, and that is always helpful in establishing relationships and having a better understanding of what the market wants and needs.

‘In many respects, the chief health & safety officer is not really a conflict at all,' he says. The job calls for Probert to act as the main point of contact with the Halliburton board of directors' health & safety committee, ensuring that work is carried out in accordance with the committee's standards. ‘With my role as head of global business lines, that's a good vantage point to do that from.'

Probert's background in drilling technology and his HSE credentials made him a natural choice to represent Halliburton during last May's congressional hearings into the Deepwater Horizon disaster in the Gulf of Mexico. Probert testified alongside rig owner Transocean's president and CEO Steven Newman and BP Americas president and chairman Lamar McKay just weeks after the 20 April blowout, long before the gusher was shut in and while investigations into the cause of the incident were just getting started.

Probert is reluctant to talk about the event while investigations are ongoing – Halliburton was involved in the exploration well's cementing, which he insisted at the hearing was done to BP's specifications – but recognizes that the ordeal has put offshore safety at the front of concerns worldwide.

‘Health and safety is extremely important to our industry, as we all know. And it obviously has strong linkages to our day-to-day activities, as well as service quality. Lapses in service quality can lead to lapses in safety, and we certainly can't afford that and never want it to happen,' he says.

Halliburton is ‘very focused on all the elements of health and safety, whether that revolves around the safety of the individual or process safety,' he says.

‘The incident in the Gulf is likely to have a profound impact on the way in which deepwater exploration and development is undertaken. We're a very resourceful industry, and a very technologically capable industry. We will respond, and I think we will be very effective in ensuring that we exploit resources more safely and more efficiently in the future. That's not a statement about us, so much as it's a statement about the faith I have in the industry overall.'

Global reach
Probert says the company strives to maintain the same level of safety and adherence to key processes throughout the company's geographic portfolio, which has expanded dramatically in recent years.

‘The key is to have global consistency of process,' he says. ‘Our customers expect us to look and feel the same, whether we are working in the North Sea or West Africa or in Asia-Pacific. So having core processes which are the same, which allow you to establish competency standards and training standards around those, is the critical element to consistency around the globe. It hasn't always been so, but that's our key objective.'

Overseas businesses, and national oil companies in particular, have become ‘much more important participants in our portfolio,' Probert says. The trend has ‘changed the business in multiple ways,' he says. ‘Halliburton has responded by becoming a much more global company. It is fair to say that for quite some time Halliburton was a US company doing business overseas. Now, this drive to become a truly global company, with balance in resource, balance in technologies associated with our key customers around the globe, allows us to be responsive. [It] allows us to provide the specific solutions they need to exploit their resources. It has materially changed the way the company operates around the globe.'

Halliburton has responded in part by opening large research and development centers in strategic international locations, including recent openings in Pune, India, near Mumbai, and Singapore. Technology centers are planned for Saudi Arabia and Brazil in coming months. ‘We are developing a more significant distributed technology network to help us better respond to specific requirements of particular geographies, and particular national or international oil company customers,' he says. As for local staffing, he says, ‘we've been very pleased with the local talent that we've been able to attract, and the diversity of the talent and ideas and backgrounds'.

Thinking thematically
Most of Halliburton's growth over the years has been organic, but the company averages about six to eight acquisitions per year. Most are small, highly specialized technology firms – what Probert calls ‘bolt-on technology acquisitions' – that come with teams of ‘very talented and innovative people', he says.

‘Our challenge has always been to make a new home for them within Halliburton, to make sure they can continue to be innovative within a larger corporation. They're an essential element. We don't have a lock on ideas; we don't have a lock on innovation.'

Probert cites the October 2008 acquisition of microseismic company Pinnacle Technologies as a notable example. ‘Microseismic has been a key technology to helping unlock the value of unconventional shale gas,' he says ‘During the stimulation of the well, it allows you to use an observation well in which you place an array of geophones. During the stimulation process, the geophones will monitor the microseismic activity that takes place during the stimulation process – if you like, the snap, crackle and pop of the formation as it is stimulated.' The data can be used to modify the stimulation process ‘on the fly', he says. ‘It can also help lead you to optimize the process for subsequent stages that you're going to develop. It's not unusual for us to do over 20 stimulation stages in a given well these days. Microseismic provides that added degree of certainty around the process and helps you optimize that.'

In the first half of 2010, Halliburton's announced acquisitions included Louisiana-based Wellbore Energy Solutions and Houston well control firm Boots & Coots, both of which could bolster the company's well intervention services. Probert says the strategy in both acquisitions and R&D is ‘to think thematically – to identify the key themes that will drive growth in the next cycle.'

Deepwater E&P, unconventional resources and enhanced recovery are the three main trends driving technology development, he says. ‘Deepwater global production today is the first of them. In deepwater, improving reservoir characterization in real-time is really important to our customers,' he says. ‘Reservoirs are generally getting more complex, and they are generally getting smaller. So reducing uncertainty is important in understanding how that reservoir might contribute to their portfolio, and whether or not it can meet the economic hurdles which they have set for it. Characterizing reservoirs in real-time is a particularly important way to reduce that uncertainty, quickly.

‘One of the technologies, for example, that we are in the process of introducing to the market is GeoTap IDS (OE August 2009). What it allows us to do is not only take pressure samples during the course of drilling, with just a momentary pause in the drilling process. It also allows us to take fluid samples and characterize them during the course of that process. The fluid analysis component is new. It helps our customers, particularly in deepwater, understand whether or not they have stacked reservoirs which are connected, and gives them a better view of the potential of those reservoirs during the drilling process, and can help them modify the drilling program on the fly. As we undertake more complex tasks at the well site, the ability to have that real-time connectivity – essentially, to move the data to the expert rather than the expert to the data – is really key.'

While most unconventional focus has centered on shale gas, Probert says operators are increasingly concentrating on unconventional oil and ‘rich' gas. ‘Here in the US, there's been a shift from so-called dry gas activities to rich gas, which contains some liquids,' he says. ‘The presence of liquids usually enhances the value of the overall resource since those NGLs, particularly ethane, are more highly valued than dry gas itself. The technology adoption has been most aggressive in the North American market but it's moving out steadily into international markets as well.'

Other areas of increasing technology focus are heavy oil, deeply buried reservoirs and high temperature-high pressure fields. ‘We are definitely seeing that combination of high-temperature, high-pressure drive a requirement for new and enhanced technology,' Probert says. ‘There are a number of resources – the North Sea would be a good case in point – where we're looking at bottom hole reservoir temperatures at or above 200°C, which requires a significant amount of effort to ensure that we have both drilling and measurement technologies which can operate in those environments. And that has been an area of focus for us, in combination with our key customers in terms of joint technology development.'

Halliburton has over the past several years ‘greatly increased the number of joint technology projects that we work on collectively with our customers', he says, including ‘a significant effort in partnership with Total' to develop drilling and measuring tools that can operate in extreme HPHT conditions.

‘The primary goal for our customers is to have access to a technology that allows them to unlock the value of that resource in their portfolio,' he says. ‘And they generally feel, quite rightly, that the best way to continue to advance that technology is to make it available to several of their competitors, through us, because that allows us to continue to develop technology and make it economic for them. Broadening the appeal of the technology usually helps unlock the value of the resource.

‘It's one of the stories that our industry has not been able to tell very well: the technology that has been applied to the development of energy resources over the past couple of decades.'

The long view
Technology continues to evolve as operators – particularly IOCs and independent oil & gas companies – scour frontier environments, including the Arctic, for access to resources. ‘A lot of our focus is around the types of materials which can be utilized in those environments – to create a greener portfolio of materials and chemicals which can be used in those environments, and to improve control systems to assist our customers in those locations,' he says. ‘One of the frontiers I think we'll collectively be dealing with over the course of the next couple of years is sour gas: gas that has some hydrogen sulfide associated with it. There are a number of sour gas developments that our customers have identified in the chain of resource development.

‘Of course, heavy oil is not new,' he continues. ‘But the level of resource ownership, particularly among the IOCs, has grown quite significantly over the course of the last couple of years. Improving the efficiency and effectiveness of heavy oil development is another frontier, particularly the efficiency of the generation of the steam chest that liberates or mobilizes oil, and the efficiency of the development of paired (steam-assisted gravity drainage) SAGD wells. Those are all key developments which will lower the economic hurdles for some of those developments.'

Despite an uncertain economic recovery, Halliburton is banking on steady growth in the international market and strong long-term demand for oil & gas. ‘About half of our international activity is offshore,' Probert says, where ‘projects tend to have a longer gestation period. We expect to see toward the end of this year another steady up in international activity.

‘Everyone has their eye on the overall economy, which ultimately drives demand. But I think the way we feel about it is, by most measures that we look at, as we get to the 2030 timeframe the demand for hydrocarbons, simply based on a reasonable economic scenario and expected population growth, is going to be quite acute, almost regardless of the rate of development of alternative resources.'

Twenty years in the development cycle isn't that far off, he says. ‘We try and keep one eye focused on the short term – we have to respond to it, to be responsive to our shareholders – but we really do believe in the long-term fundamentals of this business.

‘Additionally, as reservoirs become more complex, and generally a little smaller, the degree of service-intensity – the things that we need to do to them to recover those hydrocarbons – goes up. So for companies like Halliburton, the quest is always to identify and apply the technologies that can help our customers meet their acceptable return criteria on these new resources. We call it looking over the horizon: between here and the horizon you can clearly identify things and you know what's happening. It's the act of trying to think over the horizon and anticipate what is going to take place – that's the exciting stuff.' OE

Categories: Technology Deepwater Shale Geophysics Safety & Security

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