IADC CONNECTION

By Linda Hsieh, associate editor

‘We’ve done a great job in the past 4 to 5 years keeping our safety records up, but we must stay focused on safety wherever we operate.’ — Robert L Long

64 November/December 2006 DDRILLINR I L L I N G CONTRACTOR IADC CONNECTION

WHEN ROBERT L LONG gradu- ated from the US Naval Academy in 1968, he envisioned a career in the Navy ’s newbuilds or the Marines. Transocean is currently building 3 new deepwater drilling rigs against multi-year contracts, 2 from Chevron and 1 from Hydro. All 3 will be enhanced Enterprise-class drillships, designed to include the most advanced drilling capabilities of the industry. All dynami- cally positioned with double hulls, the drillships will feature Trans- ocean’s patented dual-activity drilling technology, which allows for parallel drilling operations designed to save time and money in deepwater well construction. Combined with a new and enhanced top drive system, an expanded high-pressure mud-pump system Above: 2007 IADC chairman Robert L Long. and expanded completions capabilities, the rigs target the drilling On facing page: Transocean Marianas. of wells up to 40,000 ft. The rigs will each have a variable deckload

For Mr Long, the military was a fascina- of more than 20,000 metric tons and be capable of drilling in water tion going back to childhood. So, as a depths up to 12,000 ft. young high school graduate in mid-1960s Massachusetts, it seemed perfectly natu- Two rigs are scheduled to be delivered in mid-2009 and 1 in early ral to head straight into the US Naval Academy. Before long, he was selected 2010. to go into the prestigious US Naval Nuclear Power Program. The tough cur- riculum there included 6 months of theo- retical nuclear engineering and 6 months because they would combine my marine Seven Seas, which was the biggest deep- of training at a land-based nuclear engineering background and massive- water rig at the time and went on to set power facility. scale financing,” he said. numerous deepwater drilling records over the next 20 years. Mr Long himself While Mr Long said he no longer uses Mr Long joined Southern Natural worked on the Discoverer Seven Seas the nuclear engineering he was taught Resources and was soon employed from 1978-82 as division engineer, going nearly 40 years ago, the core values as a corporate planning analyst at a from Congo to Spain to Italy to Canada to he learned – honor, courage and com- subsidiary which was one of several pre- the North Sea, and back to Africa again. mitment – have stuck with him to this decessor companies that later became day. “It’s something you never forget. It Transocean. It would be more than a To Mr Long, these innovations led the becomes a part of you,” he said. quarter-century later that he would be way for others, such as the Express- elected Transocean’s CEO, but it didn’t Class and semisub- Coming out of the naval nuclear take that long for him to be impressed mersible rigs and the Enterprise-Class program, Mr Long was immediately by what he saw then – leading-edge tech- and Pathfinder-Class drillships which assigned to a nuclear submarine as a nologies and seemingly endless oppor- have set record after offshore-drilling reactors control officer. tunities. record. In short, they signaled a tremen- dous outlook and a world of business After serving for 5 years, married and “It was a very can-do organization, with possibilities . with 2 young children, Mr Long began to interesting people involved in interest- “question the separation” from his fam- ing things all around the world,” he said. “In prior years, The Offshore Company ily that a military career would require. “There were some remarkable techno- and our other predecessor compa- He eventually left the Navy to attend the logical developments going on as well. nies have owned land rigs, workboats Harvard Graduate School of Business, These technologies would seem fairly and even a subsea systems company. where he earned an MBA in finance in basic compared to what we have today, They also had the potential to get into 1975. but at the time, they were cutting-edge businesses like pipe-laying or marine innovations.” construction. Of course, a lot of those INTO THE OIL INDUSTRY possibilities are no longer part of our Many of these innovations can be seen in business today, but the opportunities and With a Harvard MBA in hand, Mr Long the marks made by Transocean and its potential were enormous.” now had to choose a new industry to predecessor companies on offshore drill- begin his next career, and he opted for ing history. For example, The Offshore the oil and gas business. Company launched the first jackup drill- A STRONG MARKET ing rig in 1954. In the 1960s, Transocean That potential continues just as strong “Some of the biggest projects going on built the first jackup to work in the today, especially as high commodity around the world at that time were mas- harsh North Sea environment. By 1975, prices over the past year continue to sive energy projects, which excited me Transocean had built the Discoverer boost rig rates for drilling contractors.

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Transocean has seen no small share of that, signing numerous multi-year contracts at record rates. Operators in these contracts have included Hydro, Chevron, BP, Reliance Industries, Repsol Exploración, ONGC and Devon Energy. Mr Long predicts that the floating drill- ing business will continue to see robust growth as companies drill deeper wells and in deeper waters in order to meet the world’s ever-increasing energy demand. “We’re continuing to see the industry step out further and further. We started with land drilling, then went to the swamps, then to the shelves, then to floating drilling,” he said. “Deep water Transocean CEO Robert L Long (left) earlier this year signed the drilling contract for the used to be 600 ft, then it was 1,000 ft, newbuild drillship with Ray Wilcox of Chevron. then 2,000, then 10,000. Now, all the new rigs that Transocean is building have pointed out. “That comes on top of con- demand for moored rigs in the Gulf of 12,000-ft capability.” tinued interest in West African develop- Mexico. ment and exploration projects.” Industry-wide, more than 90 offshore “As long as we can get the appropriate rigs are being built, but the business Mr Long also said he believes that the contractual protection, Transocean has isn’t just growing in the number of units, deepwater floater rig shortage we saw not made a conscious decision to move Mr Long pointed out. It’s also growing beginning in 2006 will continue for at our rigs out of there,” he explained. rapidly in regards to the cost and com- least the next few years. Moreover, much plexity of drilling in increasingly difficult of the world’s deepwater fleet is already One of the 2 rigs to be mobilized there, environments. For example, he said, contracted out to 2008 and beyond. At the Henry Goodrich, currently drilling consider the announcement in early Transocean, most of its existing deepwa- offshore Eastern Canada, is already September on the Jack #2 well in the ter fleet is contracted out to 2009-2010, equipped with a robust 12-point moor- by Chevron Corp, Devon and initial contracts already carry its 3 ing system, and the Jack Bates, coming Energy Corp and Statoil. That well was newbuilds out to at least 2013-2015. in from Australia, will be upgraded with completed and tested in 7,000 ft of water the same capability before it begins GOM and more than 20,000 ft under the sea- “ Our industry continues to see addi- operations. tional newbuild contracts with strong floor, breaking the record for the deepest All this GOM activity is just part of thou- successful well test in the Gulf of Mexico. rates and term durations of 3 years or more,” he said. “And when new contracts sands of hours of hurricane preparation “The Lower Tertiary is a new frontier are signed for existing 5th-generation and planning by parties including off- where we will be drilling deeper and rigs, I am optimistic that the rates will shore contract drillers, vendors, clients tougher wells, and we need to figure out be as good as or better than current and governmental agencies . how to drill these wells much more effi- contracts.” “The hurricanes are definitely a factor,” ciently,” he said. “The industry will only Mr Long said. “They impact the amount benefit if we can drill these wells safely HURRICANE CONCERNS of time that operators have to drill. An with the lowest overall cost possible. And oil company may lose 5 to 7 days shut- if you consider the capital that must be Since the devastating back-to-back hur- ricanes of 2005, more than a dozen rigs ting down operations due to a hurricane invested in order to do this, we’re looking warning, even if the storm never hits. at tremendous growth for the industry.” have gradually left the Gulf of Mexico’s rough waters. Transocean, however, Add that up across the Gulf of Mexico and that’s a lot of drilling days. GLOBAL OUTLOOK still has 10 floating rigs operating in the region, 2 more will be mobilized there in “Additionally, new site-specific safety Looking worldwide at floating drilling 2007, and its 3 newbuilds – all dynami- assessments may affect where a cus- rigs, Mr Long said, it would be hard cally positioned (DP) – will be headed tomer can use rigs during hurricane to pinpoint any one specific region for there upon completion. season,” he added. “These are all issues strong growth because all areas are we will have to manage, and they will expanding . However, one thing is clear: “Transocean doesn’t see an unmanage- certainly have an impact on capacity in Offshore operators are headed for deep- able hurricane risk to the DP rigs in the the Gulf of Mexico.” er and deeper waters. Gulf of Mexico because our procedures give us enough warning to pull the riser He cited deepwater Gulf of Mexico, and move away from the storm ,” Mr OIL PRICES Mexico, Brazil, India, offshore Egypt Long said. By early October, crude prices had and the Mediterranean, and China all as Some operators have been voicing a dropped to about $60 from a summer- growing with significant promise. “And time high of nearly $80 per barrel. Wall for the first time next year, East Africa preference for DP rigs, he added, but the industry is still seeing a fair amount of Street appears to believe that this is the will see some deepwater drilling,” he beginning of the ride down to $30 again,

66 November/December 2006 DDRILLINR I L L I N G CONTRACTOR IADC CONNECTION but that “overreaction” isn’t putting Mr and metrics,” he said. “Instead of hav- Long on the edge of his seat. ing different contractors play numbers games, we should focus on measuring “The price drop so far doesn’t raise any accurately and pushing the culture that fundamental concern for our business,” zero-incidents is possible.” he said. “I think you could even make the argument that the industry’s better off at He would also like to lead IADC in $65 rather than $80 because there’s less promoting our industry to potential impact on the overall economy. I suspect workforces around the world. He noted that oil could go down to near $40 and that efforts must be targeted toward the still not have much of a fundamental younger population in schools and uni- impact on the economics. So, right now, versities all around the globe. the numbers still look great.” “For example, at Transocean, we’re working hard to bring in remarkable OBSTACLES, GOALS young talent from many different coun- Stepping up to take the reins as IADC’s tries,” he said. “It never ceases to amaze 2007 chairman, Mr Long knows the me the capabilities, ideas and energy work’s been cut out for him as the indus- these young people have. Seeing them try steps further into a resource-con- interact and bringing them all together strained environment, which is sure to as part of a team, that’s one of the most bring a host of challenges. exciting parts of this job.” First, the industry must figure out how to recruit new people and train them A CHALLENGING BUSINESS efficiently, especially as upcoming retire- Mr Long is obviously leading a success ments and young workers dilute the story at Transocean, which not only has industry’s experience base. “We’ve done benefited from its technical leadership a great job in the past 4 to 5 years keep- and increased rig demand but also had ing our safety records up, but we must its best year ever in safety last year. stay focused on safety wherever we Nevertheless, he is frank about the chal- operate ,” he cautioned. lenges that offshore drilling contractors face along with their clients and suppliers. Second, the industry needs to work on finding better reliability and better ser- “One, look at our business dynamics vice from its equipment vendors. “The – we have an up-cycle in which everyone cost of downtime – with today’s dayrates has essentially the same resource con- – is huge. There are increasing concerns straints,” he said. “We are all working with not being able to get parts when we at virtually full capacity, trying to safely need them and with the quality of service improve performance amid increasing in equipment repair,” he said. costs and growing demand for techni- cally competent personnel. In some And vendor problems could have sig- cases, our equipment suppliers have had nificant long-term consequences. “We to commission new production facilities, know that equipment suppliers are just creating additional challenges to meet as strapped for people as we are. They their schedules.” are so busy working on just supplying and servicing today’s orders. Who is “Second, speculators who have no idea focused on designing the next piece of how to operate a rig are investing $500- equipment that will carry this industry $700 million to own one. Third, you can’t forward?” create primary demand. Structurally, we have some basic issues, but nothing that Third, with scarce resources, the indus- hasn’t been overcome in the past and try must learn to further improve opera- nothing that we cannot overcome in the tional efficiency through new rig capa- future. ” bilities, innovative drilling methods or improved logistics. “We need to address No mistake about it, Mr Long has no nonproductive time for the operator and regrets about choosing this career path. reduce well costs in order to make new frontier areas economic,” he said. “This is the way this business has always been and probably the way it Looking at these upcoming challenges, always will be,” he said. “But it’s part Mr Long cited safety and people as the 2 of what makes it interesting. Sometimes areas to which he will dedicate his 2007 it’s more difficult than others, but there’s chairman leadership. “I’d like to see always something new on the horizon.” the industry’s safety performance con- tinue to improve. That includes better For information on Transocean’s recent man- standardization of safety measurements agement changes, see Page 73.

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