Managing Innovation in a Cyclical Industry

Panel discussion at the Offshore Drilling Symposium, ONS 2018
Stavanger, 29 August, 2018
CEO Jørn Madsen, Maersk Drilling A/S

Managing Innovation in a Cyclical Industry

I was in Stavanger recently to attend a panel discussion at the Offshore Drilling Symposium as part of ONS 2018. I found the conversations very stimulating – not only is there a renewed sense of optimism about drilling activity but there is also growing momentum to build new models for collaboration and innovation that will improve the competitiveness of offshore oil and gas.

The panel discussed a number of critical questions and I spoke about the need to challenge the old ways and consider new models to complement the day rate model. The questions and my comments are below.

Q: How does reducing total well cost and total well construction risk create value for the oil companies?
At the well level, Maersk Drilling is reducing waste and complexity and lowering cost and risk. Today, it takes up to 60 suppliers and 6,000 invoices to drill an offshore well. That creates a lot of complexity. While modern rigs are very efficient with up-times close to 100%, non-productive time (NPT) is often 20-25% across all the services that are delivered on a well by the various suppliers. This isn’t smart, but our ambition is to make it so through innovative technologies and new types of commercial models.

At the industry level, reducing the cost and risk of drilling campaigns helps to improve the competitiveness of offshore oil and gas – which now has to compete for investment with shale and other onshore sources, as well as renewable energy projects.

Q: Offshore drilling is a commodity business. How do you differentiate your offering through technology, alliances and integration with the oil companies and other service providers?
Maersk Drilling is creating new types of alliances with our customers where we align incentives, share pain and gain on the well and create value for the partners. Our unique alliance with Aker BP provides a glimpse of what is possible:

  • It takes a five-year time horizon, rather than a project-to-project view;
  • It shares risk and reward and aligns incentives between the parties – we share the pain and gain on the well;
  • Teams are integrated, which means giving up some roles to give the best person the job and avoiding duplication;
  • We have a common goal and shared language on safety and operations;
  • Simplification and standardisation are the focus;
  • And it’s underpinned by digital collaboration.

We have also partnered with GE to build digital tools which take data from over 20,000 sensors on our rigs. By analysing this data, we gain the opportunity to monitor and report equipment performance and health. By comparing the equipment behaviour to a Digital Twin, it is possible to predict upcoming failures or deviations weeks or in some cases months in advance. This helps to reduce maintenance and downtime, while enhancing safety and productivity. It makes our Drilling Productivity and Predictive Maintenance tools very attractive to customers.

Q: Do the changes being talked about today represent a paradigm shift or will they end up being just “talk”?
At Maersk Drilling, we believe it’s different this time – for a number of reasons. The first is the changes underway in the energy system. With a lot of uncertainty about future demand and more competition from other sources, operators are focused on being resilient to a lower future oil price.

The second reason why the traditional cycle is not an option is the disruption that we are likely to see in oil and gas from innovation. New uses of data, digital tools and Artificial Intelligence will make drilling safer, more automated and more efficient. When digitalisation is combined with new commercial models, we’ll see real value unlocked and the opportunity to take a significant amount of waste out of the system.

Taking these two reasons together, we believe that operators will increasingly want drillers that can innovate and work in an alliance or partnership structure to reduce waste, lower the cost per barrel and improve safety while unlocking value for all the parties involved.

In fact, we are seeing this already: a significant part of the tenders that Maersk Drilling has participated in over the last 1-2 years have requested that the drilling company takes responsibility for additional third-party services in order to reduce complexity and risk for the operator. We expect this trend to continue in the years to come.


Tine Østergaard Hansen
Tine Østergaard Hansen
Head of Corporate Communication & Sustainability

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