CRITICAL ISSUES IN DRILLING & COMPLETIONS
The agreement under which the Kingdom 1 jackup was built – and under which 19
other new jackups will be built – allows ARO Drilling to avoid the pitfalls associated
with the drilling industry’s up and down cycles. This type of long-term partnership
can also lead to better alignment between operator and contractor interests.
think more strategically about how rigs
are going to look in 10 or 20 years without
worrying about having to really downsize
in any major way .
Since ARO is in such a special position,
is there any advice you can offer
around how operators and drilling
contractors can better align their
interests so they can create more
value or forge better partnerships?
I think there’s a lot of overlap between
what operators and drilling contractors
want , especially when you look at safety,
operational efficiency and consistency .
But, for drilling contractors who are not
in a joint venture situation, the challenge
is always going to be around competi-
tiveness and commercial attractiveness.
I think that having more long-term, com-
mitted projects can make a difference,
where the operator and drilling contractor
each take some risk but also have some
opportunity for rewards .
You know, the format and the spirit of
contracts in the drilling business is the
same as it was probably 70 years ago –
fundamentally dayrates, fundamentally
30 short term. That creates a certain behav-
ior, both from drilling contractors and from
operators. The challenge lies in the con-
tract ing strategy ; it’s too volatile .
Is that changing at all?
I see some operators beginning to offer
more integrated projects where they give
a contractor a multi-year scope of wells to
drill. I think these kinds of projects could
trigger a change in contracting practice
and give both sides more assurance.
They might also help solve the labor
and talent acquisition issue, because both
sides are trying to hire the same kind of
people right now. If the operators offer
more integrated contracts, that might par-
tially solve that problem.
Going back to technology – if you had
unlimited R&D funding , what would be
your dream list of technical innova-
tions that you would like to work on?
As I mentioned earlier, a lot of work
can definitely be done on automation . In
addition to automating well construction
processes, we should also look at automat-
ing o ther processes that people don’t think
about as much. For example, using drones
for inspection s so we can eliminate the
need for human interaction.
We should also be looking at differ-
ent power sources for operating the rigs.
Maybe we can power a drilling operation
with liquid gas, or maybe we can make
more use of batteries. Batteries are not
where they need to be for an operation like
ours, but they’re evolving . Maybe some of
the rig’s instrumentation can be powered
by battery because they’re lower consump-
tion and more predictable.
We also haven’t looked into how rig
moves can be powered differently – there
may be a better way to do that rather than
using diesel.
Finally, we really need to look more
at how to get artificial intelligence and
things like ChatGPT much more involved
in our business . There are companies look-
ing at using ChatGPT for supply chain,
for writing up contracts and policies and
procedures , and even to do arbitrations .
People often don’t approach technologies
like this with an open mind , but in fact,
these things progress very quickly. Before
you know it, a lot of arbitration will be
done through ChatGPT, and a lot of HSE
policies will be written by ChatGPT .
I don’t mean to dwell on ChatGPT itself
because there are multiple variations of
the same concept, but I think it’s an area
we should explore in drilling.
Anything else you’d like to see for the
future of drilling in the coming years?
I’d like to think that our rigs can be
remotely operated , very reliant on data and
more accepted globally as a reasonably
clean way of prospecting for energy, which
the world needs.
Today, a jackup rig needs maybe 100 to
110 people in order to operate. In 20 years,
can we reduce that number to just 10 ?
Why not? We have to dream big and take
big steps rather than keep making small
incremental improvements . The industry
hasn’t really evolved that much in the last
50-60 years, and the way the rig functions
is still more or less the same. We need
a step change in the industry, and we’re
going to work on driving that change at
ARO. DC
JAN UARY/FEB RUARY 2024 • D R I LLI N G CO N T R ACTO R
CRITICAL ISSUES IN DRILLING & COMPLETIONS
Amid regulatory headwinds,
Australia seeks policy stability,
growth for gas and LNG markets
Industry must continue to position itself as a key
player in energy transition, but needs broader
support to attract the necessary investment
Samantha McCulloch, Chief Executive,
Australian Energy Producers
BY STEPHEN WHITFIELD, SENIOR EDITOR
What was the motivation behind your
recent name change from APPEA to
Australian Energy Producers?
We were the Australian Petroleum
Production and Exploration Association
for more than 60 years, so it was a name
that held us in good stead for decades. But
when we looked at the role of our indus-
try today and the role of the industry in
our future, it’s actually broader. Of course,
we’re exploring for and producing oil and
gas, but our industry is key to net-zero
technologies, and it’s key to the invest-
ment in and deployment of low-emission
fuels. We wanted a name that reflects that
broader role of the industry.
What do you see as some of the big-
gest challenges facing the industr y in
Australia? And what roles can organi-
zations like yours play in helping the
industry address those challenges?
It’s a challenging environment as we
transform our global energy systems to
net zero. Australian Energy Producers has
committed to net zero, and we see tremen-
dous opportunities, particularly with the
role of natural gas in that transformation,
in terms of partnering with renewables to
provide power to Australian homes and
businesses. Gas will also play an important role
in supporting manufacturing and new
industrial opportunities. In Australia, we
talk about critical minerals manufacturing
opportunities, and gas can be a key partner
in that.
Even in a net-zero pathway, we still
need oil and gas, so communicating that
understanding and translating that into
policy settings and support is critical. In
Australia, it’s been a very challenging and
dynamic policy environment for the past
12 months. We’ve had a range of interven-
tions and policy reforms that have added
to the cost and complexity of the operating
environment and the investment envi-
ronment for the industry. That’s had an
impact in terms of our reputation.
We’ve had some of our key international
investors and customers raising concerns
publicly about whether Australia is still a
reliable supplier of energy. That’s some-
thing that we, as an industry, are very
concerned about.
For example, we have seen court deci-
sions overturning approvals for projects
that had been approved by the nation-
al regulator. We need new regulations
to ensure meaningful consultation with
Traditional Owners – Aboriginal and
Torres Strait Islander people – as well as
certainty for business.
We need to ensure we have stability in
policy setting and a policy environment
that attracts new investment and enables
us to continue to be a reliable, secure sup-
plier of energy to the region. That’s really
central to the work that we’re doing.
What do you say to those investors
who might be a little skeptical of Aus-
tralia’s energy position?
This all has been the result of months
of policy interventions and change, and it
has been concerning to the industry and
the broader international investment com-
munity. There are challenges in Australia’s
operating environment, but we think we’ll
see greater stability going forward. As
an industry, we’re calling on the gov-
ernment for policies that will encourage
new domestic supply to ensure our energy
security. We have abundant gas resources,
but we are in a situation where energy
authorities and the energy analysts are
forecasting supply shortfalls.
Also, we play such an important role
in terms of regional energy security. Our
LNG exports underpin many of our stra-
tegic relationships in the region and sup-
port decarbonization efforts. We want to
ensure that we’re able to service the grow-
ing demand for LNG and gas in our region.
Can you provide some examples of
regulatory changes that have had this
negative effect on operating costs in
the region? What kind of impact have
they had, exactly?
In our East Coast market – the largest
market in Australia in terms of popula-
tion density – price caps were introduced
on the wholesale gas market toward the
end of 2022 without industry consulta-
tion. That created a lot of uncertainty,
and it took quite a few months for us to
just work through the details of how this
was going to work in practice. It’s meant
that projects have not been able to move
forward. Investments that were aiming to
supply gas to the domestic market have
not been able to progress. Some gas supply
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