| WEST CHESTER, Pennsylvania, April 15
WEST CHESTER, Pennsylvania, April 15 The
backbreaking life of a roughneck, the iconic worker bees of
oilfield drilling rigs, is getting a little easier.
Schramm Inc, which built the drilling rig that four years
ago helped rescue 33 trapped Chilean copper miners, has designed
a 500,000-pound rig for the oil and natural gas industry that
can walk, rotate 360 degrees, be operated with a remote control,
and load pipe automatically.
The T500XD rig's futuristic control room has touchscreens
and joysticks, rather than the valves and dials on conventional
rigs, appealing to a generation of oilfield workers raised on
video games. More than 200 sensors monitor pneumatics, oil flow
and myriad other processes, "talking" via satellite or Wi-Fi to
Schramm's Pennsylvania headquarters and signaling any problems.
Riding the global boom in fracking - the practice of
injecting sand, water and chemicals deep underground to release
oil and gas - Schramm's latest rig, although pricey, allows
producers to sharply reduce labor costs, the company says.
It's all part of what Schramm, controlled by private equity
firm GenNx360, says is an attempt to make the process of
drilling a new well safer and faster.
So far, selling the rig to the slow-to-change drilling
industry has been a challenge, and the risk of technological
theft looms over much of the energy sector. But executives say
they are pushing forward regardless, and some analysts say the
company could be an appealing acquisition target, especially if
its new rigs start selling.
"We designed the rig to have lots of automation and to be
simpler to run," said Ed Breiner, Schramm's president. "That
means less fatigue and fewer injuries for oilfield workers," who
often have 12-hour shifts.
Conventional oilfield drilling rigs must be assembled in
pieces, often requiring a crane. To ship parts to an oil well,
it typically takes 40 truck loads of supplies. Time is wasted
building and breaking down such rigs, especially if the next
well to be drilled is only a few hundred feet away.
Schramm's T500XD ships in roughly half the amount of loads,
can assemble itself, and walk to the next well. At 30 feet per
hour, the speed is not exactly a jackrabbit's pace, but it
reaches a new well in a quarter of the time and is faster than
the few other rigs on the market that can walk.
On a conventional rig, a roughneck needs to stand on top of
the derrick tower to guide and move oil pipe into a well.
Schramm's rig lets the operator sit in the control room and,
with joystick controls, guide an automated arm to pick up and
"Pipe handling is probably the biggest area of injury in the
oil industry," Breiner said. "This rig removes that risk."
Highlighting the risks, a Chevron Corp natural gas
well in eastern Pennsylvania exploded earlier this year while
roughnecks were preparing to run tubing down the well, killing
SAFETY VS. JOBS?
Schramm's new rig, which took three years to develop, also
uses about 40 percent fewer workers than traditional rigs. For
remote regions with vast energy supplies but few workers, such
as North Dakota or west Texas, the T500XD could be a welcome
relief. But in regions with workers hungry for jobs, such as
Pennsylvania, Ohio or even China, with its rapidly growing
population and thirst for oil, the T500XD could be seen as a
job-killer, analysts said.
It's an assertion that Breiner rejects, saying new
technology in the industry will boost production and reduce
Energy Drilling Australia, a subsidiary of Ausdrill Ltd
, is paying $8 million for Schramm's second T500XD in
order to frack in Australia's Cooper Basin, which the U.S.
Department of Energy estimates has the world's seventh-largest
deposits of shale oil.
The company picked Schramm's rig, rather than buy from
rivals that include Sweden's Atlas Copco or Italy's
Trevi Group, because of its safety features and also
because "you need fewer people on the rig," said Allen Pais, a
manager with Energy Drilling Australia.
"This rig can move faster and drill deeper," Pais said.
"It's got a high-tech kind of design, which makes it as easy as
possible to run."
Energy Drilling Australia spends about A$1 million
($940,200) every time it tears down and moves existing rigs,
meaning that, in time, Schramm's walkable rig should help pay
for itself, Pais said.
Even so, the new rigs are expensive - nearly three times the
cost of Schramm's earlier model, the TXD - and that has caused
some prospective buyers to hesitate. Schramm, which customizes
each rig it builds, has yet to ink new agreements to build more
Still, Schramm considers the T500XD a big step up,
technologically speaking, from its TXD model, which has far
fewer electronic controls and weighs less than half than of its
larger sibling, meaning it has far less power.
Many contract drillers - companies like Ensign Energy
Services Inc hired to do the actual drilling of wells
for oil and natural gas producers - have a fleet of oil rigs
that, while older, do the job perfectly fine. Rig companies are
often reticent to make quick changes given the long life span of
rigs and the immense capital that must be invested up-front.
Ensign Energy, for instance, had 238 North American rigs
operating at the end of 2013, compared with 356 for Nabors
Industries Ltd, which operates the world's largest land
drilling rig fleet.
"The oil industry is saturated with old technology," Breiner
said. "It has to, eventually, transition to new technology."
In may ways Schramm's success during its 114-year history
belies a series of modern myths about the inferiority of
American manufacturing. Its breakneck growth in the energy
industry since building its first natural gas rig in 2000 has
shown how American dominance in the fracking sector extends
beyond energy companies to include technology-driven
Sales to the energy and mining industries are the largest
chunk of the company's revenue, taking up roughly 48 percent
each of the company's 2013 sales, though Schramm does have a
small business building rigs for water wells.
All of its rigs are built by its roughly 200 workers at a
26-acre suburban Philadelphia campus, nestled amidst a high
school football field and cookie-cutter houses.
The company achieved international celebrity when its
drilling rig reached the trapped Chilean miners before two rival
rigs, an achievement touted widely in company literature.
GenNx360, founded by former General Electric Co
executives, bought its majority stake in the company two years
ago from the Schramm family, eyeing the company's "diverse
blue-chip customer base" around the globe. Breiner and other
executives retained a small stake. Terms of that deal were not
Schramm, analysts say, clearly punches above its
weight-class, making it an attractive prospect either for a
stock market listing or outright sale. Roughly half of the
company's $100 million in revenue last year came from exports, a
geographic diversity that many corporate leaders would covet.
Now may be the best time for GenNx360 to make a move, as the
market for niche suppliers to the rapidly growing energy market
is white-hot. It was only last year, for example, that GE bought
oilfield pump maker Lufkin for nearly $3 billion to bolster its
Schramm isn't for sale today, said Breiner, who sits on the
company's board along with several GenNx360 executives. GenNx360
did not return phone calls seeking comment.
Schramm also retains value from its intellectual property
rights, and it stores patent data and other material at offsite
servers to keep thieves from eroding its market lead.
While Schramm has applied for some patents, including one
for a feature that allows pipe to be lowered into an oil well
automatically, Breiner said the company strategy is to focus on
innovation rather than suing potential copycats.
"If somebody in China wants to steal a rig design, all they
have to do is come to the United States and buy one on the
secondary market," Breiner said.
Schramm even commissioned a model of the rig used to save
the Chilean miners from a Chinese artist, who crafted it with
extreme accuracy using only a photograph. The model sits in
Breiner brushed aside concerns about the company's
intellectual property and said the most effective defense
against theft is a good offense.
"The best way I know how to compete on the global market is
to continue to advance our technology," he said. "If you think
you've got it figured out and stop innovating, you've probably
made a mistake."
($1 = 1.0635 Australian Dollars)
(Reporting by Ernest Scheyder; Additional reporting by Zachary
Goelman; Editing by Terry Wade and Ken Wills)