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A Choice Between Partnership and Poison

As authorities of Iranian petroleum industry gathered for their annual forum, Minister of Petroleum Bijan Namadar Zanganeh made two landmark statements. The first remark was more in line with the endeavors of Deputy Minister for Industrial Logistics Ali Kolahdooz Isfahani for cementing the triangle of manufacturing, support and procurement through international partnership. The Oil Minister reiterated, “I have always believed that refusing from international cooperation is like drinking poison!” This was a strong stress on the Oil Ministry’s determination to cooperate with international companies for transfer of advanced technology.
The second statement was good news on a better structural authority for the Iranian oil sector. “I am delighted to inform you that the first managing director of National Iranian Oil Company after the Islamic Revolution was officially appointed today,” Zanganeh announced.
What follows is a report on a recent initiative taken by the Iranian oil industry for international partnership in local production of exploration equipment:

Joint production of bits by international companies in cooperation with local firms in Iran that has the backing of the Iranian government holds the key to success.

Bits, Drilling Interconnected: Bits have been part and parcel of drilling since oil wells were first discovered in Iran and the Middle East. In Iran, varied earth structures prescribe the use of different bits. Nowhere is more important than Iran for bit manufacturers and suppliers to conduct a field test on their products. A correct choice of bit coupled with optimized use will sure boost drilling speed, decreasing overall cost. Earth solidity, bit weight and revolution and hydraulics are among the factors that do play a role in bit selection.
Bit costs account for only a small portion of overall expenditure. However, optimized use of bits could be crucial in pushing down other costs. That is why suppliers make every effort in their search for more durable and versatile bits.

History and Progress: In the 1800s, blade bits were widely in use. Introduction of fishtail bits in 1901 pushed blade bits aside. In 1909, cone bits emerged and stole the show in oil fields until 1917. Between 1910 and 1940, drilling engineers carried out extensive research to speed up drilling. To that end, they put hydraulics, drilling mud, and bit revolution and weight on the list of parameters to be studied.
Hard facing and Tungsten Carbide were introduced later. As a result, bits became more and more durable and effective. Even diamonds found their way into oil fields as the industry developed Polycrystalline Diamond Compacts (PDC). Tungsten Carbide bits that are relatively new have made drilling less time-consuming and more effective in the past few years. The new generation of bits widely known as Thermally Stable Polycrystalline (TSP) exhibits more efficiency in solid and rocky earth compared to the PDC.
Whether a bit is good and efficient depends on drilling cost and progress. The fact that drilling speed and bit durability are even more important than the bit prices pushes technology to the fore. In other words, bit speed and durability can lower overall costs of drilling.

Iran, Problems and Solutions: In Iran, red tape interferes with access to high technology. To have new bits on the ground, a company needs to go through a long list of processes. That translates into being behind modern technology by two years. Risk aversion is another problem facing the industry. Iranians don’t order modern bits for fear of failing to achieve desired objectives.
To go around this problem, oil industry authorities call on suppliers and manufacturers to provide them with a trial period so as to enable them order new products only if they prove efficient and economical. Joint production of bits by international companies in cooperation with local firms in Iran that has the backing of the Iranian government holds the key to success. That will expedite the order and trial processes.

What Are Officials Up To?: Iranian oil industry officials are bent to support local industries. This will serve several purposes among them: weaning the economy off foreign products, backing local industrialists and stopping the increasing outflow of hard currency. All in all, promotion of local industries will lead to an economic boom. To that end, the Manufacturing Support & Procurement Company (MSP KALA) treads three significant paths to promote local production:

Is It a Success Story? These efforts so far have seen local production of up to 80 much-needed items. The MSP KALA also seeks to establish joint companies bringing together local and international firms. The move that comes in the framework of the company’s new policies is aimed at importing oil industry know-how. To that end, up-to-date technology and economical considerations are of great importance. So far 26 agreements have been struck on local production of goods and services here in Iran. These accords place much stress on inflow of technical know-how, establishment of engineering and designing offices as well as technical services. Offering training courses for local experts and technicians along with creating job opportunities are part of the agreements.
Besides meeting oil industry standards, competitive prices and high quality are also on the menu. Iran’s Almaseh Saz Company and Smith Bits have struck a deal on production of drilling bits here in Iran. A similar agreement has been arrived at by Iran Electrical Equipment Company and Hughes Christensen.

What is New? Technological advances and new economic perspectives of drilling and oil and gas production have seen an improvement in quality of rotary bits. New generation technology has now given birth to new facilities and equipment. New technologies have resulted in fewer bit trips and shorter drilling time.
In the past, foreign contractors would take care of every process down the road in oil and gas fields. This left production as well as transfer of technology and technical know-how out of the question.
Iranian industrialists and oil experts have in the past two decades put production of well and drilling equipment high on their agenda. That Iranian experts have managed to manufacture mechanical and electrical equipment proves they have practical abilities in this regard. Competitiveness on global stage will be a non-starter without determination, intense efforts and follow-ups.

Potentials and Partnership: Extensive exploration and drilling activities in the Middle East, littoral states of the Persian Gulf in particular, has revived the issue of exporting final products of these agreements. After economic and technical studies, internationally recognized bit manufacturers have launched joint drill bit production plants in cooperation with Iranian companies.
Presently, the Iranian sides account for 12% of production but the figure is expected to rise. Joint investment in oil equipment is aimed at meeting the satisfaction of both sides and providing consumers with easy and quick access to products. Special geological features of Iranian land could be scientifically significant for bit manufacturers around the world. Local production of drilling bits also reduces delivery time of at least one year for foreign purchases to only six months. MSP KALA seeks to import technology through establishment of joint companies that bring Iranian and foreign firms together.