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Home / Issue Archive / 2009 / June #6 / Discovery Drilling Buys IDM’s Rig Plant in Ukraine, Sees Come Back for Russian Drilling

№ 6 (June 2009)

Discovery Drilling Buys IDM’s Rig Plant in Ukraine, Sees Come Back for Russian Drilling

It is no secret that the economic recession has depressed the drilling market world-wide, including Russia, which a year ago was, by some measures, the drilling industry’s hottest growth market.  Oil prices were at all time highs, investment seemed unlimited, and in Russia, Soviet-era rig stock and drilling equipment was fully depreciated and in need of replacement and upgrade.

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   Though the market seems to have swung 180 degrees in the last 12 months, recession also has its plus side: companies are forced to become more efficient, seek out new revenue streams, and when some companies leave the market, new entrepreneurial firms take their place.

   In Russia, one “new kid on the block” who seems to have been in the right place at the right time is Discovery Drilling Equipment. When U.S. drilling equipment and rig manufacturer IDM refocused its business some months ago and sold off its West Ukraine manufacturing plant and rig-up yard, Discovery’s London-based principals took over the facility.

   With the manufacturing asset, Discovery also picked up existing contracts for rigs, including those for rigs that were in the process of being manufactured at the time of IDM’s exit. As Keith Holliday,  VP of Sales & Marketing, told Oil&Gas Eurasia: “Discovery is a new company. Its principal asset is the plant in Ukraine that had been supplying drilling rigs and equipment to the region for 100 years. Having superb design engineering from Canada, Discovery bought out the plant and we’re continuing to build for international clients working in Europe, the Middle East, and Russia.”
“The main focus in Russia is the manufacture of Arctic skidding-style rigs,” said Holliday, who is no stranger to the CIS market. He worked previously for Nabors Drilling in Kazakhstan; other senior management in Discovery worked previously for Nabors Drilling, National Oilwell Varco, Atwood Offshore, Woolslayer, and Canrig.  “We have had a few inquiries of late for such (Arctic skidding-style) rigs. The Middle East rigs (two swing-lift styles) have been delivered now, and we’re currently building several box multidirection skidding rigs for Weatherford.”

   “Since the recession started there are fewer tenders but there are still serious inquiries,” Holliday said. “Any country that has an internal need to produce oil will continue to buy drilling equipment. We’ve started offering services to upgrade existing equipment. It’s good solid work and it makes sense in the current environment.”

   As for the when the downturn might bottom out, Holliday thinks it may have already. “In Russia, everything depends on the price of oil and the price of oil is starting to bounce back," he said. "I’m hearing about a lot of approved budgets for the end of 2009 and 2010 for some of the major oil companies. The current slow down is not going to last. I feel pretty comfortable that 2010 will be a reasonable working year.

   “The comment we keep hearing from Russian drilling contractors is that they are still working but they don’t have the budgets that they used to have. They have no budget for new rigs, but at the same time they can’t stop drilling,” Holliday said. “That’s why we’re talking to customers about upgrade services.”

   Discovery is London-headquartered with sales offices in Houston, Moscow and an engineering base in Calgary. “Our plant in Ukraine is a strategically-located manufacturing facility which we can operate at a reasonable cost so far as welding and fabrication is concerned, with world class quality,” Holliday said. “It also has easy access to rail transport.” Our facility is the only plant in the former Soviet Union which makes international-standard, high-quality drilling rigs and has full API certification.

   “Russian companies are keen on buying local equipment, or at least from vendors who have the service bases in Russia," he said. "We are currently looking at rig-up yards and manufacturing facilities in Russia to set up our own assembly and later partial fabrication, but when and where we might expand in terms of manufacturing sites depends on the customers. We’re experienced in project management, and we’ve built our careers on manufacturing.”

   Discovery offers a line of rigs including trailer-mounted, carrier-style rigs, a swing lift style, and also a pad drilling rig sold under the brand, “Arctic Crawler” which Discovery will present at MIOGE (the Moscow International Oil&Gas Exhibition, June 23 – 26). “Having said that though, we’re flexible,” Holliday said. “We pride ourselves on manufacturing the asset that makes the most sense for our customers’ operational requirements.”

   Most Russian inquiries are for the skidding-style, winterized rig suitable to work under minus 50 Celsius temperatures. “The biggest thing is the x-and-y skidding,” said Holliday. “We can drill all the wells but they don’t have to be lined up completely. We can do one row and then come back and do another row on the same pad.” Holliday said that “Russia is a long term bet. Obviously, the oil and gas industry is huge in Russia but it is a difficult place to work. It requires a lot of commitment but it’s the biggest country on the planet and it has more oil and gas prospects than anywhere else. So long term it’s the place to be.”

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