Oil Patch Transition: Manufacturing Adapts as Prices Recover


Manufacturing Engineering Magazine – May 2018
By Bill Koenig

Manufacturing for the oil and gas markets is in a transition. The oil market has firmed up after prices plunged earlier this decade. That’s helping suppliers of machines used to produce parts for oil and gas exploration and distribution, as well as the companies that make those parts.

At the same time, there are new challenges as difficult-to-machine materials are used more frequently. At the begging of 2017, average oil price will be about $57 a barrel, while forecasting $55–$65 for 2019. Crude oil is a commodity that moves beyond your normal supply/demand factors. Geopolitics is the biggest external factor—especially because of the world’s reliance on crude oil from countries where political risk is high. Countries in the Middle East, Russia and Venezuela would be the prime examples. So political/economic/social changes in these countries have a heavy bearing on crude oil production and price dynamics.

The Organization of Petroleum Exporting Countries (OPEC) has made production cuts to try to support oil prices. Such cuts have definitely made an impact in controlling prices, and more cuts are expected in 2018 and 2019. However, Saudia Arabia and Iran have been at loggerheads recently and the situation is very dynamic. Crude oil production in the US has been growing steadily and it would be hard to see increased gasoline prices domestically during 2018.

Regardless of the specific numbers, oil price changes have been felt in the machine tool industry. Machine tool manufacturing fell around 12.6% in 2016 without adjusting for inflation, reflecting the demand decrease from the oil and gas industry, but the machine tool industry is expected to increase over the next five years.

The exploration market for oil and natural gas seems to be picking back up. The drilling market is gaining a little bit of momentum. The key is, if oil prices can stay in that happy medium where oil companies can justify pumping oil and exploring.

Some companies used the period of low oil prices to prepare for a recovery. Capital investments for the programs tend to have an inverse relationship to production, i.e. corporations are more likely to invest in improved processes or equipment during periods of low production. Those who use this time wisely are better positioned to use new and/or improved tools to take full advantage of the next upturn in production.

‘More Tools at More Places’

Smaller buy volumes and quicker deliveries will yield orders. We also see smaller batch sizes being run at multiple manufacturing sites [simultaneously] as opposed to one company getting the entire contract. This puts more tools at more places, but also is a challenge because the machining process may be varied due to machine type.

The price of oil and gas during 2012- 2014 increased demand for fluid ends. The current demand that started in 2016 does not appear to be driven by fluctuating oil prices. What may be a driving factor is more efficient methods of producing shale oil.

In any event, the Ingersoll officials said by the end of 2016 the company was starting to see a rapid increase in demand for other types of cutting tools used in the subsequent roughing and finishing operations of the fluid ends. Throughout 2017, the demand for all types of cutting tools needed in the production of fluid ends grew rapidly. During 2017, we also saw an increase in demand for cutting tools used in the machining of other parts used in oil and gas, like mud pumps.

For suppliers, the shift to harder materials is a major consideration. There has been a transition from alloy steels to stainless steels and other materials that last longer. The life of the pumps have been greatly increased by changing the materials that go into them. The materials have different machinability.

Solving the Chip Problem

For example, there may be a 25-30% difference in the machinability of an alloy steel block compared with a stainless steel block. The machinability means potentially more tool changes, different tool selections, and additional focus on chip management. That mean, not getting long, stringy chips that cause problems in terms of automation of the manufacturing process. Long stringy chips can cause problems with tool changes.

There have been changes to machine tools to adjust to difficult-to-machine materials. The machine needs more rigidity to handle special alloys. What’s more, newer machine tools perform multiple functions, which “allows you to do all of the features…you don’t have to move parts from machine to machine.

More material removal capability via larger diameter drills and larger depths reduces the overall time to manufacture the part. Productivity is the name of the games. In the past, you would buy one machine to do the roughing and another to do the finishing. Now you do the roughing and finishing on one machine.

Many experts agreed the trend is to have machines do multiple tasks with the biggest factor there are not enough machinists and the mentality is we don’t have extra machinists, we have to be cutting all the time, also need to have more capability, more technology in every spindle that was purchased.

Mitsui Seiki is licensed by General Electric Co. to sell machines equipped with Blue Arc, a high-speed electro erosion technology. GE originally developed Blue Arc for internal use more than 15 years ago to cut materials such as titanium and nickel alloys. But Mitsui Seiki sees Blue Arc as one way to address increased use of difficult-to-machine materials in the oil and gas industry by doing rough cutting that will removes amounts of material very quickly.

Blue Arc works faster than conventional milling and can reduce manufacturing costs. It is also melts part of a workpiece and flushes away the molten material. GE says it uses low force, enabling higher speeds and allows an operator to do unusual geometries.

Increased Fracking

The increased use of fracking also puts more demands on makers of machine tools. With traditional drilling, whether on land or off shore, oil and gas comes up with pressure. Much of the drilling equipment is used to manage the pressure. Fracking, by contrast, calls for forcing a slurry of water and sand into the ground to force oil and gas out.

Since the move from traditional drilling to fracking, we have seen a wide range of parts that need to be machined from monolithic pieces of varying materials. The transition to higher tensile strength materials have placed more demand on the tooling as reduced tool life is seen when compared to more traditional materials. Anything we can do to improve tool life and cycle time whether it be tool design, geometry, insert coatings etc., is always welcome by our customers.

There is also a challenge of trying to machine similar parts in not-so similar machines and perhaps using a different process. Here, we find that what works for efficient metal removal for one customer, may not be the best answer for another customer who has different machinery to work with. That is the reason why Ingersoll have developed more than one type of tool for machining similar features.

One question facing oil and gas manufacturing is whether the industry will adopt Industry 4.0, involving “connected” machines that can be managed on smartphones and table computers. Industry 4.0 brings the machinery industry to another level of manufacture by using sensors and data to monitor every process of the production. With such an approach, operation can be more effective, efficient and with less error and discrepancy. The system does exactly what Industry 4.0 is pursuing. When every step of the production can be monitored, users will know exactly when to change parts or call service before it affects the end product.

Some companies are looking to what their customers want. Increasing machine utilization is important. There’s really multiple levels of how complex and wonderful you need to be. Some customers are still just trying to figure it out. They’re struggling with the ability to find operators to run the machine and people to maintain the machines.

There’s also the question of whether additive manufacturing has a role to play in oil and gas manufacturing. Additive manufacturing is continuing to gain momentum in a variety of markets, although we have not seen it be used in production components that we have been involved in. Most [but not all] of the components we are machining are designed for high-pressure applications…which puts an added demand on certifications for use in general applications. All components made from additive processes would need to be initially tested for design, safety and life standards.