Here, we cover the distinctions between drilling operators, contractors and service companies. Considering the differences will help a drilling engineer decide where they might be best suited to work. The same applies for many job positions related to drilling teams.
This knowledge base article answers the question in a simple format, for students or other information seekers. We also go into a bit more detail for O+G workers who will already have some understanding.
First of all, lets define the basic terms:
Who are the drilling operators?
A drilling operator is an oil company that has successfully tendered for, and owns the mineral rights, leases and permits to explore in a particular area. They also plan the life of the well, and specify the materials and labour needed. After a drilling plan has been approved, the operator orders the necessary materials and equipment, and recruits the contractors and service companies.
The operator may be a national oil company (NOC), a public oil company, or a private one. The biggest group are the national oil companies that control and produce three quarters of the worlds oil. Examples include Sinopec and Petrobras. The most well known operators are the public companies such as Exxon Mobil and Shell.
Smaller, private operators are the most numerous, but also tend to be unknown outside of the the industry. These are the family businesses, and junior companies that have yet to go public, (or may not want to).
The drilling operator is ultimately responsible for the project, they win the contracts from, and deal with governments and other official bodies. There might be 10-30 different companies involved in a project, but the operator is there at the beginning, and the end, from planning to decommissioning. They also sell or supply the oil and gas to the market.
What’s a drilling contractor?
These are companies that own the drilling rigs. This might be a single company that owns the rig, or a small group of companies that are pooling resources. The drilling contractor drills the well, supplying the rig, and crew. The crew includes the roughnecks, drillers, toolpushers and other staff that tend to be less skilled, and local.
Examples include Transocean, Ensco or Patterson UTI. The contractors work for the operators and follow the carefully laid out drilling plan. The rules, guidelines and regulations are also set out for the staff of the contractor to follow. They usually supply the rig and personnel at a ‘day rate’ package for the duration of the contract.
A version of a contractor is a consultant, who might work individually, or for a small group. These are specialists and subject matter experts. They might be called upon to support a drilling team during a particularly challenging well operation. Examples include high pressure, high temperature (HPHT) wells, or those that involve extended or directional drilling.
What’s a service company?
A service company fills in the supply gaps for the contractors and operators. These can include many different physical products, as well as services such as logistics, supply chain, software and training. These service companies get called out to the rig site to perform specific duties as agreed by the operator.
There are so many parts of a drilling and completions operation, the contractors and operators choose not to do absolutely everything. They focus on what they specialise in. Many of the roles of a service company are only needed occasionally or are very specialised. This means that it makes more sense to contract on-demand, or for fixed job scopes. Examples of these niche services include fluids and cementing, wireline or mud logging expertise.
Halliburton, Baker Hughes and Schlumberger are huge service companies, so not all service companies are small. This is by far the most numerous sector though, where some companies have under 20 employees. You wouldn’t find this at drilling operators or contractors.
Which is the best type to work for?
During the course of your career, you might move between companies, and types of companies.The first thing to consider is what your degree, or past experience covers, and what you want to do. It’s likely that the decision about whether to join an operator, contractor or service company will be obvious as you search for a position.
There’s a tendency to see the drilling operators as more stable and offering better opportunities. The sheer size means that you can move from job site to job site and stay busy. This means more travel destinations, and job security. Operators usually have downstream business sectors that create a more robust organisation during downturns.
There are downsides to working in a large company though, it might be hard to stand out and get promoted. As in most industries, there will be more politics, bureaucracy and seemingly stifling rules and regulations. It’s unlikely that you’ll gain in much upside no matter how well business is going.
Another issue is that, (depending on your position), you’ll be expected to be on call and on standby 24/7. Because the operator is in charge, you’ll need to deal with lots of requests from the drilling contractors, service companies, and local government agencies.
For these reasons, working for a drilling contractor might suit you better, when you make a difference, you’ll get noticed. Mid-sized companies find it easier to change direction, and reward those that help them.
Contractors and consultants can be hired by companies all over the world, so if you work on this basis you’ll see more variety. There will be opportunity to learn and experience a broad view of cultures, environments, and job challenges. This won’t happen if you work for a national oil company within a territory.
Small service companies might offer opportunities that suit your skill set and preferred working environment. The family feel of a small company is in stark contrast to working for a super major. Service companies are also under less pressure and can be more relaxed. If you want regular hours, holidays, and a more friendly environment, this might be a good fit for you.
PS: If you’re considering the study of an oil and gas related field, you might want to check out our oil and gas universities article.