Col. Edwin Drake, who drilled the first producing well in the United States, got to bottomhole depth on August 26, 1859. He drilled to about 69 ft (21 m). It took him most of the summer to get there. In 1901, a salt dome near Beaumont, Texas, was the site of Spindletop, where drilling commenced on October 27, 1900. On January 10, 1901, at a total depth of about 1,000 ft (305 m) in loose sand, the Lucas Well came in at about 50,000 b/d - with a rotary rig and a drilling fluid system called "drilling mud." The legend is that the driller ran cows through a pond to create a muddy water supply that was pumped down the hole to keep the hole stable.

Drilling is an icon function for the entire upstream organization. It involves spending lots of money, taking big risks and sometimes reaping huge rewards. Jett Rink's famous West Texas wildcat well in the Hollywood classic Giant puts a face on the driller - the determined loner who overcomes great odds and at great personal risk under the most severe of circumstances achieves a stunning victory as a massive gusher spews unbelievable volumes of oil.

Drillers in today's organizations are often project managers with a petroleum engineering education. Some play a role that is a blend of project management and internal consultant to the business units of the organization. Some have real power and authority in matters related to the design of the drill-well plan. Others are considered staff members to the real decision-makers in the line organization. In many companies, the drilling function is a service function sandwiched between the exploration and production functions. For some in the drilling function, the scope of the function is sharp and relatively narrow. For others, the role is broader and more strategic.

Most upstream organizations outsourced their capital-intensive drilling equipment and the related direct-labor personnel many years ago. The only real alternative that exists today is to hire a merchant driller to drill a well. A merchant driller goes from job to job drilling for any company that will pay the going rate for drilling wells.

At the interface between the operating company and the merchant rig contractor, a type of sub-culture exists that offers significant business improvement opportunities to all upstream oil and gas companies. The Driller's Culture is a mosaic of behaviors that are strongly embedded in the everyday life of the industry - especially in North America. This culture is pervasive and it is very hard to change. It begins with a command and control style of management that insists on directing all decision-making relative to the drilling project. But, beyond questions over control, the Driller's Culture projects a complex and very assertive set of attitudes that are often shared in some fashion from top to bottom in every company. The Driller's Culture indirectly nurtures a Balkanized organization where each little organization unit insists on exercising complete control over each drilling project. For example, this culture demands control over supply chain decisions regarding suppliers of materials and especially services. The first and second level drilling personnel of some oil and gas companies (the operator) may often be advertised in public relations pronouncements of the formal organization as being key contributors, but in the de facto, or actual culture, are treated more like mere service providers to the core functions of exploration and production. The Driller's Culture, along with the Balkanized approach to projects, contributes to sub-optimal business performance at the project level, asset level, business unit level and even the enterprise level.

Drilling managers disproportionately and profoundly impact the capital expenditures (capex) budget allocated to all drilling projects. They spend the money! This spending occurs in a process that we describe as the atomization of capital. It occurs in thousands of discrete small decisions. It's often out of mind, it's usually out of sight and it certainly is out of control in some companies.
The Driller's Culture includes the myth of the hero project manager. It is one that features the expert driller dramatically and decisively solving problems, keeping things on target, putting out fires and practically leaping tall buildings. In every upstream organization, there are drillers who have masterfully created an aura of indispensability around themselves.

Drillers often don't like to be in the home office. They would rather be out on a rig or almost anywhere but in a conference room filled with flip charts and hand-holding, song-singing team-centric activities. Ask them the right question and they'll give you an honest answer. But, if you aren't smart enough to ask the right question, you won't get the full story. If you haven't drilled a hundred wells, worked on multiple drilling projects and earned your spurs, you aren't really a bonafide hand and certainly not qualified to challenge a real driller.

Clearly, we're exaggerating the issue here - but you get the idea. This is the stereotype and in many companies, this form of culture is closer to the reality than an exaggeration; and this is the culture that remains to be changed for the better.

So, what then is the significance of the Driller's Culture? Among the more significant effects are longer cycle time, higher costs and lower than necessary volumes from well performance. At each organization interface, inefficient transactions occur as people have to contend with the effects of the Driller's Culture. Every transaction carries a small "pain tax" as a result of this culture. The carefully constructed Capex budget, often approaching a billion dollars or more in some organizations, inevitably and ultimately devolves into thousands of much less carefully executed spending transactions - upon each of which is imposed an inefficiency tax. The sad news is that each transaction tax incurred diminishes the bottom-line. This doesn't even account for the impact of lost revenues from sub-optimal well design and development.

Rather than aspiring to become an action-hero super problem solver in tights and cape, drillers would be better served to avoid drilling-related problems altogether through better planning and design of the drill-well project. And, it makes sense to hold them accountable for delivering more margin engineering performance gains relative to the spending activities they guard so jealously.

Talk to senior executives of many upstream organizations and you'll hear a certain tone in their voice and invariably experience a type of attitude that serves to reinforce and perpetuate some of this Driller's Culture. The role of the drilling function, you ask? "Of course, the role is to drill low-cost wells and to drill them fast. And don't wind up on CNN." And then there's the pregnant silence coupled with the inevitable glare that seems to dare you to suggest that there could be any other possibility.

Well, OK. Low cost is a real issue. And, upstream drilling functions are universally expected to be safe and environmentally responsible. We've never encountered even one company that doesn't quickly link low-cost drilling with safe and responsible execution. But, is that the extent of the purpose of the drilling function? And, what is the best way to design and manage this function? And, shouldn't we be more concerned about the value-creating implications?

Upstream organizations - throughout the full course of the history of this industry - have endured mergers and acquisitions that have thrown people from different companies together, often under the most unpleasant of circumstances. Especially during the last 20 years, this industry has witnessed numerous attempts to find organization solutions that inevitably seem to feature simplistic answers such as requiring centralization this year only to shift to decentralization next year. Popular one-dimensional fixes for complex business issues have included installing business units, carrying out portfolio rationalizations, re-engineering, and a host of New Age, politically correct, feel-good initiatives. But, at the end of the day, long-term success depends upon a more sustainable capability - one that cannot be found in the embrace of the latest and greatest warm and fuzzy solution du jour. It depends on the quality of the assets under the control of the upstream organization and it depends upon two clear non-negotiable imperatives that the organization must carry out: Execution and organization capability development.

Over the last decade we have been working on the development of models for upstream business performance that will ensure sustainable excellence where it matters most - the bottom-line. To that end, we have surfaced a framework for a redesign of the ubiquitous drilling function to create a more logical design for creating value. Essentially, this includes the integration of what is commonly viewed as the drilling and completion function along with elements of the supply chain, capital budgeting discipline, as well as other elements of the traditional upstream organization. But, we are getting ahead of ourselves. Our task here is to describe how the classic culture of the drilling function affects upstream business performance.

As the industry pushes the frontier out to 5,000 ft and 6,000 ft (1,525 m and 1,830 m) of water, drilling "routinely" involves multiple companies, staggering amounts of capital, marvelous technological designs for equipment needed to find a spot on the floor of the ocean from which to poke a drill bit and thousands of feet of pipe, lots of chemicals, instruments and cement far into the earth for the purposes, maybe, of flowing oil or gas.

When the risks were a mere few hundred thousand dollars per throw such as in drilling post holes in West Texas, there wasn't much reason to question the overall business model for how drilling activities are carried out. But, when a single well in today's business environment can cost upwards of US $50 million - well...that begins to look like real money.

Drilling may be the best starting point for the integration of many of the discrete functions that define the much-abused upstream organization. Rather than viewing drilling as a service-provider, the focus should be on creating effective wells. This means organizing around the drill-well and complete-well processes rather than driving upstream activities along the classic exploration to drilling to production value chain. All of the pretenders to new and better organization structure are really nothing new. Using labels like "business development" or "commercial development" or similar monikers is equivalent to putting an extra coat of lipstick on the same old hog. It's still ugly.

No matter how much change comes to the upstream organization, you still have to drill the well.

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