Making the Connection
Horizontal directional drilling (HDD) definitely has a positive vibe to it these days, giving the industry the proverbial bounce in its step and a good jolt of long-term optimism. From water and sewer work to oil and gas to the fiber optic/telecom market, HDD seems to be enjoying a buoyancy it hasn’t felt in a long while.
People want to talk about HDD and learn more about it. There’s a new generation of drillers pulling back the product pipe and they are thirsty for knowledge.
“It is a good year to be a directional driller,” says Vermeer senior global product manager for underground Jon Kuyers. “It’s not the manufacturers saying it. The manufacturers are seeing the results of a good market. Our core trenchless products are very strong. All the market dynamics are very favorable for HDD, whether it’s gas, telecom, water, electric or sewer.”
“I have referred to this as we may be entering the ‘Golden Age of Underground,’ which has to do with the fact that through aged infrastructure or these demand-driven infrastructure spending programs around oil, gas, communications or the need to remediate gas distribution lines, aged plants for water, sewer and water supply infrastructure — they are all underground technologies,” says Chris Daum, president and senior managing director of FMI Capital Advisors. Daum has been with FMI for 16 years, focusing on utility infrastructure.
“All of that involves underground construction,” Daum says. “All of those infrastructures have to be expanded, upgraded, repaired and maintained and there’s healthy growth across all of those. HDD is an acceptable and economically cost-effective delivery method that is much more prevalent today [than in past years], which bodes well for HDD services.”
The Digital Age
One of the healthiest areas that HDD is enjoying a sweet uptick is in fiber optics and telecommunications. Digital is everything today and broadband and cable providers are pushing to expand their networks all over the country to meet this incredible demand. Where 4G and 5G service was unheard of just a few years ago, it’s the next “thing” today. FMI estimates that communications capital expenditures will increase to approximately $70 billion this year, with mobile network bandwidth expanding 500 percent over the next four to five years.
The ramping up of fiber-optic and telecommunications line installation has been a boon for the HDD market. Unlike the previous big fiber push of the late 1990s to early 2000s, this substantive increase will have a long-term impact on the market as the demand for more bandwidth and wireless communications continues to be a part of our daily lives. From laptops to tablets to videos to cell phones to music — the list goes on and on for consumers whose thirst for fast, up-to-the-minute information and entertainment only continues to grow.
“The increase in capital spending for communications and broadband is favorable for the HDD market because it portends more new construction, more fiber deployments because of Google, AT&T and CenturyLink,” Says Daum. “Their planned build-outs and private fiber network deployments — all of that will portend to more construction and will drive HDD where these deployments are taking place, into the neighborhoods into the urban infrastructure that is done predominantly underground.
All of this bodes well for HDD as the trenchless delivery method has become a popular option for fiber and telecom installation. The HDD market has seen this before. In the late 1990s, when the Internet was really starting to take off, HDD experienced a huge influx of work as the networks were being constructed. The end of that work coincided with the HDD market bottoming out, taking years to recover.
However, the tremendous upswing in communications work this time around is different, as the long-term demand is there — something that energizes those who sell the compact to midsize HDD drills. “It has really contributed to the case for investing in the small to midsize machine market,” says Seth Matthesen, senior HDD product manager at Ditch Witch. “We have seen an uptick [in purchasing] through the last half of 2014 and this year for compact to midsize directional drills like the Ditch Witch JT9 and JT20 … This definitely feels like a more healthy build than what we saw in the late 1990s. There is a steady, healthy demand.”
Daum agrees about the difference of today’s fiber/telecom market to years past. “The fiber deployments of the late 1990s and early 2000s were highly speculative, meaning they were wholesale, long-haul fiber buildouts because of the Internet boom and dot com bump. In many respects, a lot of that dark fiber and urban interconnects ended up being empty conduit,” Daum explains. “Back then, HDD was somewhat in its infancy as an acceptable technology that was unproven and had not been adopted as widely. Vermeer and Ditch Witch pioneered a lot of that growth.
“Flash forward 15 years later and we are living in a bandwidth-rich, interconnected world with a more mature Internet with completely mature e-commerce with demand for data being exponentially greater that it was before. It’s a totally different environment than before…The really big difference is that we weren’t even talking about video broadband. We weren’t talking about mobile data and we certainly weren’t talking about 5G. That’s all taken place in the last five to seven years.
“What’s driven the market the last five years and continues to drive it is the wireless mobility. That’s not going away.”
Kuyers concurs with Daum and notes how much of everyone’s daily lives revolve around digital devices at work and in their personal lives. The proliferation of bandwidth and the demand for fast data has and will continue to have a huge impact on the HDD market, he says. “What is different this go around is that the demand is there for the product and the service,” Kuyers says. “People are spending the $100-plus to get the service to their homes. Fifteen years ago, they might not have. Society has changed. People now watch TV on their computers or mobile device. Fifteen years ago, they didn’t do that. Everyone has a smart phone today or a tablet. It’s how you get your information and how you communicate. All of this used to be a luxury and today it’s a necessity,” he says.
With all of this demand, HDD is reaping the rewards. Contractors are spending their dollars on new HDD rigs to handle the work, buying both compact and midsize rigs. The speed and power of these machines are perfect for this market, which sees fiber being shot out in 600- and 700-ft lengths, experts say.
“It has really helped the smaller rig market focus on technologies that improve efficiency,” Matthesen says. “Contractors working on the jobsite definitely expect increased output from compact and midsize machines. [The fiber/telecom market] has given us the ability to re-invest in those product lines. New products are being developed to meet these growing customer needs. Contractors want a smaller package with more power that is easier to maneuver.”
Oil and Gas
With the fiber and telecom market gaining more momentum and strength, it has offset the tepidness HDD manufacturers say they are experiencing in the oil and gas market. HDD saw a tremendous surge in work the last several years with the emergence the Marcellus and Utica shales plays in New York, Ohio, Pennsylvania and West Virginia, as well as the Bakken shale play in Montana and North Dakota. The work involved new installations to meet the needs of shale gas production to repairing or replacing old lines.
Though the work seems to be there, the oil and gas market is getting mixed reviews from the manufacturers on the impact it’s having on HDD drillers.
American Augers director of product management Richard Levings has been involved in the HDD industry for more than 20 years, experiencing the highest highs and the lowest lows that have come and gone during that time. He believes that the lower oil and gas prices the market is seeing has caused some drillers to take a pause in their spending for the time being. “It has caused reserve in the minds of contractors because they have plenty of work today but they’re not sure about tomorrow,” he says. “They are doing the work with the equipment they already have.”
Kuyers acknowledges the oil and gas slowdown from the HDD side but notes that there is still a lot of work out there. “There are still pipelines that still need to be built and will be built and are still being built,” he sums up. “That work has not completely stopped. A lot of the markets are underserved, especially as some of the power plants come online that demand for gas will increase. They’re going to have to increase the supply to those plants and to existing infrastructure to accommodate for that larger demand.”
Daum is more positive in his assessment of the oil and gas market and what it means for HDD. “It’s not slowing down at all. That’s a big misunderstanding in the market,” he says. “You’ll have 25 percent more pipe installed in 2015 vs 2014 and [FMI] projects upward to 100 percent increase in pipeline deployments in 2016.
“Drilling activity in certain nonconventional shale plays has slowed because of the price of oil but the midstream infrastructure from gathering pipelines to mainline transmission pipelines to take the product that has been produced away from its source and send it downstream is 18 to 24 months behind the drilling that has already taken place. A lot of that activity is just entering into the construction phase in 2015 and 2016,” Daum explains.
Daum describes the construction activity for the gas market as fairly robust and has a favorable outlook because infrastructure in some areas that will be producing gas hasn’t been built.
Topical: Drilling Fluid Misconception
To those involved in the HDD industry from its inception know the topic of drilling fluid disposal and regulations have never really been settled. Outside of the HDD industry, there has always been a misconception about the use of drilling fluids: Are they safe? Are they harmful to the environment? How are they disposed? And on and on it goes.
Today, HDD leaders are fighting the same battle as the use of drilling fluids has come under fire, as opponents are confusing it with as the same material used in the hydraulic fracking operations of the oil and gas industry. “Today we have regulations of all kinds as it pertains to drilling fluid handling, disposal, cost, makeup water availability, disposal facilities, etc.,” Levings says. “There are a lot of people who are misled to believe that fluid used for HDD is the same as that used in [hydraulic fracturing] in the oil and gas industry and it’s not the same thing. HDD drilling fluid is basically soil mixed with water with no chemicals and wouldn’t be harmful in anyway.”
Disposal costs is a huge issue for contractors, as the costs to transport and get rid of the used mud continue to increase. The use of mud cleaners and recyclers has become commonplace by contractors for projects of all sizes, not just the larger work. Contractors are now using the systems with the compact and midsize units.
“Before it was easy to get rid of your mud. Contractors would just dump it in someone’s field,” Kuyers says. “Today, people don’t want you to do that. We are working in urban areas and there is no space to do it and you have to find a local facility to dump it and it’s costing them an arm and leg to do it.
“Every one of these contractors is using a vacuum system and they are sucking up the mud and it costs them money to dump it. This is not just occurring on large back reams. It’s an industrywide problem,” he adds.
Levings wants the HDD industry to work together to educate the general public, engineers, municipalities, as well as the politicians on what HDD drilling fluid actually is. “We have an industry that needs to work together to help people understand the truth about HDD drilling fluid, so they understand that HDD is a friend of the environment in every way,” he says.
Sharon M. Bueno is managing editor of Trenchless Technology.