HDD Maxi Market Slowed by Flat Oil & Gas: Is There Anything Positive Ahead?
When thinking of the trenchless component of oil and gas pipeline work, one of the first images that appear in most people’s heads is that of maxi-size horizontal directional drilling (HDD) rig. So, it’s no surprise that as the oil and gas pipeline market slows, so does the sale of maxi-rigs and the associated tooling and equipment along with it.
While no one is saying that the sector isn’t slowing and down, experts agree that there is still work to be had for contractors looking to keep their equipment turning.
The downturn can also be a good time for contractors — with cash in hand — to buy used equipment as several contractors have chosen this time to either downsize their fleets or close shop. This has meant several maxi class rigs and ancillary equipment have hit the auction block in recent months.
In our annual look at the maxi-rig sector, we reached out to American Augers and Vermeer – the two major players in the North American maxi-rig sector – to get their view on the market both here and abroad. We also spoke with Tulsa Rig Iron and Century Products to get the perspective from the ancillary equipment and HDD tooling side of the sector.
What the respondents told us is eye-opening, but also had a glimmer of hope for a not-too-distant up-cycle for the maxi-rig sector in North America.
“The market has decreased, and it will continue to do so because, as everyone knows, the maxi rig work has generally, and in the past, been driven by the oil and gas pipeline activity. That activity has paused for the time being,” says Richard Levings, product manager for American Augers.
Levings goes on to describe the current maxi rig market as “interesting” and not completely dead. “We’re moving rigs and fluid systems, just not at the levels that we did three years ago,” he says.
Like Levings, Andy Bremmer, external sales manager for pipelines at Vermeer, notes the downturn in the maxi rig work is due to a slowdown in oil and gas pipeline work. However, he sees steady work for those running the smaller side of the maxi rig range.
“The market for larger maxi rigs in North America is down. Mostly because this class of drills is used for more traditional oil and gas pipeline construction, and that market has been down since 2020. We expect maxi rig utilization will continue to diversify in the future, which should bring more stability to the market,” he says. “It [the downturn] has hurt larger maxi rig sales — 500,000 lbs and above — but we’ve also seen contractors, who traditionally only do oil and gas pipeline work, expand into other underground infrastructure installation projects.”
While companies like Vermeer and American Augers feel the effects of the downturn, their larger overall product ranges help them weather the downturns better than smaller companies like Tulsa Rig Iron. Tulsa Rig Iron, a staple in the HDD market for the last 35 years, is known for its mud cleaning systems and triplex mud pumps. This equipment, while used on smaller HDD projects, is really focused on the larger maxi rig work.
“We have some smaller units for the smaller rigs, but a large chunk of our business is toward the maxi size and that’s where we’ve traditionally done well throughout the years. The HDD part of [oil and gas] pipeline installation is a niche part of the overall project – when you look at the scale of a pipeline installation,” says Terry Flynn, vice president of sales and marketing at Tulsa Rig Iron. “When you take into consideration that our core business is the maxi side of HDD, when the big-inch pipeline work is down, we slow down. Unfortunately, all indicators I see are that we’ll continue living in the downturn for the foreseeable future.”
Wisconsin-based Century Products is a manufacturer and custom designer of downhole tooling for the HDD market. The company serves clients globally, but the core of its business is with some of North America’s major HDD contractors.
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Century Products president Todd Bielawa notes that current policies in the United States have slowed the maxi rig work since 2020, but things are starting to shift.
Where’s the Work?
“Without a doubt, the current political stance from our government has had a significant impact on the maxi rig market. It is clear to see that large pipeline work has slowed since this administration took office. Not only has business slowed, but prices for products have increased tremendously,” he says. “Having said that, the future still looks good, especially for natural gas. Regardless of the current rhetoric to go green, natural gas will be the fuel that powers the majority of energy for the foreseeable future. Regarding the tooling side, we are seeing a small uptick in the large market, it certainly won’t be overwhelming, but the second half of the year should be better than the first.”
Where is this uptick coming from? The panel notes several factors. Contractors shifting their rigs to other sectors, more pipeline work coming in Canada and a thirst outside of North America for new energy sources, in part due to the war between Russia and Ukraine.
With a focus mostly on North America, Flynn says that he’s hearing from customers who work in Canada that the market is starting to come back. “Canada was down way before the U.S., so them coming out of it a little before us makes sense. But it’s still not anything to write home about. It’s a glimmer of hope, but we’re not going to hang our hat on it by any means,” he says.
With less oil and gas work, it’s imperative that contractors look to other underground infrastructure sectors to keep their HDD rigs moving. Levings recalls the early 2000s when the HDD industry was driven largely by fiber installs. As that market dropped off, HDD really began to move into other sectors and grow as an industry. He sees that happening again on the maxi-rig side as other underground infrastructure needs to be put in place.
“In the 100,000-lb class, demand is steady with opportunities in gas distribution, water/sewer markets and underground electrical transmission lines (hardening),” says Bremmer. “For some of this type of work, contractors may be using larger rigs depending on ground conditions, final ream diameter and the overall length of the bore.”
Bemmer adds, “I think everyone believes there will be opportunities for smaller classes of maxi rigs in electrical undergrounding/hardening efforts as well as renewable energy-related projects. But it’s going to take a bit of time before there is the volume of work we once saw in the oil and gas pipeline market.”
Bielawa sees similar things, but he is also seeing growth outside of North America —something that Bemmer, Levings and Flynn also concur with.
“There has been an increase in South American markets — Mexico, Columbia and Brazil to name a few. These countries along with Australia and Italy are investing in new gas pipeline projects,” Bielawa says.
Levings points directly at the conflict in Eastern Europe as the leading contributor to an uptick in pipeline construction now and in the future.
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“Let’s not say that war has not had an impact across the globe in terms of where sources of energy are derived from, geopolitical tensions have impacted where people get their energy source. For example, people who once were comfortable with Russia as their energy source are no longer comfortable and they are building infrastructure to receive energy from other sources,” he says. “Globally, the oil and gas and pipeline work have woken up. The retraction and stagnation in that market is really only in the United States. Outside of that, people are hungry for energy and they’re finding ways to get it.”
Even in Europe, where many countries are committing themselves to renewable energy sources going forward, maxi rig work is required.
“There is a push toward renewable energy, which also requires underground infrastructure to support electrical transmission and distribution,” Bremmer says. “The European market for HDDs in the 100,000- to 200,000-lb class is very strong right now, and we expect that to continue.”
Because maxi rig work is a niche portion of the HDD industry, and sales have slowed, supply chain issues have impacted the sector, but not nearly as hard as others.
“As we blow through some of this stock, we are seeing some supply chain issues, but not at the same magnitude that others are. At the outset of the pandemic, we never stopped working, we stayed full steam ahead. Because we knew if we did that when the industry picked up, we’d lose sales due to lack of availability,” Flynn says. “My hope is that business starts coming back and we start going through the inventory we have built up and that the supply chain issues will be alleviated by then.
From the rig manufacturer side, Levings and Bemmer note that their companies have not slowed in terms of being able to get their customers the equipment and parts they need.
Maxi Rigs in the Future
So, what does the future hold for the maxi-rig sector whose boom is predicated by oil and gas pipeline work?
From Flynn’s perspective, at least in North America, the future is ultimately in the hands of legislators. “Until we can get a fossil fuel-friendly administration, we’ll continue to battle continual downturns. We cannot continue to suppress domestic oil and gas production, while begging for other countries to increase production to meet demand. That makes no sense whatsoever,” he says. However, things might be looking up as Flynn looks across the ocean at Europe.
“On a brighter note, recently the EU Parliament approved a new policy that will classify investments in natural gas and nuclear power-related projects as ‘green’ under the EU financial regulatory system, which will hopefully impact the U.S. policies. It’s a much-needed step in the right direction for our industry,” Flynn says.
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Bremmer points to other sectors beyond oil and gas as growth opportunities. “Electrical transmission line undergrounding and hardening represents a tremendous opportunity for maxi rig drill owners. Several utility companies across the United States have announced plans for undergrounding thousands of miles of transmission lines, which could keep contractors busy for the better part of a decade,” he says. “The renewable energy market is another area of growth. Emerging technology related to the capture of energy from wind and tidal waves is being tested off the coastlines in several states. The construction of these projects involves drilling under the ocean floor from the shore, and they can be very challenging and require large drills to complete the work.”
Bielawa knows that maxi rig operators are a resilient lot, and the market will come back as people realize the importance of pipelines. “Well-run businesses will still survive and prosper over the next decade,” he says. “The pipeline market is resilient and still the most cost-efficient and environmentally safe way to move large amounts of product.”
Levings reiterates that the global maxi rig market is strong and growing and that it’s not all doom and gloom in North America.
“The population is predicted to be 10 billion by 2050, which means there will be a great number of developing countries that will need new energy supplies, “Levings says. As a result, the need for underground construction and energy installation projects will increase positively impacting the global maxi-rig market.
He adds, “There are people dreaming about owning new pipeline equipment again, and the used market has picked up. That all gives the indication that things are beginning to happen again.”
The hope — by all on the panel and others working in the maxi rig HDD sector — is that these “things” begin to happen sooner than later.
Mike Kezdi is the managing editor of Trenchless Technology.
