Q&A: Diamond Offshore Drilling swims fast to meet demand

Diamond Offshore Drilling executives say they are preparing for an era of growth, with 187 drilling rigs under construction or on order. Those rigs will require thousands of new workers over the next few years.

New workers means training. A lot of training.

So the company this year opened a nearly $10 million Offshore Technology Center with some of the world’s most advanced simulators. The goal is to train employees for Diamond and other companies looking to expand their ranks and get workers up to speed quickly.

Diamond CEO Lawrence Dickerson spoke with the Chronicle recently about the challenges of such a growing offshore industry. Edited excerpts follow.

Q: Why are so many new offshore rigs on order or under construction?

A: What drives our business is success from the customers. People aren’t going to order rigs if they aren’t going to be able to use them to find a well, and so far exploration efforts around the world in deep and ultradeep water have yielded really amazing results. Brazil, the Gulf of Mexico, West Africa and increasingly in other places, they’re just finding lots of oil. So a company that may have an ultradeep-water ship under contract is faced with a choice: Do I stop exploring and finding oil while I use this tool now to develop and produce the oil? And so rather than making an either-or choice, often they’re going out and contracting another rig.

Q: The expenses of leasing, supplying and operating an offshore rig are increasing and can cost an oil company around $1 million a day. Why are companies continuing to go offshore instead of investing in onshore shale developments? How big a challenge is shale to your business?

A: We haven’t seen the impacts of shale at this juncture. The shale oil is largely responsible for the increase in U.S. production, so maybe a million barrels a day, which is actually fairly small from a worldwide basis of marginal oil coming on. So they need everything. They need both shale oil and offshore oil.

Q: Is it becoming more of a big boys’ game to be an exploration and production company operating offshore because of the costs compared with onshore?

A: There’s a certain size you have to be, but increasingly we’ve seen companies that once stayed out of the deeper water moving into the deep water. It’s easier to raise money because the potential upside is so much greater in deep water. In recent years, a new company, Cobalt International Energy, has been finding that’s working. Anadarko Petroleum Corp. is a very substantial independent that is moving out there, and Apache Corp. has acquired some deeper water. … There’s obviously a cutoff. So some independents stick to land, but pretty much if you go offshore, with few exceptions, most of them try to head as deep as they can because of the prospects that are out there.

Q: What is your new training center going to do for your business?

A: We talk about the number of rigs, the day rates and the investment that’s required to do that, but none of that works without people, trained people. Traditionally this industry is trained on the job, but we’re just running into limitations on that. At one time, we had the bed space on some of our existing rigs to utilize people for training purposes. A lot of those beds now are full of subcontractors that are helping on the exploration, so there’s not a lot of excess space out there. And even to the degree that we are able to utilize that, we need something more. So a training center like this is a great way to evaluate people, to give them some training.