How to Start an Online Oilfield Equipment Rental Business

The advancements in oil rigging technology and access to new sites is making oil and gas extraction more economic, due to which many new players are entering into the industry. However, to expand their business operations, or simply get started, businesses are required to set up their own oil rigging infrastructures. These infrastructures can be both small and large and are inclusive of various types of oilfield equipment ranging from drilling, controlling, pumping, containment and lighting.

Apart from this diversification, setting up oil rigging operations is a complex and exhaustive process. Getting the infrastructure right from drilling a well to casing and extraction requires assistance. At such times, oil companies can rely on a trustable oilfield equipment provider.

This article attempts to outline key parameters of the industry and highlight an approach to assist entrepreneurs in launching their online oilfield equipment rental business. To properly cater the various equipment rental needs of oil companies, it is important to understand the various types of oil rigs and how online oilfield equipment rental companies conduct their operations.

Table Of Contents

• Different Types of Oilfield Equipment
• Business Model of an Online Oilfield Equipment Rental Business
• Top Players in the Online Oilfield Equipment Rental Industry
• Challenges in the Online Oilfield Equipment Rental Industry
• How to Start an Online Oilfield Equipment Rental Business
• Important Features to Look for In the Rental Business software
• Conclusion

Different Types of Oilfield Equipment

Oil rigging operations are conducted on both on-shore and off-shore sites. On-shore sites include all those operations that take place on land. Due to technological advancements and easy availability of rental equipment, oil companies now can set up a smaller infrastructure for on-shore rigging.

In contrast, off-shore oil rigging takes place on sea surface and thus is more challenging. Setting up an oil rig underwater is an intimidating task for many entrepreneurs. However, using quality equipment can assist in managing all types of rigging operations. On-shore and Off-shore oil rigging involves the following type of equipment:

On-shore Rigging

The site preparation for on-shore rigging involves the leveling up of land, creating a rectangular pit for working, digging a well for drilling purpose and a reservation pit for disposing waste such as mud and rubble. All these operations require the following oilfield rental equipment:

• Oilfield Trucks: Oilfield trucks are fuel-economic and highly convenient for transporting material. There are also special trucks available in the industry for removing liquids and sludge, these trucks are known vacuum trucks.
• Solids Control Equipment: Oil rigging operations leave behind various types of debris and sediment. To remove all such solid wastes, solids control equipment like settling tanks, vacuum degassers, desanders, desilters and decanter centrifuges are required.
• Well Control Equipment: The main purpose of well control equipment is to ensure clean and safe oil extraction. This type of equipment is primarily used for cleaning and maintaining wells and also controlling the flow of oil. Some examples of well control equipment are diverters, blowout preventers, mud gas separators, kill-lines, kill pumps, choke lines and stabbing valves. 
• Crawler Rigs: Crawler Rigs use compressed air for drilling boreholes. Implied from the name, crawler rigs are equipped with track assembly for movement. Many crawler rigs drill at a 360-degree angle, which expands their utility. Being light-duty drills, crawler rigs are only used for digging shallow holes.
• Rotary Drill Rigs: Rotary drill rigs are the most common oil rigging drills that use a sharp rotating head to drill through the earth. During operations, rotary drills accumulate heat, due to which a water well is commonly created and used for cooling purposes. Rotary drill rigs are very efficient even at drilling through hardest rocks. They can also go deep into the earth using a pipe or cable.
• DTH Drill Rigs: DTH or Down-the-hole drugs are specifically designed for vertical drilling operations. They function on three technologies, which are rotary drilling, bit loading and pneumatically controlled air compression. Due to this, DTH rigs have a very high striking power and are one of the most used rental equipment for digging deeper holes. In deeper surfaces, DTH rigs power consumption is also lower than other types of rigs.
• Top Hammer Drill Rigs: Top hammer drill rigs use a hammering mechanism to push drill rods into the ground surface. The rate of hammering is also very high, around 2000-5000 strikes per minute, making it possible to dig holes even in the hardest surfaces. For more efficiency, hammer drill rigs use a drill and blast method that speeds up drilling.

Off-shore Rigging

While the solid and waste control equipment remain the same in off-shore rigging, it is the type of rigs and the efforts to set up the complete infrastructure that make off-shore rigging more challenging. Below are some types of rigs that can be set up for off-shore rigging purposes:

• Barge Rigs: Barge rigs are used for conducting rigging operations in shallow water with a depth no greater than 20 feets. Barge rigs float over water and have the drilling mechanism underneath to reach shallow water surfaces. To conduct rigging operations with barge rigs, one needs to lower the drilling mechanism towards the surface instead of setting up an entire structure underground.
• Submersible and Semi-submersible Rigs: Submersible drills work like barge rigs but have a better in-depth drilling capacity of 3,000 feet to 10,000 feet. As the name suggests, these rigs neither rest on seafloor nor on the surface. They are half-way submerged into the water and kept in position with the help of cables and anchors attached to a floating deck. Semi-submersible rigs can even go to greater depths ranging around 30,000 – 35,000 ft.
• Floaters: Floater rigs are similar to submersible and semi-submersible rigs. However, they are not attached to the seabed nor anchored to a specific position. This makes them highly flexible for off-shore rigging. For drilling purposes, anchors can be attached to a floater 
• Drillship: Drillships are dedicatedly built ships for drilling. They are the most useful type of oil rig and can drill in depths no other type of rig can reach. Furthermore, drillships also ensure faster travel times and are much safer than other rigs. Unlike submersible rigs, drillships do not require external transportation, for this reason they can be easily navigated to remote locations. 
• Platform Rigs: These are the most formidable rigs for off-shore oil riggings. Platform rigs are heavy establishments anchored down to the seabed and can be used to drill underwater in many directions. While it is not easy to move or relocate platform rigs, they are very safe and useful for long-time oil rigging operations. With various attachments, platform rigs can be used for different depths with max reaching up to 17,000 feet.
• Compliant Towers: Compliant towers are fixed rigid structures cemented at the base of the water for oil rigging operations in depths around 3000-4000 feet. These structures are built in a way that they become flexible to withstand water pressure and strong forces of waves. Compliant towers are useful for oil rigging in near land water bodies.

Business Model of an Online Oilfield Equipment Rental Business

Understanding the complexities of different types of oil rigs and the type of equipment oil companies require for setting up the infrastructure, the need for a reliable equipment supplier is obvious. However, instead of the traditional offline rental models, there are three online oilfield equipment rental business models that entrepreneurs can follow:

Contract Based Business Model

In a contract based rental business model, the equipment rental business provides the entire oilfield rental equipment from the start till the end of the oil rigging project, which can last up to many months or years. Along with the equipment, the rental business is responsible for providing equipment operators as well. In a contract-based deal, the contract is generated for a minimum for six months and a fixed discounted cost is paid to the rental business as the rental and operations fees. 

Single Vendor Oilfield Equipment Rental Business Model

In this business model, the oilfield equipment rental business enlists all its equipment online. The oil rigging company visits the business’ official website and places orders. These orders do not require to be necessarily for the entire duration of the oil rigging project but can be for short fixed routines as well. Later, the rental period for the rented equipment can be extended.

The workflow of an online single-vendor oilfield equipment rental business is as follows:

• The oilfield equipment rental company lists all the equipment on its online storefront.
• The oil company browses the equipment and adds it to the cart with the help of an advanced booking calendar
• The oil company submits a rental security deposit and necessary ID proof and workplace address in order to place an order
• On the return of the equipment, the oilfield equipment rental company inspects the equipment for any damages and deducts an reimbursement from the company’s rental security.
• The remaining security is paid back to the oil company.

Multi Vendor Oilfield Equipment Rental Business Model

In a multi-vendor business or online marketplace business, the business does not require to own any of its inventory. Instead, different vendors sign on the platform to rent out their equipment, whereas the marketplace owner primarily earns via rental commission. Being an asset-light business, it is easy to launch a multi-vendor business instead of a single vendor storefront.

The workflow of an online multi-vendor oilfield equipment rental business is as follows:

• Multiple vendors register themselves on the marketplace platform and upload detailed equipment listings
• Oil companies browse those listings and add all required equipment to their cart with the help of an advanced booking calendar. 
• The oil company submits a rental security deposit and necessary ID proofs along with the rental fee in order to place an order
• The marketplace owner deducts his commission from the rental fee and adds the rest to the vendor’s eWallet. Meanwhile, the marketplace owner also takes care of the rental security. 
• On the return of the equipment, the vendor inspects the equipment for any damages and reports any damages to the marketplace owner.
• The marketplace owner reimburses the vendor from the oil company’s rental security and returns the rest.
• Now, once a vendor reaches a minimum threshold amount in his eWallet, for example, $100, he can transfer his earnings to his actual bank account. Note that the threshold amount is set by the marketplace owner and the $100 here is only an exemplary figure. 

Top Players in the Online Oilfield Equipment Rental Industry

The following groups are leading the online oilfield equipment rental industry. However, they face a strong competitive environment with an increasing scope for many new entrants to enter and establish their place in the industry in different regions throughout the world.

Businesses	Established In	Est. Revenue (USD)
Sunbelt Rentals	1983	$7 Billion
United Rentals	1997	$9.35 Billion
Halliburton Company	1919	$15.3 Billion
Schlumberger Limited	1926	$23.6 Billion
Weatherford International	1941	$3.6 Billion
Superior Energy Services	1991	$667 Million

As we can see in the table, the majority of top oilfield rental equipment players are based in the US. This highlights a huge scope for entrepreneurs in other countries to launch an online oilfield equipment rental store and take the first mover advantage in specific regions. 

Challenges in the Online Oilfield Equipment Rental Industry

Businesses in the online oilfield equipment rental industry also face several challenges. These challenges exist due to the need for constant upgrades in technology and involvement of heavy machinery. For oil companies renting out off-shore oil rigging equipment, it is especially important to meet the dynamic demand, which is possible with proper planning and the right business strategy. 

Equipment Customization Demands from Oil companies

Rigging equipment such as drills, trucks, excavators, waste management systems, etc. come with various types of attachments. Some companies also require temporary modification for each and every operation. Online oilfield equipment rental business can meet all customization demands with the help of rental add-on and Request for Quote (RFQ) features. While oil companies can select attachments in the rental add-ons during checkout themselves, RFQ orders require some manual attending.

Heavy Cost of Oilfield Equipment

Purchasing oilfield equipment, even heavy equipment in general, is a very costly capital investment. To meet the increasing demands for more equipment, oilfield rental equipment companies are obligated to find multiple sources of the same. However, to overcome this challenge, oilfield equipment rental businesses can adapt asset-light business models or even introduce an optimal rental pricing policy that helps them recover their investment cost and generate profit in the shortest time possible.

Need for Licensed Operators

Heavy commercial machinery requires proper licenses. Many equipment, such as heavy-duty trucks and rigs also require licensed operators. It is difficult for oil rigging companies to find licensed operators for their oilfield equipment. Thus, oilfield equipment rental businesses face the demand for operators as well. On an online oilfield equipment rental business, entrepreneurs can provide equipment operator and maintenance services as an additional add-on. 

Increasing Complex Offshore Rigging Opportunities

Offshore rigging operations are more complex and expensive than on-shore rigging operations. Oil rigging companies need special equipment, technicians and flexible partners to successfully undergo offshore operations and extract oil. However, with an increasing number of opportunities in offshore areas, the need for equipment is also getting more diverse. To overcome this problem, not only do oilfield equipment rental businesses need to upkeep their inventory but also require to stay updated with modern industry practices and technological advancements.

The Speed of Technological Advancements

Continuing from the previous point, the technological advancements in the oil and gas industry are reshaping the way oil companies carry out their operations. In the 21st century, oil companies are paying more importance to advanced IT-based infrastructure, strengthened with the help of Internet of Things (IoT). Another technology streamlining operations in the oil and gas industry is Radio Frequency Identification (RFID), with the help of which, oil companies can more efficiently perform drilling and well cleanup operations. Along with IoT and RFID, there are several other technological advancements making it easier for oil companies to operate in even the most unconventional regions and locations. To keep up with the modernity, oilfield equipment rental businesses are suggested to offer the latest technology and machines.

How to Start an Online Oilfield Equipment Rental Business

After covering all major parameters and factors governing the oilfield industry, we can map out a brief outline to help you launch your own online oilfield equipment rental store. While the initial steps of the outline focus on research and business strategy, the latter are more inclined towards the software technology for digital enablement.

Find a Market

North America, Gulf Countries, China, South East Asia are the leading regions for oil rigging operations, especially on-shore rigging. You can establish your headquarters in any of these regions and cater to the oilfield equipment rental requirements of domestic oil extraction companies. For business expansion, you can expand your business to different states of a country. However, business scaling may take its necessary time.

Select your Business Name and Domain Name

Selecting a business identity appropriate for the target market is highly recommended. The identity will include various aspects, such as the licensed business name, brand name, domain name, etc. In the modern day, digital marketing practices such as Search Engine Optimization (SEO) highly require the brand name and domain name of a business to be the same for better ranking and digital exposure. For this purpose, selecting the brand name and domain name together is a very helpful and cost-saving approach, saving investment in rebranding.

Select an Oilfield Equipment Rental software

Traditional scratch development approach is not advised today especially for the business niches for which readymade off-the-shelf rental software are available. Not only do these software save your time but are also tried and tested many times to ensure performance and accuracy. Today, there are several rental business software and ready-made software available that support the oilfield equipment rental industry. After research, you can select an oilfield equipment rental software that you find the most suitable for your requirements.

Purchase a Hosting Server

After you have selected a rental business software for your online equipment rental store, consult the software’s team for requirements. In the case of a self-hosted software, you will be required to purchase a hosting server on your own. While, self-hosted software do give entrepreneurs the freedom to select a hosting server of their choice, consulting with the software’s official team can help you find the most appropriate server and streamline software installation/implementation. 

Setup the Equipment Rental Software on the Server

Once you have purchased the hosting server, the rental software company will install the software and share complete documentation with you. With the help of the tools and features available in the software, you can set up different web pages, product listings, blogs, discount offers, payment methods, etc. To grow your online oilfield equipment rental business, you can also use various marketing tools.

Important Features to Look for in an Oilfield Rental Software

The following features are essential to run a viable oilfield equipment rental business, so make sure the rental business software you select has majority of these features:

Request-for-quote Module: Oilfield equipment requirements can be very complex and stretched for a long period of time. Between this time, or if we say rental duration, the equipment may require maintenance, servicing or replacement. While all such requirements are handled under a contract-based business model, a dedicated Request-for-quote (RFQ) module can also help online oilfield equipment rental businesses in accepting and negotiating complex rental orders along with their associated terms.

Rent Plus Sell: The demand for certain equipment in the oilfield industry is repetitive. Instead of renting such equipment again and again, your clients may prefer to purchase them. The same will be the case in operations where oil rigging operations may last over years. Instead of paying a recurring payment, clients will prefer to buy the equipment at a more economic one-time payment. Thus, to meet purchase requirements, your oilfield equipment rental platform should have the feature to rent out and sell equipment as well.

Advanced Booking Calendar: Regular business softwares and eCommerce softwares fail to facilitate rental softwares as they lack the basic functionality to accept rental dates and do invoicing for a rental order. A booking calendar is capable of doing both. Instead of going for a calendar plugin or third-party integration, we recommend selecting a software that comes with an in-built booking system.

Document Verification: Renting out expensive oilfield equipment is not easy for any entrepreneur even after having insurance. So, to ensure equipment safety and comply with statutory requirements, your oilfield equipment rental business software should also support a document verification feature. With the help of this feature, you can collect the address proofs and identify proofs of all your customers.

Rental Security Management: Along with document verification features, rental security management features will also assist you in ensuring equipment safety. With the help of these features, you can collect rental security from customers at the time of checkout and use it for various purposes, for example reimbursing any damages, deducting late return charges or collecting fines for violation of terms and conditions.

Late Return and Late Cancellations: Both late returns and late cancellations are not good for a rental business. While late cancellations result in the loss of order processing costs, the former limit the capacity of the business to fulfill the next order. Thus, to overcome this problem, your oilfield rental business software should have features to define and levy return and late cancellation charges.

Rental Agreement and eSign: In a multi-vendor oilfield equipment rental marketplace, different vendors can also have their own terms and conditions. To apply those conditions, you will require a rental agreement management feature. Complemented with an eSign feature, clients can sanction those terms and conditions directly on your online store.

Bulk Volume Discount: Oil rigging operations are very comprehensive, due to which an oil company may require various types of equipment in bulk quality. Instead of manually handling bulk volume requirements, with a volume discount feature, you can easily profile pre-defined volume discounts on a percentage or fixed-rate basis.

Conclusion

Having understood the business model and after selecting the right software, the ideal approach to begin with your oilfield equipment rental operations is to start networking with oil companies and related people in your industry. After gaining the first few customers, you can expect the business to grow. Other factors on which you can count on for business growth are a competitive pricing policy, customer satisfaction and marketing. All these will help you develop a structural base for your online oilfield equipment rental business and are bound to show results over time.