JANUARY 2010 The Better Business Publication Serving the Exploration / Drilling / Production Industry

Digital Oil Field Technology Offers Valuable New Options For Optimizing Production
By Maris J.B. Mikulis
HOUSTONDid you make New Years resolutions for your business this year? Perhaps those resolutions include working smarter, carving out unnecessary costs, staying clear of unrealistic schemes, making that smart investment that will differentiate your company and accelerate growth, or maybe renewing that passion, that drive, that exhilarating spark that used to permeate throughout the company? If this years list does not differ significantly from last years resolutions, operators can take heart in knowing it is true that persistence certainly counts in the oil and gas business. However, one tongue-in-cheek definition of insanity involves the expectation of different results while continuing to do the same things. Digital oil field technology offers an option worth considering, or reconsidering, as a means to move toward corporate business goals in 2010. Digital oil field programs have become mature enough to be modularized. It no longer requires a soup-to-nuts, do-it-yourself effort to see dramatic results. Whether it is cost containment that keeps an oil and gas executive up at night, or optimization and growth, independent operators now have fresh weapons in their arsenal.

Reproduced for Baker Hughes with permission from The American Oil &Gas Reporter

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While there are certainly several common production operations challenges, the good news is that various enlightened options also exist for addressing the promise to make improvements throughout the new year. Increasing asset awareness may be one approach to delivering the changes and improvements needed to achieve improved production goals. Remote sensing is available for all facets of production operation, providing pressure, temperature, flow and other data. There are a number of choices for network transmission of the data, and service companies and suppliers equip wells and fields accordingly. Acquired assets may already be wired, and proven engineering, production modeling and field management tools from companies such as Petroleum Experts and others consistently help to deliver practical understanding from the complexity. The biggest hurdles are no longer field infrastructure or analysis tools. For the independent, they are generally a distraction because of office information technology infrastructure and confidence in measurable benefits. The focus has moved from capability, which has been demonstrated, to attitude and judgment. The Last Mile The notorious last mile of connectivity may not be some remote field site; it may be the office suite. For many independents, staying lean, mean and focused relegates IT efforts to the category of necessary evil, overhead cost burden and nonproductive time. When IT lite becomes the operators strategic position, infrastructure at the office is constrained. While well equipped with staff experts to analyze and use the data, the provisioning of software, networks and data can remain problematic for the independent operator. The underlying network management, security, data storage, software portfolio and training are perceived as representing a significant investment of effort and money. These perceptions may have been well founded at one time, but rethinking those perceptions may be in order during 2010. To bring corporate IT decisions into a little more personal perspective, consider an oil and gas executive trying to decide whether to perform the lawn care at his home, or alternatively, rely on a company specializing in yard maintenance to perform that task for him. Would it be cheaper from him to do it himself? On a direct expense level, the cost of a mower might definitely be less. However, factoring in the full cost of lawn maintenance beyond the cost of a mower by adding the value of his time to learn the tricks of the trade and perform the work, shifts the balance. Could he do the work as reliably and fast as the lawn crew? That is doubtful. Is lawn care optional? Not really. So, he negotiates the best price he can for the service, judges the expense as worthwhile, and subsequently perceives delivered value. A similar approach is increasingly being implemented in integrating business IT capabilities. Contracting for shared IT services or hosted services gains expertise and value, in many cases. IT centers specifically established to serve the needs of independents enable operators to focus their costs on the personalized IT capability they need. A broad range of available services allows for flexible access to software tools and data handling on a temporary or periodic basis, as needed. Benefits also are gained from the improved quality and level of service that comes from a fully-equipped IT operation that enjoys attendant discounts and priorities that come with volume operations. Do independents pay for this? Yes. They judge the investment worthwhile to achieve their business objectives to carefully manage costs and deliver reliable production levels. Do they pay as much as they would if the same, smaller-scale service was in-house? No, particularly when all the hidden costs are exposed. Digital Oil Field Of The Future Just what is the digital oil field? Circa 2000, Cambridge Energy Research Associates christened the digital oil field of the future (DOFF) and defined it as entailing total asset awareness, right-time analysis and decision making, and timely execution. Others have characterized it similarly, as technology and workflow solutions connecting geographically dis-

Digital oil field technology consists of components and workflow solutions that connect geographically distributed experts to optimize oil field activities in process-consistent time to increased reservoir recovery and production rates, optimize well performance, reduce downtime, and lower operating costs.

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New tank-level monitoring and control systems have been introduced to facilitate condition-based chemical injection processes and enable the monitoring and efficient control of injection systems. Treatment levels can be kept synchronized with dynamic producing conditions, such as adjustments in

production rates, pump performance, power outages and chemical tank levels. Shown here is a solar-powered injection unit at left with an automated chemical injection software screen display at right.

tributed experts to optimize oil field activities in process-consistent time. The opportunities that DOFF enables were summarized by CERA as: Increased reservoir recovery; Increased production rates; Better well performance; Reduced downtime; and Lower operating costs. Motivated by the promise of DOFF, improvements in the way the upstream works escalated into transformation mode. Early adopters, such as BP, Chevron, Shell and Statoil, consistently identified a similar set of innovations critical to success. New levels of systems and organizational integration would be required to enable the business to interact in new ways. In the cross hairs was the friction associated with information sharing across all facets of business. This spotlighted the industrys enormous gaps in foundational IT infrastructure and integration to deliver the digits of the digital oil field. Version one implementations of DOFF were by necessity, then expansion, emphasizing the construction of strategic foundational data-moving elements that could then be reused. Today, DOFF stands on the shoulders of those leaders and others persistent and massive investments in technology, testing and organizational transforma-

tion. A community of experienced practitioners exists both within the operating companies and among the service providers that also invested significantly. The myriad benefits of DOFF in upstream decision making (the original objective) are well documented now and measurable on the bottom line. Among the good news for the independent keen to pursue DOFF-type gains is that this community of capable service providers is available. A do-it-yourself approach verges on being counterproductive, since these suppliers bring with them their hard-won experience in what works well and what does not. Also, with expanded IT infrastructure making oil field digits more easily accessible, todays DOFF projects are often much more focused than previous ones. That is, the projects target a specific oil field issue starving for better, timelier decision making. Questions have shifted from How do I get the data from those field devices into my software applications? to How can my chemical treatment program be changed to control costs while achieving even greater improvements in flow assurance? and How could I get more value for my spending on artificial lift in this field? These questions and others like them resonate loud and clear with independent operators.

Flow Assurance The formations todays independent producers are working are more and more challenging to operate. Increasing water production also increases tendencies for corrosion and scale. Asphaltenes, hydrate development and many other geochemical anomalies conspire to choke hard-won production. Chemical treatment has become widely practiced to counter these difficulties and maintain flow levels. Therefore, applying chemicals is often imperative, and the costs of chemicals definitely impact the economic viability of the field. In which situations do DOFF practices apply to chemical injection? Traditional chemical injection devices are static and commonly result in chemical overuse or underuse, either of which undermine the operators flow assurance objectives. Producing conditions are dynamic, so delivery systems must be as well. Today, tank-level monitoring and control systems have been introduced to facilitate condition-based chemical injection processes. These innovative systems enable the monitoring and efficient control of injection systems. With this new level of insight, the treatment levels can be kept synchronized with dynamic producing conditions, such as adjustments in production rates, pump performance, power outages and chemical tank levels.

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The following example highlights how tank-level monitoring and conditionbased injection bring value. During 2009, an operator reprioritized the need to maximize production and protect against production system upsets in an offshore Gulf of Mexico asset. An effective chemical treatment program was designed and deployed. To help ensure uninterrupted demulsifier application and avoid facility shut in because of wet oil, the operator teamed with its supplier to install a unique DOFF-style remote tank level inventory system to continuously monitor and report on system status. Eventually the tank level system detected a low usage condition in the demulsifier injection operation during the overnight hours and immediately initiated the alerting process. The service provider quickly contacted the offshore operator to notify it of the issue. The operator mobilized, and onboard staff confirmed there was a problem with the demulsifier injection pump. The problem had eluded the platform personnel despite the fact that the demulsifier injection pump was tied to the supervisory control and data acquisition system, and benefited from around-the-clock site presence seven days a week. While a SCADA system may be part of a DOFF pursuit, this example clarifies that it is not a substitute for one. The pump failure was promptly corrected, demulsifier injection restored, and production continued without incident or upset. The operator clearly benefited from the cooperative and integrated service delivered by its supplier. Without the tank-level system and its DOFF monitoring services, it is unknown when the off-line situation might have been noticed. The operator speculated that had the situation run to failure, the cost of downtime and startup would have run to $1.2 million. By preventing a wet oil condition, and most probably, a facility shut in, the operator lost no production as a result of this incident. Expenses related to system upset and system restart also were avoided. The values of the DOFF scheme are many, but include: More reliable production levels because of reduced downtime; Improved management of chemical use and costs; Decreased threat to other costly elements of the completion, such as pumps; More timely and accurate reporting, including regulatory obligations; and Decreased health, safety and environmental exposure resulting from unexpected developments such as leaks, which are swiftly identified through realtime monitoring and surveillance. Artificial Lift Chemical treatment programs often are applied in conjunction with artificial lift systems that provide another vital route to production improvement. Today, remote artificial lift monitoring and automation services give operators the information and insight necessary to optimize production and extend equipment run life. A full range of proven equipment and services for data collection, data communication, Web-based monitoring, and data analysis are commonly available in the market. Equipped for digital oil field pursuits, their performance, reliability and bottom-line impact are significantly enhanced. Downhole sensors measure well parameters and provide critical data to enhance electrical submersible pump system efficiency and reliability. These sensors can cover a broad range of needs from basic downhole measurement to more sophisticated data for production optimization. Data distribution, retrieval, and analysis capabilities seamlessly link downhole data to a desktop, spanning the independent operators last mile. Also, specialized software modules now can provide ESP operators realtime, constant flow measurements at a fraction of the cost of traditional flow monitoring devices. Flow readings help diagnose well or ESP problems and accurately track reservoir performance. Again, the question at hand is not whether DOFF-style artificial lift programs can be reliably implemented. The question is whether such a program is

Remote artificial lift monitoring and automation services give operators the information and insight necessary to optimize production and extend equipment run life. Specialized software modules provide ESP

operators real-time, constant flow measurements at a fraction of the cost of traditional flow monitoring devices. Flow readings help diagnose well or ESP problems and accurately track reservoir performance.

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suitable for application by independent producers. As real-world examples from the field suggest, the answer is yes, and 2010 is the year to do it. For instance, for two years a California independent had been experiencing approximately three hours of ESP system downtime daily because of gas locking. The deep, highly deviated well had significant gas production, but the natural gas along with the complex well bore formed foam on top of the fluid, masking the fluid level. By investing in sensors on the ESP, accurate measurements were provided (fluid levels and temperatures, as well as pressure and motor winding temperatures). Intake pressure readings from the instrument now give accurate fluid readings and eliminate the gas locking. By eliminating three hours of daily downtime, production increased by 15 barrels of oil a day, improving the bottom line by approximately $164,000 annually at $30 a barrel. In another instance on a carbon dioxide flood program, DOFF-style ESP remote monitoring by a service provider exposed a severe cycling situation. The experts recommendation reduced the ESPs cycling and increased daily oil production by 25 barrels. Finally, on a water-alternating-gas (WAG) field program, DOFF-style ESP remote monitoring by a service provider allowed service techs to apply management by exception practices across 130 wells to better prioritize work and respond to critical situations more quickly. In this case, the operators techs were notified of undesirable operating conditions prior to failure or shutdown. Among the results documented were nine immediate failures prevented over two months. With each failure costing approximately $80,000, the operator saw a direct gain of $720,000. This gain was compounded by the increased uptime and daily production delivered. From these examples, decisional oil field efforts can clearly be scaled for the needs of an independent operator. Moreover, although an all-encompassing program is not required, powerful results can be obtained when a couple of DOFF projects are blended. For example, since chemical treatment programs and artificial lift programs often operate in tandem, operators may consider combining the monitoring and surveillance programs of both to better optimize well and field operations. Chemical treatment can affect pump life; pumping dynamics dictate the need for chemicals. Starting small and targeted with DOFF is absolutely realistic now. What was previously too complex to coordinate is now easily within reach. To get started, a trial phase may be useful to identify which elements work well and which are lower priority. r

MARIS J.B. MIKULIS

Gas locking in a deep, highly deviated well with significant gas production was causing an average of three hours of ESP system downtime a day. By investing in sensors on the ESP to acquire accurate fluid level, temperature and pressure measurements, the three hours of daily downtime were eliminated and production increased by 15 barrels of oil a day.

Maris J.B. Mikulis joined Baker Hughes in September 2008 in the newly created position of director of production decision services within the companys intelligent production systems group. She brings more than 25 years of experience in the oil and gas industry as well as the technology sector. Mikulis is responsible for developing a portfolio of services that expands Baker Hughes capabilities for improved production optimization and reservoir management. She also serves as an adjunct professor at Jones Graduate School of Management at Rice University. Prior to joining Baker Hughes, Mikulis was Microsofts worldwide oil and gas industry manager. She also has held management positions at companies such as Petroleum GeoServices and Energistics/POSC. Mikulis began her energy career with The Superior Oil Company. She holds a bachelors in geology and mathematics from Tufts University.