ARC has been blogging over the last few years about new products, solutions or technologies that may be able to provide operational improvements to operators and end users across process, discrete and hybrid industries. The oil & gas market, especially the upstream segment, has been of particular focus since operators and independent E&P firms have the greatest opportunity to benefit from investments in automation and solutions that can help them realize operational excellence.
The global upstream oil and gas segment has been suffering an unprecedented downturn for more than two years, which has seen CapEx reduced by over $700 billion since the summer of 2014 and the number of bankruptcies exceed well over 100 companies. Layoffs are exceeding 350,000, and a growing wave of consolidation in the upstream segment has also created an environment in which companies are being forced into embracing automation and new technologies such as artificial lift optimization (ALO) solutions in order to survive.
As more owner-operators, independent E&P firms, and related stakeholders embrace the new “lower for longer” margin-compressed environment, an increasing number are expected to resume their investment in ALO solutions as oil prices begin to slowly recover and the supply-demand equilibrium regains its balance since they realize that ALO can help them lower costs, enhance production, improve and/or enhance recovery, and ensure more efficient operations with fewer experienced personnel are a vital investment that translates into material ROI and continued competitive survival.
Recent ARC Advisory Group research indicates that investment in artificial lift optimization (ALO) can provide significant operational value and ROI. Major applications for ALO solutions covered include:
- Artificial lift
- Flow assurance
- Multiphase pumping
- Predictive maintenance
- Production optimization
- Reservoir management
- Well monitoring/control
Artificial lift is a means of overcoming bottom-hole pressure so that a well can produce at some desired flow rate, either by injecting gas into the producing fluid column to reduce its hydrostatic pressure, or by using a downhole pump to provide additional lift pressure downhole. Majority of oil and gas wells become unstable at some stage during their production lifetimes, mainly during the tail end of production, limiting average production rates and oil and gas recovery. This instability can occur for a variety of reasons including: gas or cone water breakthrough; the accumulation of water, oil or condensates in the pipeline (slugging); or increased pressures in the well. Artificial lift is a key instrument in bolstering recovery from older fields. With artificial gas lift, gas is injected into the production tubing to reduce the impact of the hydrostatic pressure where the reservoir pressures are not sufficient to force the hydrocarbons to the surface. By reducing the oil viscosity and thus allowing reservoir liquids to enter the well bore at higher flow rates, fields around the world can enjoy improved reservoir performance.
More and more suppliers are expected to provide IIoT-enabled solutions such as enhanced communications, advanced analytics, and machine learning as more operators and end user realize, and embrace, the real business value. These solutions and other remote monitoring functional enhancements will optimize the performance of the customer’s operations and help ensure lower costs, increasing production, increasing employee productivity, improved collaboration across operations groups and external ecosystems. Improved profitability is the end goal.
The emergence of IIoT and its promise of leveraging smart sensors to create smart artificial lift systems that can be monitored, measured, and controlled more efficiently, more timely, and in such a manner as to increase ROA and/or reduce costs will no doubt play a material role in the future growth in adoption of artificial lift optimization.
Artificial lift optimization (ALO) solutions are designed to empower owner-operators and independent E&P companies to lower costs per BOE, optimize production, enhance profitability and provide real-time operational visibility, agility, and flexibility. These systems can help maximize production, improve recovery rates in new wells, enhance oil recovery in more mature wells, and open up production on a broader array of well types and application locations including subsea, offshore and onshore. Depending on the production level of an individual well (or field) the financial benefit of increasing operational performance by even 2 percent to 3 percent can translate into millions of dollars per year for very large projects.
ARC strongly recommends that operators, independent E&P firms, and related stakeholders consider investing in, and/or upgrading existing, ALO solutions that can help lower cost per BOE, increase production and improve recovery rates, increase employee productivity, improve collaboration, and, most importantly, improve profitability. The investment will no doubt provide meaningful ROI and help companies to operate more cost effectively in these unprecedented times.
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About ARC Advisory Group (www.arcweb.com): Founded in 1986, ARC Advisory Group is a Boston based leading technology research and advisory firm for industry and infrastructure.
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About the Author:
Senior Analyst, ARC Advisory Group
As a senior analyst at ARC, Tim's research primarily focuses on upstream Oil & Gas automation as well as Digital Oilfield technologies.
Tim's focus areas include upstream oil and gas operational activities in support of the Digital Oilfield including multiphase flow metering, oilfield operations management systems, artificial lift optimization, leak detection systems, drilling optimization, and general field devices such as radar and ultrasonic level measurement devices, and pressure transmitters, among others.