INNOVATIVE SOLUTIONS FOR

MARGINAL FACILITIESBrady Parmenter

Facilities Engineering Intern

Midland Basin (Central)

Midland ClayDesta Office

Saturday, August 22, 2015

• Bio

– From Glennallen, Alaska

• Education

– University of Tulsa

– Mechanical Engineering

– Expected Graduation May 2017

• Prior Experience

– Geothermal drill-hand, Goldsby Oklahoma

– Maintenance Tech, Kuparuk Alaska

2

Introduction

• Project Scope

• Trial Site

• Possible options

• Economic Analysis

• Universal Applications

• Summary & Future Work

3

Outline

• Hundreds of low producing tank batteries in the Permian Basin

• $500,000 replacing pressure vessels in Midland Basin in two years

• Much of operating equipment has passed its designed life

• What options are available when the separator fails?

• Compare these options

– Technically

– Environmentally

– Economically

• Under what criteria should each option be used?

• Design a universal tool using the results of this study

4

Project Scope

• Cummins Lease

– Cummins M tank battery

• Two wells

• Facility Production Rates

– 4 BOPD

– 52 Mcf/D Gas

• Equipment

– (1) Vertical Separator

– (1) Vertical Heater Treater not in service

– (2) 500 bbl Steel Oil Tanks

– (1) 300 bbl Fiberglass Water Tank

5

Trial Site

• Vertical separator has exceeded its design life

– Identification has rusted away

– Operating pressure of 20 psig

6

Vertical Separator

• (2) 500 bbl Steel Oil tanks

• (1) 300 bbl Fiberglass Water tank

7

Tanks

Options bypassing separator

1. Produce to tanks and vent

2. Produce to tanks + VRU

3. Produce directly to compressor unit

Options Using Separators

4. Replace Separator

5. Compressor unit with a separator

8

What to Do When the Separator Fails

9

And This Happened An Hour Ago

• Reduction of wellhead surface pressure (Casing Pressure)

• Using differential pressures, can estimate % increase in production

Theoretical Site

• 15 BOPD, 30 mcf/D Gas

• Surface pressure of 50 psig

• Pump intake pressure of 500 psig

• Can drop surface pressure from 50 psig to 20 psig

• Potential increase of 6.7%

• About $20,000 more per year!

10

Potential Production Increase

𝑄𝑖

𝑃−𝑃𝑖=

𝑄𝑓

𝑃−𝑃𝑓

• Pro’s

– Inexpensive to keep battery producing oil

• $13M total cost

– Easy to pipe up

– Zero added maintenance

– Potential production increase

• Con’s

– Lose gas sales

– Environmental/Safety concerns

• Site by site basis especially for this option

11

1. Produce to Tanks + Vent

• Pro’s

– Under current EPA (QuadO)

requirements

– Maintain gas sales

– Possibility of increased production

• Con’s

– High initial capital

• $40M for just the unit

– More OPEX

– May need to run electrical lines

– Need good tanks on site

12

2. Produce to Tanks + VRU

• Pro’s

– Very easy to pipe up

– Possible production increase

– Equipped with all valves needed

– Good for handling low fluid flow rates

• Con’s

– Only handle about 30 BFD

– Need electricity on pad

– If unit goes down, wells need shut in

– Can’t handle much H2S

– Rental or high initial capital

• Rental $1.7M per month

• Purchase $38M

13

3. Produce Directly to Compressor Unit

• Pro’s

– Keep gas sales

– Small separators are inexpensive

• $4M-$20M

• Con’s

– No increase in production

– Holding backpressure on wells

– Valve maintenance

14

4. Replace Separator

• Pro’s

– Potential production increase

– More protection from down time

– Can handle much greater than 30 BFD

– Universal application to wide range of sites

• Con’s

– Can’t handle much H2S

– May need to run electrical line

15

5. Replace Separator + Compressor Unit

Compare Options

• Initial capital

• Return on investment

– Income per year over the initial capital expressed as a percentage

• Payback period

– How fast the cost of the initial capital can be recovered

• Net Present Value (15%)

– The net value of the project after a period of time expressed with the present

value of money

*Use on Cummins M site, assuming zero production when separator fails

16

Economic Analysis

17

Production Rates

41%

59%

Yearly Revenue

Gas

Oil

Cummins M

Production Rates for Facility

Maintenance CapitalCost Estimate8/22/2015

Quantity/ Year Price Units Total Yearly Sales

Gas 52 Mcf/d 18980 $3.00 $/Mcf $56,940

Oil 4 BOPD 1460 $55.00 $/bbl $80,300

Gas %sales = 41.49%of total sales

SUM = $137,240

Oil %sales = 58.51%

Production Inrease Due to Decreased Surface Pressure =

Production Increase Sales Increase per Year

1.10% $1,510

18

Initial Total Capital

$14M

$115M

$49M

$22M

$66M

$0

$20

$40

$60

$80

$100

$120

$140

1.) Produce toTanks + Vent

2.) Produce toTanks + VRU

3.) Produce toCompressor Unit

4.) Replacement 5.) CompressorUnit + Separator

THO

USA

ND

S (M

)

Initial Capital

19

Return On Investment

600%

120%

260%

630%

190%

0%

100%

200%

300%

400%

500%

600%

700%

1.) Produce toTanks + Vent

2.) Produce toTanks + VRU

3.) Produce toCompressor Unit

4.) Replacement 5.) CompressorUnit + Separator

ROI Analysis

20

Payback Period

2

10

5

2

6

0

2

4

6

8

10

12

1.) Produce toTanks + Vent

2.) Produce toTanks + VRU

3.) Produce toCompressor Unit

4.) Replacement 5.) CompressorUnit + Separator

Mo

nth

s

PBP Analysis

21

Net Present Value (15%)

$170M$190M

$240M

$290M

$210M

$260M

$330M$370M

$430M

$350M$390M

$550M$580M

$660M

$550M

$0

$100

$200

$300

$400

$500

$600

$700

1.) Produce toTanks + Vent

2.) Produce toTanks + VRU

3.) Produce toCompressor Unit

4.) Replacement 5.) CompressorUnit + Separator

Tho

usa

nd

s (M

)

NPV15

3 Year 5 Year 10 Year

• Gas is equivalent to 42% of total sales

– Need to keep gas sales

• Minimal production increase at this site

– Very low surface pressure to begin with

– High PIP for these wells

• Most of initial capital is electrical

– If electricity is on pad, initial capital is drastically reduced

• VRU is not economic if site is already below QuadO emission limits

• Recommendation for this site: Replace Separator

22

Cummins M Conclusions

Environmental

•EPA (QuadO) VOC emissions• 6 tons/year

Economic

•Yearly sales increase

• Initial costs• Equipment

• Electrical

• Tank Replacements

Technical

•Gas Oil Ratio

•H2S content

•Barrels of Fluid

•Number of tanks

•Tank Condition

23

Universal Applications

• Develop universal criteria

• Create computer code to step through procedure

based on these criteria

• Flowchart gives visual step through of

procedure

• Validates computer program

• Allows double check of all options

• Determines best options based on specific inputs

24

Facility Inputs

• Find information in LOWIS

• Gives estimated sales increase

25

Well Inputs

26

Outputs

• Found options to deal with separator failures at marginal batteries

– Initial cost savings

– Potential increases in production

• Developed criteria to compare options

– Economic

– Environmental

– Technical

• Created templates to easily analyze specific sites

– Field Sheet/Inputs

– Outputs

27

Summary

• 5 sites next year that have separator/HT fail

• Previous cost of replacing averaged about $40,000

• $200,000 total spent on 5 sites

– Replacing exactly what is there now

• Using this study

– (2) need replacements

• Get small inexpensive separator instead of just replacing

• $30,000 a piece for those 2 sites

– (2) we can just produce to tanks and vent

• About $15,000 a piece and less maintenance costs

• Low pressures on site so no production increase

– (1) we can produce directly to compressor unit ($50,000 total)

• Get a 10% increase in production at this site

• Saved $60,000 and increased a site’s production by 10%

28

Example

• Apply this study to the hundreds of low producing tank

batteries in the Permian Basin

– Lead to major initial cost savings

– Increases in production

– Bring old sites under current environmental regulations

– Extend the economic feasibility of sites

29

Future Work

Mentor: Colyn Jurek

Manager: Del Oliver

Stephanie Arriola

Brandon Merrill

Walter Fults

Kyle Richter

Jennifer James

Brent Corwin

Eric Wooten

Joshua West

Corey Payne

Larry Sammons

30

Acknowledgements

Questions?

THANK YOU

• Arnold, Ken, and Maurice Stewart. "4/Two-Phase Oil and Gas Separation, 5/Three-Phase Oil an Gas Separation." Surface Production Operations. Amsterdam: Elsevier, 2008. 150-310. Print.

• El-Halwagi, Mahmoud M. "2/Overview of Process Economics." Sustainable Design Through Process Integration. Amsterdam: Elsevier, 2012. 15-62. Print.

• Huvard, Gary S., Richard M. Felder, and Ronald W. Rousseau. Elementary Principles of Chemical Processes. New York: Wiley, 2005. Print.

• OXY Petroleum Inc., Oil and Gas Exploration and Production. A Guide for Selecting Production Equipment. Tulsa: Crest Engineering, 1983. Print.

33

References

• LOW PRODUCING BATTERY TOOL.xlsm

• Procedure Flowchart.xlsx

34

Tools

35

Production vs. Pump Intake Pressure

36

Production Increase Graph

14.50

15.00

15.50

16.00

16.50

17.00

17.50

18.00

18.50

0 200 400 600 800 1000 1200

BO

PD

Pumping Pressure (psi)

New Oil Production vs. Pumping Pressure

New Oil Production

Original Oil Production

• Pro’s

– Under environmental regulations

• Con’s

– Lose gas sales

– More expensive than tiny separator

– Needs backpressure to operate

*Operationally will not work

37

Produce to Tanks + VCU