I have been in the oil-extraction business for a long time, and I have seen more boom/bust cycles than I care to remember. We have started another down cycle, but I have hopes that the rapid decline rate of horizontal wells will make it a short one. One thing this cycle has in common with all of the other down cycles the industry has been through is that most companies ignore the opportunities a down cycle presents.
During a boom, companies tend to focus on how much they are making, not how much they are spending. If a USD 250,000 electrical submersible pump (ESP) fails after 30 days, it is just replaced, usually before anyone knows why it failed. The new one will pay out in a few days, and no one can tolerate deferring revenue. This amount also reflects a senior engineer’s salary and benefits for a year, but this can pass notice in a boom. Meanwhile, that senior engineer who should be looking at why the ESP lasted only 30 days is doing well to find time to turn in an approval-for-expenditure form for the replacement ESP.
No one notices each instance, but it is not at all unusual for a horizontal well to see three or four artificial-lift installations the first few months of its life. No one who works in horizontal-well artificial lift can doubt that tens of millions, if not hundreds of millions, of dollars are wasted by industry in a boom.
When a bust arrives (and it will arrive), it presents an opportunity to review those failures. It presents an opportunity to update (or maybe create) failure tracking databases and maybe get in a little training or go to a couple of conferences. It presents an opportunity to see what has and has not worked and, more importantly, to document what does and what does not work so that, when the next boom arrives (and it will arrive), you are prepared with trained personnel and best practices so that maybe you will not throw away quite so much money.
Instead, what happens is that companies tend to see a zero-sum game (for this quarter). Employees sometimes are not viewed as assets. Companies do not see what their staff can save; they just see what they cost. So what happens? Corporate tells the divisions to reduce expenses by X. Local managers may see the value of their personnel and see the opportunities, but they no longer have the latitude to act accordingly. So now, when the next boom arrives, you are just as short-handed, you still do not know what does and does not work, and resources are still being squandered.
I selected these papers because they were submitted by authors who somehow found the time to use their heads to increase production or reduce failure rates with what they had. They demonstrate what engineers can accomplish if they are allowed to function as engineers instead of project managers.
Recommended Additional Reading
IPTC 18014 Stimulation Through Electrical Submersible Pumps: An Innovative Solution To Improve Production by S. Spagnolo, Eni, et al.
SPE 172285 A Case Study on Optimization of Progressing-Cavity-Pump Operations for Production Increase in an Unconsolidated Sandstone Reservoir by Akmaral Netzhanova, Sejong University, et al.
SPE 173585 Maximizing Productivity Using High-Angle Electrical-Submersible-Pump Tangents by Travis P. Gray, Range Resources Corporation
Mike Berry, SPE, Independent Artificial-Lift Consultant
01 July 2015
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