Share on linkedin
Share on facebook
Share on email

Reducing Capital Costs With Downhole Monitoring

Downhole Monitoring Basics: How utilizing real-time downhole data can help reduce spending and maximize capital investments

In this series of posts, we are going back to the basics as we cover the high-level benefits of the real-time downhole data that downhole monitoring systems provide.

As our industry quickly transitions to data-driven operations we hope to provide a resource detailing the ways that modern technology such as real-time downhole monitoring systems can provide greater optimization and profitability.

In this post, we will take a specific look at the ways downhole monitoring can help in reducing capital costs. As we look ahead we will also cover topics such as reducing operating expense, maximizing production, and maximizing EUR. To make sure you don’t miss our next post we encourage you to follow us on LinkedIn and subscribe to our newsletter so you get notified when our next post goes live!

Subscribe To Our Newsletter

The Pursuit of Oilfield Optimization

Production optimization and reservoir management are two primary components of any E&P (exploration & production) company’s field development and deliverability strategy.

While optimization is critical for all industries, it is especially important for oil and gas producers as a poorly optimized well/field can quickly go from being profitable to losing money with the swing of a highly volatile commodity price. In order to secure the long-term viability and payoff of their investments, companies must effectively manage and optimize their assets.

When we talk about the word optimization in a broader sense, defining both the technical aspects of an oilfield and the individual well economics, the literal definition covers it aptly:

Op·ti·mi·za·tion

/ˌäptəməˈzāSHən,ˌäptəˌmīˈzāSHən/

noun

the action of making the best or most effective use of a situation or resource.

“companies interested in the optimization of the business”

Throughout the life of a well, there are many different areas where great effort is put in to achieve high levels of optimization. Companies use in-house resources and utilize both consultants and service providers to optimize key areas such as:

  • Process Management & Facility
  • Field Development- Well Planning & Surface Operations
  • Operational Planning- Forecast & Execution
  • Technical challenges specific to types of
    •  Subsurface – Geological & Petrophysical Challenges
    • Fluid Type – Physical & Chemical Properties
    • Well Type – Drilling Program & Completion Selection
    • Artificial Lift Selection
  • Etc…

However, one of the most untapped processes as it relates to optimization, is leveraging real-time downhole monitoring. Irrespective of all different variations in well/field types, or the current stage of life for the well, real-time downhole monitoring can be utilized effectively to generate increased value and truly optimize your operations.

Home-Solutions-Artificial-Lift-Pump-Jack-Icon-GEO-PSI

Artificial Lift

The right downhole data is critical to maximizing efficiency & ROI for artificial lift systems. We can provide an optimized solution based on the type of lift, and the unique characteristics of your well.

Home-Solutions-Reservoir-Surveillance-Icon-GEO-PSI

Reservoir Surveillance

When surveying a reservoir, reliable data is priceless. Our reservoir surveillance solutions will provide you with the highest resolution downhole data possible.

Home-Solutions-High-Temperature-Off-Shore-Rig-Icon-GEO-PSI

High Temperature

Accurate, real time data is critical to managing a high-temp downhole environment efficiently. At GEO PSI we have the most reliable high-temp solutions available.

Home-Solutions-Environmental-Water-Drop-Icon-GEO-PSI

Environmental

Environmental downhole monitoring is essential for ensuring protection, and avoiding costly errors. Our systems can provide an accurate and cost effective solution.

The Dollar / Barrel Equation

Every energy company spends considerable time, money, and resources on putting their FDP (Field Development Plan) together to achieve maximum reservoir optimization.

The goal from the beginning is to keep the expenditures as efficient as possible while maximizing reservoir capability. Essentially, the goal is to optimize the dollar per barrel ($/Bbl) equation.

By effectively managing capital costs, energy companies are able to reach the break-even point on their investments much easier and improve their bottom line by avoiding unnecessary capital spending.

Reducing Capital Costs (CAPEX)

The key to reducing capital costs is to spend what you need, and nothing else. Also, to make sure you are only spending the capital once!

As we dive deeper into the benefits of downhole monitoring as it relates to reducing capital costs we will be exploring how the real-time downhole data can help you optimize your field development. While we will look at it from the perspective of over-developing an oilfield, it is worth acknowledging that the opposite could be true and the real-time downhole data could help producers avoid under-developing and thus help them avoid losing out on extracting the maximum amount of resources from their field.

How Downhole Monitoring Helps

One cannot determine well spacing accurately without access to high-quality well interference and drainage data. This data comes from monitoring downhole pressure which can be used to develop accurate reservoir simulation models.

The better the reservoir pressure data, the better the reservoir models to predict reservoir performance. By deploying reliable high-quality downhole gauges you are able to gain high-quality data which provides insight into the details of your reservoir to help you develop them appropriately.

Some examples of the optimizations which can be made through high-quality data are:

  • Placing the injectors in the correct spot the first time vs. having to re-align the producer injector pairs because of poor or absent data
  • Starting with the correct well spacing vs. having them too far apart or too close together
  • Placing infill locations in the correct spot to ensure economic wells

Application Results

There are many beneficial results you can expect when deploying a real-time downhole monitoring system to many different areas of your operation. Below are just a few that you can expect to see as it related to capital costs:

  • Optimized Infill drilling locations = Reduced capital
  • Optimized injector/producer alignment = Reduced capital and increased EUR

Below is a graphical representation of the calculated well count reduction (which correlates directly to capital cost reduction) required to pay for a permanent downhole monitoring system in just one year.

Well Count Reduction For A Full Field Development To Pay For Permanent Downhole Monitoring

Well-Count-Reduction-Graph-Reducing-Capital-Costs-GEO-PSI

For a USD $50,000 monitoring system on a 100 well field development with a cost of USD $2,000,000 per well, we need a reduction of only 2.5 wells to break even on the cost of downhole monitoring systems for the entire field within only 12 months. Not only is this example very easily achievable, but after the initial 12 months, everything else is just money in the bank! And this is when only considering the single benefit of reduced capital costs, not any of the other significant benefits such as increased production and EUR, reduced workovers, etc…

Another way of looking at this is if you can re-evaluate the well spacing after analyzing the reservoir data and change from 100 meters to 125 meters in well spacing this can result in a 19% reduction in the well count of a 100 well field plan! And that is not just reducing the number of wells to save on upfront costs, this will both optimize production and maximize EUR making the development less expensive upfront, and more profitable in the long run!

In the first example, only a 2.5% reduction is needed to break even on the cost of a USD $50,000 downhole monitoring system in one year when only considering capital savings. This alone is very achievable! However, say if we were to double the cost of the well to USD $4,000,000, then the decrease in well count needed to break even on the downhole monitoring system is only 1.25%!

And as shown in the graph above, even for the most expensive systems costing around $100,000 each, only a 5% reduction in well count is needed to pay for a system in every well.

This alone would justify installing permanent real-time downhole monitoring systems in every new well to provide the pressure data to optimize well placement.

Conclusion

As you can see by the examples above, the size of the prize is too great not to try and capture it. The potential benefit of running a real-time downhole monitoring system is tremendous, all with a relatively small initial investment relative to the cost of developing the oilfield.

For a potential 100 well development with an average well cost of $4,000,000/well, a 19% reduction in well count by increasing well spacing from 100m to 125m results in $76MM potential capital savings.

Below is a high-level overview of these economic calculations including the net capital savings of implementing real-time downhole monitoring:

Net Capital Savings Calculation

Total capital savings as a result of increasing well spacing from 100m to 125m, thus reducing well count by 19%:

(100 wells x 19%) x $4,000,000/well = $76,000,000

The maximum cost of installing a permanent downhole monitoring system in every well:

(100 wells x (100-19%)) x $100,000/well = $8,100,000

Net capital savings:

$76MM – $8.1MM = $67.9MM!!

We have been fortunate to see the many benefits of real-time downhole monitoring from our clients first hand and look forward to sharing more in our upcoming posts.

If you would like to know more about how real-time data from our downhole monitoring solutions can help you save on capital costs we encourage you to contact us!

Want to be the first to know? Subscribe to our Newsletter!

Enter your email below and we will send you our latest content directly to your inbox. Be the first to read about topical discussions, and new product releases.

Leave a Reply

More-Articles-Icon-Two-Documents-Blog-News-GEO-PSI
Downhole-Cable-Cost-vs.-Quality-GEO-PSI
TEC
Nick Nazarovs

Downhole Cable: The Cost vs. Quality Conundrum

When it comes to Downhole Tubing Encapsulated Cable (TEC) do you really get what you pay for? The cost vs. quality conundrum is ever-present, does paying more really equate to better quality and increased performance? Tubing Encapsulated Cables (TEC) form an integral and critical part of any downhole monitoring solution. TEC failure most certainly delivers

Read More »
What's-Inside-The-Industries-Best-Data-Acquisition-Systems-GEO-PSI
Top Posts
Ida Moghaddam

What’s Inside The Industries Best Data Acquisition Systems?

How exceptional workmanship and intuitive design makes for the most reliable and user-friendly surface data acquisition systems in the oil & gas industry. Why Data Acquisition Systems Matter It’s no secret that one of the most critical roles in the Oil and Gas industry is played by Data Acquisition Systems. As we often say, you

Read More »
Next-Level-Predictive-Health-Monitoring-GEO-PSI
Top Posts
David Macdonald

Next Level Predictive Health Monitoring For Artificial Lift

Utilizing Enhanced Vibration monitoring and machine learning software to predict unplanned workovers and reduce downtime. Why is predictive health monitoring needed? Downhole failures in any artificial lift well is an unplanned cost that no operator wants to bear. A failure of an ESP is arguably the worst. Equipment cost is one part, but there is

Read More »