Reducing Operating Costs With Downhole Monitoring

Downhole Monitoring Basics: How utilizing real-time downhole data can help reduce equipment failures and minimize operational spending

This is part 2 in our series of posts where we are going back to the basics covering 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.

You can view our first post in this series ‘Reducing Capital Costs With Downhole Monitoring‘ by clicking the link below.

In this post, we will take a specific look at the ways downhole monitoring can help reduce operating costs. As we look ahead we will also cover topics such as 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!

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Operating Costs For Oil & Gas Producers

As is the case in any industry, it is critical for oil and gas producers to keep operating costs to a minimum so as to maximize their profitability. Beyond just reducing the final amount spent, it is critical to make sure that spending is efficient and goes towards maximizing value.

Operating Cost

Accounting [usually plural]


the day-to-day business expenses related to maintaining a company’s operations.

“an oil & gas producers operating costs may include the cost of production, system maintenance, personnel costs, insurance, etc…”

Due to the volatility of commodity prices, it is important that oil & gas producers optimize their operations so as to control operating costs in both the short term and long term. While producers may be able to get away with sloppy management of assets or poor operations when prices are high, a sudden dip in prices (like was experienced over the last year) can quickly turn an operation that should otherwise be profitable into something that loses money.

Having the right infrastructure and processes in place to optimize operations can have a massive impact on a company’s bottom line as we will explore below.

Reducing Operating Costs (OPEX)

Reducing operating costs is a holistic process that requires the overhauling of all the functional components of production operations. For the sake of this article we are going to look at three major areas in which downhole monitoring can help significantly reduce operating costs:


The time of your crew members is very valuable. When you consider the associated costs of site inspections and manual fluid level monitoring, our downhole gauge systems can save several thousand dollars per-well per-day. Salary costs, vehicle costs, fuel expenses, insurance expenses, etc… can all be replaced with the one time cost of one of our downhole gauge systems. The real-time data our systems provide is not only more accurate, but it can also allow for remote monitoring and control of the well. Immediate savings are significant, but since our systems are designed to last the life of the well, the long term savings, especially in fields with multiple well sites are substantial. These direct savings can easily make up for the cost of one of our systems, sometimes in only a matter of days.


Real-time data from our systems also allows for enhanced protection of downhole equipment. Having reliable pressure data to properly manage fluid level helps keep from burning out pumps, while being able to monitor spikes or anomalies in temperature or vibration data can show signs of possible damage or impending failure. While the cost of replacement equipment may vary, the cost of intervening downhole can be hundreds of thousands of dollars. Being able to better protect, and monitor the health of downhole equipment can make a massive difference to the bottom line, and help you maximize up-time.


In Fracking or SAGD applications especially, the energy and resources needed to achieve optimal production of the well is immense. The costs of these resources can also be substantial, especially for remote wells. If improperly managed it can greatly reduce the profitability of a well. With many SAGD applications for example, it is not uncommon to see massive spikes and dips in temperature due to the inability to properly regulate the level of steam injected. This can cause harm to the system as a whole, and results in inefficient use of resources and inconsistent production. The real-time data from our downhole gauge systems can eliminate this, and help to optimize resource intensive operations.

While these three categories may not be exhaustive, they do represent some of the most tangible and quantifiable benefits that come from implementing real-time downhole monitoring as it relates to reducing operating costs.

How Downhole Monitoring Helps

To put it simply, real-time downhole monitoring provides valuable data which can be leveraged to optimize operations.

As we often say “You can’t manage what you don’t measure”.

Below we will explore some of the specific ways downhole monitoring can reduce operating costs.

Optimized Well Performance

Downhole monitoring provides critical data which is used by operators to optimize artificial lift systems. While this has significant impacts on production levels and EUR we will explore those benefits in detail in a later post.

When you consider the impact of optimizing for greater efficiency and longer run-life, the added value is immense. These are some of the key benefits to well performance as a result of running real-time downhole monitoring systems:

  • Keep artificial lift system operating within design parameters for longer run life resulting in fewer workovers
  • Control drawdown to control sand production, scale production, excessive gas production (oil wells), and to prevent premature failure of the downhole pump
  • Control steam injection to limit wasted energy on SAGD applications
  • Monitor rod load, rod torque, pump intake pressure, bottom hole flowing pressure, pump discharge pressure, vibration, etc… to proactively understand what type of intervention is required
  • Prevent installing the incorrect size of artificial lift system for the wells capability
    • Too big = higher capital and operating cost
    • Too small = additional workover to install a properly sized system to match well performance
    • Prevent pump-off conditions
  • Maximize Well Online Time
  • Secondary/Tertiary flood monitoring & management

Efficient Utilization of Personnel

The costs associated with personnel are significant. When considering the high cost of employing staff, operators want to ensure they are utilized as efficiently as possible.

With real-time downhole data, crews now have access to reliable information which they can use to avoid wasting time on unnecessary tasks, and better planning of maintenance and workovers. Our people are incredibly valuable, and we want to make the most of their time and skills.

One fantastic example of this is eliminating the need for crews to drive out to site regularly to check on well conditions. Rather than waste time driving to site (and the significant vehicle, fuel, and insurance costs associated with it) to acquire a fluid level, operators can instead monitor all of this data remotely. Real-time downhole monitoring systems provide highly accurate readings up to 10 times a second which can be monitored remotely. This means that entire fields can be optimized in real-time without a single person needing to physically visit the site.

Some of the other key benefits to utilizing personnel are included below:

  • Daily task prioritization – Assigning the best resources to address specific problems
  • Not driving back and forth from site regularly (saving on insurance, fuel, vehicle maintenance, man-hours, etc…)
  • Prioritize work activities based on well netbacks or production rates
  • Overall reduction of staffing requirements with the removal of redundant monitoring tasks
  • Limiting time in the field helps mitigate safety risks and overall exposure to liability
  • Operations personnel can focus on higher priority activities and drive further efficiencies:
    • Maximizing production
    • Preventative maintenance
    • Training
  • Skilled crew members can focus time working in their area of expertise rather than redundant tasks

Protecting Downhole Equipment

In being able to both monitor and optimize artificial lift systems in real-time, operators can correct for conditions that may result in damage to the artificial lift system.

Based on the well conditions, adjustments can be made to prevent sand-off or over-torquing. You can also monitor the overall health of a system and be able to predict/prevent catastrophic failure. There are many benefits of real-time downhole monitoring as it relates to protecting downhole equipment, some of which are listed below:

  • Prevent Sand-off conditions
  • Prevent over-torquing of pump/rods
  • Maintain & monitor fluid level to keep pumps lubricated and avoid dry run failures
  • Prevent gas lock or seizing issue
  • Proactive planning for well intervention based on well performance
    • Allows for optimization of artificial lift system design as reservoir depletion impacts well performance
  • Raising alarms with real-time data to help shut down wells to prevent catastrophic failures
  • Preemptive measures by predicting scale, sand, gas, or wax issues by utilizing downhole dynamic assessment
  • Significant reduction in downtime or reservoir damage

Increased Safety

Safety is a top priority for every oil & gas operator. By utilizing real-time downhole data there are a number of ways that they can increase overall safety for their crews.

We will explore this topic in greater detail in a later post, but it’s worth noting that the greater insight into system health, the vast reduction in travel to site, and the ability to better plan maintenance and workovers will significantly limit your crews exposure to risk.

Application Results

As highlighted above, there are many tangible benefits to running a real-time downhole monitoring system. However, in an attempt to quantify them we wanted to take a look at some of the results and tie them back to dollars and cents.

To help set some context and put things into perspective, the operating expense for a 3-day workover results in approximately ~1%/year of downtime. For a 100bbls/d well at $50/Bbls this equates to a significant $15,000 (100Bbl/d x 3 days x $50/Bbls) in deferred revenue, and that’s not including the cost of workover itself!

As we look at the graphical representation below we can see that even for the most premium downhole monitoring system the reduction in operating cost needed to pay for a system in 1 year is very achievable.

Reduction In Operating Costs Required To Pay For Permanent downhole Monitoring System


As seen in the example above, to fully pay for the cost of a $50,000 downhole monitoring system within 12 months at 100Bbl/d only a $1.37/Bbl reduction is needed.

This is when only considering the reduction in operating cost. When you consider the expected savings as it relates to better utilization of personnel, equipment, and resources, this number is easily achievable. And that is just for the first 12 months!

Our downhole monitoring systems are designed to last the life of the well, and with our industry-leading reliability, the added value over the life of the well is tremendous.


As you can see by the examples above, the potential benefit of running a real-time downhole monitoring system is massive, all with a relatively small initial investment relative to the cost of developing the oilfield.

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!

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