American Oil and Gas Reporter - June 2015 - 74

have cost only $14,000 to rent, but because
diesel is more expensive than natural
gas, acquiring fuel would bring the total
cost back to $32,500. Since diesel works
better in remote locations, we figured it
would be the right choice. Unfortunately,
Endurance experienced generator problems
that could push the total monthly cost of
powering ESPs to $40,000.
On paper, gas lift offered much better
economics, for the requisite gas-powered
compressor would cost only $4,000 to
rent and $4,000 to fuel for a total monthly
cost of $8,000. That made selecting gas
lift an easy choice.
In the field, the costs associated with
gas lift exceeded $8,000 because of
compressor downtime. But even after
taking that into account, switching to
gas lift and eliminating the rental and
fuel costs associated with powering
ESPs cut our early LOE in half, dramatically improving margins.
Today, because we now have access
to city power, we are able to use ESPs in
the same area. Even without needing a
generator, ESP wells have LOEs around
$19,000, twice those of gas-lifted wells.
However, the ESP's ability to lift more
oil and operate at lower bottom-hole pressures makes up for the difference in the

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right application. This assumes the gasto-liquid ratio is low enough to allow the
ESPs to run efficiently.
The right application is key. In deeper
wells, those with high gas-to-oil ratios,
or those with strong bottom-hole pressures,
gas lift can make more money even when
city power becomes available. As shown
in Table 1, our experience suggests ESPs
are best reserved for wells with low
GORs.
Of course, it is also vital to maximize
equipment run times. In the Bone Spring
area, the number one cause of downtime
for ESPs is paraffin. Hot oil treatments
have proven ineffective at combating
paraffin, so we are experimenting with
microbial treatments. So far, they seem
to be working. In the first three weeks
after the initial treatment, production on
the Telecaster No. 4H well went from
100 to 140 bbl/d. We continue to look at
other chemical methods as well.

Infrastructure's Importance
The dramatic shift in artificial lift economics once city power becomes available
demonstrates a broader point: To minimize
capital expenditures, wells must be planned
with infrastructure in mind. For example,
Endurance tries to schedule drilling so
city power is already available. This requires us to know the utilities and keep
up with their plans, but when it is possible,
it can be a tremendous economic driver.

In general, Endurance builds tank batteries, installs production equipment, and
connects the pad to pipelines before completing a well. That way, when we turn a
well on, we do not need to worry about
setting up temporary tanks, flaring natural
gas, or transporting oil by truck. In
addition to protecting the environment,
this gives us more gas to sell and increases
our margins by reducing transportation
costs.
Reducing infrastructure costs is one
of the best tools for minimizing capital
expenditure. While more efficient construction and operations make a difference,
the biggest lever operators can apply to
infrastructure costs is concentrating assets.
A $1 million tank battery would unduly
burden one well, but it is far easier to
justify as a $250,000 cost spread across
four wells.
Concentrating infrastructure also allows
operators to work more efficiently. When
an operator drills three or four wells in a
row, the last one might cost 10-15 percent
less because the rig crews have gotten
acclimated to the area. Highly-concentrated
assets also are easier for pumpers to visit,
reducing long-term operating costs.
Building production facilities, obtaining
key equipment, and arranging transportation for oil, natural gas and water before
drilling significantly reduces LOEs. While
LOEs have less impact on RORs than
EURs or capital expenditures, learning

TABLE 1
Factors to Consider When Selecting Artificial Lift Methods
Depth Limitations
Volume Limitations
GLR
LOE (on city power)

ESP

Gas Lift

Rod Pump

12,000 feet

Not an issue

10,500 feet

500-2,500 bbl/d

500-2,000+ bbl/d

350-400 bbl/d

1,250 Mcf/b

1,500+ Mcf/b

1,250 Mcf/b

$19,000/month

$8,000/month

$1,500/month

Bottom-hole Pressure

<1,000 psi

1,000+ psi

500-1,000 psi

Primary Failure Mode

Paraffin

Compressor
run time

Barrel wear when running
tail pipe into curve

Wheels are
Field-replaceable

TABLE 2

Call
800-537-9327
or Your Oilfield
Supply Store
www.rodguides.com


1902 N. Yellowood Ave.
Broken Arrow, Oklahoma 74012 U.S.A.


		
	

74 THE AMERICAN OIL & GAS REPORTER

Endurance's Lease Operating Expense Model
Month 1
Labor

Month 2

Months 3-23

Month 24+

$25,000

$11,500

$4,100

$3,000

$0

$500

$1,500

$750

$10,000

$51,000

$5,000

$500

$1,000

$4,000

$4,000

$1,250

Water disposal

$42,000

$15,000

$5,000

$3,000

Total Monthy Avg

$78,000

$82,000

$19,600

$8,500

Installation

ESP/Gas Lift

Rod Pump

Chemicals
Rentals
Power

Well Stage

Flowback
American Oil and Gas Reporter - June 2015

Table of Contents for the Digital Edition of American Oil and Gas Reporter - June 2015
