Guidelines & Recommended Practices

Selection of Artificial Lift Systems

for Deliquifying Gas Wells
Prepared by Artificial Lift R&D Council Council
Status
 Document written and edited
 Chair: Cleon Dunham, cleon@oilfieldautomation.com
 Team: Not applicable
 Comments: Not applicable

1.3 Know the Components of Your Economics

This describes the factors that must be known about the economics of gas
well production. For instance, in some cases gas well deliquification may be
highly profitable; in other cases, it may be uneconomical.
- Know the value of your products

The value of your product is a hard thing to keep up with these days,
as the market value fluctuates often. The job of keeping up with values
belongs to the Accountants and Economists of the company. The most
important thing for the artificial lift staff is to be generally aware of the
value so decisions can be made wisely. It makes no sense to spend a
lot of money to enhance gas production if the resulting increase in
income isn’t enough to payout the increase in cost.

- Royalties, taxes, overhead, and net income per MCF or M 3

It’s not enough to know the value (sales price) for gas. The income
made by the Operating Company is “net” income which is equal to
sales prices minus royalties, taxes, and overhead costs.
The Accountants should be able to provide the artificial lift staff with a
reasonable value of net income per MCF or M 3 that can be used to
justify expenses for well work.

- Know the components of your revenue – expected uplift, increased

production over time

The reason for applying artificial lift is to increase production. The goal
here is to increase both the current production rate and the ultimate
recovery by lowering the final abandonment pressure. Accountants
and Economists can try to predict prices. Only the artificial lift staff and
the Reservoir Engineers can predict increase in production (uplift) and
increase in ultimate recovery that result from the artificial lift system.
Selection of Artificial Lift Systems for Deliquifying Gas Wells Page 2

- Contract constraints – commitments to delivery volumes, BTUs,

penalties

In some situations, we are not free to produce all we can. Sometimes

there are contractual constraints. Sometimes there are commitments
to deliver specific volumes of gas or there will be penalties for non
delivery. Sometimes the BTU content of the gas must meet a minimum
value, so the amount of non-choleric caloric gases such as CO 2 must
be limited. If such constraints exist, they must be known as they may
affect the artificial lift decisions that can be justified.

- Acceleration vs. increase in reserves

If an artificial lift installation increases the gas production rate, is the

resulting increase an acceleration of the same production from the
reservoir that would be obtained anyway, or is it an increase in
reserves. This makes a big difference in the economics of the job.
Acceleration means that the well will ultimately produce the same
amount of gas, just produce it sooner. An increase in reserves means
that the total amount of gas produced by the well before abandonment
will actually be larger. In general, to obtain an increase in reserves, the
ultimate abandonment pressure must be lower. Often, if the liquid load
can be removed from a well, and if it can continue to be removed over
the life of the well, the ultimate abandonment pressure can be lowered
and the ultimate recovery will be increased.

- What ultimate bottom-hole (abandonment) pressure can be achieved

The ultimate abandonment pressure depends on a number of factors.

o What is the reservoir drive mechanism? This is a question for the
Reservoir Engineer. If it is a depletion drive reservoir, it may be
possible to reduce the pressure to a very low value. It if is a water
drive reservoir, the wells may “water out” at a substantially higher
pressure. This difference is profound and it has a profound impact
on the types of artificial lift system that makes sense for the well.
o What is the impact of any liquid blockage in the reservoir? This is a
question for the Reservoir Engineer. If liquids have been allowed to
accumulate in the reservoir, and if they can’t be fully removed, the
reservoir may not “see” the actual operating pressure at the bottom
of the well.
o Can the liquid load be removed and can it continue to be removed?
This is a question for the artificial lift staff, and the type of artificial
lift system that is used.
o What is the operating surface wellhead pressure? This is a
question for the Facilities Engineers and the artificial lift staff. Is
wellhead compression used to minimize the wellhead pressure?
Selection of Artificial Lift Systems for Deliquifying Gas Wells Page 3

o What is the operating bottom-hole pressure? This is a question for

the Production Engineer and the artificial lift staff. It depends on
the surface pressure, the depth of the well, the size of the flow path
(e.g. tubing), the flowing gradient of the gas and any liquid, etc.

- Know the components of your costs – CAPEX, OPEX, Maintenance

(repair/replace)

The most important aspect of project economics for the artificial lift staff
is the cost side – capital costs (CAPEX), operating costs (OPEX), and
maintenance costs including costs to repair and replace equipment.
The artificial lift staff can’t control the sales prices, but it can control
CAPEX, OPEX, and maintenance costs.

- Consider all components of CAPEX

Often there are many things to consider in determining the overall or

“real” cost of a project. In addition to the cost of buying the artificial lift
system, there are costs for associated components, installation,
commissioning, start-up, etc. The typical components of capital
expenses (CAPEX) for each type of artificial lift system are discussed
in Section 2.4. All of these costs must be considered in preparing the
justification and the AFE (authority for expenditure) for the project.

- Consider all components of OPEX, Maintenance Costs

The other major components of cost are the cost to operate the system
(OPEX) and the cost to maintain the system. Too often, these costs
are under estimated. This will hurt the real economics of a project and
can sour the attitude of management for this type of work in the future.
The typical components of OPEX and R&M (repair and maintenance)
costs for each type of artificial system are discussed in Section 2.4.
These costs, and how they are projected to occur over time, also must
be considered in preparing the justification for the project.

- Know the resources you need and that are available (people, services)

A final aspect is the resources you need for the project in terms of
people and services. If these are readily available, it may be easy to
determine their cost. If they are not readily available and have to be
imported from another location, it may be more difficult to estimate their
cost and they may be more expensive.
Selection of Artificial Lift Systems for Deliquifying Gas Wells Page 4

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