Reducing Lease Operating Expenses (LOE) for Oil And Gas Production

The LOE of Production

Maintenance is only a single (and very broad) aspect of a multidimensional picture when it comes to LOE. In addition to capital equipment maintenance, E&P companies must marshal the labor force to conduct maintenance and ongoing operations, dispose of saltwater byproduct, and manage chemicals used in the production process. As it stands, many if not most companies could stand to optimize at least one of these processes in order to reduce their LOE.

• Optimizing Compressors to Rescue Gas Wells
  As a well grows older, the amount of oil or gas that it produces via free flow will begin to decline significantly. Using a wellhead compressor for gas lift lowers the density of the fluids inside the well, making the extraction of oil easier and unlocking years of extra production potential.
  
  The primary challenge for operators is to ensure that the compressor generates enough production to exceed its ongoing operating costs, especially maintenance, which can become the largest expense. 
   
  One way Producers can reduce LOE is to reduce routine maintenance and inspection trips to the compressor itself by instrumenting the compressor and using sensor reading to determine whether the machine can operate safely. Doing so allows producers to remotely restart their compressors without arranging an inspection tour, dramatically decreasing planned downtime and increasing production.
   
• Environmentally Compliant Disposal
  The same frangible rocks that contain oil and natural gas also contain saltwater, which is then produced as a byproduct of drilling. On an offshore oil rig, disposing of this byproduct is usually as simple as letting it flow back into the sea. Inland oil wells such as those found in the Permian Basin will experience more complex disposal challenges.
  
  On land, saltwater is an environmental hazard that can poison local ecosystems, and its treatment requires careful consideration. The most common decision is to drill a second dry well alongside the first, pump saltwater into it, and then cap the well with non-porous rock.
  
  Coordinating the disposal of wastewater can be difficult in this manner. The material should be pumped as soon as possible, and every day that it remains aboveground represents an additional storage cost. In order to minimize LOE related to saltwater, producers should expedite disposal using the optimal combination of personnel and equipment. If an operator mismatches disposal capacity with its need to dispose of saltwater, then the operator risks paying unnecessary overhead.
  
   
• Saltwater Separation and Pipeline Maintenance via Chemical Mechanisms
  Chemical treatment is a foundational step in the oil production process. Separating crude oil into its various grades is an intense process that doesn’t start at the refinery, but rather at the well itself. Chemical additives can be used to: help separate oil from saltwater; thin out paraffin and asphalt to prevent blockages in the well and pipelines; clean emulsions on the bottom of tanks; and prevent wells from becoming shut-in. Purchasing and deploying these chemicals can represent a major component of a company’s LOE.
  
  Once again, there are several variables at play and questions one should ask when determining whether a production company is spending wisely on their chemical management program. For instance, are batch (or “truck”) treatments occurring at the correct frequency and intervals? Are the dosages of chemicals injected for continuous chemical treatments correct? Under-dosing chemicals has the potential to expose operators to expensive equipment damage or even well shut-ins that result in both lost production and costly well workovers. On the other hand, overdosing results in wasting chemicals and money.
  
  By implementing IIoT sensors within the production environment, the company could achieve an empirical understanding and adjust injection or dosage rates as necessary. In addition, producers can optimize their use of chemicals with flexible automation, allowing them to stop chemically treating shut-in wells or automatically change their use of chemicals based on fluctuating weather conditions.
  
   
• Optimizing the Labor Pool for Efficient Operations
  Labor, like maintenance, is a fairly broad aspect of a multidimensional LOE picture. A traditional oil well utilizes labor during almost every stage in the production process, but out of necessity, this is beginning to change.
  
  During the early part of the 2010s, the oil industry went through what’s known as The Great Crew Change. A huge portion of the workforce retired—taking their institutional knowledge with them—and leaving much of the remaining personnel composed of under-35s. Additionally, low oil prices have depressed hiring budgets, which means that there isn’t much new talent entering the field.
  
  Lease operating expenses surge when this newly shrunken workforce is deployed ineffectively. When equipped with mobility options and industry 4.0 applications, each crew member can cover a large area, addressing problems remotely and preemptively. Companies can always ensure that their crews are equipped to do the job they’re assigned, minimizing repeated trips, and potentially the crew's safety. In addition, they can ensure that their crews prioritize the most important tasks—instead of running down the same rote checklist every time they visit a production site.
  
  To mitigate the LOE, oil companies need a solution that does more than simply reduce maintenance costs. They need an expansive digital toolkit that helps them optimize their operational expenses over every aspect of the production process.