The deployment of Artificial lift optimization (ALO) solutions designed to enhance operational efficiency and production optimization for upstream oil and gas operations is a mature technology, to say the least, with over 90 percent of wells in operation relying on some form of artificial lift to enhance (or extend) production. The market is growing at a strong pace as it continues to hold its appeal for users particularly in the form of value-add software and services that can add material ROI, increased production, enhanced oil recovery (EOR) and estimated ultimate recovery (EUR).
Artificial lift optimization (ALO) solutions typically exclude the artificial lift system hardware (i.e. pump types described above); however some ALO solutions may provide a component in the form of a controller, VSD, etc. from which the ALO software is deployed. Artificial lift optimization service related revenues that would be included as part of the scope of this report would be those revenues derived from optimization services provided for which the end user would handle internally rather than outsource to a third party.
Artificial Lift Optimization System Types
Artificial lift optimization (ALO) solutions include only the software solutions designed to optimize the performance of the artificial lift system (hardware). The solutions may also include any optimization related services, which may leverage a supplier’s software, as applicable for the main types of artificial lift systems such as electric submersible pump (ESP), rod pump, progressing cavity pump (PCP), gas lift system, plunger lift system, hydraulic submersible pump (HSP), and jet pump. An ESP assembly consists of a downhole centrifugal pump driven by a submersible electric motor, which is connected to a power source at the surface.
Rod pump works by moving fluid from a suction chamber to a discharge chamber. A rod pump consists of a surface pumping unit powered by an electric or gas prime mover, a rod string, and a positive displacement pump. Fluid is brought to the surface by the reciprocating pumping action of the surface unit attached to the rod string, which in turn, moves a traveling valve on the rod pump, loading it on the downstroke and lifting fluid to the surface on the upstroke.
PCP systems typically consist of a surface drive and a downhole progressing cavity pump with a single helical-shaped rotor that turns inside a double helical elastomer-lined stator. The stator is attached to the bottom of a production tubing string and, in most cases, the rotor is attached to a rod string suspended and rotated by the surface drive.
Gas Lift System
Gas lift involves injecting high pressure gas from the surface into the producing fluid column through one or more subsurface valves at predetermined depths. In a typical gas lift system, compressed gas is injected through gas lift mandrels and valves into the production string. The injected gas lowers the hydrostatic pressure in the production string to reestablish the required pressure differential between the reservoir and wellbore, thus causing the formation fluids to flow to the surface.
Plunger Lift System
Plunger lift is a type of gas-lift method that uses a plunger that goes up and down inside the tubing. The plunger provides an interface between the liquid phase and the lift gas, minimizing liquid fallback. The plunger has a bypass valve that opens at the top of the tubing and closes when it reaches the bottom. An automated system mounted on the wellhead controls the well on an intermittent flow regime. When the well is shut-in, a plunger is dropped down the production string. When the control system opens the well for production, the plunger and a column of fluid are carried up the tubing string. The surface receiving mechanism detects the plunger when it arrives at surface and, through the control system, prepares for the next cycle. Plunger-lift methods are used to remove water and condensate from a well, but they can handle only a limited column of liquid.
Hydraulic Pump System
Hydraulic pump systems use a power fluid – usually light oil or water – that is injected from the surface to operate a downhole pump. With a reciprocating hydraulic pump, the injected power fluid operates a down-hole fluid engine, which drives a piston to pump formation fluid and spent power fluid to the surface.
Jet Pump System
Jet pump systems are a type of hydraulic pump with no moving parts, an advantage over most lift methods. Power fluid is injected into the pump body and into a small-diameter nozzle, where it becomes a low-pressure, high velocity jet. Formation fluid mixes with the power fluid, and then passes into an expanding–diameter diffuser. This reduces the velocity of the fluid mixture, while causing its pressure to increase to a level that is sufficient to lift it to the surface.
Oil & Gas Industry Structure
The upstream oil and gas market is made up of a rather diverse group of suppliers. There are several different classes of suppliers including oilfield service providers, such as Schlumberger, Halliburton, Baker Hughes, and Weatherford; some companies are large automation suppliers and others are niche focused suppliers of artificial lift optimization solutions and related services to the upstream oil & gas segment. Some participants that are large automation suppliers in this marketplace may include providers of distributed control systems, programmable logic controllers, SCADA, industrial drives, HMI, operator workstations, valves, flowmeters, transmitters, I/O devices, sensors, production management software, and control software. Many of these suppliers maintain relationships with one another. For example, a PLC or industrial drive supplier may purchase computers, operator workstations, and/or application software from other firms to be able to complete its control system offering.
Industrial automation companies rely on a complex web of distribution channels to get their products to the end user. Depending on the type of supplier, these channels may include direct sales, distributors and/or value-added resellers, and independent representatives. Products and services are sold to OEMs, system integrators, or directly to end users. Joint marketing agreements and alliance programs are also increasingly common. In these arrangements, one supplier's salesperson may sell and support not only their own product, but also complementary products from other suppliers. For example, many control companies’ market third-party application software. Similarly, oilfield service suppliers and niche suppliers focused exclusively on upstream oil & gas rely on a network of partners, such as engineering firms, system integrators and consulting firms to reach the end user, but also employ their own direct sales force when dealing with the major owner operators, independent E&P companies, and drilling contractors, among others involved in the upstream value chain.