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Summary
For decades, upstream operating companies have been employing some sort of artificial lift optimization technology to increase the production of mature wells, both onshore and offshore. The technology is also being widely employed in newer, unconventional wells to help offset the steeper decline rates and maximize production over the life of an individual well.
The global upstream oil & gas segment has been suffering an unprecedented downturn for more than two years. The industry has 
seen CapEx reduced by over $700 billion since the summer of 2014 and well over 100 companies filing for bankruptcy. Layoffs exceed 350,000 people, and a growing wave of consolidation in the upstream segment has created an environment in which companies are more open to embracing new technologies. Examples include sophisticated software and service-based solutions designed to optimize their typically hardware-based artificial lift systems to survive. ARC Advisory Group recently published research on this exciting and dynamic market. Here, we highlight some of the contextual findings.
Artificial lift solutions are designed to overcome bottom-hole pressure to enable a well to produce at the desired rate. This typically involves either injecting gas into the producing fluid column to reduce its hydrostatic pressure or using a downhole pump to provide additional lift pressure downhole.
Most oil and gas wells become unstable at some stage during their production lifetimes, mainly during the tail end of production. This limits average production rates and oil and gas recovery. This instability can occur for a variety of reasons. These include gas or cone water breakthrough; the accumulation of water, oil or condensates in the pipeline (slugging); or increased pressures in the well. Artificial lift is a key instrument used to bolster recovery from older fields. With artificial gas lift, gas is injected into the production tubing to reduce the impact of the hydrostatic pressure in wells in which the reservoir pressure is no longer sufficient to force the hydrocarbons to the surface. By reducing the oil viscosity and thus allowing reservoir liquids to enter the well bore at higher flow rates, fields around the world can improve reservoir performance.
Selecting an Appropriate Artificial Lift Optimization System Requires Detailed Analysis
The majority of oil and gas wells operated throughout the world require some form of artificial lift during their lifecycle. Selecting the 
right lift technology requires detailed analysis including gas, oil and water property predictions; pressure loss from inflow to wellhead; variation in gas and oil ratio; and water cut over a time period.
Once implemented, it’s equally important to monitor and optimize the artificial lift system because improper operation generally leads to higher operating costs, ultimately requiring additional capital investment. Monitoring is generally performed using downhole and surface sensors, since these provide basic information about lift performance. However, this information is not always sufficient to determine if the well is running at the highest possible efficiency. Such calculations require a sophisticated mathematical model to capture physical and chemical processes that take place during the lifting process.
Depending on the production level of an individual well (or field), increasing performance by even 3 percent or 4 percent can translate into millions of dollars per year, or even per day for very large wells. Therefore, owner-operators, independent E&P companies, and oilfield service suppliers should view investments in artificial lift optimization (ALO) solutions in terms of meaningful ROI metrics. Industry sources indicate that the vast majority of wells, over 90 percent, are producing at rates sufficient to financially justify an investment in an artificial lift system. ARC believes that the majority of these should also be leveraging an ALO solution.
Artificial lift optimization solution suppliers employ a variety of software and services to optimize the performance of the lift systems. These include understanding well dynamics, physical pump operating conditions (temperature, oil viscosity, vibration, etc.), and performance of key components such as variable speed drives, motors, etc.
Although artificial lift systems are typically applied for mature wells, it appears that an increasing number of unconventional shale oil and shale gas wells are incorporating artificial lift at the outset of well production due to the steeper rates of decline than conventional wells. In addition, new study findings indicate that field production can be enhanced by employing different artificial lift optimization solutions during different phases of a well’s production life. New research indicates that users find that deployment of a jet pump or an electric submersible pump (ESP) system during the early and transitional phases of the well’s life, respectively, can be used in conjunction with rod pump systems deployed later in the well’s life to realize the largest estimated ultimate recovery (EUR).
New Approaches to Artificial Lift Optimization
ARC believes that an increasing number of end users will be deploying artificial lift optimization solutions that leverage the connectivity, real-time monitoring, Big Data information management, and advanced analytics capabilities of the Industrial Internet of Things (IIoT). IIoT lends itself to the geographically distributed and infrastructure-constrained nature of upstream production assets, onshore, offshore, and subsea. IIoT-enabled solutions can extend the reach of a respective artificial lift system operations that may be covering disparate and distributed projects, such as found on multi-well pad sites. In these applications, one or more operating companies can benefit by sharing operational data across the field or larger reservoir. Given the large installed base of artificial lift optimization systems in wells across the world, ARC believes that it is safe to say that these systems provide meaningful ROI.
Recommendations
The initial well planning process should consider deployment of artificial lift systems, recognizing that at some point in the well’s lifecycle it’s also likely that artificial lift optimization will have to be deployed. Lift requirements should be based on the overall reservoir exploitation strategy and will have a strong impact on the well design. While numerous factors influence the selection of an appropriate artificial lift method, it’s clear that deploying ALO solutions is critical to helping owner-operators, independent E&P players, and drilling contractors maximize their production, improve recovery rates in new wells, enhance oil recovery in more mature wells, and open up the production envelope in a broader array of well types and application locations including subsea, offshore, and onshore.
As oil and gas become more challenging and costly to bring to market and the current trend is toward dropping prices, ARC believes that owner-operators and other stakeholders cannot afford not to invest in these types of solutions.
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Keywords: Production Optimization, Artificial Lift, Predictive Maintenance, Electric Submersible Pump (ESP), Hydraulic Submersible Pump (HSP), Progressing Cavity Pump (PCP), Rod Pump, Gas Lift, Plunger Lift, ARC Advisory Group.