Business Case for Joining ALRDCPage 1
Artificial Lift R&D Council
Business Case for Oil and Gas Operating Companies
to Become Active in ALRDC
September 14, 2001
Updated June 13, 2008
Oil and Gas Operating Companies have asked for a “business case” to join and become active in the Artificial Lift Research and Development Council (ALRDC). Participation in ALRDC must be fully justified, in dollars and cents. The purpose of this “white paper” is to present this justification, in terms that can be translated into dollars and cents by any operating company.
The paragraphs below are based on the “Membership Benefits” that are listed for Operating Companies in the ALRDC Pamphlet or Flier. The specific benefits in the business case are based on the author’s experience in helping to administer artificial lift for Shell International Exploration Production over the past five years.
The benefits are summarized in a table at the end of this document.
Deal with one Artificial Lift R&D Organization
Any Operating Company that is interested in advancing its technology or capabilities in artificial lift has had, in the past, to deal with several different internal and/or external departments, companies, universities, JIP’s, consultants, etc. This could require a significant amount of time to explore different organizations and options, review various R&D proposals and programs, administer various contracts and agreements, attend various meetings, etc.
An objective of ALRDC is to provide one interface or focal point (or at least a fewer number of contacts) where Operating Company artificial lift staff can come to bring artificial lift R&D needs, have help with coordinating R&D proposals and programs, receive coordinated R&D status updates, etc.
Benefit: For an Operating Company that is actively trying to advance its artificial lift technology, capabilities, or understanding, this can result in a savings of from 2 – 8 staff weeks per year.
Have One Focused Program, with Clear Objectives, Milestones
Currently, there are several artificial lift R&D, documentation, and training programs that are conducted by different companies, universities, JIP’s, consultants, and others. Often the focus of each program at least partially depends on the particular interests or capabilities of the people involved in the R&D provider. Often, the “members” of the consortium have somewhat different objectives.
An objective of ALRDC is to help each Operating Company define a focused artificial lift R&D program designed to meet its particular needs, and then to help coordinate the R&D providers to produce artificial lift R&D results to meet these needs, with less overall investment of time and coordination on the part of the Operating Company staff.
Benefit: For an Operating Company that currently has to deal with more than one (internal and/or external) source of artificial lift R&D, this can result in a savings of 2 – 8 weeks per year of manpower. It can also result in obtaining better artificial lift R&D results with a lower overall R&D expenditure. For estimating purposes, one focused program could produce the same or better results with 80% or less than the total cost of a “fractured” program.
Have a Common Artificial Lift Technology Vision and Direction over Time
All Operating Companies and R&D providers experience problems with continuity of staff over time. This can result in changing understandings, differing priorities, and “flavors of the day” for artificial lift development. Yet, many artificial lift development needs are long-term.
An objective of ALRDC is to help promote and provide long-term continuity to the process of defining artificial lift development needs and trends. Often, it may be necessary and appropriate for these needs and trends to supercede the tenure of individual engineers, developers, researchers, or students. ALRDC will be in a position to help formulate and articulate a long-term vision and direction that can help keep people focused on the true long-term needs of the industry.
In addition, ALRDC will maintain and provide a world-class virtual library of artificial lift information - bibliographies, papers, reports, books, recommended practices, case histories, etc. This large, easily accessible library of information will help to make all artificial lift staff, both those who are experienced and those who are new, become better aware of existing tools, techniques, and practices, and how to apply them
Benefit: This should have several benefits. It will be easier to communicate the artificial lift development plan to the management that must fund the work. It will also result in earlier development and delivery of needed artificial lift capabilities. Rather than spending time on interesting but unneeded capabilities, development efforts can be better focused on required capabilities. This may allow the acceleration of developing new fields or enhancing the wells in existing fields where this depends on new artificial lift technology.
Reduce Duplication of Effort
Currently, because in many cases the industry-wide artificial lift R&D effort is not fully coordinated, there can be duplication of efforts, re-inventing the wheel, and important items going un-addressed. Some duplication of effort may be unavoidable, but where it is avoidable, a process to minimize this duplication will result in faster development and delivery of needed capabilities, rather than the development of often similar but competing products, where the “best choice” may not be obvious. Also, enhanced visibility of projects through a clearer industry-wide focus will work to minimize duplication of efforts that may currently be based on ignorance of other worthwhile opportunities that may be underway.
An objective of ALRDC is to help coordinate both the expression of artificial lift technology needs and the provision of artificial lift developments, to help minimize duplication, assure that needed items are not “falling in the cracks,” and therefore accelerate the delivery of required capabilities.
Benefit: For an Operating Company that is currently funding artificial lift R&D by two or more (internal and/or external) organizations, there is a good possibility that there is some duplication of effort, and some needed items that are not being addressed. The cost of this duplication, and thus the potential savings, could easily reach 20% or more of the current artificial lift R&D budget.
Have Artificial Lift R&D Budget Continuity from Year to Year
In most companies, the budgeting process is an annual affair. ALRDC will not change this.
However, an objective of ALRDC is to promote a long-term, coordinated programs with clear year-to-year plans, costs, milestones, deliverables, etc.
Benefit: This will not alleviate the need for annual budgeting, but it should make it much easier for budgeting and planning managers and teams to accept the need for committing to longer-term development projects if they can see a logical progression of work and deliverables, with clear objectives in the process. ALRDC will work to encourage and assist this transparency to occur in the artificial lift R&D process. In addition, improved continuity in the budget process will help improve continuity in staffing among the R&D providers. This will, in turn, help them to better meet planned R&D delivery schedules.
Gain Leverage from Limited R&D Funds
In most Operating Companies, many worthy projects compete for limited development funds. The economic benefits must be very clear to the people that fund R&D and associated projects.
In many other Operating Companies, especially Independents, there are no artificial lift R&D funds. Yet, there are needs.
An objective of ALRDC, through the coordinated, focused program already discussed, is to help Operating Companies stretch their R&D funds by gaining more leverage. One obvious way will be by helping to find other companies that have the same or a similar need that may be willing to share in the cost.
For Independent Operators, this may open a door that has previously been closed. While they may not be able to afford an artificial lift development on their own, they may be able to afford investing in a small share of a project, if the total cost of the project is shared by several companies.
Benefit: The benefit of this is obvious. If a given artificial lift development effort would cost a certain amount, and if, say, five companies were willing to share in the development cost, the cost to each company would be only 20% of the total. If 20 companies were willing to share, the cost would only be 5%.
Gain Quicker Access to Proven, Field-Ready Results
Often, artificial lift R&D results come in the form of a report or thesis that may be interesting but very difficult to implement in the field. Often, these results may have been developed in the laboratory and not adequately field-tested.
An objective of ALRDC is to help R&D providers test and present the results of their developments in a form that can be more readily accepted and put to use in the Operating Company.
Benefit: Real benefits only come from development results that can be effectively accepted and used in the field. This effort by ALRDC may help to accelerate the timing of this acceptance and use by 15 - 20% or more by allowing earlier implementation of successful projects, which in turn should result in better returns on field investments through lower OPEX, CAPEX, etc.
Use These Results to Help Increase Oil and/or Gas Production, Reduce Operating Costs
For Operating Companies, the bottom line comes when artificial lift R&D results can be used to help increase oil and/or gas production or reduce operating costs.
Benefit: As one Operating Company representative has said, “If I can save one workover or one artificial lift change out per year, this will more than justify being a member of ALRDC.” The “good news” is that most Operating Companies operate many artificial lift wells. Therefore, there is often the opportunity to gain significant leverage when a good new idea, invention, adaptation, hybrid lift system, or even just the adoption of a series of small changes to agreed recommended practices, can be applied to a large number of wells. The hope is that most Operating Companies can enjoy the benefits of ALRDC membership many times over.
Make it Easier to Justify Financial Support for Artificial Lift R&D Efforts
If there are clear and demonstrated economic benefits and results from applying artificial lift R&D results, this will clearly make it easier to justify financial support for artificial lift R&D in the future.
An objective of ALRDC is to help articulate the benefits that come from effective application of artificial lift technology, through sharing of recommended practices, case histories, etc. Getting the right word to the right people is an important step.
Benefit: This will have the obvious benefit of helping to advance artificial lift technology. It can also save from one to three weeks of time that would otherwise be required to write and defend justifications for artificial lift development to sometimes skeptical Business Unit managers.
Gain Access to Highly Qualified Graduates as Potential Employees
A common observation, and one that is repeated at ALRDC meetings, is that many of the experienced artificial lift engineers and technicians are becoming a bit grayer (or balder, as the case may be). In fact, many of the industry leaders are nearing or past retirement age.
Yet, the need for effective artificial lift expertise is growing, not shrinking. Where will the experts of tomorrow come from? One answer is the Universities. Another is developing young engineers and technicians that are already on the staff. However, University students and young employees will only gravitate to artificial lift if they see it as a growing, challenging technology area that has strong support from the Operating Companies.
An objective of ALRDC, as a strong advocate and voice for artificial lift, is to help advance both the technology of artificial lift, and the understanding and appreciation of this technology, so that new young people will be encouraged to enter the field to the benefit of all. As the profile of artificial lift is raised within the Oil and Gas Operating Companies, they will give it more credibility, funds for recruitment will increase, and that will translate in time into attracting more engineers to this field.
Benefit: The benefit will clearly be a continued flow of “new blood” to help meet the artificial lift needs of the Operating Companies in the years and decades to come.
Category of BenefitsSummary of Actual Benefits
Deal with one artificial lift R&D organization /- Save 2 - 8 staff weeks per year.
Have one focused program, with clear objectives, milestones /
- Save 2 - 8 staff weeks per year.
- Receive same or better results with 80% or less of the total cost.
Have a common artificial lift technology vision and direction over time /
- Easier to communicate artificial lift plan to management.
- Earlier delivery of artificial lift capabilities.
- Potential acceleration of new fields or wells that depend on new artificial lift technology.
Reduce duplication of effort /
- Reduce current artificial lift R&D costs by 20+%.
Have artificial lift R&D budget continuity from year to year /
- Make it easier for companies to have a long-term artificial lift R&D plan.
- Improve staffing continuity among R&D providers.
Gain leverage from limited R&D funds /
- Potentially share artificial lift R&D costs among several companies, thus significantly reducing the cost to any one company.
Gain quicker access to proven, field-ready results /
- Accelerate acceptance and use of new artificial lift technology by 15 - 20% or more.
Use these results to help increase oil and/or gas production, reduce operating costs /
- New artificial lift capabilities can often be applied to many wells.
- This provides significant leverage to justify the cost of ALRDC membership many times over.
Make it easier to justify financial support for artificial lift R&D efforts /
- Save 1 - 2 staff weeks per year.
Gain access to highly qualified graduates as potential employees /
- Continued flow of "new blood" to help meet growing artificial lift needs
Prepared by:
Cleon Dunham
Oilfield Automation Consulting
September 14, 2001
Updated: June 13, 2008