Marginal/Stripper Wells

 

Oil and gas are the fuels that keep our nation’s economic engine running. An important contribution to our national energy supply is made every day by thousands of small independent oil and gas producers. These enterprises, many of them family businesses, are the “gleaners” in our nation’s oil fields, extracting the resources that larger companies have left behind. They are using every available technology, and no small amount of ingenuity, to keep marginal wells producing in the face of volatile prices and increasingly challenging regulatory hurdles.

 

 

Stripper Oil Wells account for over 15% of US Oil Production

 

Source: U.S. Energy Information Administration

 

Fundamentally, there are three challenges small producers face in keeping their stripper wells on line - economics, basic physics and access to technology. Because stripper wells operate close to the edge of profitability, if oil and gas prices fall, the value of the oil or gas produced each day can quickly drop below the average daily cost of operating the wells. These costs include maintaining and operating pumps, transporting the produced oil or gas for sale, safe disposal of produced water, salaries, insurance, taxes and of course the royalties paid to the owners of the mineral rights.

 

Any technology or new operating practice that can lower the cost of operating a stripper well directly influences the limit of profitability and the time that well can be kept producing.

 

Physics controls how fast the oil, gas and water flow into the wellbore from the reservoir, and how difficult it can be to lift the fluids to the surface. Keeping stripper gas wells clear of water so that gas can flow more freely into the wellbore is a major challenge. Remediating wellbore damage so that oil and gas can both flow at higher rates is another. Optimizing the downhole and surface production equipment so that a stripper well produces the maximum amount of oil and gas for the minimum amount of power cost is yet another challenge.

 

Reducing costs and overcoming the physics of production both rely on technology. Unfortunately, most stripper well producers have neither the capital nor the manpower to invest in developing new technology tools. In addition, most technology providers do not recognize the widely dispersed, marginal operations of the stripper well industry as a major market.

 

Mechanical failures are the cause of nearly one quarter of the abnormal production declines seen in stripper gas wells. These mechanical failures are most commonly the result of corrosion, often exacerbated by the build up of corrosive brine in wellbores or its movement through production equipment. Marginal well operators must react to corrosion-sourced mechanical failures, but typically do not follow a proactive methodology for identifying problem areas and selecting the appropriate corrosion mitigation alternative before the failure takes place. As a result, opportunities for reducing failure rates and increasing production are missed.

 

Research suggests that 86 percent of failures in plunger lift systems are a result of corrosion damage brought on by produced brine. The inability to effectively deliver corrosion inhibitor to plunger lift wells leads to equipment failure, high operating costs, and premature abandonment.

 

Marginal and Stripper Well Statistics

 

  • One out of every six barrels of crude oil produced in the United States comes from a marginal well - a well whose production has slowed to 10 to 15 barrels a day or less.

 

  • Over 78 percent of the total number of U.S. oil wells are now classified as marginal wells.

 

  • There are over 400,000 of these wells in the United States that produce nearly 900 thousand barrels of oil per day, which equates to 15 percent of U.S. production.

 

  • From 1994 to 2003, approximately 142,000 marginal wells were plugged and abandoned, costing the U.S. more than $3.0 billion in lost oil revenue at the EIA 2003 average world oil price.

 

  • Many stripper wells are marginally profitable and at risk of being prematurely abandoned. When world oil prices dropped in the late 1990s, the oil that flowed from marginal wells often cost more to produce than the price it brought on the market.

 

  • Despite oil again reaching record highs, significant quantities of oil remain behind when marginal wells are prematurely abandoned. A common misperception is that oil left behind remains readily available for production when oil prices rise again. In most instances, this is not the case, leaving our nation more dependent on foreign oil imports

 

  • Oil prices would have to rise several times higher than their historic highs - and most importantly, stay at elevated levels for many years - before there would be sufficient economic justification to bring many marginal fields back into production. When marginal fields are abandoned, the surface infrastructure – the pumps, piping, storage vessels, and other processing equipment – is removed and the lease forfeited. Since much of this equipment was probably installed over many years, replacing it over a short period should oil prices jump upward, is enormously expensive.

 

  • Estimates are that the marginal wells plugged and abandoned between 1994 and 2003 represented 110 million barrels of crude oil that was still in the ground.As a result, once a marginal field abandoned, the oil that remains behind is often lost forever. The costs of re-drilling a plugged well may be as much as or more than drilling a new well. 
 

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