How an Oil and Gas Company Can Reduce The Power Cost Per BOE

How can a company potentially reduce their electricity cost per barrel of oil equivalent (BOE)?

By using a turbine to generate electricity to be used internally or sold back into the grid.

First things first, in the example here, it is a conventional oil well in the Western Canadian Basin (British Columbia, Alberta, Saskatchewan and Manitoba). The well also has to have the right conditions:

• Proper temperature on water cut from the wells production, which should be at least 95 degrees Celsius
• Flare from gas on well with proper consistency
• A way to boost water temperature to the appropriate level to drive a turbine, which could be solar or a combination of solar and gas
• Solar with storage unit to keep a consistent heat for a 24 hour period

In order to show how to reduce the electricity cost, the following example will be used:

Background:

• The average oil well in the Western Canadian Basin produces 40 barrels of oil equivalent per day (BOED)
• Average Q2 2009 operating costs for 80 publicly listed juniors and intermediates with conventional production in Western Canada is $12.57/BOE
• Power costs can range between 20% and 40% of overall operating costs depending on the location of wells
• This would be between $2.51/boe and $5.03/boe for the electricity portion of the operating costs

Assumptions:

• Assume that a well site uses an electric 20 HP motor - or a combination of 20 HP's
• 20KW electric turbine will be used to provide the electricity.
• Assume this turbine would have yearly costs of $15,000
• Assumption that there is a readily available heat source that provides the optimal heat, either flared gas, ground water, solar, etc.

Results:

• At 25% of overall costs associated with electricity, this would be equal to $3.14/BOE
• By using a turbine on site to create the electricity required, the new cost for electricity is $1.03/BOE, which is 67.3% lower than the current rate.
• If electricity cost are 40% of the overall operating costs, then this would be equal to $5.03/BOE
• The savings from using a turbine would be $1.03, 80% less which is equal to a $4.00/BOE savings

Based on an average oil well with 40 barrels per day production and a 10 reserve life index, the life time savings would be $3,121,000 if you were to save 80% on $5.03/BOE electricity costs.

Based on the average oil production of 83 TSX listed conventional oil and gas companies, their average oil production is 4,401 BOED. On the low end, they could be adding on average, $9,286 per day in profit and on the high end, $17,604 per day in profit if they were to implement a turbine technology. Given an 80% savings or $4.03/BOE, on all of this production with a reserves life of 10 years, then the overall savings would be $353,400,300.

There are a lot of wasted opportunities for harnessing potential sources for electricity generation in oil and gas operations, all of which can help reduce the operating costs for these companies.

Three Point Energy Inc. assists companies with profitable green projects. Three Point Energy Inc. can be contact at info@threepointenergy.com.