Stripper Well Production … Feast or Famine In The Oil Patch!
A stripper oil well is one that averages production of ten or less barrels of crude oil per day. According to a report published by the U.S. Department of Energy, one out of every seven barrels of oil produced in the United States during 2008 came from stripper wells. Another source estimates that one out of every six barrels of oil currently come from stripper wells. That source maintains that there are over 420,000 stripper oil wells in the United States and that those wells produce nearly 915,000 barrels of oil per day. If those numbers are correct, the average stripper well produces less than 2.2 barrels of oil per day.
When oil prices were less than $10.00 per barrel, many stripper oil producers could not afford to produce their stripper oil wells. As a result, many stripper wells were shut in, temporarily or fully abandoned. However, now that the price of a barrel of oil has reached and exceeded $100.00 per barrel, producers find it more economically feasible to produce those same stripper wells.
To the uniformed, it might appear that a stripper oil well which produces 2.2 barrels of oil per day during a period when that oil sells for $100.00 per barrel is a money maker. However, cost factors beyond the control of the producer could cause the well to lose money. Once the oil well is drilled and completed, the modern day oil producer continues to face risks that can and sometimes do consume all profits. However, a knowledgeable producer can produce stripper wells in such a manner that they can prove to be very profitable.
There are two very basic considerations that control the profitability of a stripper oil well. One consideration is price paid per barrel of oil. The other is the cost incurred to lift the oil to the surface.
High oil prices do not always translate into high profits for the stripper oil producer. While it is correct that some of the larger oil companies make billions of dollars of profit when oil prices escalate, the same cannot be said for the average stripper producer. As a general rule, the profits enjoyed by stripper producers are at the mercy of third party providers and world events. The revenues enjoyed by the majority of those small oil producers often are consumed by economic factors that are beyond their control.
An increase in the price of oil does not necessarily mean an increase in profits. It is an economic fact of life that each time the price paid for a barrel of oil increases, workover and oilfield supply company prices also increase. Unfortunately, those prices do not decrease when the price of oil decreases. Thus, it is not uncommon for the increased revenues realized when oil prices soar to be matched by increased service and parts prices. when those oil prices decrease, as they always seem to do, it is rare to witness a decrease in service and supply house prices.
Lift costs include all expenses other than royalties and have a major impact upon stripper well profitability. Stripper oil producers must wage a constant battle to control lift costs. Some of those costs, such as power and ordinary labor, are rather stable. However, those extra-ordinary costs which are related to maintenance can be overwhelming. In addition to oil, most stripper wells produce a combination of salt water, gaseous substances, paraffin and/or sand. Those substances can create expensive maintenance problems. The stripper producer must therefore become an effective problem solver.
Oil and gas production is classified as primary, secondary and tertiary. Most stripper wells fall into the category of secondary production. Secondary production requires equipment to lift the liquid and gas products from subsurface to the surface. The equipment used to produce oil from the typical oil well includes a pump jack, rods, tubing, casing and a down hole pump. Known as rod and beam production, each of the separate items of equipment plays a crucial role in crude oil production. All of such equipment is mechanical and thus subject to wear and tear. Moreover, those substances that are being lifted have the potential to cause problems. Salt water and many of the other substances that are mixed with or suspended within the oil and salt water are corrosive and thus accelerate normal wear and tear. Each time the equipment breaks down, in addition to the expense of money for replacement or repairs, the producer loses valuable production time. Thus, maintenance of equipment is always a costly concern.
In addition to being corrosive, problems associated with disposal of salt water are also expensive and potentially fatal to the life of an oil well. In most areas of our nation, crude oil cannot be produced without the production of salt water. Oil producers must dispose of the salt water in order to maintain oil production. Even with advanced well technology, disposal of salt water remains an expensive proposition. In areas other than Southern Arkansas (El Dorado and Magnolia), salt water has no commercial value and in fact is a liability. Every barrel of salt water that reaches the surface must be injected back into the ground. The various states only permit such injection if it is in compliance with state statutes, rules and regulations. Compliance with the law is often difficult and is always expensive. When determining whether a particular oil well can be produced economically, the producer must take into account the expense of salt water disposal.
The presence of sand in the oil presents another major problem for oil producers. Oil is produced from subsurface geological formations that are often composed of rock and sand. Conventional secondary production techniques utilize specialized equipment to pump liquids that have sand mixed therein. A sand pump is the device most often used. The sand pump must be inserted near or at the very bottom of the oil well. To achieve such insertion, the sand pump is first attached to a rod that is lowered into the tubing. Additional rods are attached to that rod and to each other until the sand pump is inserted into an area near or below the perforations. The sand that passes through the pump ultimately destroys the pumps capacity to produce liquids. The sand pump must be removed from the well periodically for replacement or repair. The process by which the sand pump is removed is referred to as a workover. A typical workover consists of removal of all of the rods and the sand pump. That removal requires the usage of a specialized piece of equipment that is known in the oil and gas industry as a workover rig. The process is very expensive in terms of money and lost production time. Moreover, in wells with a severe sand problem the process may be required several times each year.
The presence of paraffin also presents a major problem for oil producers. Paraffin is a waxy substance that is suspended in the oil. As it exist in the subsurface, oil is hot. When conventional pump jack technology is utilized, the liquids are slowly raised from beneath the surface to the surface. During that slow process of ascent, the paraffin hardens on the outside of the rods and on the inside of the tubing. It is somewhat akin to a blood vessel that fills with plaque. Once sufficient paraffin accumulates, the passage way through which the oil, gas and salt water would otherwise pass will be completely obstructed. Once the tubing becomes fully obstructed, no oil, gas or salt water can be pumped to the surface. When that occurs, it becomes necessary to perform a workover operation on the well. The rods have to be removed and the paraffin must be physically or chemically removed from inside of the casing and the outside of the rods. The removal process may be required several times each year. Special treatment is always required. The process is expensive in terms of money and lost production time.
The presence of natural gas in the oil also has the potential for producing major problems. To begin, gas has the capacity to lock up an oil pump. In addition, many types of natural gas are extremely corrosive. Thus, those corrosive gases can weaken or destroy down hole pumps, rods and tubing. When that occurs, the only surefire remedy is a workover job. Workovers are labor intensive, require specialized equipment and are expensive in terms of time and money. While normal workovers are expensive and time consuming, the replacement of rods and tubing is extremely expensive.
For many years, oil producers have yearned for an inexpensive method of production that effectively deals with sand and paraffin which does not utilize pump jacks, down hole pumps, rods or tubing. Moreover, those same producers have searched for a method to produce oil while producing little or no salt water. A geologist in Union County, Arkansas decided that it was time to go back to basics. He presented his idea to local craftsmen and requested their assistance. Together they devised a fluid lift system that marries age proven concepts to modern day technology.
The result of that marriage is a fluid lift devise that is marketed by by Liftek, Inc, Inc. under the trade name of the “Oil Hound Lift Unit®”. Many people who have viewed the Oil Hound Lift Unit® in action have characterized it as an oil bailer. The device has also been compared to a down hole oil skimmer. In fact, it is neither. However, the lift unit performs functions that are similar to both an oil bailer and a skimmer.
The Oil Hound Lift Unit® is an alternative fluid lift device. The lift unit does not utilize a down hole oil pump. Instead, a flexible fluid collection tube is lowered into the oil well casing until it reaches the fluid level. The tube is then immersed into the fluid, which enters through a foot valve until the tube is filled to capacity. Once the collection tube is filled to capacity, it automatically returns to the surface and its contents are extracted into a collection tank. The lift unit can be instructed to extract fluid only until a specified lever is reached, thus providing the opportunity to limit or exclude salt water production. The lift unit captures everything that is suspended in the oil, including gas, sand and paraffin. The lift unit does not need any type of special pump to remove the suspended sand, paraffin or gas and in no manner is impaired by the presence of those substances in the oil well.
In those wells that cycle to allow oil to float to the surface of salt water, gravity acts as a natural method of separating oil from salt water. Many producers have demonstrated that Oil Hound® technology allows oil to be produced without salt water. The lift unit operates on electrical power and is considered smart technology. Costs of operation are minimal.
Oil Hound® technology is limited to utilization on shallow wells (those that do not exceed 3000 feet in depth). Well producing from the Haynesville shale are not candidates for the technology. Oil Hound® Lift Units are currently being utilized in the States of Arkansas (El Dorado), Louisiana (Converse and Oil City), Tennessee and Texas (Luling). Development is underway for adaptation for usage as an integral part of gas well technology.
Many producers are convinced that utilization of the Oil Hound Lift Unit® on their stripper production will maximize profits while effectively and economically dealing with those problems normally associated with gas, salt water, sand and paraffin.