SMALL PRODUCER OPERATING ISSUES/CONCERNS ROBERT D. (BOB) KIKER PERMIAN BASIN PROGRAM DIRECTOR PETROLEUM TECHOLGY TRANSFER COUNCIL TEXAS REGION

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1 SMALL PRODUCER OPERATING ISSUES/CONCERNS ROBERT D. (BOB) KIKER PERMIAN BASIN PROGRAM DIRECTOR PETROLEUM TECHOLGY TRANSFER COUNCIL TEXAS REGION

2 GENERATING TOPICS Food for Thought HANDLING PRODUCED WATER DISPOSAL COSTS/TRUCKING COSTS DE-SALINATION TECHNOLOGY RE-CLAIMING FRAC WATER CHEMICAL TREATING TUBULAR USAGE DIGITAL DATA GATHERING VENDOR SUPPORT Completions Stimulations

3 Disposal /Trucking Costs From a recent survey of disposal costs in the Permian Basin and Kansas Trucking costs have doubled in the past 3 years Disposal Fees/Maintenance fees have increased 35-50% Total costs of trucking and disposal range from $1.50-$2.25 per barrel, up from.65$ to 1.00$ per barrel. That represents a cost of.036$ to.054$ PER GALLON. Remember these figures! We are enjoying nice returns from the price of oil and gas; are we ignoring our lifting costs that we use to watch so carefully? Why not increase our return by doing some best practices to reduce our water handling and lifting costs?

4 Membrane Desalination Becoming the Technology of Choice Cost of Water $/1,000 Gal $1,400 $1,300 $1,200 $1,100 $1,000 $900 $800 $700 $600 $500 $400 $300 Cost of Water $/AF Year

5 Mobile Pre-Treatment and Desalination Unit. GPRI Designs TM Texas A&M GPRI Designs TM Desalination Process

6 Brine Treatment at Well Sites Brine Desalination Process µ filters Chemical addition Recycle Brine Water RO System Concentrate Pump Centrifuge/ hydrocyclones Organoclay polish Permeate RO Post Treatment

7 Representative power costs of desalination of oil field brine Salinity of Feed Brine, tds (ppm) Pretreatment Power Costs Kw Hr per 1,000 gal. Permeate RO desalination Operating Cost, $ per 1,000 gal. Operating Cost, $ per bbl Contaminated Surface water ~1,500 tds. $.65 $1.25 $1.90 $0.08 Gas well produced brine ~ 3,600 tds. $2.50 $2.00 $4.50 $0.19 Oil well produced brine ~50,000 tds $2.20 $6.00 $8.20 $0.34 Gas well produced brine ~ 35,000 tds $2.00 (est.) $4.20 (est.) $6.20 (est.) $0.26

8 Compare the costs of desalination to disposal Under the current technology Updated trucking and disposal costs.036 to.054$ per gallon Desalination costs $ per gallon Does not include disposal of 10-20% concentrated brine Even so-should be considered

9 Produced Water in the Barnett Shale Play: Potential for Beneficial Use It is estimated that more than 5 million gallons of water per well are used in fracturing operations. Most then goes to re-injection disposal. More than 50% of this brine can be re-used in subsequent well fracs. As much as 24% can be recovered as fresh water for beneficial use.

10 Barnett Shale Water Conservation and Management Committee About the Committee Goals A consortium of industry leaders Approximately 20 Energy Companies operating in the Barnett Shale Initiated March 2006 Completed Charter, spring 2006 Status: Collecting information on industry water use Review of Reuse/Recycle Technologies

11 Chemical Treating Costs have doubled in the last 4 years Due to oil based solvent chemicals Need for careful evaluation of chemical needs-what are the problems-corrosion (downhole, internal, external, surface, etc)-paraffin? What is the best solution-chemical or metalurgy? Small Producers do not have the expertise or the staffs rely on vendors-workshops Good Reference on Proven Chemical Treating Practices are found in a PTTC Developed Produced Water Manual- Looking at Updated and make more comphrensive for small guys-for EXAMPLE A FEW GUIDELINES ARE:

12 GENERAL GUIDELINES AND PRACTICES FOR TREATING CORROSION BATCH TREAMENT WELLS MAKING <600BFPD CONTINUOUS TREATMENT > 600BFPD ALWAYS SELECT AN INHIBITOR THAT PASSES BOTH AN EMULSION TENDENCY TEST AND A FILM PERSITENCY TEST VOLUME OF CHEMICAL USUALLY BASED ON 100 BFPD Chemical concentrations vary by operator from 1-4 gals per 100 BFPD Rule of thumb: ppm concentration is adequate. Excessive volumes can increase oil carryover.

13 CHEMICAL INHIBITION GUIDELINES CONTINUED FLUSH VERY IMPORTANT OIL IS BEST KEEP OXYGEN OUT PREWET CASING-1 BARREL OF FLUSH PUMP INHIBITOR FLUSH WITH ½ BARREL/1000 FEET-2 BBL MIN. IF FLUSHING WITH H20 USE WATER FROM GAS BLANKETED TANKS OR O2 SCAVENGER

14 CHEMICAL GUIDELINES CONTINUED PRETREATING RODS 5 GALS INHIBITOR IN TUBING PRIOR TO RUNNING THE PUMP CIRCULATE ONE TUBING VOL PRIOR TO PUMPING UNDER DIFFICULT CIRCUMSTANCES DISPLACE TUBING WITH LEASE CRUDE PLUS 10 GALS OF INHIBITOR LUBRICATE SUCKER ROD PINS

15 Tubular Usage-Reduce Cost-Reduce Corrosion and Wear POLYETHYLENE TUBING LINERS VERY POPULAR LAST 2 YEARS PROTECTS AGAINST: CORROSION MECHANICAL WEAR INEXPENSIVE INSTALLED ON USED TUBING GREEN BAND VARIOUS AMOUNTS USED-BOTTOM 200 TO OVER HALF THE STRING

16 Specifications Maximum operating temperature is F (71 0 C) in oil production and F (82 0 C) in aqueous service. Coated couplings protect J-area against corrosion. Minimum API torque recommended for tubing connection make-up. No special position make-up or coupling inserts required. Maximum operating temperature is F (99 0 C), and increased resistance to CO 2. Coated couplings protect J-area against corrosion. Minimum API torque recommended for tubing connection make-up. No special position make-up or coupling inserts required.

17 NEW Product Falcon Ultratube TM is a new liner composed of an engineering thermoplastic that can withstand downhole temperatures exceeding 350ºF (177ºC). This patent pending product is highly abrasion and chemical resistant. The mechanically bonded seamless tube is tolerant to minor surface damage and the base resin has been proven in other downhole applications for over twenty years.

18 TUBULAR LININGS Applications Beam Pumped Wells PC Pumped Wells Submersible Pumped Wells Plunger Lifted Wells Gas Lifted Wells Coal Bed Methane Acid Gas Injection Disposal Flow Lines Solution Mining

19 Polycore TUBULAR LININGS Falcon Liner Price List 2 3/8-inch: $ /8-inch: $ ½-inch: $1.90 (per foot) Enertube 2 3/8-inch: $ /8-inch: $ ½-inch: $ 2.15 Includes coupling removal, coating and installation; thread cleaning & visual inspection; API ring & plug gauge inspection; liner material and labor; pin protectors and thread compound

20 Digital Data Gathering Saves Up to 50% Pumper/Operator Time Laptop or Handheld Runs every 2 hrs from 4am 6pm Tank Run Tickets Entered Volumes Seals Comments Automatic Activity-based Update Completion Well tests Entered Readings Comments Meter Run Tickets Entered Readings Comments Equipment Entered Readings Comments Runs at 7am, 8am, 10am, 11am, 12pm, 3pm, 4pm, 5pm, 6:15pm DB

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23 Systems can be expanded or reduced to meet any company size needs from very large to single user systems. Office Lease operator/ Foreman PC database Server And Allocation Server Local Network access Modem Dial Up Dial Up Laptop Dial Up To network Lease operator These Lease operator machines can be used from home using a phone line or on a companies network. PDA Dial Up to network Lease operator

24 18 OIL AND GAS OPERATORS VISITED-25 TOTAL VISITS PLUS TWO SUPPLIERS OF HAND-HELD COMPUTERS IHS/FIELD DIRECT MERRICK SYS. INC

25 METHODS/TECHNIQUES PRESENTLY BEING USED TO GATHER FIELD PRODUCTION DATA HAND-HELD COMPUTERS FIELD DIRECT-uses Production Explorer MERRICK-uses Pro Count LAPTOPS DATA ENTRY-FOR TRANSMISSION OF DATA EITHER ELECTRONICALLY OR PAPER FAXED-EXAMPLES BELOW EXCEL SPREAD SHEETS TOW LOWIS WINTANK ACCESS DATA BASE INTERNALLY DEVELOPED TOTAL ROD

26 New models of technology recently developed More interfacing between data gathering devices and accounting software Better displaying of data Regulatory reports Companies merging-trying new systems Pumpers/Lease Operators becoming less frightful.

27 Interface with accounting software is a must!! Some Total Accounting (Production and Financial) Software being used: SAP Artesia Excalibur P2 Energy Systems

28 Contact other companies FUTURE GAME PLAN Follow up with companies just starting up and those that have started new programs. This is a very volatile technology New technology on the horizon using weather balloons for wireless communications that are much cheaper than satellite. Conduct future workshops Keep participating companies informed of the survey.

29 VENDOR SUPPORT LACK OF FOR SMALL PRODUCERS STIMULATIONS COMPLETIONS CHEMICIAL TREATING THESE ARE JUST SOME

30 NEED TO DEVELOP TECHNOLOGY CIRCLES TO PROVIDE SMALL PRODUCERS ASSISTANCE PROVIDE MEMBERSHIPS?