The AER requires “production hours for gas wells designed to operate on an on/off cycle basis that are operating normally on repeated cycles, and where part of the operation involves shutdown of pump equipment and/or shut-‐in as part of the repeated cycles are to be considered on production even when the wells are not flowing” (see D17, clause 18.104.22.168 for complete wording and clause 6.4.1 for the regulation for oil wells). Due to higher producing hours lowering the producing rate, and this generally lowering the provincial royalty payable, these are important rules to follow. There is a similar impact in British Columbia, but not currently in Saskatchewan, likely not until mid 2016.
Measurement schematics in Alberta, Saskatchewan, and B.C. are required to identify all wells that are on artificial lift. The reported production hours for each of these wells should be reviewed to ensure that they are the maximum allowed. The reported production hours are typically accessed by your Production Accountants from either a production accounting system, or indirectly by anyone elses from a commercial service such as AccuMap or IHS.
If the reported hours are consistently less than the full hours in a month, it is a strong indicator that the well is on an artificial lift, and its production hours are being under-‐reported. Due diligence with this process presents a significant revenue opportunity for companies, in our experience companies have recovered sums in the millions as a result of this process. The applicable section in B.C. is from the Ministry of Finance Mineral, Oil and Gas Revenue Branch Report Completion Guidelines for the BC S1, which reads, “Production hours for wells with intermittent timers, pump-‐off controls, plunger lifts, well cycling control, well throttling, etc., that are “operating normally and as designed” are to be considered on production even when the wells are not flowing or pumping. Physical well shut-‐ins and emergency shutdowns (ESDs) are considered downtime”.
How FacilityStudio provides value
The following are the different artificial lift options to select from in FacilityStudio:
- Pump Jack
- Gas Lift
- Elect Sub Pump
- Progressive Cavity Pump
The below image shows a well that is flowing (does not have an artificial lift) and a well that has a Pump Jack artificial lift, which is represented with a PJ to the left of the well.
Part of the FacilityStudio Data Cross Check report verifies all producing well-‐events have the correct producing status for their artificial lift status. All producing well-‐events that have a “Pumping” producing status are checked to ensure they include an artificial lift on the measurement schematics.
1. Any artificial lift wells that appear in the Data Cross Check report needs to be looked into further. Verify the following:
- Artificial Lift Wells: Verify any artificial lift well has a status of “Pumping” in Petrinex and that it is represented properly in your measurement schematic.
- Non-‐Artificial Lift Wells: Verify any well that does not have an artificial lift has a status of “Flowing” in Petrinex and that it is represented properly your measurement schematic.
2. Each well with any form of artificial lift should then be reviewed for suspect under-‐reported production hours over the last 5 years to determine if a correction is required. It is useful to review all wells feeding a common facility (field compressor or gas plant) at the same time to see if the reported hours are similar for all wells (i.e. reflecting a plant turn-‐around or compressor problem) or unique to only one or two wells.
3. For wells that require the production hours to be updated, ensure the Petrinex status is set to “Pumping” before submitting the updated hours, otherwise the changes will be rejected by the Department of Energy.
4. Once the increased production hours are uploaded into the Provincial Royalty Calculation System, reduced royalties will automatically be calculated for each month of the last 5 years with larger production hours. The royalty credits will be applied to the following month’s royalty invoice.