An Innovative Method to Reduce Electricity Costs ICONICS 2008 Worldwide Customer Summit April 8, 2008 Tim Shreve Manager Automation Technology Group-Systems.

An Innovative Method to An Innovative Method to Reduce Electricity CostsReduce Electricity Costs

ICONICS 2008 Worldwide Customer ICONICS 2008 Worldwide Customer SummitSummit

April 8, 2008April 8, 2008

Tim Shreve

Manager Automation Technology Group-Systems

Occidental PetroleumOccidental Petroleum•Occidental Petroleum Corporation is an international oil and gas exploration and production company.•Operations in the United States, Middle East/North Africa and Latin America regions. •Oxy is the fourth largest U.S. oil and gas company, based on equity market capitalization. •Oxy's wholly owned subsidiary, OxyChem, manufactures and markets chlor-alkali products and vinyls.

www.oxy.com

Mission for Step-ChangeMission for Step-Change

For several years, OXY has been on a For several years, OXY has been on a mission to make a Step-Change in how mission to make a Step-Change in how we operate.we operate.

Operational improvements provided by automation in the areas of Health, Environment & Safety (HES), production costs and volumes are generally in place at OXY

Can a new operational model based on automation be used to revolutionize the way OXY runs its business?

Upstream Oil & GasUpstream Oil & GasOperational ParadigmsOperational Paradigms

Some History:Some History:(1)(1) Hire a person stay at a well and operate Hire a person stay at a well and operate

it.it.(2)(2) Hire a person stay at a small building and Hire a person stay at a small building and

operate several wells.operate several wells.(3)(3) Hire a person to drive around in a truck Hire a person to drive around in a truck

and operate several wells.and operate several wells.(4)(4) Acquire some data from the well using Acquire some data from the well using

automation, to improve efficiency of automation, to improve efficiency of transmitting information to headquarterstransmitting information to headquarters

Some History cont’d:Some History cont’d:(5)(5) Acquire more data from the well using Acquire more data from the well using

automation, so the person driving around in automation, so the person driving around in the truck can operate even more wells using the truck can operate even more wells using a central dispatcher.a central dispatcher.

(6)(6) Add control of the well using automation, so Add control of the well using automation, so you can further segregate the roles, and the you can further segregate the roles, and the person driving around in the truck only person driving around in the truck only deals with problem wells.deals with problem wells.

(7)(7) Centralize control to reduce dispatchers and Centralize control to reduce dispatchers and further leverage the person driving around further leverage the person driving around in the truck.in the truck.

(8)(8) …………………………....

Upstream Oil & GasUpstream Oil & GasOperational ParadigmsOperational Paradigms

From: Surface Operations in Petroleum Productionby Chilingar and Beeson, © 1969

TOTAL

INFORM

ATION S

YSTEM

REAL TIM

E

DATA ACQUIS

ITIO

N

DATA ACQUIS

ITIO

N

WIT

H ARIT

HMETIC

OPERATOR GUID

E SYSTEM

INTEGRATED

INFORM

ATION S

YSTEM

MANAGEM

ENT

INFORM

ATION S

YSTEM

DATA

ACQUISIT

ION

Strategy

Upstream Oil & GasUpstream Oil & GasOperational ParadigmsOperational Paradigms

Upstream Oil & GasUpstream Oil & GasOperational Paradigms Operational Paradigms (Using Different Terms)(Using Different Terms)

Some History:Some History:(1)(1) Pump By Location.Pump By Location.(2)(2) Pump By Route.Pump By Route.(3)(3) Pump By Exception.Pump By Exception.

Upstream Oil & GasUpstream Oil & GasOperational Paradigms Operational Paradigms (Using Different Terms)(Using Different Terms)

Some History:Some History:(1)(1) Pump By Location.Pump By Location.(2)(2) Pump By Route.Pump By Route.(3)(3) Pump By Route using a Computer!Pump By Route using a Computer!(4)(4) Pump By Exception.Pump By Exception.

(5) Pump By Intelligence!(5) Pump By Intelligence!

Upstream Oil & GasUpstream Oil & GasOperational ParadigmsOperational Paradigms

From: Surface Operations in Petroleum Productionby Chilingar and Beeson, © 1969

Strategy

So, an example of using So, an example of using computerized systems to computerized systems to “Pump with Intelligence”:“Pump with Intelligence”:

The single largest operating cost for Occidental in West Texas is Electricity!

How could OXY reduce electricity costs without losing production?

First… A DetourRoughly 1/3 of OXY’s West Texas energy usage is located within the boundary of ERCOT (Electric Reliability Council of Texas).

ERCOT

Non-ERCOT

Non-ERCOTNon-ERCOT

New Mexico

Louisiana

Oklahoma

ERCOT: ERCOT:

The grid is an electric island The grid is an electric island (asynchronous) and is not connected to (asynchronous) and is not connected to the rest of North America.the rest of North America.

Deregulated Electricity Market Deregulated Electricity Market (competition exists between providers of (competition exists between providers of electricity). electricity).

The spot price of electricity changes every The spot price of electricity changes every 15-minutes15-minutes

There are unique opportunities for There are unique opportunities for those who can vary their real-time those who can vary their real-time electric usage!electric usage!

Beam Pumping Unit with Beam Pumping Unit with “Pump-Off-Controller”“Pump-Off-Controller”

Beam PumpsBeam Pumps

• 2,300 total beam wells (~34MW) located within the ERCOT boundary.

• 1530 of those beam pumps (~23MW) are operating at any given time

• Estimates are based on a 20 Hp average operating load per beam well.

Pump By Intelligence ExamplePump By Intelligence Example

Pump By Intelligence ExamplePump By Intelligence Example

Data shown is published 15 minute ERCOT price per megawatt hour(2/9/08-3/1/08)

• Electricity prices are typically averaging $50-$60/MWh, with 20-30 15-minute price spikes each month (~7.5hrs/month).• Normal beam pumps run 15-18 hrs/day, leaving 180-270 off-line hrs/month so there is plenty of time to catch up after price spikes.

Example of response to a price spike

0

20

40

60

80

100

0:00 0:28 0:57 1:26 1:55 2:24

Time [hrs:min]

Ele

ctr

ic L

oa

d [

MW

]

$0.00

$100.00

$200.00

$300.00

$400.00

$500.00

$600.00

$700.00

$800.00

$900.00

$1,000.00

Ele

ctr

ic P

ric

e [

$/M

Wh

]

Real Time

ERCOT Permian Load

Price

Margin

Sell back Power

Catch Up

• Potential electrical savings appear to be about 10% per well that joins the system!

Pump By Intelligence ExamplePump By Intelligence Example

Data FlowData FlowGraphWorXGraphWorX

Server

Server

Server

Server TrendWorX

Server

ConfigurationTables

AlarmWorX

Device Status& Type

BridgeWorX

GraphWorXGraphWorX

GraphWorXGraphWorX

BridgeWorX is the

Engine that does all

the real work

Price Data Feed

POC #1

RS CS TR RD TD CDTALK / DATA

TALK

RS CS TR RD TD CDTALK / DATA

TALK

POC #nnnRS CS TR RD TD CD

TALK / DATATALK

AlarmWorXMMX

eMail Notificationto Operations

SQLReporting

GraphWorXGraphWorX

GraphWorX

handles the User

Interface

ResultsResultsFirst response..7/22/2007..Idle command sent to 95 wells

5.5

5.7

5.9

6.1

6.3

Time

Wel

ch lo

ad (

MW

)

$0

$100

$200

$300

$400

$500

$600

$700

$800

$900

Sp

ot

Pri

ce [

$/M

Wh

]

~ .5MW

Wells Begin Idling Wells

Recover

Wells Recover

Wells Recover

Wells CatchUp

Results of PilotResults of Pilot

295 wells in the system~ .7MW response for each price event

Each event can generate savings of over : $500When consumers shed load the need to construct additional power generation facilities is reduced.

Questions and Questions and DiscussionDiscussion

Questions &

Discussion