800 850 900 950 1,000 1,050 1,100 $0 $2,000 $4,000 $6,000 $8,000 $10,000 $12,000 $14,000 $16,000 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 (Well count in thousands) ($ in millions) Artificial Lift - Market Size & Share vs. Total Well Count Weatherford Schlumberger GE Oil & Gas Baker Hughes Others 2014P Total Total Active Well Count Once again, the artificial lift market is on pace to achieve double digit growth (est. 15%) in 2014. In the October edition, we spotlight this sector, detailing the historical methods for artificial lift, new innovation and technology, the industry outlook, and its implications for oilfield service providers. It’s no secret that there has been exceptional growth in domestic drilling, with tens of thousands of new wells being drilled each year. With an increasing shift to horizontal drilling, the maturing of these unconventional wells presents a major challenge and opportunity: how to optimize well production. With horizontal wells exhibiting steep decline rates (see Bakken Hz. Well Decline Curve), the focus previously optimizing well completion is increasingly being allocated towards optimizing production. This shift bodes well for manufacturers and service providers of artificial lift systems. Quick Market Overview. Artificial lift is installed in wells when there is a need to supplement the natural reservoir drive to increase flow from the wellbore. Over 90% of global producing wells currently use some form of artificial lift. Further details: • 94% of oil wells will need artificial lift or pumps at some point in their lifecycle, and 90% of existing oil and gas wells requiring water removal utilize some form of artificial lift system • 70% of the world’s oil and gas production is derived from mature fields, including a large percentage in the secondary or tertiary production phase • The market has grown at an average annual growth rate of 19% since 2009 (below) October Edition: A Spotlight on the Artificial Lift Market Prepared by: Duane Donner [email protected]Joe Brady [email protected]John Ortstadt [email protected]Brandon Pilot [email protected]Ben New [email protected]Source: Spears & Associates Bakken Hz. Well Decline Curve (3,694 Samples) Bbl. Oil / Day Years from First Production Source: HPDI, Bernstein Research 1
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October Edition: A Spotlight on the Artificial Lift · PDF fileArtificial lift is installed in wells when there is a ... • Rod Lift - also known as the sucker-rod lift or the...
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Artificial Lift - Market Size & Share vs. Total Well Count
Weatherford Schlumberger GE Oil & GasBaker Hughes Others 2014P TotalTotal Active Well Count
Once again, the artificial lift market is on pace to achieve double digit growth (est. 15%) in2014. In the October edition, we spotlight this sector, detailing the historical methods forartificial lift, new innovation and technology, the industry outlook, and its implications foroilfield service providers.
It’s no secret that there has been exceptional growth in domestic drilling, with tens ofthousands of new wells being drilled each year. With an increasing shift to horizontaldrilling, the maturing of these unconventional wells presents a major challenge andopportunity: how to optimize well production. With horizontal wells exhibiting steepdecline rates (see Bakken Hz. Well Decline Curve), the focus previously optimizing wellcompletion is increasingly being allocated towards optimizing production. This shift bodeswell for manufacturers and service providers of artificial lift systems.
Quick Market Overview. Artificial lift is installed in wells when there is a need tosupplement the natural reservoir drive to increase flow from the wellbore. Over 90% ofglobal producing wells currently use some form of artificial lift. Further details:
• 94% of oil wells will need artificial lift or pumps at some point in theirlifecycle, and 90% of existing oil and gas wells requiring water removal utilizesome form of artificial lift system
• 70% of the world’s oil and gas production is derived from mature fields,including a large percentage in the secondary or tertiary production phase
• The market has grown at an average annual growth rate of 19% since 2009(below)
October Edition: A Spotlight on the Artificial Lift Market
Artificial Lift Types. Well bore characteristics including LPR (liquid production rate),water cut, gas-liquid ratio, viscosity, well depth, completion type, casing and tubingsizes and wellbore deviation all factor into determining the most suited lift system.That said, there are six major types of lifts that encompass the majority of lift systems(96%), with many customizations for specific wellbore conditions. A brief overview:
• Rod Lift - also known as the sucker-rod lift or the “pump jack”; this is the mosttenured lift and probably the most iconic visual in the oil and gas industry.These lifts provide an efficient and cost effective way to increase the rate ofextracting hydrocarbons, and the simple design and easy maintenance of therod-lift components make it easy to source service companies to work on thesystems. With more than 50% of the global rod lift market based in the US,the lift is still the method of choice for vertical wells.
• ESPs (Electric Submersible Pumps) – a dynamic lift that utilizes centrifugal force to lift hydrocarbons to the surface. ESPs are typically brought in to enhance oil production as soon as it begins to decline, and while there is still a moderate to high volume of fluid that can be lifted from the well. ESPs have an electric cable running downhole to power the lift motor, giving the ability to transmit signals, retrieve data and proactively monitor problems. ESPs’ limitations are primarily witnessed in unconventional wells with a high mixture of gas.
• Gas Lift – one of the most effective lifts for mature horizontal wells. It involves injecting high-pressure gas from the surface into the producing fluid column, reducing the density of fluids and the bottom hole pressure, and allowing the reservoir pressure to drive the hydrocarbons up to the surface.
• Hydraulic Pumping Systems – a lift designed for deep wells with solids, sand, heavy oil, water, gas, corrosive fluids, etc. In both forms of HPS (reciprocating piston and jet hydraulic), a motor is placed downhole to help force pressure upward. According to Spears & Associates, HPS’s are beginning to gain popularity in horizontal wells.
• Plunger Lift – a lift that uses the well’s own energy to open and close the well shutoff valve at the optimum times to bring up the plunger and the contaminants and maximize production. The lift’s versatility gives it applications in both gassy and oily basins, making it easier to find mechanics to service it. This lift is increasing in popularity due to its efficiency and favorable environmental impacts.
An ESP Lift Diagram
Rod Lift or “Pump Jack”
54%46% 46%
25%31% 33%
7% 7% 5%4% 5% 6%
3% 5% 4%2% 2% 2%5% 4% 4%
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Global Market Share by Lift Type
ESP Rod Lift PCP Gas Lift Plunger Hydraulic Other
Source: Spears & Associates
Source: Weatherford
2Sources: Hart Energy Research, Weatherford, Spears & Associates
Market Outlook and Implications. The artificial lift market is expected to increase inyears ahead, with unconventional wells driving the demand for new technology. Whileover 90% of the world’s wells use some form of artificial lift, it is the new horizontaland offshore well activity that is driving innovation (see Horizontal as Percentage ofTotal Rigs).
• An aforementioned demand driver is the high depletion rates in horizontalwells. The average flow from a shale gas well drops 50% to 75% in the firstyear, and up to 78% for oil wells. Consequently, operators are moving toartificial lift systems much sooner to maintain flow rates and progressing todifferent lift systems as the well conditions and flow rates change with the lifeof the well.
• An industry trend is the increasing amount of resources being allocated totechnological development and innovation in lift systems. One example is GEOil & Gas’ recent announcement of its next generation ESP Vector Plusvariable speed drive (VSD), which allows the operator to gradually increaseESP motor speed and remotely adjust ESP speed from the surface withimproved intelligent control capabilities. Additionally, there is an increasingfocus on customizing lift systems to suit well conditions.
• Automation in the oilfield remains a hot topic, and one of the biggestopportunities for implementation and upside is in production operations.Reducing unplanned downtime and maximizing efficiencies withoutcompromising health, safety or environmental impacts are big goals foroperators. A little can go along way; according to a McKinsey & Companyresearch report on automation and production, a 10% increase in productionefficiency could yield over $260mm to the bottom-line on a particularbrownfield asset.
Consolidation. Over the years, key market players have been focusing on expansion oftheir product offering and venturing into submarkets, resulting in consolidation of theartificial lift market. From 2009 to 2013, the number of market participants reduced byapproximately 50%, highlighting the market consolidation trend.
• Founders Director of Oil & Gas Services, Joe Brady recently stated, “withexpected double digit growth in the segment and increased demand forproduction-based services, the space has become very attractive. We expectto see new entrants coming in to the market, primarily driven by PEG-backedservice providers that will offer niche technical expertise and cost savingmaintenance.”
Summary Remarks. Production optimization has always been a priority of theoperator, but as basins continue to mature, increasing attention and resources will beallocated to optimizing production from their existing wells. Further, the continuedexpansion into unconventional plays will call for new and improved technologies inartificial lift systems. As we push to extract resources from deeper, tighter, and moredifficult formations, demand will rise for artificial lift systems engineered for specificwell conditions. We expect emerging opportunities for companies that can pioneernew technology and provide customized solutions via higher expertise and ongoinginnovation. In addition, we expect automation to play a growing role in the productionspace and the overall oilfield. In the coming months, we will explore the digitizationand automation of the oilfield and its potential implications.
WE EXPECT TO SEE NEW
ENTRANTS COMING IN TO
THE MARKET, PRIMARILY
DRIVEN BY PEG-BACKED
SERVICE PROVIDERS THAT
WILL OFFER NICHE
TECHNICAL EXPERTISE AND
COST SAVING MAINTENANCE
“
”- JOE BRADY, DIRECTOR OF
FOUNDERS OIL & GAS SERVICES
PRACTICE
A diagram of oilfield automation
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Horizontal Rigs as Percentage of Total Rigs
Source: Baker Hughes
3Source: Baker Hughes, McKinsey & Company, Spears & Associates & HIS Inc.
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Announced Date Target/Issuer Buyers/InvestorsTotal Transaction Value