With about 25 intelligent completion systems operating in the North Sea, Norsk Hydro is in the forefront of this technology and has already laid the groundwork for what Sigurd Erlandsen, Program Manager for Smart Well R&D for Norsk Hydro calls an "intelligent field." The first well of the intelligent field was to be completed before the end of last year, and plans were in place for it to be up and running the first of January 2002, Erlandsen said. From that point on, creation of the intelligent field would progress gradually because it is partially an R&D exercise to get the entire field up and running. This move toward an intelligent field comes five years after the first smart well was placed in the ground.
Applying the technology
Norsk Hydro is not alone in its forward-looking move toward implementing intelligent completion systems. Other operators are putting it to use. Carlos Glandt, Smart Wells Global Implementation Manager at Shell International E&P, says: "We are trying to install as many intelligent completion systems as we can because we see the value of the technology in our fields."
Despite the normal glitches associated with a new technology, both companies have seen positive results from intelligent completions. When a well is drilled with a conventional completion, it is permanent, and the operator, in effect, becomes a passive investor. Even if well data are being sent to the surface, the operator cannot change the course of how the well produces without sustaining the additional cost of an intervention. With an intelligent completion system (or eventually, an intelligent field), the operator becomes an active investor because he can change the course of events by redirecting subsurface efforts. Particularly where geology is complex and it is difficult to determine what to do with the well, remote operations offer a new dimension to reservoir management. The biggest risk today is in the reservoir. With a smart system, an operator can react to developments and mitigate risk.
Weighing the benefit of intelligent completion
The fact is that oil and gas exploration and production are inherently risky. Despite improved geophysical and geological data, in the end, the subsurface constitutes an unknown. Every time a well is drilled, there is a risk that it will not be profitable. Even if a well is successful, there is also the possibility that a workover will be required. When a well is completed in deepwater, workover costs become significant. So when a well encounters a reservoir, it is in the operator's best interest to exploit the reservoir to the greatest degree possible. That, in the end, is the greatest value of an intelligent completion system.
According to Glandt, uncertainty is simply one element that needs to be taken into account before deciding to use intelligent completions. Because Shell understands the value of what happens when things go right, the company is willing to take the risk. In making this decision, Glandt explains, Shell is able to discount value based on risk.
Smart completions provide insurance to mitigate the downside associated with reservoir uncertainties. Because Shell bears in mind the benefits an intelligent well can deliver, Glandt said, the company considers the incremental cost of a smart completion warranted to hedge the risks.
"When deploying new technology, we always build a clear incremental business case including the production impact, reliability, and costs of new equipment. We deploy the valve, even if it might fail after a few years, because we believe the benefit warrants the installation." In his view, an intelligent completion system is relatively easy to justify in subsea applications. In contrast, "in dry-tree cases we need to consider wells and reservoir management options, intervention costs and risks, operational practices, and other factors to come up with a solid business case," he said.
Most of the intelligent completion systems Shell has installed are working okay, Glandt said. Shell is using a wide spectrum of applications. "We've installed a few systems on platform wells. We intend to install many in subsea applications. In each case, reliability receives a different emphasis," he said.
Regardless, when discussing systems valued at $1.5 million to $4 million, the question of reliability is critical. With other operators and service providers, Shell set an initiative in motion to agree upon methodologies and share data on smart system reliability. "The industry as a whole will have to jointly address and overcome the perceived reliability problems, if we are to realize the potential of Smart Wells," Glandt says.
The proof of the pudding
Without question, there is equipment failure on occasion, and there are times that the structure of the reservoir limits the usefulness of the intelligent completion system. But in general, the benefits have been reasonable. In some cases, if conventional workovers had been carried out on these wells, the costs would have been significantly higher, and the results would not have been as desirable.
Ideally, the objective is for every system to perform flawlessly from the outset, but even in the absence of that kind of efficiency, companies are moving ahead with installations. Shell continues to install intelligent completion systems in great part because the discounted value remains very high.
Reliability has been a hot issue for Norsk Hydro as well, but according to Erlandsen, it continues to improve. "We would like the equipment to last for the life of the well, which could be ten years, and we are not there yet. However, even if the equipment fails after two years and we have to recomplete the well, we still have got the benefit from the intelligent completion," he explained. Most of Norsk Hydro's intelligent completion systems have yielded "quite a reasonable payback," Erlandsen said.
Return on investment
Shell's intelligent completions in Southeast Asia and the North Sea have had satisfactory results over all, and the company has been pleased with system performance. "In the Gulf of Mexico, soon all of Shell's subsea wells will have some kind of intelligence, and you can bet that will be the trend in the coming years," he said.
"We have confidence that the value we have identified will be realized, and we have some examples where that has already happened. Shell has realized millions of dollars in value from using intelligent completion systems," Glandt said.
From smart wells to smart fields
Norsk Hydro is rapidly moving toward an intelligent field in which most wells in the field have an intelligent completion system. The objective is for the entire field to be managed through a single system. This opens up many possibilities for system application and increases the benefits of using all of the "bells and whistles" of the intelligent completion system.
"The Snorre B Development, which came on production this summer (2001), is the closest thing Norsk Hydro has to what would be classified as a smart field," Erlandsen said. And now, the company is in the starting phase of implementing it. If this field proves successful, it will have a major impact on decisions regarding application of this technology in other fields.
The Snorre B Field will have a combination of reservoir modeling and day-to-day production management of the field. The information from the downhole sensors will feed into the reservoir simulation model, which will send data back to the surface so the feedback loop is complete and the choke settings can be changed for optimizing the next month's or next year's production. "Every time you get a new data point that differs from your model unit, which you are updating all the time, it sort of continues the optimization loop," Erlandsen explained. In his view, there will be a gradual build-up toward a real intelligent field. Based on the first completion, Norsk Hydro will be able to do modeling in the reservoir simulation work and have some estimation of the potential.
Shell is in the process of implementing smart field concepts at South-Furious-30 offshore Sabah, Borneo. Individual well flow allocation is based on real-time downhole and surface pressure and temperature measurements from which gas lifting of all wells will be adjusted to optimize total field production. The facility is a slim design; all critical data is transmitted to the office onshore, where decisions are made regarding valve settings and lift optimization.
Shell has such high expectations for the Smart Field concept that it has formed a dedicated team to implement the technology and take it forward, building on the smart wells initiatives.
The Society of Petroleum Engineers (SPE) will host a forum called "The Smart Oilfield" September 8 through 13, 2002, in Ste. Maxime, France, to address some of the challenges and opportunities of intelligent completion technology.
Meanwhile, a small segment of the industry is moving forward with intelligent completion technology as manufacturers work to eradicate the equipment failures that have limited the technology's success. The general view is that reaching a level of system reliability is a goal that will be attained in the near future. In the meantime, more installations are on the books. Evidently, the proven benefits of the system are adequate impetus for pushing the envelope of system application. Certainly, operators who have had the most experience with intelligent completions believe in the technology enough to build their future on it. The inference that can be drawn from their expanding investment is that companies that are holding back on investment in this technology may soon have difficulty catching up.
Evaluating reliability and making improvements
As the number of intelligent completions globally approaches 100, it is evident that the technology has gained a foothold and is moving forward. Of the completions currently installed, WellDynamics has the greatest market share, with 64 completions. Evaluating performance by analyzing a large number of systems in operation provides valuable performance data that can be used to identify reliability issues so that system improvements can be designed.
In order to monitor product performance, the company maintains close ties with the operating community, though admittedly, data collection is particularly problematic at the sub-system level where the installation base is globally dispersed. Despite this obstacle, Reliability Assurance Manager Derek Mathieson analyzes operators' performance data to establish product reliability and to identify system weaknesses.
Table 1 quantifies the reliability history of all WellDynamics SmartWellRegistered systems in place since 1997. System "failures" indicate problems with system operation. The worst failure relegates the intelligent completions system's capabilities to that of a conventional completion and leaves the well fully operational by conventional standards.
Closing the loop
There are many ways to present historical data. This table shows reliability as a function of time (based on population survival as presented by van Gisbergen for PDGs 1). WellDynamics uses this historical data to analyze and quantify the technical risk associated with a particular project.
The intelligent completion system industry will be better received when systems prove to be extremely reliable. The challenge for the industry as a whole is to implement new technology fast enough to capture value potential and to build markets in the short term, while maturing reliability assurance processes and system in parallel so that actual value is captured in the long term.
References: S.J.C.M. van Gisbergen, "Reliability analysis of permanent downhole monitoring systems, " Shell International Deepwater Services B.V., OTC 10945, 1999.