May 2000 Supplement  Case Study

How to cut electrical power costs by 30% with little or no investment

James C. "Chris" Hall, Drilling & Production Co., Torrance, Calif.

Bottom line. Operator experience confirms that low-tech, low-cost actions can reduce electrical power costs by as much as 30% or more, when applying simple, good business management practices and monitoring their operations.

Background. One of the action strategies developed by the U.S. Department of Energy (DOE) in early 1999 during the oil price crisis was to help producers learn how to lower their electrical power costs. These costs, depending on type of operation, can range from 5% to as much as 50% of overall operational costs – so even a 10% reduction is significant to operators, often extending the life of mature fields. While more complex and costly solutions (such as the development of energy efficient equipment) have their place, experience shows that reductions up to 30% can be achieved with little or no capital investment.

Working with industry in a DOE-sponsored effort, the National Association of State Energy Officials (NASEO) held workshops in Vernal, Utah, and Farmington, New Mexico, to share practical wisdom on how to reduce power costs. Later in 1999, California oil producers, working in conjunction with the PTTC West Coast Region, held two similar workshops there.

Practical power cost reduction. Many companies track power usage and costs on a monthly basis, using that information to manage costs, monitor field operations and make production decisions. But there are additional things to do – simple, but sound business management concepts that can lead to additional cost savings.

First step – Locate and analyze power bills:

• Get one year’s worth of power bills (get them all, make sure they are yours).
• Put them in monthly order and read them carefully.
• Become familiar with all of the terms and factors.
• Construct a spreadsheet to input data; include gross oil and water production volumes.
• Look for trends or unexplained anomalies.
• Does the cost change from month-to-month make sense? How many different rates are there? Why are the rates different? Are there any penalties or late charges? If so, why? Do you need power at these sites? If so, why? Is the math correct?

Second step – Get outside help for free:

• Contact your utility representative; get to know the person individually.
• Let the representative know that you want to work together on reducing your power bills.
• Ask for an explanation of the bills and rates, and how they are applied.
• Ask which rates are best for you.
• Ask how to operate your facilities to benefit from various rates.

Third step – Get into the field:

• Inventory your electrical motors, controllers and equipment.
• Determine your expected power consumption – does it agree with your bills?
• Talk to field employees about how they manage power usage. Most do not realize that they have some responsibility for this.
• Look at how equipment is operated and at what time of day.
• Find power meters, verify that they are yours and match them with bills being paid.
• Learn how to read meters, especially newer time-of-use meters with digital readouts.
• Copy down power-meter information and verify that meter factors match those on the bills.
• Using an amp meter, measure current drawn by each motor. It should be about 70% of nameplate rating. If below 50%, power is being wasted with oversized equipment.
• Stop, look and listen – check to see that pumping units are properly balanced.

Fourth step – Step back and analyze:

• Determine if electrical rate you are on best suits your operation. Corollary: Determine if you are operating to take advantage of the best electrical rate.
• Determine if large, intermittent loads (i.e., water disposal and shipping pumps) can be shifted to non-peak hours to reduce peak demand. This can be a major item.
• Look for inefficient uses of power. See if motors are properly sized. Look for "motor creep" (the up-sizing of motors when they are replaced because "bigger is always better").
• Do not ever assume that because something is energy efficient it is best suited for oil field use.
• Understand electric rates. Know how time-of-use rates work and at what time of day the rates change. How does this integrate with the way your wells and facilities are being operated? Also look at days of the week and seasonal variations, as well as time of day.

Fifth step – Take action:

• Set goals for what power usage and costs should be.
• Assign someone the responsibility to implement changes.
• Look for the elephants. Focus on large loads and ways to reduce power.
• Change to the best electrical rate structure for your operations.
• Operate facilities to take advantage of the best rate.
• Make every employee aware of their role in reducing power.
• Follow-up on a regular basis.
• Make electrical power cost reduction an annual training topic.

These first steps are very simplistic. But because they are simple, don’t assume that they have been done. Without continual attention, bad habits or changed operating conditions can cause electrical power consumption to creep up unnecessarily.

There are other steps that require a greater investment of time, resources and capital. They are worth doing only after the initial steps outlined above have been taken:

• Look for alternate electrical service providers (ESPs).
• Talk to your oil producer electric co-op. If you don’t have one, then create one.
• Find out about performance contracting – how to get paid to reduce your power consumption.
• Ask questions and share experiences with local operators and others in the business. Search for knowledge using the Internet, PTTC, trade journals, associations, etc.
• Determine if any industry workshops on this topic have been held in your region. If not, ask for them.
• Get the available rate structures changed. Oil fields have a very desirable flat load profile.

Proof that it works. Tejon-Grapevine field, Kern County, Calif., is a mid-sized field on primary recovery, producing about 80 bopd at 92% water cut. Major electrical equipment consists of 18 producing oil wells, two injection disposal pumps going to three wells and one shipping pump. An audit of the power requirements of the field discovered that:

• Motors were properly sized.
• Changing to a better oil field rate structure resulted in an immediate 20% cost savings.
• The water disposal pumps, which were controlled by a float switch, did not run continuously. By installing a clock timer and overflow-protection circuits (cost = $200), load was shifted to off-peak hours when power costs were less. This saved 5% during the summer months.
• Oil was being shipped by pump into pipeline at peak electrical rate hours. By shipping earlier in the day, a 2% cost reduction was realized.

Other operators have applied the concepts described above to reduce their power costs. Examples include:

• Tidelands Oil Production Co. operates several hundred wells in a waterflood in Wilmington field, California. Motor sizes were examined for proper sizing, and some mismatches found. However, unless motors are significantly oversized, Tidelands has found it uneconomic to replace them. But when motors fail, they are replaced with properly sized motors.
• Champlin operated a field that had access to two ESPs with different rate structures. By installing equipment to switch between suppliers at different times of the day and year, power costs were reduced by as much as 30% with a 12-month payout.
• Tidelands Oil Production Co., working with the California Independent Petroleum Association and others, fought for rate changes. Rates were changed, benefiting Tidelands and others. Tidelands has realized savings of up to 36% on some meters.

In most oil fields, power cost reductions of up to 30% can be achieved simply and with little investment. And they will be realized from now on. One can reinvest the savings from simple steps in other more expensive and complex solutions (controllers, efficient motors, better facilities) to further reduce power costs another 15%.

Acknowledgment

The U.S. DOE’s Office of Fossil Energy provided partial funding for the National Association of State Energy Officials’ efforts in this program. In addition to Chris Hall, other producers who were primarily responsible for organizing the California workshops were Robert M. Fickes, with Tidelands Oil Production Co. in Long Beach, Calif., and Casper Zublin in Bakersfield, Calif.

The author

James C. "Chris" Hall is president of Drilling & Production Co., Torrance, Calif. A third-generation oil producer, with production primarily in the Kern County area, he has been extremely active in numerous trade associations at the national and regional level. Mr. Hall received a special industry leadership award from DOE’s Office of Fossil Energy, has served as national chair of PTTC and still serves on its board, representing the West Coast Region. He graduated from Brown University in 1972 with a BS in mechanical engineering.