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№ 5 (May 2010)

ESPs Expand Presence in Russia At Sucker Rods' Expense

Industry experts see growing electric submersible pump sales and the expansion of the artificial lift service sector in Russia as signals of a market upturn for artificial lift.
A rise this year in ESP sales coupled with other signs that the artificial lift market has entered an upturn, is putting smiles back on the faces of Russian manufacturers who had braced themselves earlier for a protracted period of stagnation in new orders.

By Elena Zhuk, Pat Davis Szymczak

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  Analysts from the Marketing Group Research.Techart, a Russian company that specialises in studying the oil products market and oil production industry, note that the revival of the artificial lift equipment sales market and the slight increase in sales prices for equipment are key trends that signal a market upturn. These positive changes were aided by growing oil prices,. the resumption of asset replacement projects and the overall return of investments to the oil industry, they say.

ESP vs. Sucker Rod Pumps: Who’s Winning?

   April 2009 data from Research.Techart show that electronic submersible pumps (ESPs) predominated in Russian oilwell production (at some 80,500 wells), while sucker rod pumps were employed at about 66,000 wells.

   Research.Techart analysts explain that this is due to the peculiarities of crude production in Russia. Outside of Russia, sucker rods predominate as the prefered method for artificial lift. In the United States, for example, approximately 500,0000 wells are rod pumped. Why the different approach? When wells lose their natural pressure, Russian producers install an ESP and only move to rod pumps at the very end of the life of the well, if they don't abandon the well first. The ESP produces more volume and is cheaper upfront. The problem though is that the ESP must be replaced every one or two years whereas a rod pump can last 50 or more years if properly maintained.

   In Russia, sucker rod pumps are most widely used in Tatarstan and Bashkortostan where well debits are lower, water cut higher, and crude is more viscous than that of West Siberia. TNK-BP, however, is using rod pumps in the Raduzhny area, manufactured in East Texas by Lufkin Industries. LUKOIL is also considering the Lufkin brand.

   Oleg Kalmykov, the commercial director of Izhneftemash (Russia's highest volume domestic producer of sucker rod pumps, with 60 percent domestic market share) agrees that statistics favor ESPs. He says that 2009 market trends paralleled those of 2008 – sucker rod pumps were used on 40 percent of the fields, while ESPs were employed at 52 percent. According to Reseach.Techart, 95 percent of sucker rod pumps used in Russia are also manufactured domestically by Izhneftemash, Uraltransmash, Elkam-Neftemash and other companies. A source in Tatneft told OGE that his company buys domestic pumps produced by Izhneftemash which he says comply with API standards.

   In contrast to the overall trend, sucker rod pumps dominate at the most marginal wells (wells producing less than 10 barrels a day over the course of 12 months meaning they requiring additional pressure – which sucker rod pumps deliver – to keep producing). Because they are used only on such wells, sucker rod pumps account for just 15 percent of overall production volumes.

   Kalmykov added that sucker rod pumps have been traditionally purchased and used at small oil wells used by Tatneft and small companies in Tatarstan, as well as at older fields operated by Bashneft (80-84 percent) in the concluding stages of production, at difficult, deeper levels. Sucker rod pumps are also used by LUKOIL (West Siberia, Perm and the Komi Province), Rosneft (Sakhalin, Samara Region, Udmurtiya), Surgutneftegaz (Tyumen Region) and TNK-BP (Samotlor) though at a much lower rate – between 10 and 45 percent. Even before the recession, sucker rod pump manufacturing was dropping (2008 production was 8 percent down year on year). Izhneftemash sources note that in 2009, domestic demand for sucker rod pumps fell 20 percent compared to 2008. According to Research.Techart analysts, the stable decline of the rod pump sales market is linked in part to the increased mean time between failure as the quality of Russian-made rod pumps gradually improves.

   In West Siberia, where many marginal wells and wells with high water content (both these types of wells are targets for sucker rod pumps) are being decommissioned due to low profitability, the decline is stronger than the average across Russia. Data provided by Research.Techart show that from January to April 2009, the number of new wells equipped with ESPs significantly exceeded the number of new wells equipped with sucker rod pumps – 1,145 units compared to 299. Kolmakov noted that production at West Siberian fields began later than in Tatarstan because of the swamps and harsh climate in the region. Consequently, these fields are younger and their deposits are closer to the surface. Fracking is commonly used in these areas to increase output and where ESPs are used, sucker rod pumps are being squeezed out.

   On the other hand, Vladimir Ivanovsky, the head of the Oil and Gas Automation and Equipment Dept. at Gubkin State Oil and Gas University, said that in the next decade the share of oil produced with ESP technology is set to go down.
He said this is due to the advantages rod pumps have over ESPs in new fields which have highly viscous oil and where small bore, horizontal drilling is used (ESP cannot be used in either of these cases), as well as in fields where the gas content is high and where gas lift technologies can be successfully used.
Another significant reason ESPs will keep producing less oil than rod pumps is because they are often used to “pump water” in fields with high water cuts (up to 90 percent).

   Last year’s ESP and sucker rod pumps production dynamics remained positive despite the crisis, according to data from the Russian statistics service, Rosstat, as reported by Research.Techart. In 2009, the country achieved record production levels – 21,000 submersible pumps (up 10.4 percent on 2008), and 19,850 sucker-rod pumps (up 12.8 percent). End-of-year data shows that ESP sales also increased, rising 5.4 percent.

   In this segment, the Russian manufacturers Borets, ALNAS and Novomet Perm lead the pack. Only a small share is held by foreign-made REDA units (Schlumberger) and Centrilift (Baker Hughes).

   Rosneft New Technology Systems project manager Sergei Petrenko told OGE that imported ESPs are more expensive than Russian units because Russian manufacturers’ use less durable materials and make their equipment on cheaper machine tooling equipment resulting in less precision in the manufacturing process. Another issue for imports is a protectionist tax regime of 35 to 50 percent VAT plus other duties, which push up prices.

   During the crisis, the falling ruble also contributed to domestic companies’ success, enabling producers to consolidate their competitive positions as foreign units became relatively more expensive (in 2009 the use of import equipment fell from 12.1 to 5.6 percent).

Niche Pump Segment Set to Grow

   The growing move from sucker-rod pumps to ESP and progressive cavity pumps (PCPs) with controllable asynchronous and valvular electric actuators and valve types is the key market trend in the automated production market segment, specialists from the Borets pump manufacturing company said.

   “This is due to the economic and operational efficiency of electric-centrifugal, screw-type and powered equipment developed in recent years. Meanwhile, domestic Russian sucker-rod pump technology has run into a wall as far as options to modernize are concerned and they cannot be fully adapted to difficult wells on domestic fields with a long production life,” a company representative told OGE.

   PCPs are mainly meant to produce high-viscous crude while rod pumps produce light crude. Moreover, PCPs are used to produce crude from wells with complicated features like a high content of solids, low flow rates, emulsions or layers of asphalt-parafins.

   A significant feature of PCP screw pumps is the shorter length of the unit compared to other types of pumps with asynchronous drive. This makes it possible to use them in crooked wells. In Russia, PCPs are made by Borets, Livgidromash, the Gadzhiyev plant and ELECTON. Foreign manufacturers supplying screw pumps to Russia include Can-K, KUDU, Centrilift and others.

   Analysts predict that PCPs, jet pumps, and others will retain their niche markets.
These types of pumps are used infrequently and account for only about 1 percent on the pump equipment (or about 5 percent in oil production terms). According to Ivanovsky, the share of oil produced using screw or jet pumps will increase from 2010 to 2020.

   “Jet pumps dominate during initial well development and in environments where other types of pumps are useless, i.e. when wells have small-diameter lateral holes or formation fluids are hot and contain solids, etc.,” Ivanovsky explains, adding that these types of pumps are used infrequently and account for only about 1 percent of pump equipment (or about 5 percent in terms of oil production).

High-Demand Solutions for Various Operating Environment

   Complicated production environments demand innovative solutions for boosting the versatility of pumping equipment according to the actual operating conditions. “Strategies employed globally to boost wells’ operating efficiency using sucker-rod pumps include automated control systems for fluid pump-out, specific filters, corrosion inhibitors, fiberglass rods  and rod centralizers,” Research.Techart analysts say. They note that ESP technology also requires certain typical solutions for gains in operating performance, such as using sectional pumps, gas separators and dispersants, while at high-corrosion wells – tailored cables, corrosion inhibitors, plastic and corrosion-proof materials are used and intermittent wells use frequency-to-current converters and directional and horizontal wells – use tailored cables, metal protectors and monitoring equipment-to-hole descent operations.

   Novomet Perm, which claimed at the end of 2009 to occupy 22 percent of the domestic submersible equipment market (putting it second only to Borets), developed a new energy-efficient ESP – the next-generation unit for production of formation fluids (the operation cuts price cost of the produced crude by reducing energy costs.

   “This year our company is launching new energy-efficient units – types 3, 5A, 7A and 8. This equipment saves significant amounts which otherwise would have drowned in electricity bills,”  Novomet Perm R&D Director Yevgeny Poshvin says. “For example, comparative data for the VNN5A-500-2000 unit show that this energy-efficient equipment consumes 25 percent less electricity than conventional units (180 kW against 237 kW); this would save over 1 million rubles a year.” Such results are achieved by optimizing the entire unit, from the submersible electric motor to the ground control station. Applying valve SEM (submersible electric motor) instead of asynchronous motors provides an efficiency gain of up to 8 percent, while optimizing cascade configuration reduces cascade losses by 10-15 percent.

   “At the same time, the structural integrity of the equipment is not compromised and remains sustainably high. Significant reductions in power consumption reduce the current load and this in turn lowers loss in the cable line and in station management,” Poshvin said.

   An employee with the Borets press office noted that the company is now focused on developing  oil industry equipment which is in high demand, including equipment for complicated production situations such as in wells with a high content of gas and solids, which produce high-viscosity oil or have high temperatures or salt deposits along the well borehole. Borets is also concentrating on technologies for automating production from low-yield and low-pressure wells and wells which present other problems.

The Crisis Promotes Equipment Servicing

   The crisis had positive impact on the Russian market for servicing automated upstream equipment, Research.Techart analysts say. Limited cash flow and the need to optimize costs forced oil producers to pay growing attention to the bottom line and search for other ways to boost performance. As a result, the equipment servicing market grew much faster than oil pump sales.

   “This year we plan to continue using more rod pump systems as an alternative to ESPs,” Mikhail Avdonkin, the head of Weatherford’s Sucker Rod Pump Systems Dept. in Russia, Ukraine and Belarus, said.  This applies in particular to wells with small-diameter casing and high deviation, where it is impossible to use standard equipment for a number of reasons. Avdonkin said these reasons include a lack of appropriately sized equipment and the physical properties and low mechanical strength of certain materials.

Weatherford’s Unique Solution

   In 2009 and the beginning of 2010, TNK-BP and Weatherford ran a joint project at the Sorochinskneft Oil and Gas Production Division, and successfully implemented long-stroke rod system with Rotaflex top drive (Long Stroke Pumping Units Rotaflex) with a pump stroke of 7,500 mm and 8,000 mm. Avdonkin said this project is unique because the stress-resistance of the equipment installed allows the operator to pump fluid from the well after drilling lateral holes with an internal diameter of 89 mm and deviation of up to 7-9 degrees over 10 meters. “Our colleagues covered this project well, and companies have started to show an interest in routinely using such equipment in the future and maybe even in 2010, too,” Avdonkin said.

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