TECHNOLOGY Closed loop drilling systems can eliminate reserve pit costs

Lance Astrella, Reginald Wiemers
Environmental Equipment Corp.
Denver

Closed loop systems have become more dependable and efficient, making drilling without a mud pit an economically attractive alternative in many drilling programs.

A closed loop system is defined simply as a mechanical and chemical system which will allow an operator to drill a well without using a reserve pit.

A closed loop system includes some solids control equipment (such as the shaker, desander, desilter, and proper centrifuge), which may already be on the rig, and a polymer flocculation unit, which is not part of a conventional rig's solids control system.

Pit construction and reclamation costs can make up a significant part of a drilling budget because of increasingly stringent governmental regulations and surface owner concerns.

After a thorough comparison of closed loop systems is made and a system is selected, the operator must then compare the economics of using a pitless system to conventional drilling with pits.

Not all closed loop systems are equal. An operator usually receives closed loop system cost estimates which do not take into account all of the costs associated with a complete system. Typically, the service company quotes only the equipment rental rate.

Flocculation unit

A polymer flocculation unit makes up the polymer either through liquid dilution or the mixing of dry polymers into an aqueous solution (Figs. 1 [29782 bytes],2 [31152 bytes],3 [33358 bytes]). The unit then adjusts the pH of the effluent as required, adds the appropriate doses of polymer and other chemicals, mixes the effluent with the chemical additives, and then transports the mixture to the centrifuge for the separation of solids, including small suspended solids.

Polymer flocculation units are sometimes referred to as "floc boxes." A floc box can be a simple pump and pipe which transfers liquid polymer into the feed line of the centrifuge, or it can be a more complex unit which uses less expensive dry polymer to make up liquid polymer on site.

To create a "floc" of the suspended solids in the incoming mud, the characteristics of the mud must be determined both before and after it is dosed with the polymer and chemical additives. This process can be labor and equipment intensive.

A flocculation unit will makeup polymer and process the effluent either in batch or "on the fly." For a given throughput capability, a batch processing unit usually requires more tank capacity.

Equipment

In calculating the cost of pitless drilling, all mechanical, chemical, and labor components must be carefully considered. The estimate should include costs for ancillary equipment, flocculation unit rental, labor, and chemicals. The cost of additional rig equipment, such as the centrifuge, feed pump, special tanks, and supplemental mechanical separators, should be included.

All labor costs associated with operating the flocculation unit and ancillary equipment must be determined. These figures should include all labor costs beyond those required for conventional rig operations.

The importance of obtaining as much information as possible about anticipated chemical costs cannot be overemphasized. Knowing the chemical costs is particularly important if the supplier of the closed loop system also supplies the chemicals. Chemical costs typically include polymer, acids, bases, and coagulants.

Although the provider of closed loop system services may not be able to give an exact number for chemical costs, the operator should insist on receiving a summary of the chemical costs incurred in the pitless drilling of other wells. Based on the weight and volume of effluent treated in other wells and the chemistry of the formations penetrated, the operator can estimate chemical use and approximate cost.

One important reason for understanding these cost components is that economic trade offs among equipment, chemical, and labor costs are a function of equipment utilization. The use of highly automated flocculation units results in maximum cost savings to the operator in continuous drilling programs because the equipment has a high utilization rate. The high utilization rate permits the capital cost to be amortized at a reasonable daily rental rate. It is uneconomical for the expensive equipment to stand idle.

With high utilization, the labor and chemical cost savings of the automated units will more than offset their relatively high rental rates.

For an operator which drills only an occasional well or wells, the less automated, labor-intensive equipment may prove to be less expensive because of the lower capital costs.

Performance

The operator should obtain information on the field performance of various closed loop systems. Because systems can differ widely, function is as important as cost.

Reputation for equipment dependability is important. If a closed loop system slows rig performance, the inefficiency will cost either the operator or the drilling contractor, depending on the terms in the contract.

Closely related to the functional dependability of the system is its capacity to keep up with maximum anticipated penetration rates. Insufficient capacity can force a reduction in penetration rate or require the digging of an emergency pit.

The operator should determine whether the closed loop system can truly operate pitless. If not, the cost of a small reserve pit should be included in the evaluation.

Integrating the labor functions related to the rig, the flocculation unit, and the ancillary equipment can significantly improve the efficiency of the closed loop system. In a drilling program which employs several rigs with closed loop systems, a flocculation unit operator may simultaneously operate several automated flocculation units, provided that the rig crew is trained and motivated to assist with the more routine tasks associated with the unit operations.

The drilling contractor can motivate the crew by modifying tanks and providing solids-moving equipment to minimize the manual movement of solids. A rig crew which is required to shovel solids from tanks and constantly move solids on location will probably not support the closed loop system; overall drilling efficiency will suffer.

It is of utmost importance for the flocculation unit operator to coordinate the chemical use in the unit with the chemistry in the mud system. Proper coordination with the mud engineers can result in overall mud and chemical cost savings.

Cost

Once a closed loop system is designed, its cost must be compared to the cost of constructing and reclaiming reserve pits. The cost to construct and reclaim a reserve pit is fixed, whereas the cost of using a closed loop system increases over time. The longer it takes to drill a well, the less economically beneficial a closed loop system will be. A break-even point for a particular well or group of wells can be determined by calculating the costs of pit and pitless drilling as a function of time.

Closed loop system

The total cost of a closed loop system includes the following major items: surface damage payment, solids removal, water, mud, ancillary equipment, flocculation unit, labor, and chemicals.

An operator can expect less surface damage for wells drilled without pits. If the surface land is used for growing row crops or other crops for which level ground is important, subsequent subsidence of a reclaimed pit may be a burden to the surface owner. Moreover, many farmers claim to experience a long-term loss of production from the land on which a pit was constructed.

Another important factor in determining the feasibility of pitless drilling is solids removal. The operator should investigate the possible uses for the solids discharged from the centrifuge and determine the costs of disposal or recycling.

The type of closed loop system used may affect disposal cost. If the solids contain excess polymers or other chemicals, the opportunities to recycle the solids may be limited because of the lack of functional value of the solids or the potential liability of disposal. The judicious use of chemicals can reduce the problems with disposal or reuse of solids.

Solids from the centrifuge have been successfully recycled for such uses as agricultural pond and irrigation ditch liners. Solids have been used for feed-lot liners to provide a somewhat impermeable barrier to control waste discharge. The solids serve well as berm material for drill site and production facilities. Solids may also be used as fill material or lining in landfills.

Regulations in some states specifically authorize the above described uses of centrifuge solids. The operator should still devise a plan for periodic testing of the solids to ensure compliance with applicable laws.

Where solids can be recycled for beneficial use, the disposal costs may be minor or nonexistent. Solids disposal will require some planning on the part of the operator, but it can generate major savings and create community goodwill.

Providing that the centrate from the centrifuge is relatively free of residual polymers, it can be recycled in the drilling operations. Drilling with a closed loop system can reduce water costs by as much as 65%. Because the flocculation unit and centrifuge remove the suspended but not the dissolved solids, the operator may save the cost of adding dissolved solids to the water returned to the hole.

Recycling water reduces both water and transportation costs and may eliminate the need for a freshwater pit, further reducing construction and reclamation costs. The operator also benefits from community goodwill because of water conservation and reduced truck traffic.

By coordinating closed loop operations with mud engineering, mud and additives costs can be reduced.

Amortization or rental of ancillary equipment must be calculated. Such equipment includes additional mechanical solids control equipment such as shakers, desanders, desilters, modified tanks, additional power packages, the centrifuge, an auger or conveyor for solids, the flocculation unit, and a front-end loader to move solids.

All labor costs, other than the cost of the rig crew, should be itemized. The labor cost for the flocculation unit will vary from several people for a purely mechanical unit to a fraction of a crew member for an automated unit.

The operator should estimate the cost of all chemicals for the flocculation unit. The estimate should be followed by calculation of actual usage.

Pits

The line item pit costs include the following: surface damages, pit construction, and pit reclamation.

Surface damage payments increase in relation to the size and number of pits.

Depending on location, pit construction digging costs may include locating pipeline or underground power lines or blasting rock. Digging expenses can vary widely.

Some state regulations require segregation of soil, labeling the segregated soils, protecting the stockpiles from erosion, and replacing the soils in the proper order with appropriate compaction.

Some state regulations require the use of pit liners. The operator should check regulations to determine if the liner must be removed, as this expense must be included.

In some wildlife and cattle areas, pits must be fenced, covered with nets, or flagged.

Depending on the salt and the hydrocarbon content of the mud, the contents of the reserve pit may have to be removed. Disposal on site may be possible if the landowner wishes to use the mud to supplement sandy soil. Disposal off site can be quite expensive because of transportation costs and disposal fees.

Surface reclamation re- quirements may or may not be costly depending on the requirements in the lease or those imposed by law and the amenability of the surface to reclamation. If the reclamation requires ongoing efforts, the costs can become significant.

The total cost of water and mud, including hauling and storage, should be calculated.

Table 1 lists a line item comparison of drilling with a pit and without a pit. The example assumes that there are no extraordinary costs associated with the pit construction, such as archaeological work or rocky surfaces which require heavy equipment. The example assumes the pit contents may be dried and buried on site.

Intangible benefits

Intangible benefits to drilling pitless should not enter into the quantitative assessment of the relative economics.

The intangible benefits should still be recognized, because some operators are reluctant to use closed loop systems even if the operating costs are lower. Many operators tend to conduct operations as they have done successfully in the past and are hesitant to try new techniques.

Environmental regulations worldwide are becoming more stringent, and governmental agencies zealously enforce existing regulations. Drilling with reserve pits will incur increasing scrutiny.

The accompanying box summarizes the reserve pit regulations for several oil and gas producing states. Many countries follow reserve pit regulations similar to, and in some cases stricter than, those in the U.S.

Acknowledgment

The authors thank A.R. Simmons for technical information about flocculation unit designs, Exeter Drilling Co. for data on performance of its closed loop drilling system, and Prima Energy Corp. for information generated from its original 20 well pitless drilling program.

Bibliography

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16. South Dakota Administration Rules 74:10:03:13, 1987.

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18. Utah Administration Rule R649-3-16, R649-3-34, 1989; State of Utah, Division of Oil, Gas, & Mining, guidance document, Determination of Liner Requirements for Reserve Pits Used in Oil and Gas Drilling Operations and Onsite Pits Used in Production Operations, 1993.

19. West Virginia Code SS 22-6-30, 1993; Legislative Rules, Division of Environmental Protection, Office of Oil and Gas, SS 38-18-16.4, 1993.

20. Rules & Regulations of the Wyoming Oil & Gas Conservation Commission, Rule 401, 1993.

The Authors