SmartWell® completion technology provides a broad spectrum of value generating functionality for oil & gas field operations, all derived from the ability to monitor and control fluid production and injection by zones in real-time. Adoption of SmartWell® completion technology has been delayed by the lack of a method to quantitatively define the value associated with various applications of the technology.
Operators are typically conservative in their use of new methods for field development, operations and technology deployment. Field development decisions, and thus technology application decisions, are made through well-established decision processes and capital planning programs that quantify value and rank various projects and technology deployment scenarios. Most, if not all, operators use conventional Net Present Value (NPV) models or their variants to quantify and rank project proposals. Due to the uncertain timing and impact of a SmartWell® completion, conventional NPV analysis is not applicable. Operators intuitively understand the benefits of the technology, but are unable to compute a realistic value with conventional NPV valuation techniques. Thus a SmartWell® technology deployment is difficult to justify over a more conventional, better-understood, but lower valued, completion technology.
An approach has been developed to define and solve the SmartWell® completion valuation problem using mathematical techniques from the financial community called Real Options analysis. Using simple option valuation mathematics as the basis, a case study is reported using well data from a field in the Gulf of Mexico region to value the implementation of the SmartWell® technology compared to a conventional completion technology. The analysis uses SmartWell® completion critical variables to quantify the value of operating flexibility derived from implementing SmartWell® technology. This case study reflects the added value of active SmartWell® reservoir management, i.e. the added value to the asset generated by responding to changing circumstances - taking advantage of higher production rate and increased recoverable or mitigating loss such as early gas or water breakthrough. The case study demonstrates and compares the total economic value of a conventional completion with SmartWell® and SmartWell® reliability adjusted systems.
SmartWell® completion is a new emerging technology for the oil and gas industry. Adoption of SmartWell® technology has been delayed by the lack of a method to quantitatively define the value associated with various applications of the technology. Due to the capital-intensive nature of the technology, the industry is typically conservative in its use of new methods of field development, operations, and technology deployment.