New Tool Assists Informed Purchasing Decisions Based on Overall Cost and HSE Risk Potential of Well Construction Fluids

Abstract

The well construction fluid (WCF) used in a particular operation influences the overall cost of the well construction both during and after the construction phase. The fluid can also be associated with a certain Cost at Risk potential, as unwanted incidents involving fluids may lead to consequences that carry costs. These costs can be related to the fluid's hazard level. The cost and risk related data requirements that support informed WCF choice decisions include direct fluid costs, but also cost items related to operational deployment and production stream treatment. Health, safety and environment (HSE) direct and indirect costs through risk and liability potential also form an important input into the decision making process. Identifying the most cost effective fluid that carries least risk potential may therefore significantly enhance overall well economics. To compare overall fluid costs, the different fluid pricing models, overall operational costs and HSE related risk potential must be evaluated and summed in the same format. The Activity Based Costing (ABC) approach provides a valid framework for allocating indirect operational costs to each well construction activity and evaluating the overall operational expenditure per well. However, such overarching cost comparisons for WCF choice appear to be rare. This is considered partially attributable to a lack of a simple yet overarching cost and risk assessment tool. This paper presents the management advantages achievable from using a novel, decision supporting software tool for collating and analysing all charges related to the deployment of WCF. The tool utilises operator-, location- and operation-specific data in a format that supports data collation across different asset team departments and budgets. This enables systematic, fast, repeatable yet operation-specific assessment and allows management to base decisions on the overall cost and HSE risk associated with the assessed WCF alternatives. The tool has been initially set up to compare high-density completion brines. It provides management with a clear overview of the overall financial implications and comparative HSE risks and advantages related to fluid choice. The approach is currently being adopted by a major oil company and integrated into their fluid decisions-analysis software. The problem setting Well constructions fluids are chosen and designed based on the fluid's technical performance and include consideration of the cost and ease of acquiring and using the fluid. However, cost calculations are often limited to evaluations of direct fluid costs, charged against the operational budget of the well construction team. As the operational consequences of using a particular fluid may have considerable impact on several budgets through costs related to for example flow time, waste management options or produced water discharge conditions (Gilbert and Kumpulainen 2008a), limiting fluid cost evaluations to direct fluid cost is clearly not optimal. Comparisons of overall cost consequences related to fluid choice would support more informed decisions. Overall cost evaluations that include indirect and direct costs regardless of which departmental budget these cost items fall however appear to be rare. HSE risk level is also directly affected by the fluid hazard level and the potential for additional operational costs arising from undesirable incidents may vary significantly between fluids. In order to compare true cost consequences of different fluids, some practical and theoretical challenges must be overcome. The theoretical challenges are mainly associated with certain ethical dilemmas relating to the costing of HSE risk - a topic amply reviewed in the literature (e.g. Bennett et al. 2003, Dixon 1998, IFAC 2005, Rikhardsson et al. 2005, UNDSD 2001, US EPA 1996) and discussed in relation to fluid costs in previous papers (Gilbert and Kumpulainen 2008a, Gilbert et al. 2008b). The practical challenges firstly centre on ensuring the calculation process is simple, logical and give clear results, as discussed in previous papers. Secondly, all the operational cost centres need to be aware of the process and their role in the providing input to the cost evaluation. Thirdly, a process that relates the cost evaluation to the well planning phases is required. Finally, management approval and encouragement to overall cost evaluation is required.