Operator Series: Petroamazonas' optimization drive

Monday, February 12, 2018

In times of crisis what is important is to be resilient and that means changing the way that things are done at every level, working on cost, organization and process structures and also on rules and procedures.

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That was a conclusion at a workshop organized by Latin America and Caribbean (LAC) oil, gas and biofuel companies association Arpel that looked at how to stay profitable during low oil prices.

The event highlighted that what is required is a new way of thinking; placing much more attention on efficiency and generating a culture of continuous improvement to sustain optimization efforts.

"No one knows how long depressed oil prices will last, how they will affect the industry or whether the oil price will return to recent highs, of nearly $115/bbl. But one thing is certain: a more sustainable approach to cost management - embracing new ideas and, indeed, a new mindset - is needed," according to a study from Accenture.

Efficiency and optimization have become household terms for the hydrocarbons industry, above all in upstream operations where reduced margins as a result of the price dip have forced companies to implement cost-cutting measures.

"Optimizing the core business, controlling costs and employing digital technology like predictive analytics will all play a part," Tom Ellacott, senior VP at Wood Mackenzie said in a recent research note which highlighted a shift in focus on the part of upstream companies to "thrive" from "survive" in the current operating environment.

One such company in LAC is Ecuador state E&P operator Petroamazonas, which has stepped up activity on this front to help safeguard revenue for the oil-dependent economy.


Petroamazonas, however, is not a newcomer to energy optimization, having implemented a program well before the downturn in global commodity prices.

In 2009, the operator kicked off a government-mandated power generation optimization and energy efficiency (OGE&EE) project to reduce the "human footprint" of oil production through the use of lower cost and more environmentally-friendly energy resources.

Specifically, OGE&EE calls for replacing diesel with flared natural gas from crude production to generate electricity.

A project previously highlighted that in the 30 years before OGE&EE, over 100Mf3/d of associated gas was burned that represented more than US$14bn in barrels of oil equivalent.

Volume of diesel displaced by natural gas (SOURCE: Petroamazonas)

Economic savings from diesel displacement (SOURCE: Petroamazonas)

In 2015, Petroamazonas became the first Latin American oil company to join the World Bank's "Zero Routine Flaring by 2030" initiative.

And in what was branded as "historic" by local authorities, Petroamazonas connected its system with that of state power generation holding company Celec in September to access electricity from the country's grid.

This interconnection marked the start of second phase implementation of OGE&EE.

2018-20 PLAN

This year, Petroamazonas plans a further reduction of its barrel production cost, setting a target of US$17.50.

Barrel production cost (SOURCE: Petroamazonas)

A key driver to reach this goal will be renewed impetus on the part of the hydrocarbons producer to advance its energy optimization strategy.

Petroamazonas has laid the groundwork for this push through increased engagement with the electricity sector, specifically Celec.

Weeks after the interconnection milestone, the two unveiled an energy efficiency plan which looks to save US$348mn/year starting in 2020 through four projects: Zona Este-Interconexión del Bloque 43-ITT; Zona Nororiente-Interconexión de sistemas eléctricos Petrolero y Nacional; Zona Centro-Generación mediante gas asociado; and Zona Suroeste-Optimización de facilidades.

The state companies strengthened their relationship this January with agreements that include studies for projects to connect oil producing areas with the national power grid.

The government has budgeted US$12mn for the studies and design work which are due to be put out to bid in 2018 and include the following goals: securing rights of way and the environmental license for the different lines, and acquiring land for substations.


Petroamazonas is Ecuador's principal upstream operator, accounting for approximately 75-80% of the country's crude output from Amazon assets Indillana, Edén Yuturi, Oso Yuralpa, Palo Azul, Auca, Cuyabeno, Lago Agrio, Libertador, Shushufindi, Amazonía Viva, Apaika, Tiputini (ITT) and Sacha.

Shushufindi is the company's largest oil producer accounting for 18% of the 393,174b produced on February 10, followed by Sacha (16.9%), Auca (15.9%) and Tiputini (10.8%).

Read ITT to become Ecuador's top producing asset

The state company also is the country's sole natural gas producer with output from the Amistad field at offshore block 6.

SOURCE: Petroamazonas production report for February 10