Petro Management Group Ltd.

The Benefits of Surface measurement

Test Two-phase and Three-phase GOW Separators
Authors;
In g. Denis Andrew Gittins, B.Sc., M.Sc., P.Geoph, PMGC, PMP
In g. Saad Ibraim; B.Sc, M.Sc, P.Eng. Reservoir/Production engineer
In g. Geragg Chourio, BSc MSc.Petroleum Engineer, reservoir and simulation.

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 CONTENT

1. EXECUTIVE SUMMARY

2. BENEFIT OF SURFACE SEPARATION MEASURES.

3. MAIN TYPE OF SEPARATORS

4. APPLICATIONS OF THE TEST SEPARATORS (GAS/OIL / WATER)

4.1 DIAGNOSIS AND OPTIMIZATION OF PRODUCTION.

4.2 DIAGNOSIS OF PRODUCTION PROBLEMS

4.3 DECISIONS OF REMEDIAL ACTIONS

4.4 OPTIMUM SEPARATOR MEASUREMENT PERIOD

4.5 COMPLIANCE WITH REGULATORY REQUIREMENTS FOR FIELD

PRODUCTION

4.6 MANAGEMENT OF MULTIPLE OWNERSHIP OF OIL FIELDS

4.7COMPLIANCE WITH PARTNER PAYMENTS AND TAX ROYALTIES

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 1. EXECUTIVE SUMMARY

In the following document, we would like to draw your attention to the importance of
the use of the new affordable two-phase and three-phase separators (oil / gas / water).
Previously production optimization using the data obtained from surface separator was
restricted to large companies that can afford the high cost of this surface flow measurements.
Now with low cost of affordable separators, small companies can now afford to optimize the
production of their oil fields at very affordable costs.

The new separators in the market are more affordable, more compact, mobile and can
be used for a wide range of production rates. Also, the new separators can be customized to
handle oil of 10-25 API, and also for low flow wells of 20-200 bopd, which make 80% of the
wells in the world and were previously neglected.

Critical well production information is now recorded in real time 24/365 using advanced
technology; cloud computing technologies, to help make decisions to optimize production. This
collected data is inputted to reservoir simulation models to develop good reservoir management
strategy which will impact the bottom line results/economic benefits.

This report shows the improved technologies currently existing and will advance the
tools that will be available in the near future to obtain the production volumes of all the fluids (oil,
water and gases), as well as the properties of the fluids (pressure, temperature, among others),
which can be uploaded to a database. This data will be available in a virtual Cloud so that they
can be used by all the interested parties, without the need to wait for the processing of the data
as it was done in the past.

Our separators have the advantages in terms of ease and versatility of movement of
compact separation equipment, with a fraction of the time and the personnel required, reducing
the operating costs. This will enable that the smaller companies can obtain essential
information at fordable costs facilitating production optimization and lower Opex costs of the
operations. Our surface separator equipment can be connected to a cluster of multiple wells on
an automatic trigger mechanism

Finally, our integrated oilfield Intelligent Remote metering Management system, with data stored
on a Cloud based historical data system become readily available.

2. BENEFIT OF SURFACE SEPARATOR MEASURES

Test separators are very essential surface facilities to obtain data used to optimize the
production of oil and gas fields. Separators are used for various applications; some of them are
as follows:

1) Production diagnoses and optimization

2) To meet the production regulations set by regulatory agencies
3) To provide data required by multiple surface ownership of oilfield.
4) To meet royalty partners and Government Fiscal royalty payments

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 The key part of the separators is in the design based in different operators proprietary
software of the vortex and the different diameter sizes and lengths of cylinders, as well as
angles of drainage which are now custom designed for each type of reservoir characteristics.
The equipment is custom designed and built and delivered to the service company that offers
the service in their area. This design is based in complex mathematical equations that are now
simplified with different proprietary software, and the oil and gas characteristics are now
introduced into the program to model and simulate the results, which are then used to design
the actual tool and equipment before manufacturing it, and then compared with the actual
results of a pilot project.

Separators are specially designed not only for the oil characteristics, as low, medium
and high API density, but also on a wide temperature range; normal or high temperature steam
injection oil of 250C, and for high or low flowrates. To date, most separators had been designed
for high flow rates of 500 bopd and higher, as well as medium 25 API and higher lighter oil. The
reason for this limitation is because the cost of this service has been expensive, so that it was
not cost effective to have separators for low flow rates or heavy oil wells. This was unfortunate
because 80% of the global oil wells are low flow rate wells of 20-200 bopd in heavy and medium
oil reservoirs

Nevertheless, as the oil price has come down and taxes and Opex have increased,
companies have been concentrating in spending money in optimizing the production in this
large section of the market, including the heavy oil steam injection of hot oil, and this has
brought a niche of manufacturers to design and build separators for low flow wells of 20-200
bopd and for 10-25 API oils, with thermo resistant materials for hot steam injection tools.

With the objective of encouraging more continuous measurements that are required to
be able to optimize production, other improvements include building the separators more
compact; more economical; mobile on a truck of both types two-phasic and three-phasic with
their own onboard electric generator that makes them independent to the general grid for
isolated areas to get the job done in a shorter time within daylight hours in areas where it is not
safe or permitted to leave equipment or personnel overnight. The new three-phase separators
have also a small tank receiving the oil directly from the well before cooling in a small tank,
including hot 250C oil, that measures the water/ oil cut much faster than older large gravity
based tanks where the heavy oil cooled off and made it harder to introduce back into the
pipeline, as well as using fixed separators to measure a cluster of horizontal wells of up to 12

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wells, with a manifold trigger measuring every well within 8 hours and making changeover
automatically.

Separators come as fixed individual separators for a well, or with a manifold for multiple
wells, or mobile skid or truck mounted units, or helicopter transported units. There are now
companies offering much more economically priced integrated services that connect an oilfield
wells with separating devices that work continuously 24/365 delivering the data in real time to a
central data gathering local station that sends the data that is within 95% accuracy to a Cloud
based storage with all historical data for the field engineers to remotely compare to a simulated
optimized model and make changes to optimize the oilfield production.

The main objective of separators is to separate the produced fluids and gases to allow
the reservoir engineer to measure the actual amount of produced fluids (oil, gas and water) and
have an historical record for tracking the behavior of the dynamic production of the reservoir and
compare against a simulated model. The engineer can then decide to either reinject some or all
of the gas back into the formation to conserve reservoir energy, or send part of produced gas to
a compression equipment and into a sale pipeline. It is especially useful in steam injection
projects that need to use gas to operate a steam injection boiler, minimizing any gas they have
to purchase from a 3rd party to generate electric power required for the boiler. Generally, part of
the produced gas is used as fuel, sour gas components are flared, and the remaining is the
“Sale gas”, or gas to be used for energy. The data form separator also includes the water/oil
cuts of the resulting liquid, and to be able to make arrangements to separate the water for
disposal either for reinjection into the same reservoir to maintain pressure, or dispose into water
disposal wells, and the resulting oil is delivered into the pipeline for sale.

3. MAIN TYPES OF SEPARATORS;

There are two main types of separatrors, such as:

1. Two-phase (Biphasic) separators such as gas/water production

2. Three-phase (Triphasic separators for oil/gas/water production.

A typical diagram of the surface facility (battery) is shown below.

Two phases (gas-liquid) fixed and truck mounted separator

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 Three phase (gas-oil-water) truck mounted separator example

Multiple tool for separator up to 12 wells.

4. APPLICATIONS OF DATA FROM TEST SEPARATORS:

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4.1 PRODUCTION DIAGNOSIS AND OPTIMIZATION
In order to optimize oil and gas production, it is essential to have a good handle
on the periodic production volumes of all the wells and all the fluids; oil, gas, and water.
In many fields oil and gas volumes are measured only once every three months and
prorated over the whole period. Although this practice might be sufficient for routine
reporting, it is not good enough for production optimization efforts missing aan
opportunity that could save Opex costs. In order to properly understand well
performance, more frequent data and production rate measurements are required from
test separators. Production optimization is performed in two steps, diagnosis and
remedial action.

4.2 PRODUCTION PROBLEM DIAGNOSIS:

In order to diagnose a production problem, it is essential to measure accurately
the production rate of all the produced fluids. Production problems could be a wellbore
completion problem and/or a reservoir problem. Therefore, additional information; such
as, regular pressure surveys of the reservoir pressure have to be included. However, the
primary information needed to diagnose production problems is the producing rates and
OWG ratios obtained from separators. Production data as well water cut (WC), and gas-
oil-ratio (GOR) are important diagnostic tools for selecting problem wells that may
require workovers, or shutting down high water producing wells, or if to switch low
producing wells to water injection, or injecting gas into gas zones to maintain oilfield
energy and production rates. Further, selecting wells that could benefit from AICD
(Autonomous Inflow Control Devises) completion on multiple pay-zone producers to
optimize their production.

4.3 REMEDIAL ACTION DECISION

In order to perform remedial actions and the type of workover required
information is based on the information obtained from measured production data.
Production/reservoir engineers will analyze production and pressure data to select the
appropriate remedial action or well workover. This action could include isolating or
cement squeeze a producing interval or other actions, or the use of Inflow control
devices (AICD’s) to manage the production of producing zones, being a very effective
technology in reducing production of unwanted fluids in an oil well blocking or reducing
gas or water zones, or decisions regarding injection polymers of gel to seal off zones
causing water or gas coning.

4.4 OPTIMUM SEPARATOR MEASUREMENT PERIOD

Due to the traditional high cost of the service, small operators only used the fluid
separation measurements when forced to do so to report to the government or partners
every 3-6 months and averaging the data throughout. Large operators with deep pockets
and with the interest, financial means and technology to use the data to optimize
production did measure each well in an oilfield twice (2) a month and averaging the well
production over the previous 15 days. Ideally it would be preferable to have daily
measurements but to date this was not previously affordable for every operator.
However, this is changing as our separators have become more affordable offering an
affordable 24/365 continuous real time remotely accessible service.

Due to the more affordable service, now small operating companies can have the
same or better service as the large operators, being able to contract a separating service

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 company on a 2 years renewable service contracts to measure twice (2) a month every
well at a fraction of the previous cost, with a better custom made tools and service where
the data is collected and fed directly to a central location, and to a cloud storage where
reservoir engineers can access it remotely on a 24hrs/365days service from anywhere in
the world, enabling small companies to have the data to maximize and optimize their
production.

The affordability of separator equipment and the availability of different

proprietary design software have enabled smaller service companies to offer a more
affordable separator service to clients. Smaller service companies serving local areas for
multiple small and big operators and can be very mobile making the data available
remotely to the engineers. In addition, the service with more compact and truck mounted
mobile units can be done within 8-12 Hours, instead of the previous 3 days each service,
with these units to be able to service 3 times more wells in the same time as older more
expensive units, lowering the service cost. In addition, there are service companies that
offer a monthly service of providing measurements managing multiple cluster wells
making data available real time measurements that are Cloud stored and managed and
supplied to reservoir engineers to monitor remotely their fields around the world.

This fix Cluster separator gathering systems will soon be offered for individual
wells as a direct result of improvements in the technology and affordable manufacturing
of small individual separators for isolated wells making data available on a 24/365 days.

4.5 TO MEET COUNTRY REGULATORY PRODUCTION REQUIREMENTS

Oil and gas production around the world are controlled by Government
Regulatory Agencies (GRA). The main mandate of the GRA is to direct the oil
companies to follow accepted code and regulations to ensure maximum long-term
recovery, and that environmentally safe and good production practices are applied. In
many countries one of the strict requirements by the GRA is to receive regular
production data reports from each well in the district and the country. This data is stored
in a public data base to benefits of the country, and in some countries, this data
becomes either government or/and public data after several months and available to all
the companies to help operators to optimize production from lessons learned of the other
surrounding companies.

4.6. MANAGEMENT OF MULTIPLE OWNERSHIP OF OIL FIELDS

Most of oil and gas properties in the world are either (i) owned by multiple
companies (working interest partners), or (ii) the oilfield has multiple surface partners
sharing the oilfield production on a percent (%) ownership of the surface with one
administrator, or (iii) is owned in a PSA (Production Sharing Agreement where the net oil
production is shared between the government designated company and different
partners that handle their allocated production through and operator or individually.

(i) In this case, the Partner with the majority of the working interest in a property, or
the one that may have the most experience in the area, is usually selected to act
as the Operator on behalf of all the other partners. The other Partners request
that the Operator report periodically the net oil production as well as the water
disposed and gas reinjected or purchased for other parties, and they can do this
by regularly measure the flow rates and Net gas and oil from each well, using

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 test separators. Based on the production data obtained from the test separator,
revenues are distributed accordingly between working interest partners.

(ii) In this case, the oilfield is over several surface owners that may or may not
include the government, as well as other private farmers that own the deep
rights, and oil companies, that use the subsurface seismically structure mapped
oilfield which is divided based in the percent ownership of the surface. This
seismic structure has to be correlated with the separator data results, as the
downdip owners will be the first ones affected as the wells are depleted when this
happens the Operator has to show all partners in a report what is happening and
how the oilfield is being depleted, and who are the owners affected.

(iii) In this case of the PSA, a government owns a significant percent of the oilfield,
and the Operator, representing other partners require to report to all parties, not
only the net production they are obtaining, but they need to prove that they are
maximizing the oilfield production over a long period, and that they are not
overproducing the field shortening the oilfields life and leaving oil in the ground.
They have to report what they are doing with water and gas injection, and to
show against a simulated production model what is happening with what they are
doing, and how it is affecting an oilfield. If they require Capex for workovers, they
require to prove with facts why they need it and what production increase will
result with the investment in workover. All this information is based in getting
regular pressure and oil and gas production data, through using separators.

4.7. TO MEET PARTNER GOR AND FISCAL ROYALTY PAYMENTS

Governments and GRO (Gros Overriding Royalty) partners, rely on
Royalties per each net barrel of oil produced for payments and taxes payable
and demand accurate net oil production delivered. Governments use this data to
offer certain incentives for low producing or mature wells. Banks will like to have
this historical data together with reports of production, to evaluate the actual
asset value of the remaining recoverable oil when companies request corporate
loans. When this data is not available, Banks tend to use the lowest risked asset
value to determine the risk of payment, therefore it is advantageous for the
companies to be able to show their accurate measurements. Accurate reporting
of production of liquids and net oil and gas being produced and delivered and
sold can be tracked and benefits all parties involved;

CONCLUSION;
Our company Petro Management Group (PMG) in Calgary, Canada, or through its
local strategic partners in other countries, offers reservoir optimization services through
integrated operations management services and using the data to build a reservoir simulation
model to find the best optimal way to produce and control the model by receiving critical daily
data from the wells. For any questions in this article please use email
andrew.gittins@petromgt.com or saad@petromgt.com

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Calgary, A.B. T2P 3N2 pmg@petromgt.com Fax: (403) 216-5109