An Innovative Method to Reduce Electricity Costs ICONICS 2008 Worldwide Customer Summit April 8, 2008 Tim Shreve Manager Automation Technology Group-Systems

Occidental Petroleum Occidental Petroleum Occidental Petroleum Corporation is an international oil and gas exploration and production company. Operations in the United States, Middle East/North Africa and Latin America regions. Oxy is the fourth largest U.S. oil and gas company, based on equity market capitalization. Oxy's wholly owned subsidiary, OxyChem, manufactures and markets chlor-alkali products and vinyls.

Mission for Step-Change Mission for Step-Change For several years, OXY has been on a mission to make a Step-Change in how we operate. Operational improvements provided by automation in the areas of Health, Environment & Safety (HES), production costs and volumes are generally in place at OXY Can a new operational model based on automation be used to revolutionize the way OXY runs its business?

Upstream Oil & Gas Operational Paradigms Some History: (1) Hire a person stay at a well and operate it. (2) Hire a person stay at a small building and operate several wells. (3) Hire a person to drive around in a truck and operate several wells. (4) Acquire some data from the well using automation, to improve efficiency of transmitting information to headquarters

Some History contd: (5) Acquire more data from the well using automation, so the person driving around in the truck can operate even more wells using a central dispatcher. (6) Add control of the well using automation, so you can further segregate the roles, and the person driving around in the truck only deals with problem wells. (7) Centralize control to reduce dispatchers and further leverage the person driving around in the truck. (8) …………….. Upstream Oil & Gas Operational Paradigms

From: Surface Operations in Petroleum Production by Chilingar and Beeson, © 1969 Strategy Upstream Oil & Gas Operational Paradigms

Upstream Oil & Gas Operational Paradigms (Using Different Terms) Some History: (1) Pump By Location. (2) Pump By Route. (3) Pump By Exception.

Upstream Oil & Gas Operational Paradigms (Using Different Terms) Some History: (1) Pump By Location. (2) Pump By Route. (3) Pump By Route using a Computer! (4) Pump By Exception. (5) Pump By Intelligence!

Upstream Oil & Gas Operational Paradigms From: Surface Operations in Petroleum Production by Chilingar and Beeson, © 1969 Strategy

So, an example of using computerized systems to Pump with Intelligence: The single largest operating cost for Occidental in West Texas is Electricity! How could OXY reduce electricity costs without losing production?

First… A Detour Roughly 1/3 of OXYs West Texas energy usage is located within the boundary of ERCOT (Electric Reliability Council of Texas). ERCOT Non-ERCOT New Mexico Louisiana Oklahoma

ERCOT: The grid is an electric island (asynchronous) and is not connected to the rest of North America. Deregulated Electricity Market (competition exists between providers of electricity). The spot price of electricity changes every 15- minutes There are unique opportunities for those who can vary their real-time electric usage!

Beam Pumping Unit with Pump-Off-Controller

Beam Pumps 2,300 total beam wells (~34MW) located within the ERCOT boundary of those beam pumps (~23MW) are operating at any given time Estimates are based on a 20 Hp average operating load per beam well.

Pump By Intelligence Example

Data shown is published 15 minute ERCOT price per megawatt hour (2/9/08-3/1/08) Electricity prices are typically averaging $50-$60/MWh, with minute price spikes each month (~7.5hrs/month). Normal beam pumps run hrs/day, leaving off-line hrs/month so there is plenty of time to catch up after price spikes.

Potential electrical savings appear to be about 10% per well that joins the system!

Pump By Intelligence Example

Data Flow

Results

Results of Pilot 295 wells in the system ~.7MW response for each price event Each event can generate savings of over : $500 When consumers shed load the need to construct additional power generation facilities is reduced.

Questions and Discussion Questions & Discussion