New Paradigm Engineering Ltd., the Centre For Engineering Research Inc. and a consortium of over 35 oil producers and equipment suppliers are now into the 5th year of a joint industry project on downhole oil/water separation. After three prototype trials and over 15 commercial fields trials, downhole separation has shown itself to be economically very attractive in numerous field trials and potential field applications around the world. While reduction of water production has long been a goal of the oil industry, the economics of reducing water at source still appear to be poorly understood. Often this may be due to the way in which costs are tracked, however, generally the low degree of emphasis placed on water management activities is more likely to blame. In Western Canada, the volume of water produced from oil wells is more than six times the average volume of oil produced and surface water handling costs often exceed $3/m3($0.50/bbl) of water. As a result many wells are shut-in and abandoned, because they do not produce enough oil to cover the costs of water production.

This paper will look at economic impacts that can be directly attributed to water production and which affect producing rates, reserves, capital expenditures and operating costs. Some of the potential impacts of DHOWS technology on those costs will also be considered.


Many companies in the Western Canadian Oil & Gas industry use rough economic or performance indicators to benchmark themselves against their competition. The indicators include: operating cost/bbl of oil; finding cost/bbl of reserves; reserve replacement ratios; return on capital employed; drilling cost/meter of depth; etc. While all these indicators have their uses, it is possible that a significant indicator of relative corporate performance might be the average cost of handling water. After all, more water is handled by the oil industry than oil, and, to a large degree, the amount of oil produced from a given reservoir is often most strongly correlated with how the water is handled than in how the oil is found or produced.

As the primary displacer of oil from petroleum reservoirs, water has both positive and negative impacts on the oil production. To allow oil to be produced from a given pool, something must come in to displace it In areas where regulations and good production practice do not allow the reservoirs to fall below their bubble point, and no significant natural gas cap exists, the displacement fluid is almost always going to be water. If a natural source of water does not provide pressure support for a pool then water must be added to the reservoir. Therefore, water is usually present in the vast majority of fields producing oil and the oil would not be produced in any significant amounts without it.

At the same time the relative permeability and general flow characteristics of water in an oil reservoir, mean that water, when present, is going to find its way to a producing well long before all of the oil has been produced.

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