Abstract New Paradigm Engineering Ltd., the Centre For Engineering Research Inc. and a consortium of over 35 oil producers and equipment suppliers have spent the last five years developing and testing a Downhole Oil/Water Separation (DHOWS) process which consists of hydro cyclones and conventional pumping equipment. As of the end of 1996, over 18 field trials have been completed using ESP, PCP and Beam pumping systems and in a wide variety of well configurations and reservoir conditions. In the original prototype ESP application, water reductions of up to 97% were achieved and, generally, water oil ratio (WOR) to surface of two or less is achievable in most applications encountered to date. This paper will provide a brief summary of the field trials completed and the key results achieved, including oil production rate increases, water reduction, predicted increases in economic reserves recovery, and general factors affecting a successful DHOWS application. Also included will be a discussion of some of the challenges which have been overcome and an outline of potential future applications and challenges which will be the driving force behind a wide range of future research, development and field application work. It is anticipated that DHOWS applications will soon change the current paradigms of the industry in relation to what is possible in the area of water management. Introduction As many "oil companies" have begun to recognize, they should really be known as "water companies". The majority of oil wells, especially in the more mature North American fields produce more water than they do oil. In western Canada, the average water oil ratio (WOR) for all the conventional production is at nearly six cubic meters of water per cubic meter of oil. The average WOR in Alberta has been rising as more of the production comes from large mature fields. These water production trends have been relatively consistent in Alberta and Saskatchewan for a number of years (Figure 1) with some dips occurring when oil prices dropped. British Columbia has remained at a consistently lower average WOR for the province. As Alberta's production of both oil and water dominates over the smaller volumes from Saskatchewan and B.C., the total western Canadian WOR trend closely follows the Alberta provincial plot. 1 As water production rises, so do the costs and problems associated with it. Artificial lift equipment, gathering lines, surface facilities, and water disposal systems reach operating capacity limits, which in turn forces a reduction in oil rates. As produced water rates continue to grow, capacity additions to handle more water become difficult to justify, due to the continually declining oil rates. Corrosion rates may also increase and cause increased maintenance and corrosion prevention costs in older facilities and increases in the size, frequency and clean-up costs for brine spills from gathering or disposal lines. Adding to the problem is the pressing need for more disposal wells, more injection pipelines and injection pumps while the revenue stream continues to fall and the operating cost per meters cubed of crude increases.