Don’t blow it with your newly surplused compressor

A guide for getting the most out of your spare iron.

Of all the gas processing equipment out there, compression often represents the larger portion of capital and operating costs. Purchase prices ranging from $1,100 to $1,600 per horsepower are quite common. To producers, this means that dollars tied up in surplus compression can represent missed drilling opportunities.

Selling surplus compression is not as easy as advertising it and waiting for a cheque. The hard part is finding a fit between a compressor’s previous life and subsequent applications. This article attempts to help you maximize your value.

Age and design are main determinants of as-is values. Older grouted-in units are difficult (read: expensive) to resell due to packaging requirements and emissions updates. Newer, modular designs now plied by manufacturers are more attractive, and thus more valueable on the resale market, but age is still a factor.

Background:

The obvious task of compressors is to bring gas from a lower pressure to a higher pressure. This allows you the producer, to move more gas through a smaller piece of pipe or equipment and thus saves you money on processing. Simply put, higher-pressure equipment typically can treat more gas per dollar than lower-pressure equipment.

The downside of this simple rule of economics is that your 100 psig well is going to need a compressor downstream of it to help sell your gas to the local Co-Op, your US customer or your cousin in Ontario.

To achieve this, a number of compressor designs exist. The main designs, in order of typical size and horsepower range, are: screw compressors; reciprocating compressors and finally turbines. I will go into more detail on these designs later.

Compressors are a necessity and will always be a part of your inventory. The unfortunate thing is that gas wells never behave in a linear production pattern. They produce at one pressure for some time and tend to be on a decline from there. As compressors have a limited operating range they may at some time require re-cylindering or outright replacement.

You might own booster compressors to get your lower pressure wells up to a high enough pressure so you can produce into a typically-larger multi-stage unit. These can be screw compressors or smaller reciprocal units with capacities in the 50 MCF to 5 MMSCF/d range and a typical 50-300 HP driver.

You probably also own larger reciprocal units to get your gas pressure up, typically through a number of stages, to pipeline pressures. These units tend to be multi-staged units with capacities in the 1 to 15 MMSCF/d range, and with up to 2500 motivated ponies.

Maximizing Value:

So what do you do with your just-surplus million Dollar, 900 HP compressor? If you’re a typical producer with a unit that can no longer do the job you bought it for, you disconnect the unit, complain about all the hauling costs (these things are heavy!) and put the unit in an accomodating trucker’s yard and forget about it. You may put a tarp around the unit in an effort to keep it looking clean and you make sure you get the operating manual back to the Calgary office so you can sell it to a broker or perhaps trade it in with your favorite supplier.

If you’re a typical producer with a compressor you just built new for a project that unfortunately got cancelled for some reason, you might ask the manufacturer to store the unit for you until you, or they, sell it or find a use for it.

After a year or two plus, you realize no-one has come along to buy it in spite of letting five brokers and all your partners know it‘s surplus and that you’re a “motivated seller”. So what happened?

Here’s what you may have missed in either of the above cases: If it’s a used unit, in order to maximize your dollar, get the people who sold or service the unit to mothball it properly. This means that among a number of other things, they will: oil internals, close off exposed piping, seal exhaust connections and a host of other things specific to each model of driver and compressor that will ensure the unit’s integrity will be the same upon startup as it was when it was shut down. This is best done by the manufacturer’s representative(s) for the simple reason that they know the unit best.

Don’t quit yet: your used unit’s mothballing is not finished. Make sure that you have all relevant documentation; compressor curves; operating manuals, lubricating oil used (some additives don’t agree well with others); report on last overhaul of driver as well as compresssor; all provincial registration documents for each vessel on the skid, including last Ultrasonic Tests; Skid drawings such as Piping and Instrumentation Diagrams, Layout drawings, etc.; spare parts lists; reports on relief valves; running parameters at time of shut-in. Preferably store some of the more relevant information electronically because some of the above will inevitably get lost over the years as the compressor’s ownership changes with each takeover and buyout.

The second case happens when you have to mothball a new surplus unit. This happens due to project cancellations or missed shipping windows on ice roads etc. Typically people will take the time to ask the manufacturer to store it for them, but rarely do they ask about warranty extensions. If the unit was bought new, was never used, but you still took delivery, ask the manufacturer to keep your warranty current. They will often accommodate you. This means they commit to do periodic inspecitons to verify condition and can thus maintain a warranty for 2-3 years beyond the original manufacturing date. Usually there is a price tag involved, but it’s well worth your while. The reason for this is that a new surplus unit without a warranty can be discounted by at least as much as the cost of an overhaul. This is a reasonable standpoint to assume from a buyer’s perspective, so why not make sure they can’t use warranty as a point to negotiate your price downwards?

When putting a compressor in storage, be it a new unit or a used one, be sure to put the unit on timbers or otherwise suitably raise the unit so that it does not freeze to the ground. You should also make sure the unit is stored on a level surface, as not doing so will stress structural, piping and drive connections to the point where the skid will be compromised, causing overhaul costs. Also note that an independent third party inspection will greatly enhance your chances of selling the unit.

You did all the above and your unit still isn’t selling? Maybe you didn’t tell the right broker. After all, a competent re-seller owns software for most common units, and has staff on hand to size and re-size complicated equipment such as compressors. They take into account things like bottle sizing, piping, cooling, horsepower, rod load, re-cylindering, re-staging and a host of other parameters, all of which need to be taken into account when compression equipment is to be relocated.

Only after all these data are integrated can a useful recommendation be made about potential surplus units that fit a job. The range of applications out there is large, so count on 3 months to 2 years turnaround time to sell your compressor, longer if yours is somewhat specifically configured, shorter if the unit is easily modified to fit other applications.

Ask your favorite re-seller for a inventory sheet which would pose all the right questions for an expedited resell. You can use this to send a one-page comprehensive description to all interested parties.