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May 01, 2014
Production allocation: Critical to the upstream energy industry but still mostly a manual process not well understood
By: Dean Forrester

The ability to understand and accurately capture production at every well in an operation is critical to managing production and correctly reporting revenue to partners and government regulators.

At least three sets of key stakeholders rely on production information at a sales meter, well or completion level: Finance requires production volumes from each well to calculate ownership and royalty interest to the owners of the mineral rights. Reservoir engineering updates their reservoir models with the actual production which is calculated from each well. The actual production volumes drive related areas such as decline analysis, reservoir depletion planning and new-well plans. Operations use the production volumes to manage the day-to-day activities against their production plan, with the allocated volumes driving processes such as forecasting, loss management, equipment management, optimization and constraint management.

In an ideal world, every well would have highly reliable meters with low error rates (+/- 2-3%) installed which would be connected via a digital network to a long-term storage device allowing efficient analysis and reporting of the collected data. They would also capture a detailed breakdown of all chemical components, also called “fractions,” of the oil or gas stream from the high-value wells or complex reservoirs. The issue in the real world, however, is that the cost and effort of maintaining a fiscally accurate meter for every well in an operating asset is prohibitively expensive and, in some cases, simply physically impossible.

To address this issue, most operators in the upstream industry have adopted a process known as production allocation. This process—mostly a manual one using spreadsheets—uses mathematics and modelling to calculate the production of each well in a network from a small number of fiscal meters at key points of the production network. These fiscal meters, also called custody transfer points, are where ownership is transferred between commercial entities. Fiscal meters are maintained to a high accuracy and audited regularly by joint venture partners and government regulators.

Once the total flow from a group of wells is established from these fiscal meters, a variety of different calculation methods can be used to apportion, or allocate, production from the meter back down to a given set of wells using one or more apportionment methods. These apportionment methods can be based on a variety of measured parameters such as pressure, temperature and historic well test. The newly calculated volume per well is referred to as the allocated volume.

To accurately allocate, operators take into consideration several different calculation methods: Percentage factor calculation, metered flow, well test and lift curve. The exact method selected for a given field is dependent on the available measurement points present in any given delivery network of piping and meters as well as legal allocation agreements drawn up between partners for how well production is calculated. Unfortunately, the number of metered points in a network always decreases over the life of a field since replacement of a damaged gauge becomes increasingly less economically viable as the field’s production declines. Therefore, allocation calculations must be designed to take into account degrading information quality over time.

While production allocation is a highly manual process today, operators are increasingly moving away from these proprietary manual tools to automated enterprise-strength solutions that provide repeatable, auditable and accurate allocation of production.

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