In the petroleum industry, Allocation is typically referred to as Production Allocation, which consists of two key components: commercial allocation and technical allocation. Commercial allocation ensures the accurate distribution of revenue and costs, while technical allocation refers to practices of breaking down measures of quantities of extracted hydrocarbons across various contributing sources. Allocation aids the attribution of ownerships of hydrocarbons as each contributing element to a commingled flow or to a storage of petroleum may have a unique ownership. Contributing sources in this context are typically producing petroleum wells delivering flows of petroleum or flows of natural gas to a commingled flow or storage.
The terms hydrocarbon accounting and allocation are sometimes used interchangeably. Hydrocarbon accounting has a wider scope, taking advantages of allocation results, it is the petroleum management process by which ownership of extracted hydrocarbons is determined and tracked from a point of sale or discharge back to the point of extraction. In this way, hydrocarbon accounting also covers inventory control, material balance, and practices to trace ownership of hydrocarbons being transported in a transportation system, e.g. through pipelines to customers distant from the production plant.
In an allocation problem, contributing sources are more widely natural gas streams, fluid flows or multiphase flows derived from formations or zones in a well, from wells, and from fields, unitised production entities or production facilities. In hydrocarbon accounting, quantities of extracted hydrocarbon can be further split by ownership, by "cost oil" or "profit oil" categories, and broken down to individual composition fraction types. Such components may be alkane hydrocarbons, boiling point fractions, and mole weight fractions.
Scope and terminology The term allocate is being used in the sense to denote distributing according to a plan, but the etymology may also be linked to 'earmark'. The term accounting is being used in the sense to denote justification of actions.
In the context of hydrocarbon accounting, an oil field is an area developed for exploration of hydrocarbons from one or more reservoirs in the underground. Sometimes one well extracts hydrocarbons from more than one geologic formation or reservoir, hence it may be useful to divide the oil field and its well streams by formations or layers. More than one oil field may share infrastructure like oil processing units and pipelines. The field activities are regulated by a jurisdiction of a state and a contract of the licence. The contract is a business arrangement for exploration of the oil field between the licensor, (the mineral rights owner, onshore in United States often the land owner, elsewhere often the state possesses the ownership of mineral rights including petroleum reservoirs) and a licensee to share investment costs, operational costs, and income from the oil field. In case of a production sharing agreement, PSA, the licensee will take all development costs and have this capital recovered by "cost oil". "Profit oil" will be shared by licensee and the state. The licensee may be one oil company, or often a group of companies sharing the risks, costs and profit in a partnership, consortium or joint venture. When more than one company is involved, the term "group ownership members" is used, and the business arrangement for petroleum extraction specifies the equity of cost and income for each member company. Where a petroleum concessionary licence system is in use rather than contractual type of petroleum fiscal regime, ownership of extracted hydrocarbons are shared according to fixed equities of each member company.
More specific definitions Field allocation or platform allocation denotes allocation cases where contribution sources are more than one production field or more than one offshore platform, making a commingled flow into a pipeline.
Well allocation is a term used in the case where the contribution sources are production petroleum wells, or any type of injection well.
Component allocation: while the term product allocation is used to allocate the primary product groups like oil, gas or condensate ingredients (phase fractions) to a contributing well for instance, component allocation breaks down and allocate individual alkane hydrocarbons like methane and ethane, to 3 isomers pentanes in a natural gas stream. Components of crude oil streams to be allocated may be split up by boiling point fractions.
Other combinatorics on the allocation term include production allocation, hydrocarbon allocation, pipeline allocation and back allocation. Export allocation denotes the allocation at a custody transfer where production quantities are transferred from an oil field. Allocation at exports decide exactly what quantities each partner of the contract is paid for. Ownership allocation is also used to denote the income distribution from extracted hydrocarbons on each partner of a licence or joint business arrangement area.
Scope Allocation is an ongoing process based on flow or volume measurements, and gives the distribution of contributing sources, often with a final calculation per day, which in turn provides the basis for a daily production report in the case of a field that produces hydrocarbons. Moreover, the allocation process may be designed to split up a flow of multiple products of the individual ingredients or phase fractions, for example when associated gas and water are supplied with a crude oil flow, and each fraction within the commingled flow or storage is allocated between the contributors and its ownership. A traditional allocation practice will execute quantity calculations for crude oil, natural-gas condensate and produced water based on measured results from periodic, time-limited well tests. Natural gas flows from pure gas wells are usually measured continuously at or near the individual wellheads.
Within the wider scope of hydrocarbon accounting; all measurements and parameters used for calculations are being deposited in a data storage, results of calculations along with methods used in calculations, are stored in a manner that is accepted by the internal and external audit. Stored results can be further utilised to optimise the reservoir performance of a producing field, possibly optimising the utilisation in case of a transportation system.
The hydrocarbon accounting process is emphasizing the tracking of all hydrocarbons through flows until a sale to a customer has occurred or hydrocarbons are disposed for including all fluid discharges, vents and flaring of gas, consumption of gas for power production at the facility, and quantities of evaporation from oil storages. Similarly, measurements of injected flow of water and gas into the reservoir through injection wells are being part of hydrocarbon accounting.
Demand for allocation Allocation is commercial rooted in the need to distribute the costs, revenues and taxes among multiple players collaborating on field development and production of oil and gas. There are various incentives for collaboration, one is risk and cost sharing, the practice by issuing licenses for exploration and production to a partnership of oil companies. Another is the aim of improving production efficiency, by extracting from multiple land properties or multiple oil fields by shared arrangement for production, also called unitisation.
Production allocation to wellbore or completion is required for Reservoir Simulation where the dynamic geological model is history matched and used for production forecasting.
History The principle of unitised production, to allow for more efficient development of new exploration areas, was established for the Van field in the State of Texas, US, since 1929, and this practice has been developed to a widespread "hidden law of unitisation" in Texas. Even before 1929, it was early established a practice of sharing equipment to extract from several wells. Today, most US states except Texas, have compulsory unitization statutes. Ownership and extraction of oil and gas in the ground of USA is regulated by the present oil and gas law in the United States.
Sharing risks by a joint venture of several companies to field development, production and transportation, and downstream activities has also been going on for long time, specifically for cross border arrangements. In the North Sea, oil companies shared risk in consortia, and in the initial licence round regulated by Norwegian government, more than half of the licences were awarded partnerships of several licensees. It has also been a clear tendency towards transition to awarding licences to partnerships.
In recent times, cost savings have become an impetus for shared utilisation of infrastructures for processing and transport of oil and gas in areas of extraction from the ground. Methods are being developed to allocate back contributions into commingled streams in pipeline, when oil is being transported from a collection of offshore oil fields to facilities terminals onshore in Asia.
Recent restructuring in this industry for enhanced oil recovery, deepwater field development, and use of subsea production systems that commingled production flows from multiple oil fields, strengthen the requirements for flexible and accurate allocation systems, to keep up with the transition from conventional well flow testing to prevalence of model simulations, virtual flow meters and multiphase flow meters.
Benefits There are multiple operational benefits from allocation. Detailed results from allocation to wells, or even to oil or gas layers per well, are used to manage the production process.
Results from the allocation process are important feed into production reporting to governments and partners, and allocation results may also feed operator's internal systems for product sales, accounting, enterprise resource planning, data warehouse, and management information. Allocation and hydrocarbon accounting are supporting information to the wider business area petroleum accounting, the latter considering life cycle business and financial aspects of oil field operations.
Allocation practices and methods Transparency, fairness and compliance with audit requirements are fundamental criteria for the design of allocation practices and methods. Furthermore, the implemented processes should be cost efficient as well as practical to operate. Requirements for the measurement processes and the associated allocation process are set by legislation and the relevant government authority, contract documents governing the relationship between the operator, partners, licensor, and government may also provide guidelines for allocation. Details of design configuration and setup can be read out of available piping and instrumentation diagrams, process flow diagrams and other documentation showing flow measurement and connections between measuring points via flow from wells to sale points. P&ID showing downhole sensors may also contribute to the design of an allocation process.