Allocation (oil and gas)

In the petroleum industry, allocation refers to practices of breaking down measures of quantities of extracted hydrocarbons across various contributing sources.

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.

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)[citation needed] and a licensee to share investment costs, operational costs, and income from the oil field.

[19] Ownership allocation is also used to denote the income distribution from extracted hydrocarbons on each partner of a licence or joint business arrangement area.

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.

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.

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.

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 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.

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.

[28] Transparency, fairness and compliance with audit requirements are fundamental criteria for the design of allocation practices and methods.

The principles states the units and measurement types used in allocations, i.e. where to account mass, volume, molar or energy balance.

Available meters in the market are characterized by properties such as accuracy, operational rangeability: flowrate, viscosity, velocity, pressure and temperature conditions, durability and demand with respect to calibration and monitoring, the ability to withstand contaminants, injected chemicals, salty and acidic environment.

[35] For the application of allocation measurements, multiphase flow meters have been adopted, especially for subsea production systems.

However, a set of methods and techniques that aim to provide estimates for flows, are adopted by the industry to solve allocation problems.

Gas chromatography and isotope analysis are the known methods that are used for determining the characteristics of hydrocarbon material samples.

[36] The method is also named oil fingerprinting, and uses data about the chemical and isotope composition of liquid and gas flow for each contribution that is collected.

Samples from each contributing stream is parsed, and fingerprints established, for example by using whole-oil gas chromatography methods.

[13][15] Moreover, the adoption of fingerprinting is widely spread geographically, it includes North America and the Middle East.

[39] Ensemble based data assimilation methods are among available techniques for back allocation to reservoir formations.

This method combines measurements taken at different times using a probabilistic dynamic model for the production type curve.

When a fluid stream is owned by a compound ownership, each owner's equity is allocated in accordance with their share.

For joint venture contractual arrangement with fixed equities, allocation is in the proportion of their share of ownership.

Figure 1: Illustration of meter setup in allocation problems, simplified for clarity. A host field "A" processing plant separates, processes and exports hydrocarbon flows from field "A", and two satellite fields "B" and "C".
Legend: Red M is custody transfer meter, black M fiscal meter, gray M indicate optional allocation meter. [ 29 ]
V-Cone Flow meter with raised face weld neck flanges
Figure 2: Periodic well tests on the production plant is the conventional way to get an estimated or theoretical production contribution per phase fraction per well per month. This plant is receiving a multi phased flow of oil and gas from many wells via a manifold. Flow from one well at a time is taken to the test separator (shaded). The output flow rates are measured for each phase fraction.