hydrocarbon accounting

SPE Moscow section

April 14, 2009

Best practices inhydrocarbon accounting

Best practices in hydrocarbon accounting2 © 2009 Deloitte & Touche Regional Consulting Services Limited

Business needs for Upstream

© 2008 ZAO “Deloitte & © 2009 Deloitte & Touche Regional Consulting Services Limited 3 Best practices in hydrocarbon accounting

Business needs – Production

Management and

elimination of losses

(downtime)

bbld

Government and

internal control

requirements

Reliability in production data

for reservoir analysis

There are three basic business needs covered by the

hydrocarbon accounting system in Upstream:

3


Losses (downtime)

A key component of the hydrocarbon accounting

system is the design, implementation and automation of

the management and the elimination of operational

losses (downtime), which includes:

• Definition of a corporate library of operational losses

(with a multi-dimensional hierarchy)

• Design of the data capturing process, root cause

analysis and reporting of losses

• Implementation of actions aimed at eliminating major

types of losses

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Losses (downtime)

Russian average International benchmark

We believe that the difference between Russian and international results

can be explained by two main types of reasons: a) historical, b) current.

The historical reasons have to do with the huge number of low quality wells

that were drilled in the 80’s and earlier. The current reasons have to do

with the lack of a strong management approach to losses elimination,

compared to international peers.

According to our experience in both Russia and other

geographies with mature on-shore fields:bbld

5 – 7 % 2 – 4 %


Production data for reservoir analysis

Another key component of the hydrocarbon accounting

system is the detailed definition (and automation) of all

the algorithms and mechanisms used to allocate

production to wells and layers, which includes:

• Detailed configuration of the layout of each field (from

wells and layers to facilities and plants, including each

intermediate field facility like manifolds, etc.)

• Detailed design of the mechanisms for capturing

product flow data (fluid, oil, gas, water) at each stage

of the layout

• Design and automation of the allocation algorithms for

fiscal production to wells and layers


Government and internal controls

Lastly, it is critical to design the solution in a way that all

reports to both external bodies and internal

departments be made automatically from the

hydrocarbon accounting system. This must be under

auditable conditions and with all necessary tracking

mechanisms, including:

• Customization of the hydrocarbon accounting system

to the requirements of each jurisdiction (country,

region, etc.)

• Compliance with Sarbanes-Oxley or other internal

controls requirements

• Total automation of reports without manual

adjustments

• Auditability for each report (who, when, how, where)


Other common Upstream issues with the hydrocarbon

accounting system

• Dependancy on Excel or systems that are not licensed

• Duplication in manual entries

• Poor historical data

• Inconsistency of master data files

• Poor integration between oil, water, gas solutions

• Focus on data input, rather than analysis

• Lack of tools or mechanisms to identify opportunities for

improvements


Associated gas

Oil producing

well

Gas producing

well

Compressor

Official

metering point

Treatment

plants

Gas lift

injection well

Separator

Thirs party

Gas balance items:

+ Production

+ Purchase of gas from third parties

– Internal consumption:

– Electric power generation

– Heaters, boilers, etc

– Volume losses during processing /

compression:

– Tons produced

– Losses

– Technological losses

– Flaring

– Gas delivery to third parties

± Gas lift

o Difference (should tend to zero)

Flaring

Flaring

Flaring


The solution


What is the solution?

A process and a tool that manages the flow of

production data from wells and layers to plants

and headquarters, allowing operational staff to

be more efficient and top management to better

control the value added by Upstream


Functional scope

• Well schemes and files

• Well tests and production controls

• Well works

• Losses control

• Production accounting and back allocation

• Multi product control (including associated gas)

• Water injection and chemical treatment

• Plant operations (including gasoline, GLP)

• Product deliveries

• Multi-dimensional analysis of the operation

• Statutory, governmental reports


Data capturing options

Internet

Local applications

Fax, email

Hand-helds

Telemetry

Stocks

Losses

Daily reports

Well output

Plant deliveries

Field activities

Third party products

Pressures

Injection

Chemicals

Compression

Well catalog

Well engineering

Well status

Extraction systems

Well works

Management reports

Operational analysis


Physical scope (example of a complex field)

Oil producing

well

• Controls

• Losses

• Tests

• Dynamometry

• Well works

• Well file

Interventions

• Pullings

• Workovers

• Equipment

• Hot-oil

• ...

Gas producing

well

• Controls

• Preassures

• Downtimes

• Well file

Satellite station (with

gas separation)

• Stocks

• Flows

• Flaring

Water injection plant

• Flows

• Downtime

Water injector

well

• Flows

• Pressures

• Downtimes

• Chemicals

Oil treatment plant• Stocks

• Flows

• Salinity

• ° API

• ConsumptionCompressor

• Group stops

• Flows

• Consumptions

LACT Unit

• Specs

• Flows

• Stocks

Plant products

(GLP, gasoline, ...)

• Stocks

• Outputs

• Consumption

• Deliveries

Official metering

point

• Chromatogr.

• Flows

• Injection

• Adjustments

Gas treatment plant

(cryo, dew-point, ...)

• Nomination

• Delivery

• Specs

• Consumptions

Field offices

• Daily report

• Other reports:

• Downtime

• Injection

• Outputs

• Stocks

Corporate

headquarters

• Month-end processes

• Various reports

• Data transfer to technical

centers and high-tech

software solutions


Our preferred software solution


Energy Components from Tieto

http://www.bp.com/home.do?categoryId=1&contentId=2006973

http://www.statoilhydro.com/

http://www.petro-canada.ca/default.aspx


Energy Components product suite

Production Transport Sales Revenue

Production

downtime

Production

operations

Production test

Well and

reservoir

Gas

stream

Oil

stream

Well fluid Data from:

•Other company operations

•JVs

•Partners, etc.

Sales and

purchases

Inventory

Tariffs

Quantities

Gas delivery

Gas dispatching

Oil delivery

Cargo Admin’n

Gas sales

Price

determination

Oil sales

Operator Company

Energy Components

Calculation and Allocation Framework


Some features ― field layout configuration


Some features ― fiscal allocation

YACIMIENTO 2

YACIMIENTO 1

100

ET-1

200

80

ET-2

ET-3

ET-4

<

ET-5

BATERIA 1

BATERIA 2

PTC 1

380

100

70

50500

450

YACIMIENTO 3 BATERIA 3 PTC 2

ULACT

PLANTA DE

ENTREGA

60

ET-6

60

50

441.18

Producción Teórica

Referencias

Producción Real

CoeficienteCoef

58.82

Coef 0.980392

500 / 510

Coef 0.919125

441.18 / 480

Coef 1.1764

58.82 / 50

349.27

91.91

58.82

Coef 0.919132

349.27 / 38091.91

73.53

183.83

57.19 Coef 0.817

91.91 / 120

40.85

Coef 0.98033

58.82 / 6058.82

POZO BATERÍA PLANTA PLANTA DE ENTREGA


Some features ― allocation engine


Some features ― user-friendly interface


How to make this all work?


Real sources of problems (and solutions!)

People’s mindset ~50%Business processes ~35%

Technology ~15%


Some “mindset” issues…

• Stop the lying game

• Don’t set unrealistic targets

• Challenge but don’t be heavy

• Find solutions, not guilt

• Never accept inconsistencies

• Plans are just plans, not a life or death matter

• Understand the “stretch” concept (over target)

• Use more graphics, less tables


The rest is just methodology

1) Field layout

2) Functional and

technical design

3) Customization

and testing

4) Training and

implementation

Project management and change enablement


Key factors of success

Integrated project management

Design only once

Measure results

Train, train, train

Communicate, communicate

Final users involved

Top management drivesClear vision

Drive

Lead

Commit

Manage


Pilot approach – asset based


Recommended features for a pilot asset

Production

• Daily net oil production 20.000 to 200.000 bbl

• Associated gas? Yes

• Water injection? Yes

• Number of final users 20 to 200 users

• Availability of telemetry Preferably, yes


The business case


Quantification – real case (not Russia / CIS)

Production

• Operational losses percentage in volume

• Lifting costs per barrel USD per barrel equivalent

• Efficiency in chemical consumption USD per barrel, dolars in stock

• Water injection uptime percentage in volume

• Workover efficiency frequency, incremental production

Example operational losses

• Annual losses about 35 mln bbl

• Annual production about 1, 000 mln bbl

• Operational losses about 3.5%

Considering our benchmark (2%) and setting a conservative target of 3% (0.5% reduction) we have:

• Incremental production about 5 mln bbl per year

• Estimated netback about USD 10 per bbl

• Business case (losses only) about USD 50 mln per year

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© 2009 Deloitte & Touche Regional Consulting Services Limited. All rights reserved.

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