Shell Exploration & Production

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Hydrocarbon Allocation Awareness Training

Welcome to the first of the Hydrocarbon Allocation Awareness training modules.

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Introduction to HCA

Introduction to HCA

EP Learning and Leadership Development

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Slide no 2

Introduction to HCA

EP Learning and Leadership Development

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Module Aims

1. 2. 3.

To explain what allocation is To explain what Hydrocarbon Allocation means To explain why we have to allocate

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Slide no 3

When you have completed this module, you should be able to do the following: Explain what allocation is, Explain what Hydrocarbon Allocation means, Explain why we have to allocate.

The second module in this awareness training covers basic terminology should you be unfamiliar with any of the terms in this presentation.

Introduction to HCA

EP Learning and Leadership Development

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Agenda
What is Allocation? What is Hydrocarbon Allocation? Why do we need to Allocate? Why is it important?

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Slide no 4

Let us first look at what allocation is

Introduction to HCA

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What is Allocation ?
A1 A
Concession A

Production Allocation is the Production Allocation is the splitting of accurately measured splitting of accurately measured total production back to the total production back to the individual wells and reservoirs individual wells and reservoirs that produced them. that produced them.

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B1

Concession B

Fiscal Production Sales Allocation is the splitting Sales Allocation is the splitting of fiscal sales amounts back to of fiscal sales amounts back to the individual companies that the individual companies that produced them. produced them.
Slide no 5

Allocation is the process of allotting portions of an amount back to contributors of that amount. It can be split into two types; production allocation and sales allocation. Volumes are only measured accurately in the terminal or at the sales point. Production is then calculated from these accurately measured volumes. Production allocation is the allocation of production to fields, wells and reservoirs, and sales allocation is the allocation of sales volumes to companies.

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Introduction to HCA

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What is Hydrocarbon Allocation?

M M

HYDROCARBON ALLOCATION

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Sales

Production

Waste

Emissions

Entitlements
Slide no 6

Hydrocarbon Allocation transforms data from the production process into information for different stakeholders, such as reservoir management, forecasting, partners, customers, and the government. This includes using data from the reservoir, wells, stock tanks, and tankers or pipelines. It then processes this data to produce reports that contain sales, production, waste, emissions, and entitlements information. This involves activities such as Allocation, Reconciliation and Balancing. These terms will be explained in the next module. It also involves ensuring rules and regulations laid down in sales contracts and concession agreements are adhered to. Sales data includes information about how much production actually passes through the custody transfer point, and provides information to finance about how much to invoice the relevant buyer. The MRPW is part of production allocation it stands for the monthly report of producing wells. Similar reports exist for reservoirs and injection systems. Allocated volumes per well and reservoir are used by reservoir management, as will be highlighted on on the next slide. Waste and emissions reporting provides information about the efficiency of production process and fulfils any governmental requirements. Companies are entitled to lift production from terminals based on: their share of the production, their entitlement carried over from previous months, and contractual rules, such as those specified in production sharing agreements. Hydrocarbon Allocation includes calculation of the entitlements, as indicated by the pie chart on the stock tank. However, sometimes the contractual rules are very complicated. For example, in Production Sharing Contracts the entitlement takes into account recovery of capex, opex, and the price of crude or gas. In these cases, Hydrocarbon Accountants within Finance will calculate the entitlements.

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Reservoir Management

Pi

Build up Plateau

Decline

Pi Reservoir pressure Water cut Produced GOR Rsi Oil rate

Produced GOR

Oil rate Rsi

Reservoir pressure Water cut

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First oil

Time (years)

First oil

Time (years)

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Slide no 7

Reservoir Engineers have different models for different drive mechanisms. In order to calibrate the models and identify which model is valid, production data is required. This includes the total volumes produced from and re-injected into reservoirs. It also helps to monitor for changes in reservoir characteristics, and to check that production policies are being adhered to. This diagram shows how historical oil rate, watercut, GOR, and reservoir pressure, could be used to confirm or reject possible scenarios for reservoir drive mechanisms.

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Production Allocation (to Wells & Reservoirs)

5. Allocated Volumes / Reservoir DATA 4. Allocated Volumes / Well 3. Allocation Method

Split Factors

1. Well Production Volumes

2. Fiscal Production Volumes

PRODUCT

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Reservoir

Wells

Stock Tanks

Export

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Hydrocarbons Flow Path Data Flow Path

M M

Non-Fiscal Metering Fiscal Metering

Slide no 8

Lets look at how production should be allocated back to wells and reservoirs. In an oil system, hydrocarbons flow from the reservoir to the wells, on to the stock tanks, and then are exported. Volumes are measured, or calculated, at various points in the process. Sales are measured by meters referred to as fiscal meters, which are considered accurate. To allocate oil production from the stock tanks back to the wells and reservoir, we follow a 5 step process. The data flow path is indicated with red arrows: 1 Determine the well production volumes - if wellhead meters aren't in place, these volumes must be estimated, either by testing the wells at regular intervals or using a data driven model like Production Universe. 2 Determine the fiscal production volumes, from sales, changes in stock etc. 3 Choose an allocation method to allocate the fiscal production back to the wells, via any intermediate data points. The most common allocation methods use a mathematical process called reconciliation to do this . 4 Determine these allocated well volumes. If reconciliation has been performed, this is done by multiplying the unreconciled well volumes by the appropriate reconciliation factor. 5 Determine the allocated volumes per reservoir by multiplying the allocated well volumes by split factors. Split factors and reconciliation are covered in more detail in a subsequent awareness module. From this schematic we can see that production allocation is a two-way process. First, the product flows from reservoir to stock tank, generating measurements along the way. Secondly, the allocation data is calculated from fiscal meter to reservoir using the measurements from the first step.

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Why do we need to Allocate Production ?

3 phase flow from wells cannot 3 phase flow from wells cannot be measured accurately be measured accurately

Measured Accurately Measured Accurately Production from Reservoir Production from Reservoir Not measured Not measured

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Increasing uncertainty in measurements

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Slide no 9

Down-hole meters to measure production from reservoirs have not been installed in many wells. Water, oil, and gas are produced commingled from each well and it is not economic to continuously and accurately measure this multi-phase well production. Multi-phase meters are not very accurate and are expensive. So we can only accurately measure single fluid phases, i.e. oil, water, and gas, after they have been separated and conditioned, such as sales gas and oil, and the stock in the terminal. Therefore we allocate and reconcile to improve the accuracy of the volumes produced from each well and reservoir.

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Sales Allocation
Several Parties Buyers Pipeline / Platform Operators Shippers Agreements between Parties Transport Agreement Sales Agreement
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Sales Allocation Balancing Volumes Calculating Relevant Volumes Monitoring Volumes

Slide no 10

In most cases, sales allocation only applies to gas systems. A good example of this is a pipeline system and gas processing plant, delivering treated gas and condensate to buyers, where there are several companies producing into the system. The gas sold at the end of the pipeline has to be allocated back to the companies. There are several parties involved in sales allocation; the buyers, the pipeline and platform operators, and the companies who own a percentage of each field, known as shippers. Various agreements exist between these parties, such as transport agreements and sales agreements. Transport agreements cover how shippers pay the pipeline operator for the volumes they produce through the pipeline. Sales agreements exist between the shippers and the buyers and cover prices and procedures that must be followed. Sales allocation involves keeping track of the volumes that have been requested, produced, transported and delivered. It also involves the calculation of relevant volumes and insuring contractual requirements are being met. For example, a shipper may borrow a volume from stock in the pipeline, or from another shipper, in order to meet the sales nomination. Therefore they will have to pay it back at a later date. Moreover, volumes must be monitored to avoid incorrectly allocating sales back to a company. The sales agreements cover how allocation is done and how under- and over-deliveries should be handled.

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Why is Hydrocarbon Allocation important?

M M

HYDROCARBON ALLOCATION

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Sales

Production

Waste

Emissions

Entitlements
Slide no 11

In summary, Hydrocarbon Allocation provides information for the following: 1 Finance and partners are provided with sales, volumes transported, and production volumes, to calculate how much to invoice, tax, and pay in royalties. 2 Allocated production volumes per well and per reservoir are provided to calibrate models for forecasting and reservoir engineering. 3 Monthly and sometimes daily reports are provided to meet government regulatory reporting requirements. 4 The data is also used in processes to reduce waste, emissions, and deferment. 5 Tanker scheduling, Partners and Third Parties are provided with entitlement volumes so that they can plan to lift these volumes from the terminal.

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Introduction to HCA

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Module Aims

1. To explain what allocation is 2. To explain what Hydrocarbon Allocation means 3. To explain why we have to allocate

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Slide no 12

This brings us to the end of the module. You should now be able to do the following: Explain what allocation is, Explain what Hydrocarbon Allocation means, Explain why we have to allocate.

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The End

This is the end of the first Hydrocarbon Allocation Awareness module. If you are still unsure about content that appeared in this module, you can go back to any of the slides. Otherwise, you should now continue with the next module.

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