Best Practices in Hydrocarbon Accounting: SPE Moscow Section April 14, 2009

Best practices in
hydrocarbon accounting
SPE Moscow section

April 14, 2009
Business needs for Upstream
2 Best practices in hydrocarbon accounting © 2009 Deloitte & Touche Regional Consulting Services Limited
Business needs – Production
There are three basic business needs covered by the

hydrocarbon accounting system in Upstream:
Management and Reliability in production data Government and

elimination of losses for reservoir analysis internal control
(downtime) requirements
bbld
3 Best practices in hydrocarbon accounting © 2008 ZAO “Deloitte & © 2009 Deloitte & Touche Regional Consulting Services Limited
Losses (downtime)
A key component of the hydrocarbon accounting bbld

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
Losses (downtime)
According to our experience in both Russia and other

bbld
geographies with mature on-shore fields:
Russian average International benchmark
5–7% 2–4%
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.
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
Gas balance items:

+ Production
Gas lift + Purchase of gas from third parties
injection well Flaring
– Internal consumption:
– Electric power generation
Compressor – Heaters, boilers, etc
– Volume losses during processing /
compression:
Gas producing
well
– Tons produced
– Losses
– Technological losses
– Flaring
– Gas delivery to third parties
Flaring
Oil producing ± Gas lift
well o Difference (should tend to zero)
Flaring
Separator
Treatment Official Thirs party

plants metering point
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 Management reports
Hand-helds Stocks Injection

Losses Chemicals
Daily reports Compression
Well output Well catalog
Plant deliveries Well engineering
Telemetry Field activities Well status
Third party products Extraction systems
Pressures Well works
Local applications
Fax, email
Operational analysis
Physical scope (example of a complex field)
• Specs
• Controls • Flows Water injection plant
LACT Unit • Flows
• Losses • Pressures Water injector • Stocks
• Tests • Downtimes well • Flows
• Dynamometry • Chemicals
• Downtime
• Well works Oil producing
• Well file well
Satellite station (with

gas separation)
• Daily report
• Pullings • Other reports:
• Workovers • Downtime
• Equipment • Stocks Field offices • Injection
• Hot-oil • Flows • Outputs
• ... • Flaring • Stocks
Interventions Oil treatment plant
• Stocks
• Flows
• Salinity
• ° API
• Controls • Consumption
• Preassures Compressor • Month-end processes
• Downtimes • Various reports
• Well file Gas producing • Data transfer to technical
well • Nomination centers and high-tech
• Group stops • Delivery software solutions
Corporate
• Flows Gas treatment plant • Specs
headquarters
• Consumptions (cryo, dew-point, ...) • Consumptions
Plant products Official metering

(GLP, gasoline, ...) point
• Stocks • Chromatogr.
• Outputs • Flows
• Consumption • Injection
• Deliveries • Adjustments
Our preferred software solution
Energy Components from Tieto
Energy Components product suite
Production Transport Sales Revenue
Gas sales
Production Gas delivery
downtime Sales and
Price
Gas Gas dispatching purchases
determination
Production stream
operations Inventory
Production test Tariffs

Oil delivery
Well and Oil sales Quantities
reservoir Oil Cargo Admin’n
stream
Energy Components
Calculation and Allocation Framework
Operator Company
Well fluid Data from:

•Other company operations
•JVs
•Partners, etc.
Some features ― field layout configuration
Some features ― fiscal allocation
YACIMIENTO 1 BATERIA 1 PTC 1

Referencias
100 Coef 0.919132 Coef 0.919125
91.91 349.27 / 380 441.18 / 480 Producción Teórica
ET-1 Producción Real
80 Coef Coeficiente
73.53 380
ET-2
YACIMIENTO 2 349.27
200
183.83
450
ET-3
BATERIA 2 441.18
70
57.19 Coef 0.817 PLANTA DE
91.91 / 120 ENTREGA
ET-4 100 500
50 Coef 0.980392 ULACT
< 40.85 500 / 510
ET-5 91.91 58.82
60
YACIMIENTO 3 BATERIA 3 50 PTC 2
60 Coef 0.98033 Coef 1.1764
58.82 58.82 / 60 58.82 / 50
58.82
ET-6
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!)
Business processes ~35%

People’s mindset ~50%
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
3) Customization
and testing
1) Field layout
4) Training and
implementation
2) Functional and
technical design
Project management and change enablement
Key factors of success
Integrated project
management Clear vision Top management drives
Manage Lead
Design only once Drive Commit Final users involved
Measure results Communicate, communicate
Train, train, train
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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Best practices in

SPE Moscow section

There are three basic business needs covered by the

Management and Reliability in production data Government and

A key component of the hydrocarbon accounting bbld

• Definition of a corporate library of operational losses

According to our experience in both Russia and other

Russian average International benchmark

We believe that the difference between Russian and international results

Another key component of the hydrocarbon accounting

• Detailed configuration of the layout of each field (from

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

• Customization of the hydrocarbon accounting system

• Dependancy on Excel or systems that are not licensed

Gas balance items:

Treatment Official Thirs party

A process and a tool that manages the flow of

• Well schemes and files

Internet Management reports

Hand-helds Stocks Injection

Satellite station (with

Plant products Official metering

Production Transport Sales Revenue

Production test Tariffs

Well fluid Data from:

YACIMIENTO 1 BATERIA 1 PTC 1

ET-5 91.91 58.82

POZO BATERÍA PLANTA PLANTA DE ENTREGA

Business processes ~35%

• Stop the lying game

Project management and change enablement

Design only once Drive Commit Final users involved

Measure results Communicate, communicate

Train, train, train

• 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

• 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%

• 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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