The custody transfer of product from an oil storage tank affects key stakeholders in unique ways. When product is measured and removed from the storage tank and loaded onto a truck, there are a series of transactions that occur.
The buyer is seeking to verify that what they are purchasing has been accurately measured, the producer needs to receive accurate payment for the product that has been removed, and the landowner needs to receive fair royalty payment for use of the land.
The producer in this value chain has a responsibility to deliver accurate measurement when product is removed from the oil storage tank to begin the custody transfer process.
In addition to measurement technicians needing to be trained on how to produce accurate measurements, production companies also need to focus on how to increase the accuracy of storage tank custody transfer. This objective can be supported through the implementation of measurement Standard Operating Procedures (SOPs).
Why Measurement SOPs to Support Custody Transfer?
Measurement SOPs incorporate the industry standards that guide the measurement of product that is being transferred from an oil storage tank.
Fortunately, producers can look to the API Manual of Petroleum Measurement Standards (API MPMS) for guidance. Specifically, API MPMS Chapter 18.2 identifies the best practice in the custody transfer of crude oil from lease tanks using alternative methods.
The new API standard was published in 2016 to provide producers with guidance on how to take measurements of crude oil from a tank without requiring direct access to a lease tank gauge hatch.
API MPMS 18.2 captures the minimum equipment and methods used to determine the quantity and quality of crude oil being loaded from a tank to a truck — without requiring direct access to a lease tank gauge hatch (the alternative method provision).
The methods and equipment contained in the API standard are grouped by tank zone, trailer zone, and the transition zone. Additionally, the equipment used for measurement is dependent on the existing design of lease equipment, the equipment used to transport the product, or a combination of the two. (For some sites, there may be a need to perform measurement from multiple zones to produce an accurate load quantity and quality.)
The new standard makes provisions for the use of new technology, such as automatic tank gauging (API MPMS Ch. 3.1B) and inline metering (API 18.2 Subsection 10.1.1) to support custody transfer.
The task for production companies is aligning available technology and resources with the API standard, then implementing procedures that support the safe, accurate, and consistent use of technology to create reliable measurement of product.
When you have procedures in place to guide measurement, then procedures provide consistency in how the measurement is performed, and consistency provides accuracy. When accuracy is achieved, then stakeholders involved in the custody transfer of oil gain confidence that they are being treated fairly in the transaction process.
Custody Transfer in Alignment with BLM Onshore Orders
If your company is involved in the production of oil and gas on federal or Indian lands, your measurement SOPs will also need to reflect the standards contained in the BLM Onshore Orders.
Aligning with the BLM Onshore Orders is particularly important because the BLM is focused on reducing uncertainty of measurement to increase the fairness to stakeholders.
When thinking about manual tank gauging, the BLM cited a statistical analysis that manual tank gauging uncertainties range from 0.6 to 2.5 percent depending on the volume of oil removed from the tank at the point of sale. This can result in thousands of dollars in losses or discrepancies on a daily basis. Taken over a full year, this can result in hundreds of thousands of dollars of loss or dispute.
When the BLM published revisions to the Oil & Gas Measurement Regulations (43 CFR 3170’s) for conducting oil and gas operations on federal and Indian lands, the BLM set out to standardize practices to create consistency in how measurement is performed across a wide range of land areas and operating conditions in order to reduce uncertainty.
In the published final rule, the BLM set a threshold of 1.5 percent uncertainty, reflecting the high-average calculated uncertainty for a typical truck load-out by tank gauging. The BLM said they believe this is representative of general onshore operations and is an appropriate threshold to use in the rule.
As the industry moves toward more reliable, alternative methods of performing measurement at the custody transfer point, the role of LACTs (Lease Automatic Custody Transfer Unit) has become increasingly important when operating on federal and Indian land.
Included in 43 CFR 3174 (Measurement of Oil), the BLM outlined the general requirements, components, and operating requirements used in an LACT system.
- General requirements include the minimum standards for how a LACT system is constructed, operated, and proven, plus how measurement tickets are completed.
- Components include the minimum requirements for equipment to be used (e.g. PD meter or Coriolis meter), electronic temperature averaging devices, and meter back pressure devices.
- Operating requirements include minimum standards for extraction probes, oil sample tests, composite sample containers, determination of net standard volume (NSV), and more requirements.
For producers on BLM-regulated lands, measurement SOPs should include procedures for how to meet the minimum requirements for operating an LACT system. This will help support custody transfer through the reduction of uncertainty in measurement.
Work with GCI to Implement Measurement SOPs
Whether your company uses manual tank gauging, alternative methods, or a combination of both, measurement SOPs can help your personnel perform their tasks in a safe and consistent manner to achieve accuracy.
Gas Certification Institute (GCI) workers with oil and gas companies to implement measurement SOPs to support custody transfer from the storage tank to the buyer at the start of the transaction.
We start with measurement templates that address the most common procedures to include in the measurement SOPs. We then adapt the templates to your resources, personnel, and activity to produce SOPs specific to your company.
The measurement SOPs allow your company to achieve operational standards, establish the credibility of measurement, validate the integrity of procedures used to generate measurement, and increase your company’s legal compliance with third-party contracts and the BLM Onshore Orders.