accounting for Oil&gas production

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accounting for Oil&gas production

  1. 1. IN THE NAME OF GOD
  2. 2. Oíl & gas production chapter 9 Presented by: Mehrnoosh Salehzadeh
  3. 3. Introduction • After ending development phase, the well is placed on production by installing surface equipment that will : • (1) collect and gather the produced emulsion of natural gas, oil, and water from the well; • (2)separate the gas, oil, and water; • (3) treat the gas and oil as necessary to minimize any remaining impurities and bring the gas and oil to a marketable condition; • (4) store the oil briefly prior to sale; • (5) measure the volumes produced and sold;
  4. 4. Production costs (Lifting costs) • Labor costs (direct or indirect) • Repair & maintenance (ordinary or extra-ordinary) • Material & supplies (inventory) • Overhead costs (calculations based on contracts)
  5. 5. Production process
  6. 6. Well head (Christmas tree)
  7. 7. separator
  8. 8. storage
  9. 9. transformation Onshore offshore
  10. 10. Allocation of production costs • • • • • • • • No. of direct labor hours Amount of direct labor costs No. of wells No. of miles driven Barrels of water injected No. of drilling days .. ..
  11. 11. Crude oil production • The volume of crude oil produced & sold is measured in barrels and the quality of that is based on its gravity.
  12. 12. Standards for measuring oil • The worldwide standard for a barrel is 42 US. Gallons of liquid measured at 60 F. • API gravity: a measure of the density of oil based on its specific gravity. • API gravity = (141.5 / specific gravity) - 31.5 API Lighter crude oil price
  13. 13. Some points • BS&W *(Basic Sediment & Water) • Price: * geographic area * the amount of sulfur (sweet,intermediate,sour) * date of sale * API gravity
  14. 14. Dispositions • • • • • • • Outright sale Direct supply Indirect supply Exchanges Frac oil Oil used in operations Un-merchandisable oil
  15. 15. Allocating oil • Oil allocating is typically based on well tests. • Theoretical production: * the amount of oil that was produced from a well based on the tests results & the number of days that the well actually produced during the month.
  16. 16. allocating oil (part2) • If there is an inventory in the tank from the beginning of the period, tow methods can be used: * FIFO (example page 239) * available for sale (example page 241)
  17. 17. Quality of oil • Factors such as the gravity of the oil can materially affect the value or selling price of the oil. • For this purpose, tow methods can be used: (example page 243) * value-on-value method (example page 244) * gravity barrel method
  18. 18. Natural gas • Associated gas: natural gas that comes from oil wells ; * free gas: The gas can exist separate from oil *dissolved gas: The gas can be dissolved in the crude oil • Non-associated gas: the natural gas that comes from gas wells in which there is little or no crude oil
  19. 19. Types of gas • The natural gas is characterized in several ways dependent on its components: • • • • • • Wet gas Dry gas Sour gas Acid gas .. ..
  20. 20. Gas products • Raw gas is processed into various products such as: • • • • • • • Natural gas Natural gas liquids (NGL) Liquefied petroleum gas (LPG) Liquefied natural gas (LNG) Compressed natural gas (CNG) .. ..
  21. 21. Gas production • Gas is generally sold in a different market than oil. • Gas sales are typically of tow types: * long term contract sales (producer & pipeline company) *short term sales: * spot market sales * direct sales
  22. 22. Gas measurement • Many physical factors affect gas volume measurement such as temperature, pressure, compressibility, gravity, etc.. • When measuring gas in Mcf, the standard for pressure is often 14.73 pounds per square inch (psi) at 60 F. • When gas is measured on an energy content basis such as Btu, its not affected by pressure or temperature.
  23. 23. Conversion methods MMBtu: Mcf * MMBtu/Mcf = MMBtu MMBtu * sales price per MMBtu = total sales value Or Mcf : Btu factor per Mcf * price/MMBtu = price/Mcf Mcf * price/Mcf = total sales value
  24. 24. Orifice meter
  25. 25. Turbine meters
  26. 26. Allocating gas • The most commonly used methods for gas allocation involves the use of metering & well tests. • When joint production of oil & gas occurs gas allocation may involve the use of gas-oil ratios (GORs). • Metered gas allocations (example page 250) • Allocation based on well tests (example page 251) • Allocation based on dry gas production (example page 252) • Allocating flash gas (example page 254) • Allocating based on GOR (example page 255)
  27. 27. performance measurement & evaluation • The most popular ratios for companies to evaluate the efficiency of their operating & producing operations are as follows: • • • • Lifting costs per BOE= total annual lifting costs / annual production in BOE DD&A per BOE= total annual DD&A / annual production in BOE Average daily production= annual production /365(days) Average daily production per well= (annual production /365) / net wells • Average production per employee= annual production / NO. of full time employees
  28. 28. Thank you!

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