American Oil and Gas Reporter - May 2016 - 51

SpecialReport: Compression & Production Optimization

Inventory Measurement
The fundamental operational concerns associated with wellpad tank storage can be categorized as ensuring containment, managing oil and water inventories, and measuring intertank and offlease volume transfers.
Applying wired or wireless sensing technology for continuous and point-level monitoring improves production management
by enhancing operations in all three categories. Continuous insight into actual inventory levels helps avoid reactive operator
events associated with high level alarms, well shut ins, or tank
overfill situations.
Oil losses to water storage tanks and diminished storage capacity caused by excessive water levels in oil tanks are minimized
by detecting oil/water interface. It also validates well production
rates, off-lease transfers of produced water, and tank gauging operations for oil custody transfer.
Integrating this functionality into automated production
management programs has proven to eliminate issues around well
allocation, unaccounted-for or lost production, and production
measurement compliance.
Combining continuous well production flow measurement with
level-based volume inventory has allowed a number of operators
to shift to comingled allocation versus dedicating a line of tanks
to each producing well. The potential reduction in tanks varies

from 20 to 55 percent, depending on the facility architecture. In
one case, well-pad tankage was reduced from 24 to 19 units. Based
on the installed cost of the tanks, piping, valves and monitoring
equipment, this equated to a potential capital savings of $70,000
a pad.
The lack of insight into oil skim in water storage tanks also
can be a reasonable contributor to lost revenue opportunities. Unaccounted-for or unauthorized hauling of produced oil in water
from a multiple-well pad can reach more than $1 million a year
in lost revenue, if not accurately monitored and recovered.
Again using the example of a pad averaging 900 bbl/d in production, a 1 percent loss from oil skim in water storage tanks would
represent nine bbl/d, or $270/day ($98,500/year) at $30 oil,
$450/day ($164,000/year) at $50 oil, and $630/day ($230,000/year)
at $70 oil.
Although manual tank gauging can be a lower-cost alternative for off-lease custody transfer measurement, it presents a number of health, safety and environmental concerns associated with
frequent field trips, working under harsh seasonal weather conditions, and cumulative exposure to volatile organic compounds.
This, combined with sustaining contractual custody transfer measurement uncertainties, is prompting operators to consider lease
automated custody transfer systems as an alternative.
An overall gauging uncertainty of ±1 percent compared with
LACT uncertainty of ±0.25 percent reduces fiscal exposure and
provides a means to validate the measurements against periodic proving. Figure 2B provides the simple payback for a fully
equipped 3.0-inch LACT unit at $50 oil in relation to a 0.75 percent reduction in fiscal exposure against the capital, installed and
first-year proving costs.
Operator feedback on when it is viable to implement LACT
systems varies from 200 to 1,000 bbl/d production, which depends
on actual gauging uncertainty experienced in the field. For example, a gauging error in the 2 percent range reduces the payback for a 500 bbl/d well pad by more than 50 percent.
Vapor Control
Vapor control is a balancing act against the various operating
FIGURE 2B
Example LACT Unit Payback
$450

$400

$350

16
14

$300
Thousands

should be noted that each operation is prone to uncertainty creep
and operational bias, which can lead to a worst-case uncertainty in the 7-16 percent range. One operator's efforts to verify the
extent of measurement variability within a team of gauges indicated volume discrepancies were actually as high as ±8 percent.
Uncertainty in production measurement can represent substantial fiscal risk. Consider, for example, the potential economic impact of a 1 percent error in tank gauging on a typical shale well
pad that averages 900 barrels a day and requires five truck hauls
a day (180 barrels each). At an average oil price of $50 a barrel,
a 1 percent tank gauging error would amount to an annual fiscal exposure of $164,000. At $70 oil, it would be $230,000 a year.
Even $30/bbl would equate to $95,000 on an annual basis.
In one case, a shale field development with 3,000 hauls per
month estimated annual losses and exposure to be more than $19
million.
Deploying tank management software and remote operation
control technology provides the means to automate various operations to manage and minimize production uncertainty. It allows automated integration of truck hauling operations and reporting, well production measurements, level-based gross volume inventory and custody transfer measurements.
In one shale operation, total unaccounted-for uncertainty was
determined to be ±15 percent. Integrating the various monitoring, control and operation components as a system involving
turnkey applications software reduced that uncertainty to ±1 percent after 60 days.
The primary contributors to this improvement were:
* Increased accuracy in level-based gross volume inventory, including shrinkage;
* Timely pay/check haul verifications using flow and level
measurement; and
* Improved allocation of hauled fluids back to the wellhead.

$250

10
$200

$150

$100

$50

$0
500
1,000
Annual Fiscal Exposure

0
2,000
3,000
Simple Payback (months)

MAY 2016 51

American Oil and Gas Reporter - May 2016

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