Three Key Components to Run & Maintain Allocations (Part II)

Three Key Components to Run & Maintain Allocations

We established what constitutes a hydrocarbon allocation calculation, some of the factors that go into creating an allocation scenario, and how scenarios will vary depending on complexity. When it comes to evaluating and selecting a system to run and maintain allocations, there are three key must-haves: flexibility, auditability, and performance. 


This is really the most important of the three components, as flexibility ensures that you can conduct all of your required processing in one system and not have to venture to spreadsheets to handle one-off scenarios. 

This flexibility must come in multiple forms. First, due to the varying nature of available measurement, commercial, and regulatory requirements, there are almost a limitless number of combinations of allocations methods and factors that can be required to accurately process completion level results. You must have multiple options to calculate the basis of allocations, both out of the box and on the fly via custom formulas without having to go back frequently to a software development team to create new options.   

Examples of flexibility in methods and factors include: 

  • Product-specific processing of an allocation scenario, e.g. processing oil before gas 
  • The processing of one scenario based on another, e.g. skim oil based on water production 
  • The ability to accurately trace scenarios where you may produce into one set of tanks but sell out of another (during times of low oil prices) 
  • Allocating more than one set of measurements to the same set of wells, e.g. if you are delivering gas into a gas plant operated by a third party, you will need to be able to allocate both the raw gas delivered to the inlet and the products from the plant tailgate without having to maintain two sets of allocation schemas 
  • Having an unlimited number of tiers within a scenario from the most upstream and downstream measurement points back to the contributing completions. Being able to determine the order in which node in a tier is allocated before another is also a key requirement. And, of course, the allocation scenarios must honor changes in the measurements or number of contributing completions, which means that all set up and applied methods and factors must be date effective. This also supports both the auditability of the allocation schema over time as it changes. 


Much like flexibility, auditability as it relates to allocations can mean more than one thing. At the highest level, it means having the ability to track and report on who changed what and when. Who entered that run ticket and was it on the right tank and right date? As important is who modified the allocation relationships between measurement entities and completions; what were they before and after? Strong alerting or error messaging capabilities based on built-in auditing of allocations as they are processed are also key to ensuring valid results. 

Auditability also means being able to trace the origin of the results of an allocation from each measurement point through each allocation point and back to the source wells. This is critical to having confidence in whatever system you are using and helps lay out the operating conditions of the well. Take gas lift scenarios for example. In short, gas lift enables liquids to be aerated, reduces bottom hole pressure, and allows oil in the formation to flow more freely. A strong allocation system will handle the correct allocation of gas lift whether its source is recirculated or bought from another source. Being able to audit each mcf of gas used for gas lift versus produced, used for compression, sold, etc. is critical both for accounting for the inventory of gas in the formation versus actual gas production, but also to understand the efficacy of the lift on oil production. 


In addition to the accuracy of the allocation results, driven by flexibility and auditability, the time spent in processing allocations is critical. The results of allocated oil, gas, water, and NGLs at the completion level drive decisions across an oil and gas organization daily. This means that as measurements become available for an allocation network, the system being used must be able to process them quickly. Whether it is the results of a set of measurements for today, or the results of statements from purchasers at the end of a month, those who work with allocations are under multiple competing deadlines and need to rely on having those results in a timely manner. 

We explored these topics and more during a recent webinar: The Who, What, and Why of Upstream Hydrocarbon Allocations. Click the link to watch the recording, or click the banner below.  

Related Articles

For Exec-Level Managers and IT Personnel, Communication Hurdles Abound When It Comes To Shift Logs, Shift Handover

In previous blogs , we have examined the communication challenges for operators and supervisors around shift logs and shift handover...

The Problem with Siloed Data in Oil and Gas Reporting

Making informed and quality decisions regarding your upstream oil and gas operation requires timely and accurate data often from different...

The Painful Cost of Non-Integrated Solutions in Upstream Oil and Gas Accounting

One of the biggest challenges facing oil and gas accounting and finance teams is the lack of centralized data –...