OTC-26612-MS

The Impact of Measurement Uncertainty on Hydrocarbon Allocation

Alick MacGillivray, TUV SUD NEL

Copyright 2016, Offshore Technology Conference

This paper was prepared for presentation at the Offshore Technology Conference Asia held in Kuala Lumpur, Malaysia, 2225 March 2016.

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Abstract
Uncertainty in the measured flow of oil and gas can create a degree of doubt that will contribute to
significant financial exposure by the operator. It can also lead to significant errors in calculated flows in
allocation systems. This paper demonstrates, using an industry case study, the need for good management
of measurement systems to minimise errors and therefore reduce financial exposure in allocation systems.

INTRODUCTION
Uncertainty in the measured flow of oil and gas can create a degree of doubt that will contribute to
significant financial exposure by the operator. It can also lead to significant errors in calculated flows in
allocation systems. This paper demonstrates, using an industry case study, the need for good management
of measurement systems to minimise errors and therefore reduce financial exposure in allocation systems.
Measurement Uncertainty
The uncertainty of a measurement is the size of this margin of doubt; in effect it is an evaluation of the
quality of the measurement. To fully express the result of a measurement three numbers are required:
1. The measured value. This is simply the figure indicated on the measuring instrument.
2. The uncertainty of the measurement. This is the margin or interval around the indicated value
inside which you would expect the true value to lie with a given confidence level.
3. The level of confidence attached to the uncertainty. This is a measure of the likelihood that the
true value of a measurement lies in the defined uncertainty interval. In industry the confidence
level is usually set at 95%.
That is, a measurement should be expressed in the form
(1)

where x is the measured value, y is the uncertainty interval and z is the confidence level.
For instance, if we say that the result of a flow measurement is
(2)

That means that the true value of the measurement lies between 3.3 l/s and 3.7 l/s 95% of the time.
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Figure 1Graphical representation of measurement uncertainty

Figure 2Graphical depiction of measurement result

The industry standard publication for the calculation of uncertainty is the ISO GUM (The Guide to the
Expression of Uncertainty in Measurement) [1]. The techniques described in this document are applied
specifically to flow measurement in ISO 5168: Measurement of a Fluid Flow Estimation of Uncertainty
of a Flow Rate Measurement [2]. These two documents give a full description of the calculation
techniques used in this paper. Note that unless explicitly specified otherwise, the uncertainties are quoted
to a 95% confidence level.

Hydrocarbon Allocation
The UK Energy Institutes HM96 document [3] describes allocation as a term used to describe the
arithmetic process by which ownership of produced hydrocarbons and water is tracked from the point of
production to the point of sale or discharge. It is important commercially as companies are paid for the
products they are allocated and not what is measured directly. Allocation therefore has a direct impact on
a companys revenue stream and generally encompasses interaction between several business processes
that are usually defined in contracts, operating agreements or by the regulatory authority. Allocated
quantities will include oil and gas sales streams, fuel gas, gas liquids and flare and sometimes quantities
recycled within the production process. For example, in a field delivering 50,000 bbl per day, generating
$5m, a bias of 0.1% in the system would generate $1.5m per annum misallocation. Allocation calculation
methodology is also described in detail in the APIs Allocation Measurement of Oil and Gas, MPMS
Chapter 20 [4].

ALLOCATION CALCULATION METHODS

Two of the most common methods for the calculation of allocated hydrocarbons are:
Proportional allocation
Uncertainty based allocation (UBA)

Proportional allocation
Figure 3 shows a simple flow measurement system comprising three partners with allocation meters.
Each individual stream is comingled into a composite stream which is measured by a high accuracy fiscal
meter. From mass continuity, these figures should balance, but due to significant uncertainties in the
allocation metering there will be an imbalance. That is, the sum of flows 1 to 3 will differ from comingled
flowrate measured by the fiscal meter. The magnitude of this imbalance I is given by equation (3)
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Figure 3A simple flow measurement system with proportional allocation

(3)

where Q denotes the mass flowrate. In proportional allocation, the imbalance is removed by adjusting
the flowrates of the individual streams in proportion to the flows. This means that the allocated flows
now sum to the fiscal flowrate. Each stream j is assigned an allocation factor mj. For proportional
allocation it is given by equation (4).
(4)

The adjusted flow for each unit is calculated using equation (5)
(5)

Note that allocation factors should add to 1.

The proportional allocation method is well established and has been the technique of choice for many
existing allocation agreements. However this technique does not account for the uncertainties inherent in
each of the allocation meter measurements. Therefore unequal uncertainties in the production unit
measurements are not equally proportioned to the units. As a result of this, the method is gradually
becoming less popular due to the inherent weakness of rewarding high uncertainties for a given unit at the
expense of a better instrumented part of the network.
Uncertainty Based Allocation
This method allows the estimated uncertainty from each of the measurements to be accounted for in
the calculations. The allocated flowrate is derived from both the measured flow and its relative uncer-
tainty, therefore accounting for different uncertainties across the production units.

Figure 4 A simple flow measurement system with uncertainty based allocation

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The allocation factor equation here has to account for the uncertainty in the measurement and as such
is a more complicated expression than that for the proportional method:
(6)

where is the variance of the measurement on the jth meter, is the variance of the reference meter
th
and Qj is the flow through the j meter. The first term in the expression assigns each stream a fraction
of the imbalance in proportion relative to the sum of all of the uncertainties of all the meters in the system.
The second term assigns the imbalance due to the uncertainty of the reference meter among the various
streams, each according to its throughput. Therefore a higher uncertainty will mean allocation of less of
the product.

THE MEASUREMENT SYSTEM

This case study involves an allocation system with three separate partners sharing a gas pipeline. The
allocation agreement specified the use of Uncertainty based calculations to apportion gas to each of the
partners. A schematic diagram of the metering system is given in Figure 5. The numbers in the rectangles
are the mass flows for each unit expressed in kg/min.

Figure 5Allocation Metering System for Gas Flow

In this allocation scheme Partner 2 (the operator of unit 2) noticed that they had a significantly higher
uncertainty in their gas flow than the other two. After some investigation they found that the major
contributor to this was significant instability in the densitometer, causing a density uncertainty of 4.5% (at
95% confidence). This was considered to be exposing them financially to a considerable degree. NEL
were contracted to conduct the calculations to investigate the magnitude of this exposure and to
recommend appropriate remedial action. It was decided to evaluate four quantities:
The measured flows
The flows calculated using proportional allocation
The flows calculated using uncertainty based allocation with the original partner 2 uncertainty
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The flows calculated using uncertainty based allocation with the improved (reduced) partner 2
uncertainty
Proportional Allocation Calculations
The imbalance between the sum of the allocation meter flows and the fiscal measurement of the flow of
the comingled streams is given by equation (3)

This represents approximately a 2.25% difference between the sum of the flows and the comingled
stream flow measured by the fiscal meter. The allocation factors are then calculated using equation (4) and
used along with the imbalance from above to calculate the allocated flows for each of the three streams.
These are shown in Figure 6. The number at the top of each of the rectangles is the measured flow. The
numbers below are those calculated by proportional allocation.

Figure 6 Flows calculated using proportional allocation

This shows a significant decrease in the allocated gas, due to the negative value in the imbalance.
Unit 2 Flow Measurement
The gas flow in unit 2 was measured by a Venturi meter. This is a type of differential pressure meter. It
operates on the principle that when a fluid flows through a restriction, it accelerates to a higher velocity,
so increasing the translational or dynamic pressure. Since the stagnation (or total) pressure is conserved
across the restriction, this means there is a drop in the static pressure over the meter. The larger the flow:
the higher the static pressure loss. The mass flow Q (in kg/s) is calculated using equation (7)
(7)

where C is the discharge coefficient of the meter. For a Venturi meter this is typically about 0.995. h
is the ratio of the orifice diameter to the diameter of the upstream pipe. The symbol denotes the
expansibility and is applicable only to compressible flow. The principal sources of uncertainty in this flow
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measurement are the uncertainties in each of the terms in equation (7). These are combined to give an
overall uncertainty in the flow measurement using the budget table in Table 1

Table 1Venturi meter uncertainty budget table with 5% densitometer uncertainty

Each of the terms in equation (7) has an uncertainty associated with it. These figures are estimated from
a range of different sources, such as ISO 5167 [5] the standard for differential pressure meters. Normally
industry quotes these figures to a 95% confidence level. To combine these into an overall figure for the
flow, these uncertainties must first be converted to standard uncertainty values. This is done by dividing
the quoted uncertainty by a coverage factor k (which has the value 2 for 95% confidence). The next stage
is to relate the uncertainty in terms of the measured value, to that in terms of the output quantity (in this
case the mass flowrate). This is done by calculating a quantity known as the sensitivity coefficient c. The
output uncertainty is related to the input value via equation (8)
(8)

These output uncertainties are combined (assuming no correlation) using the root-sum squared
technique. In this method, the output uncertainties are initially squared to calculate variances as demon-
strated in Table 1. These variances are then added together in the right-hand column of the Table 1. The
combined standard uncertainty is given by equation (9)
(9)

To quote the combined uncertainty (in the mass flowrate) to 95% confidence, the combined standard
uncertainty should be multiplied by the coverage factor k 2. For this example the uncertainty of the
mass flowrate is 1.6% quoted at 95% confidence level.

Uncertainty Based Allocation

The following table illustrates the variation of the allocation factor for partner 2 in this scheme.
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Figure 7Allocation factors partner 2 in a three partner allocation system

For proportional allocation, the allocation factors for partner 2 will be less than those for UBA for
flows less than a third of the total. As the uncertainty in the partner 2 flow increases the allocation factors
tend to get larger at lower flow fractions. In section 3.2, it was shown that a density uncertainty of 5%
gave an uncertainty in the mass flowrate of 1.6%. With a flow fraction of approximately 0.4 and an
uncertainty of 1.6%, the UBA allocation factor from equation (6) is 0.7. This is also indicated on Figure
6. Using these figures in an uncertainty based allocation scheme gives the following results for the
allocated flows to each of the streams.

Figure 8 Flows calculated using UBA with higher uncertainty.

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This represents a significant reduction in the amount of gas that is being allocated to partner 2: (210
kg/min). Over a period of time this is a significant loss of revenue.
Conclusions and recommended actions
In this allocation scheme, Partner 2 realised that they were losing money. After the initial calculations,
they discovered that the densitometer was not fit for purpose and should be replaced due to instability in
the instrument causing elevated uncertainties. To reduce the loss of revenue, it was recommended that the
unstable densitometer be replaced by a gas chromatograph (which was available). After the chromato-
graph was installed, its performance was monitored over a month and an uncertainty budget table was
constructed. The uncertainty in the density measured by the chromatograph was recalculated as 0.5% at
95% confidence (instead of 5% for the densitometer). The effect on the overall uncertainty of the flow is
illustrated in the budget depicted in Table 2.

Table 2Venturi meter uncertainty budget table with 0.5% densitometer uncertainty

Adjusting the uncertainty in Table 1 to 0.5% gives an overall uncertainty in the flow of 0.8% at 95%
confidence. Using this uncertainty in the allocation calculation gives the following results for the allocated
flows to each partner.

Figure 9 Flows calculated using UBA with lower uncertainty.

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This decreased uncertainty results in an increase of 98 kg/min of gas allocated to partner 2. The results
of each of the allocation calculations are summarized in Table 3.

Table 3Summary of measured and allocated flows

Partner 1 Partner 2 Partner 3
Flow Flow Flow

Measured 1,761 5,283 6,606

Proportional 1,722 5,167 6,461
UBA (1.6%) 1,755 5,073 6,522
UBA (0.8%) 1,748 5,171 6,432

Financial Impact
To estimate the financial impact of this decision several assumptions have been made. Natural gas streams
are normally mixtures of different gas components, such as methane, ethane and propane. Each of these
components has different energy content or calorific value (usually measured in MJ/kg). Usually streams
from different wells and formations will have different compositions. This becomes a financial issue when
streams with significantly different compositions and, therefore, energy content, are commingled and then
allocated to each partner. In this example, it is assumed that the higher calorific value for each of the
streams (and therefore the commingled stream) is 50 MJ/kg. It is also assumed that the cost of the energy
is $1.10 per therm. Table 4 details the financial savings from stream 2 by reducing the uncertainty.

Table 4 Financial Savings from Stream 2 by reducing the Uncertainty

Flow Difference Flow Difference Energy Flow Energy Flow Finance Finance Finance
(kg/min) (kg/s) (MJ/s) (Therm/s) ($US/S) ($/Day) ($/Year)

98 1.63 81.67 0.774 0.85 73,570 26.8 m

The results show that by replacing the unstable densitometer by a gas chromatograph, the resulting
reduction in uncertainty saves Partner 2 up to $26.8 million per year. This considerable sum highlights the
importance of
Proper periodic maintenance, checking, verification and calibration of flow measurement equip-
ment
The development and maintenance of uncertainty budget tables for each item of measurement
equipment. These should be updated on a regular basis to ensure that they reflect the current state
of the measurement system
This also illustrates the fact that conducting uncertainty analysis on measuring equipment is not an
academic exercise but is in fact a business critical activity, the results of which will feed into strategic
decisions on the formulation of OPEX and CAPEX budgets.

REFERENCES
1. Evaluation of measurement data Guide to the Expression of Uncertainty in Measurement. September 2008
2. ISO, Measurement of fluid flow Procedures for the Evaluation of Uncertainties ISO 5168 (2004)
3. UK Energy Institute Hydrocarbon Management. Guidelines for the allocation of fluid streams in oil and gas
production operations HM 96
4. American Institute of Petroleum MPMS Chapter 20, Allocation Measurement of Oil and Natural Gas
5. ISO Measurement of fluid flow by means of pressure differential devices inserted in circular cross-sectional conduits
running full Part 4 Venturi Tubes ISO 5157.