Horrifying Features of Allocation in Long Pipelines
6 March 2008, AECC
The Third Hydrocarbon Allocation Forum was a really enjoyable event, and we were particularly thrilled that Smith Rea Energy Limited were sponsors of the meeting. In addition, they provided a first-rate speaker in the form of Phil Stockton, Technical Director of SREL. Phil’s presentation is here.
Phil's very well-received presentation discussed the two main approaches to systems of allocation that include long pipelines. The first accounts for each user’s hydrocarbons within the pipeline itself. The second method ignores the transit time in the pipeline and allocates the metered quantities leaving the pipeline based on the metered quantities entering the pipeline on the same day. Using the second approach means that parties will not be allocated precisely what they input to the pipeline on a day, but over a period of time there is an expectation that any daily gains and losses will even themselves out.
Phil examined instances when this is not necessarily true depending on the allocation equations employed. He demonstrated, using simple models and results from a real allocation system, how parties can be systematically under and over allocated hydrocarbons due to the mathematics of the allocation agreement. He went on to discuss the reasons for this unexpected and subtle bias in the allocation system and presented methods to assess the stability of the equations and approaches to eliminate bias.
