BLM Update of Gas/ Oil Measurement
BLM Update of Gas/ Oil Measurement - PASO â Tulsa
BLM Update of Gas/ Oil Measurement - PASO â Tulsa
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Outline<br />
• Royalty determination<br />
• Volume and quality measurement<br />
• Off-lease measurement<br />
• Commingling<br />
• Beneficial use<br />
• Onshore Order update<br />
• Questions
Royalty Determination<br />
<strong>Oil</strong><br />
Royalty = Royalty Rate<br />
x Volume (bbl)<br />
x Value* ($/bbl)<br />
[API gravity]<br />
*value less transportation allowances
Tank Photo
<strong>Oil</strong> <strong>Measurement</strong><br />
Onshore Order 4:<br />
• Tank gauging<br />
• LACT meters/LACT proving<br />
• <strong>Oil</strong> sampling (S&W and API gravity)
<strong>Oil</strong> <strong>Measurement</strong><br />
Onshore Order 4 implied standards:<br />
• Verifiability<br />
• Accuracy:<br />
• Tank gauging: 0.5% to 1.0%<br />
• LACT: 0.32%
Royalty Determination<br />
<strong>Gas</strong><br />
Royalty = Royalty Rate<br />
x Volume (Mcf)<br />
x Heating Value (MMBtu/Mcf)<br />
x Value* ($/MMBtu)<br />
*value less transportation and processing allowances
<strong>Gas</strong> <strong>Measurement</strong><br />
Onshore Order 5:<br />
• Orifice plate<br />
• Chart recorders<br />
Statewide NTLs for EFC:<br />
• Electronic Flow Computers
<strong>Gas</strong> <strong>Measurement</strong><br />
Onshore Order 5/NTL standards:<br />
• Verifiability<br />
• Accuracy: 3% (greater than 100 Mcfd)
Where is oil and gas measured?<br />
43 CFR 3162.7-2 -3:<br />
“All oil/gas production shall be measured<br />
on the lease…”
“Magic line”<br />
1-1<br />
Wells<br />
<strong>Gas</strong> meters<br />
Federal Lease<br />
pipeline<br />
1-2<br />
NMN-25533<br />
1-3<br />
Magic line: <strong>BLM</strong> considers measurement within<br />
the magic line to be “on lease” with no approval<br />
required
1-1<br />
1-2<br />
No approval required<br />
NMN-25533<br />
1-3<br />
2-1<br />
Federal Lease<br />
2-2<br />
No approval required<br />
NMN-25211<br />
2-3
Where is oil and gas measured?<br />
Lease rights extend to CAs and units
Where is oil and gas measured?<br />
43 CFR 3162.7-2 -3:<br />
“All oil/gas production shall be measured<br />
on the lease [CA, unit]…”
NMN-02666<br />
Fee<br />
25
CA: NMN-98765<br />
NMN-02666<br />
Fee<br />
25
CA: NMN-98765<br />
NMN-02666<br />
Fee<br />
25
CA: NMN-98765<br />
25
CA: NMN-98765<br />
25<br />
No approval required
Exploratory Unit:<br />
WYW-012345X<br />
WYW-11111<br />
Fee<br />
WYW-22222
Exploratory Unit:<br />
WYW-012345X<br />
WYW-11111<br />
Fee<br />
WYW-22222
Exploratory Unit:<br />
WYW-012345X
Exploratory Unit:<br />
WYW-012345X<br />
No approval required
Exploratory Unit:<br />
WYW-012345X<br />
PA WYW-012345A<br />
No approval required<br />
PA WYW-012345B
Exploratory Unit:<br />
PA WYW-012345A<br />
No approval required<br />
PA WYW-012345B
Exploratory Unit:<br />
PA WYW-012345A<br />
No approval required<br />
PA WYW-012345B
Exploratory Unit:<br />
PA WYW-012345A<br />
PA WYW-012345B
Off-lease <strong>Measurement</strong>
Where is oil and gas measured?<br />
43 CFR 3162.7-2 -3:<br />
“All oil/gas production shall be measured<br />
on the lease [CA, unit]…”
Where is oil and gas measured?<br />
43 CFR 3162.7-2 -3:<br />
“All oil/gas production shall be measured<br />
on the lease [CA, unit]…Off-lease storage<br />
or measurement… may be approved by<br />
the <strong>BLM</strong>”
Off-lease <strong>Measurement</strong><br />
• Must have approval<br />
• Approval is discretionary<br />
• Public interest<br />
• Must not affect production<br />
accounting or royalty income
Off-lease <strong>Measurement</strong><br />
Why?<br />
• Well site is inaccessible<br />
• Environmental reasons<br />
• Commingling<br />
• Operator convenience is not a<br />
valid reason
Off-lease <strong>Measurement</strong><br />
<strong>BLM</strong> concerns:<br />
• Access to the measurement point<br />
• Logistics <strong>of</strong> inspection<br />
• What happens between the magic<br />
line and the measurement point?<br />
• Commingling is a separate issue<br />
• Off-lease measurement approval<br />
does not grant <strong>of</strong>f-lease beneficial<br />
use!
Federal Lease<br />
1-1<br />
1-2<br />
NMN-25533<br />
1-3
Federal Lease<br />
1-1<br />
1-2<br />
NMN-25533<br />
1-3
<strong>Gas</strong><br />
<strong>Oil</strong><br />
<strong>Oil</strong><br />
Federal Lease<br />
Not <strong>of</strong>f-lease measurement –<br />
no approval required
<strong>Oil</strong> sales<br />
<strong>Gas</strong> meter<br />
Magic line<br />
Wellheads
Commingling<br />
(surface and<br />
downhole)
Commingling<br />
43 CFR 3162.7-2 -3:<br />
“…commingling with production from<br />
other sources prior to measurement…may<br />
be approved by the <strong>BLM</strong>”
“Source”<br />
• Uncommitted Federal/<br />
Indian lease<br />
• Federal/Indian CA<br />
• Federal/Indian unit PA<br />
Anything with<br />
a case number<br />
(e.g. NMN-<br />
12345)<br />
• State or fee lease
2-1<br />
Federal Lease<br />
2-2<br />
NMN-25211<br />
Not commingling<br />
2-3
Unit Participating Area Approved (NM-45721A)<br />
1-1<br />
Not commingling: no approval needed<br />
Fee<br />
1-2<br />
NM-25533<br />
2-1<br />
1-3<br />
3-3<br />
2-2<br />
3-5<br />
NM-25211<br />
2-3<br />
3-4
1-1<br />
1-2<br />
Commingling + Off-lease<br />
measurement: approval needed<br />
Fee<br />
NM-25533<br />
2-1<br />
1-3<br />
3-3<br />
2-2<br />
3-5<br />
NM-25211<br />
2-3<br />
3-4
What’s wrong with commingling?<br />
Nothing…<br />
…it’s the allocation
NMN-25533<br />
1-2<br />
• Verifiability<br />
• Accuracy: 1%<br />
2-2<br />
Fee Lease
NMN-25533<br />
1-2<br />
2-2<br />
Fee Lease
NMN-25533<br />
20%<br />
1-2<br />
<strong>Oil</strong> rate: 50 bpd<br />
• Verifiability<br />
• Accuracy: ?<br />
V royalty = V measured x F allocation<br />
2-2<br />
1% 20%<br />
<strong>Oil</strong> rate: 50 bpd<br />
Fee Lease
Federal Lease<br />
12.5%<br />
1-2<br />
NMN-25533<br />
Federal Lease<br />
12.5%<br />
2-2<br />
NMN-25211
Commingling<br />
Economics<br />
Env.<br />
Res.<br />
Production<br />
Accountability
Commingling<br />
Economics<br />
Env.<br />
Res.<br />
Production<br />
Accountability
Commingling<br />
Production<br />
Accountability<br />
Economics<br />
Env.<br />
Res.<br />
OK
Commingling<br />
Economics<br />
Env.<br />
Res.<br />
Production<br />
Accountability
Commingling<br />
Economics<br />
Env.<br />
Res.<br />
Production<br />
Accountability
Commingling<br />
Economics<br />
Env.<br />
Res.<br />
Production<br />
Accountability<br />
No
1-1<br />
10,000 Mcf<br />
1-2<br />
NM-25533<br />
1-3<br />
20,000 Mcf<br />
OGOR B:<br />
50,000 Mcf<br />
20,000 Mcf<br />
• Verifiability<br />
• Accuracy: 3%
1-1<br />
10,000 Mcf<br />
2-1<br />
1-2<br />
NM-25533<br />
1-3<br />
20,000 Mcf<br />
OGOR B:<br />
50,000 Mcf<br />
46,000 Mcf<br />
20,000 Mcf<br />
3-3<br />
Fee<br />
CDP<br />
2-2<br />
3-5<br />
NM-25211<br />
2-3<br />
3-4
No verifiability:<br />
• Jurisdiction<br />
• Complexity<br />
• Workload
1-1<br />
10,000 Mcf<br />
2-1<br />
1-2<br />
NM-25533<br />
1-3<br />
20,000 Mcf<br />
OGOR B:<br />
50,000 Mcf<br />
46,000 Mcf<br />
20,000 Mcf<br />
3-3<br />
Fee<br />
CDP<br />
2-2<br />
3-5<br />
NM-25211<br />
2-3<br />
3-4
Downhole<br />
Commingling
Beneficial<br />
(royalty-free)<br />
Use
On what<br />
production is<br />
royalty due?
“Royalty is due on the amount or<br />
value <strong>of</strong> the production removed or<br />
sold from a lease [CA, unit]”<br />
- Section 17, Mineral Leasing Act
“Magic line”<br />
Federal Lease<br />
NMN-012345<br />
$<br />
Well #1<br />
Magic line: It’s where production becomes royatly<br />
bearing
“Magic line”<br />
Federal Lease<br />
NMN-012345<br />
41,000 Mcf<br />
Well #1<br />
How much gas was removed from the lease?<br />
Royalty is due in 41,000 Mcf
Federal Lease<br />
NMN-012345<br />
$<br />
41,000 Mcf<br />
Well #1<br />
How much gas was removed from the lease?<br />
OGOR B ‘01’ = 41,000 Mcf
“Magic line”<br />
Federal Lease<br />
NMN-012345<br />
$<br />
Production<br />
Equipment<br />
40,000 Mcf<br />
Well #1<br />
1,000 Mcf<br />
How much gas was removed from the lease?<br />
OGOR B ‘01’ = 40,000 Mcf<br />
No approval required
Federal Lease<br />
NMN-012345<br />
$<br />
Production<br />
Equipment<br />
41,000 Mcf<br />
Well #1<br />
1,000 Mcf<br />
How much gas was removed from the lease?<br />
OGOR B ‘01’ = 40,000 Mcf<br />
No approval required
CA: NMN-98765<br />
$<br />
Production<br />
Equipment<br />
100,000 Mcf<br />
5,000 Mcf<br />
25<br />
How much gas was removed from the CA?<br />
OGOR B ‘01’ = 100,000 Mcf<br />
No approval required
Exploratory Unit:<br />
PA WYW-012345A<br />
Production<br />
Equipment<br />
80,000 Mcf<br />
OGOR B ‘01’ = 80,000 Mcf<br />
3,000 Mcf<br />
OGOR B ‘01’ = 120,000 Mcf<br />
Production<br />
Equipment<br />
120,000 Mcf<br />
No approval required<br />
PA WYW-012345B<br />
10,000 Mcf
Federal Lease<br />
NMN-012345<br />
96,000 Mcf<br />
Production<br />
Equipment<br />
Well #1<br />
6,000 Mcf<br />
How much gas was removed from the lease?<br />
OGOR B ‘01’ = 96,000 Mcf
Federal Lease<br />
NMN-012345<br />
Production<br />
Equipment<br />
90,000 Mcf<br />
Well #1<br />
6,000 Mcf<br />
How much gas was removed from the lease?<br />
OGOR B ‘01’ = 96,000 Mcf
Federal Lease<br />
1-2<br />
NMN-25533<br />
Allocation = 50%<br />
Production<br />
Equipment<br />
40,000<br />
Mcf<br />
Fee Lease<br />
2-2<br />
Allocation = 50%<br />
2,000 Mcf<br />
OGOR B ‘01’ = 21,000 Mcf
Can <strong>BLM</strong> approve <strong>of</strong>f-lease<br />
royalty-free use?<br />
Maybe in special cases:<br />
• Equipment cannot be located on<br />
the lease, CA, or unit<br />
• Extreme economic cases
NTL-4A<br />
• Mangles the MLA concept and is<br />
not all that useful for b.u.<br />
• Clarifies types <strong>of</strong> on-lease use that<br />
require approval<br />
• Production from one PA cannot be<br />
used royalty-free in another PA<br />
even if they are on the same unit
Onshore Order Revisions
Revisions proposed for:<br />
• Onshore Order 3 – Site Security, FMP,<br />
Commingling, Off-lease measurement<br />
• Onshore Order 4 – <strong>Oil</strong> <strong>Measurement</strong><br />
• Onshore Order 5 – <strong>Gas</strong> <strong>Measurement</strong><br />
New Order:<br />
• Onshore Order 9 – Beneficial use, venting<br />
& flaring, avoidably lost
Timeline (Orders 3, 4, 5, and 9)<br />
• Complete Internal Drafts: Feb., 2013<br />
• “Surnaming”: March - July, 2013<br />
• OMB review: August - October, 2013<br />
• Publish Draft Orders: December, 2013<br />
• Public comment: Jan. – April, 2014<br />
• Revise Orders: April – July, 2014<br />
• “Surnaming”: July - August 2014<br />
• OMB review: Sept. – Nov. 2014<br />
• Publish as final: January, 2015
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