The below feature was published in the May 2015 issue of Scandinavian Oil and Gas
Sharing is a crucial element in a civilised society. In the oil and gas industry fair shares of hydrocarbons are vital for operators, as a discrepancy could cost millions.
In countries where natural resources are owned and operated by the state, there’s no need to distribute fair shares. But the North Sea has joint venture partners involved across shared assets and oil and gas flowing out of hundreds of wells along a complicated network of pipelines. Increasing subsea production has also added to the complexity.
Oil and gas mix during processing which makes accurate measurement and allocation of oil, gas and water critical for every operator. This helps realise the proper value of hydrocarbon production and lessens the potential for disputes, financial losses and reputational damage. Fastidious attention to detail is vital in recording movement, as well as quality and quantity of the hydrocarbons produced. The falling oil price has made producers even more acutely aware of costs and value for money.
My colleague Darius Carr uses a good analogy when describing our hydrocarbon accountancy business at Accord Energy Solutions to industry newcomers. He tells them to imagine two distilleries - one producing the finest 25 year old Scottish whisky and another making a basic value whisky. Both products are blended and then sold. The value of the basic whisky has gone up during the mix and the value of the diluted malt has gone down. But both want fair value for their contribution. That is allocation in a nutshell – working out peoples’ fair entitlement according to the quantity and quality of the mix.
If you think of the Forties pipeline system, there are over 50 different fields contributing to the oil that leaves Grangemouth, and each company wants to make sure it gets its fair share of the oil leaving Grangemouth. So you have to think about how you track the oil that’s produced from the reservoir all the way through to the oil that leaves on the tanker. That’s what we do at Accord.
We have engineers who are experts in measurement, sampling and analysis. Our chemical engineers understand the processes going on in the platforms - how the oil and gas are separated and how much of the gas is used for fuel. Then the technical parts of the contract are written, establishing how these final products will be allocated back to the fields. We also help design the computer systems that are used to carry out all the calculations, allocating the crude oil back to the field owners.
Risk and Reward
Using an independent business makes sense for operating partners because this guarantees there is no vested interest and that accuracy is paramount in calculations. At Accord Energy Solutions, one of our responsibilities is to demonstrate a clear understanding of the relationship between risk and reward to producers.
With numerous readings there are inevitably discrepancies and our job is to divide those up, using the mathematics of probability to determine what are acceptable discrepancies. This also helps identify uncertainties in the allocated quantities. These are factored into calculations to reach optimal solutions, which operating partners will then agree and sign off. In fact Accord has developed methods of allocation that utilise these uncertainties.
Nowadays growing numbers of North Sea producers are using Uncertainty Based Allocation to optimise product allocation and make the best use of all production data. Security of the information collected during hydrocarbon accounting is a priority for the industry, especially in the light of highly sensitive commercial data about a company’s portfolio of wells and production history. Such accurate and reliable information is of enormous value to operators, as a basis for reporting on reserves, for tuning and examining models of reservoirs and for deciding how best to optimise production. It forms the basis for their interactions between their partners and governments they may deal with.
It’s part of our job to ensure clients understand their own security needs when processing information. That would include ensuring records are available over the long term, that data is only seen by those with permission and that alterations should not be made without proper justification.
To meet all of these needs there is a range of computer systems for hydrocarbon allocation. And as an independent advisor, Accord Energy Solutions is vendor neutral and will factor in operators’ individual requirements for security, speed of access and effective back up of data. What is required is a system which will capture data most effectively and allow transparent calculations.
Just like some structural offshore assets, computer systems in the North Sea are beginning to show signs of age. So once operators realise their systems need modernising, managers need to find a replacement that will bring tangible business benefits.
Due to the complexity and the large scale sharing of assets in the UK North Sea, this is where we do 80 per cent of our current work. We also work in the Caspian region and in Norway, Denmark and the Netherlands. As infrastructure develops in emerging energy economies, there is likely to be even greater demand for the collection of data and the division of value. The team at Accord is ready to meet fresh challenges.
Fair Shares For All
Accord Energy Solutions was the first employee-owned company in Scotland launched from start-up. A desire for fair dealing is embodied in our business structure. As an employee-owned organisation 35% of the company is currently in staff ownership. The longer term objective is to be a 100% employee owned company, allowing all staff to build a lucrative share in the business. Our ethos is that individuals are fairly rewarded for their effort and have a say in how this business is run.
Since the business launch five years ago, Accord has achieved over 90 per cent staff retention, created a culture of nurturing new business practices, built a strong client list and achieved excellent financial results. We work with a range of companies, including oil majors based in the UK, Europe and beyond.
We believe our employee ownership model fosters an environment of cooperation and teamwork with employee owners working together to meet common goals. This is tremendously attractive for both employees and clients, ensuring sustainability and continuity across our operations.
Accord staff like Principal Consultant Darius Carr appreciate working within this employee ownership model: “I think you just feel more involved – part of the team, consulted. Since I have moved here satisfaction is up, happiness is up, pay is up, which is nice, and I always seem to be busy.”
Accord’s Business Support Manager Michelle McIntosh said: “There is a sense of accomplishment watching the company grow and knowing you have been part of that growth. I enjoy working for young companies and being part of this particular business was attractive to me. We are all in it together, so to make it work we have all got to make it work.”