Calculator: How much do testing errors cost your business?

Posted by Ian Burgess on Sep 14, 2017 3:50:34 PM

The short answer is: a lot. This explains why oil companies everywhere in the supply chain spend so much on quality and measurement, from sophisticated on-line analyzers and automatic samplers at most custody transfer points, to large annual third-party-lab budgets.

It can be easy to start to think of testing as a nuisance rather than a core function - a cost centre rather than a profit centre - since the benefits of better testing may seem indirect on a day-to-day basis. This is a problem because the accuracy of testing depends strongly on how much people care about it: the managers deciding whether or not to buy a more accurate, but more expensive on-line analyzer, and the operators doing manual processes that ultimately determines testing accuracy.

We built the calculator below as a quick reminder of how important testing is. It shows the impacts of error in three common crude tests (S&W, density, sulphur content) on an oil company’s revenues. Estimates are based on the publicized Western Canadian equalization formulas for crude oil and do not consider added costs associated with upset modes or rerouting off-spec product.

 

Sediment and Water
Total Production  1,000,000 BOE/day
Measurement Error  2 % Error
Crude Oil Price USD
Total Cost $ CAD/Year*
*This calculation is based on the USD/CAD conversion rate of $1 USD equal to $1.22 CAD

Explanation: S&W error results in water being paid for at the price of oil or oil being misclassified as water and given away for free.

 

Density
Total Production 0 1,000,000 BOE/day
Measurement Error 0 5 kg/m³ Error
Total Cost $ CAD/Year*
*This calculation is based on the Canadian Association of Petroleum Producers's
  2017 Condensate and Crude Equalization Data.

Explanation: The value of a shipment of crude to refiners depends on its density, with an optimal range between 800 and 825 kg/m3. The density of a crude correlates with the percentage of the most profitable fractions for refineries (e.g. gasoline, naphtha). Measurement error causes shipments to be sold at the wrong price.

 

Sulphur
Total Production  1,000,000 BOE/day
Measurement Error  0.5  wt% Error
Total Cost $ CAD/Year*
*This calculation is based on the Canadian Association of Petroleum Producers's
  2017 Condensate and Crude Equalization Data.

Explanation: Sulphur is a highly regulated pollutant in fuels that refineries take significant costs to remove. The less sulphur in a crude, the more valuable it is. Measurement error causes shipments to be sold at the wrong price.

Topics: BS&W, Sulphur, Density

Interesting Topics in Crude Quality and Measurement

A collection of our industry learnings and insights.

Subscribe to Email Updates

Recent Posts