BLM Update of Gas/Oil Measurement

Richard Estabrook, BLM – California State Office (Ukiah)

Petroleum Accountants Society of OklahomaSeptember 9, 2011

Outline• Royalty Determination• Volume Measurement• Heating Value Measurement/Reporting

• Science• Regulations and policy

• Onshore Order Update• Other Pre-Questions (Off-lease msmt)• Questions

Offshore OilOffshore Gas

Onshore Gas

Onshore Oil

Coal

Mining Fees

Other Minerals

TimberGrazing

R-O-W

$billions

Public Land Revenues, FY2010

0 1 2 3

Land Transactions

Royalty Determination

Gas

Royalty = Royalty Ratex Volume (Mcf)x Heating Value (MMBtu/Mcf)x Value* ($/MMBtu)

Lease terms

ONRR

*value less transportation and processing allowances

Royalty Determination

Gas

Royalty = Royalty Ratex Volume (Mcf)x Heating Value (MMBtu/Mcf)x Value* ($/MMBtu)

Lease termsBLM - Onshore Order 5

*value less transportation and processing allowances

ONRR

Royalty Determination

Gas

Royalty = Royalty Ratex Volume (Mcf)x Heating Value (MMBtu/Mcf)x Value* ($/MMBtu)

Lease termsBLM - Onshore Order 5

*value less transportation and processing allowances

ONRR

13,251 Mcf1024 Btu

Well#2-2

NMNM03551

For the month of June, 2009

POMEquipment

129 Mcf(est.)

OIL AND GAS OPERATIONS REPORT PART B – PRODUCTION DISPOSITION

(OGOR-B) OGOR Document Number: 100914190 BLM Case Number: NMNM03551

REPORT TYPE X ORIGINAL MODIFY (DELETE/ADD BY LINE) REPLACE (OVERLAY PREVIOUS REPORT)

MMS LEASE/AGREEMENT NUMBER

AGENCY LEASE/AGREEMENT NUMBER NMNM03551

PRODUCTION MONTH (YYYY-MM) 2009-06

MMS OPERATOR NUMBER 19900

OPERATOR NAME ABC ENERGY

OPERATOR LEASE/AGREEMENT NAME

OPERATOR LEASE/AGREEMENT NUMBER

L I N E

A C T

DISP

CODE

METERING

POINT

GAS PLANT

API GRAV 99.9

BTU 9999

DISPOSITION VOLUMES OIL/CONDENSATE

(BBL) GAS

(MCF) WA (B

1 A 01 0.0 1024 0 13251 0 2 A 20 0.0 0 0 129 0 3 A 0 0 0

TOTAL DISPOSITIONS 0 13380 0 Disposition Codes:

01 Sales-Subject to Royalty (MEASURED) 11 Transferred 20 Used on Lease/Agreement 27 Water Disposal-Other than Transferred/Injection

Volume

Onshore Order 5

Orifice Plate

Chart Recorder

123.9 McfdOnshore Order 5

Orifice Plate

Electronic Flow Computer

Statewide Notices to Lessees (NTLs)

123.9 Mcfd

Heating Value

123.9 Mcfd

Heating Value

Component

MethaneEthanePropanei-Butanen-Butanei-Pentanen-PentaneHexane+CO2N2

Mole %

84.56415.68123.02580.98421.25990.88430.25120.21372.76140.4102

Gas Analysis Report

Location: Tribal 6-22Sample Date: 2011-07-06Sample Type: SpotTechnician: EJ

Heating Value (Dry): 1034.87 Btu/scfHeating Value (Wet): 1016.86 Btu/scfRelative Density: 0.6965

What is a BTU?

BTU = “British Thermal Unit”The amount of heat needed to raise the

temperature of 1 lb of water by 1⁰F

Where does the heat come from?

C

Methane

HH

H

H

Hydrocarbon ComponentsMethane

C

Ethane

C CC C CC CC

Propane

C CC CC CC

n-Butane

C CC CC CCC

n-Pentane

C C C

Propane

Where does the heat come from?

Non-Hydrocarbon Components

• Carbon dioxide (CO2)• Nitrogen (N2)• Water vapor (H20)

1000 Btu1 scf

900 Btu

Non Hydro-carbonsHydrocarbons

Component

MethaneEthanePropanei-Butanen-Butanei-Pentanen-PentaneHexane+CO2N2

Mole %

84.56415.68123.02580.98421.25990.88430.25120.21372.76140.4102

Gas Analysis Report

Location: Tribal 6-22Sample Date: 2011-07-06Sample Type: SpotTechnician: EJ

Heating Value (Dry): 1034.87 Btu/scfHeating Value (Wet): 1016.86 Btu/scfRelative Density: 0.6965

Non-Hydrocarbon Components

• Carbon dioxide (CO2)• Nitrogen (N2)• Water vapor (H20)

Non-Hydrocarbon Components

• Carbon dioxide (CO2)• Nitrogen (N2)• Water vapor (H20) Difficult to measure

Must ASSUME water vapor content

0 ≤ Water Vapor ≤ Saturation

Water Vapor Saturation-is-

the maximum amount of water vapor a gas can hold at a given

pressure and temperature

PTP

F vapwv

)(=

Example:T = 60⁰FP = 14.73 psiaPvap(60 ⁰F) = 0.2536 psia

%74.173.14

2563.0==wvF

0

0.5

1

1.5

2

2.5

Pressure, psia

Wat

er v

apor

con

tent

, mol

e%

0 100 200 300 400 500

Saturation

Water vapor saturation at 60⁰F

14.73

1.74

0

0.5

1

1.5

2

2.5

Pressure, psia

Wat

er v

apor

con

tent

, mol

e%

0 100 200 300 400 500

Water vapor saturation at 60⁰F

0.26

As-delivered

997.4

Wet or Saturated

1.74 982.6

Dry 1000

Btu/

scf

What BLM regulation dictates how to report Btus?

None

Onshore Order 5 III.C.24 – “BTU content shall be determined at least annually…”

ONRR Regulations

30 CFR 1202.152(a)(1)(i) – “Report gas volumes and British thermal unit (Btu) heating values, if applicable, under the same degree of water saturation;”

123.9 Mcfd

Dry

Measured Components

123.9 Mcfd

As-delivered

Measured ComponentsAssumed water vapor

123.9 Mcfd

Wet or saturated

Measured ComponentsAssumed water vapor

ONRR Regulations

30 CFR 1202.152(a)(1)(i) – “Report gas volumes and British thermal unit (Btu) heating values, if applicable, under the same degree of water saturation;”

Onshore Order 5 III.C.21 – “Volumes of gas delivered shall be determined according to the flow equations specified in AGA Committee Report No. 3 [1985]”

AGA Report No. 3 Flow Equation

( ) fwrbf

b

f

bdv ph

GpTT

ZZCYdQ 11

1511.218

4

2

β−=

Relative Density (Specific Gravity)

• No provision in AGA Report No. 3 (1985) that allows Gr to be determined from assumed gas components• Gr is determined from measured gas components• If water vapor is not measured, it is assumed to be zero, which is “dry”

ONRR Regulations

30 CFR 1202.152(a)(1)(i) – “Report gas volumes and British thermal unit (Btu) heating values, if applicable, under the same degree of water saturation;”

How does BLM enforce Btu reporting?

Instruction Memorandum (IM) 2009-186:• BLM compares OGOR Btu with dry Btu on gas analysis as part of all production audits• If dry Btu is not used, turn it over to ONRR

Pre-question

Assuming saturated Btu is okay, should (or could) the Mcf be reported on a saturated basis also?

• Reporting saturated Btu is not ok• No volume adjustments are allowed per OO5 III.C.21

Onshore Order Revisions

Revisions proposed for:

• Onshore Order 3 – Site Security• Onshore Order 4 – Oil Measurement• Onshore Order 5 – Gas Measurement

Timeline (Orders 3, 4, and 5)

• Complete Internal Drafts: Sept. 2011• “Surnaming”: Oct. 2011• OMB review: Nov. 2011 – Jan. 2012• Publish Draft Orders: Feb. 2012• Public comment: Feb. 2012 – Mar. 2012• Revise Orders: Apr. 2012 – May 2012• “Surnaming”: June 2012• OMB review: Jul. 2012 – Sept. 2012• Publish as final: Oct. 2012

Pre-question

Concerned about FMP proposal

• Can’t comment on specifics of proposal

Pre-questionWhat is the procedure for requesting off-lease measurement? What if the purpose for the request is to claim Beneficial Use for Stage One Compression downstream of the current FMP?

• Regulations: Must request and justify• Gail and Virginia gave good guidance for request• Must consider public interest; operator’s economics are NOT justification unless it is related to ultimate recovery

Pre-questionDoes BLM expect companies to notify them when they use gas for drilling operations – assume that the well being drilled is located on the same lease or agreement or Participating Area?

• NTL-4A implies that this does not need approval• Would behoove operator to notify BLM

Pre-questionIn many cases Stage One Compressors are located on the same Unit PA or lease as the producing wells. How should companies report Beneficial Use where the FMP for wells are upstream the compressor?

Well#2-2

NMNM03551

POM Stage 1 compressor

Pre-questionIn many cases Stage One Compressors are located on the same Unit PA or lease as the producing wells. How should companies report Beneficial Use where the FMP for wells are upstream the compressor?

• This is allowed per MLA/Wexpro IBLA case• BLM should require lease use to be measured to

Onshore Order 5 standards

Well#2-2

NMNM03551

POM Stage 1 compressor

Well#2-2

NMNM03551

POM Stage 1 compressor

Pre-questionPlease explain how to allocate Beneficial Use gas used at a gas plant located downstream from the lease or Unit PA? Would BLM accept a plant-average percentage or should the fuel volume include a factor for Btu value and CO2 (and other impurities)?

• This is not beneficial use• Get clarification from ONRR