The Many Purposes of Hydrocarbon Custody Transfer

November 2, 2015

What’s the purpose of “Hydrocarbon Custody Transfer”? Depends on who you ask!   Custody transfer means something different to everyone.   Ask an Accountant to define custody transfer and they will ask, “Is it for purchase, sale, or tariff?”  Ask someone in a refinery where they take custody, and you might get a puzzled look and be asked, “can you not see those big tanks out there?” Because of the various responses you may get, it’s best to always determine the purpose of the “custody transfer” measurements.  To help with deciphering “custody transfer”, here are some common purposes with their definitions.

Critical – measurements used to produce a determination of quantity or quality, which has the potential of causing a real gain (loss) to the company.

Daily –the daily entry of quantity for the refinery fence line measurement entry within the company material accounting system

Fiscal – the determination of quantity or quality for a point of sale or purchase and one party is the company

FTZ – measurement within a Foreign Trade Zone (FTZ), used for reporting to U.S. Customs.  There are specific requirements as outlined by U.S. Customs

Inventory – determination of quantity held in inventory

Line Balance – measurements used to monitor the integrity of a pipeline

Refinery Fence-Line – the determination of the monthly closing quantity for the refinery fence line measurement entry within the company’s material accounting system.  Considered to be the known quality measurement that which you gauge all others

Secondary – comparison measurement or to serve as a spare should the primary measurement fail

SOX – validation measurement necessary to be reviewed for Sarbanes Oxley compliance.

Tariff – used for the determination of a usage fee based upon throughput volume

So, the next time you ask someone for the custody measurement, think about its purpose… or multiple purposes.

By: John Logsdon