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The Cost of Oil & Gas Measurement Inaccuracy

If you were to ask the C-suite executives of any major oil & gas corporation what the implications are of measurement inaccuracy throughout the value chain, you are likely to hear some variation on the risk to the P&L. While any oil & gas executive worth his or her salt will keep a keen eye on the bottom line, is focusing on the dollar impact of measurement accuracy shared throughout the organization? In our experience, not often.

In practice, what Trindent has observed is a focus on volumetric gains and losses that are very rarely translated into a dollar gain or loss to the operations team. The danger in this focus on the BBL is that as we move away from monetary losses, we disassociate that loss with its inevitable financial impact.

So, what is the financial impact of small measurement inaccuracies in a typical refinery? The average refinery in the US processes approximately 127,000 BBL/day. Using the 2014 average West Texas Intermediate (WTI) price of $93.26, we can see that a 0.1% mismeasurement of sediment and water would have an annualized cost of $4,322,971. Using the same methodology, a 1° change in temperature or a 1 unit change in API gravity has an annualized cost of $2,161,485 and $864,594 respectively. This highlights the fact that small measurement inaccuracies can have significant financial impact if left undiagnosed.

By: Skye Lee