Putting information TO WORK

Maximizing functionality with a producer services module

Matt Frye, OpenLink - Houston

Producers of natural gas and crude oil can easily find themselves inundated. They are faced with the daunting task each month of managing ownership changes in their producing properties, changing marketing arrangements, and calculating estimated and actual wellhead volumes to the custody transfer point for sales. Keeping track of which owners are electing to participate in balancing each month, along with their rolling balances, is also necessary when allocating production volumes available for sale.

As if that wasn’t headache enough, managing other adjustments to marketable volumes like PTR (plant thermal reduction), lease use, flash, etc., consumes precious time, and causes serious volume imbalances if handled incorrectly. In addition, aggregating wellhead volumes to the custody transfer point on the pipeline is a required task, whether the company is marketing its own production, or outsourcing the scheduling/marketing functions to a third party.

Calculating a valid price, net of applicable deductions (netback price) to pay interest owners after the actual volumes, prices, and transportation/processing fees/losses are known is a very burdensome, yet extremely important task. Being able to produce supporting information in a timely manner on how the netback price paid to interest owners was derived is critical.

Traditionally, producers have managed these tasks through a combination of spreadsheets, databases, and paper files with teams of administrators. But recent developments in the application software market should help streamline and integrate these tasks, which should yield further efficiencies for hydrocarbon producers and marketers.

Maximizing functionality with a producer services module

Tightly coupled to the burdens of wellhead accounting are the tasks associated with downstream marketing. New scheduling modules should be unencumbered by isolated, legacy designs. They should be risk-compatible or risk-enabled, as well as seamlessly integrated to front-, middle-, and back-office operations to enable straight-through-processing (STP). Designed and developed to increase productivity and eliminate integration issues, these modern systems allow organizations to greatly improve the efficiency of scheduling-related activities, including but not limited to the management and valuation of storage balances, allocation of best available volumes, and maintenance of a transportation rates.

Such logistics modules offer flexible, user-friendly filtering and query capabilities for nomination management, allowing users to create bookout or back-to-back nominations, paths into and out of interconnections and pools, and movements into or out of storage facilities and park-and-loan contracts.

Users should be able to manage imbalance accounts by transportation contracts (standard or zone-based), and create operational balancing agreements (OBAs) for specific meter locations. Cash-out and non-cash-out imbalance support is also important because proper imbalance positions must be monitored and displayed at all times.

These systems can also provide enhanced and expanded operations capabilities, such as detailed invoice generation and tracking, intelligent support of prior period adjustments, and the capture and management of complex transportation and storage entitlements. Transportation and storage entitlements should be designed within an open, real-time framework to provide robust interface capabilities to external systems.

This framework should also maintain a strong tariff rates database, which contains comprehensive rate structures (including daily and monthly tiers, seasonal-based charges, and mileage-based rates) so that transportation and storage charges can be calculated accurately and seamlessly.

New software, new options

An integrated producer services module provides a rich set of valuable features. It is capable of capturing and managing the division of interest detail, in addition to providing wellhead operator functionality. It can more easily accommodate Joint Operating Agreements (JOA) and Take-In Kind (TIK) marketing provisions, while also aggregating production to custody transfer points.

A producer services module integrated with a scheduling system provides multi-leg path structure and auto-pooling. It provides a direct mechanism for linking production to dedicated sales deals. It is also capable of managing first of the month wellhead volume estimates, managing daily wellhead volume changes, and managing actualization of wellhead volumes.

From a back office perspective, an integrated producer services module makes it much easier to report payables using divisions of interest, and can provide ample reports for payable justification. This system, coupled seamlessly with a trading and scheduling system, uses all pertinent data from transactions held in the database, including physical commodity purchases and sales, transportation, and storage. Also included are all deal fees, transport charges, and fuel losses. The Risk Control / Legal group can configure which pieces of data are used in the netback calculations, via a netback configuration utility.

This utility allows the company to include or exclude those charges deemed non-recoverable from the lease owners and federal/state authorities. This utility is extremely flexible, allowing for future rules/interpretation changes. The netback calculator constructs a virtual pipeline network, based on the nominations from the extract function. Using the rules defined in the netback configuration, the calculator arrives at a netback price at each location in the network. Various reports can then be generated to provide ample justification to the Minerals Management Service as well as interest owners. The seamless integration of such a module makes the functionality of the software complete, and truly allows a company to maximize the return on its investment.

A seamless flow of transaction data

Advanced scheduling systems provide a seamless flow of transaction data, from trading and risk operations to scheduling for next-day flows, or real-time scheduling within some markets. Regardless of the geographic focus, energy producers should have the capacity to customize their module to suit their specific needs.

In the past, companies may have relied on spreadsheets, or internally developed systems to accomplish one or more of these tasks. As companies scale-up through acquisitions and/or internal growth, these outdated tools prove to be ineffective, prone to error, and hard to maintain.

A producer services module that can be seamlessly integrated into a scheduling module is integral to avoid redundant data entry, thus eliminating data integrity issues. For this reason, savvy producers are seeking software that can provide them with functionality that directly addresses their data management, scheduling, and reporting requirements. Today’s software systems allow producers to improve, update and implement risk-compatible front-, middle-, and back-office operations, thereby providing producers with the straight-through-processing tools necessary to streamline all hydrocarbon markets.

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