With the price of crude oil always a concern, consistent accounting errors can cost oil and gas companies millions of dollars each year. That is exactly what has happened in an essential corner of the business — hydrocarbon transfer.
Hydrocarbon operations are spread far and wide, often in remote regions. At each wellhead, storage tank, offshore platform, pipeline inlet or terminal, buyers and sellers gain unattended access to oil supplies through a skid unit in a process known as lease automatic custody transfer (LACT). The unit at which the transfer occurs includes a series of pumps, pipes and valves designed to measure oil quality and purity and to govern the flow rate, operating pressure and other key parameters.
Accounting for these buyer/seller transfers is a far less sophisticated process. Most LACT units have little automation and even less network connectivity.
As a result, this is a common scenario: Truck drivers who load or unload oil at the LACT manually write out a ticket noting the amount of transferred oil and the quality metrics, such as the specific gravity. They then drop these tickets into a mailbox that stands next to the unit.
The LACT owner makes weekly or monthly rounds to retrieve the tickets, which office personnel then process for invoicing. Their work can be complicated by soggy, unreadable tickets, the result of rain at the LACT site or drivers simply failing to seal the tickets in the Mason jar left in the mailbox.
The time lag, the handwritten tickets and other variables create complications for oil companies and their balance sheets. These hydrocarbon-transfer payment cycles can range from 30 to 90 days and contain errors ranging from 2 to 8 percent.
This persistent problem troubled Ted Hutto and Ronnie Riggs, the co-owners of two Texas-based companies that sell, lease and service LACTs, Panhandle Meter and Trigg Technologies. The co-owners were aware of the impact that ticketing errors and invoicing delays can have on customers.
Panhandle Meter and Trigg Technologies serve a wide range of customers, from mom-and-pop trucking companies with fewer than 10 trucks to global oil and gas producers with billions of dollars in revenue and hundreds of trucks.
"Customers across the board struggle with ticketing errors that result from poor handwriting or spelling," said Hutto, noting that only a few of these LACT units are semi-automated with a touchscreen and on-site ticket printing or are linked via supervisory control and data acquisition. "Sometimes, key information isn’t filled in on the ticket."
Incomplete information is a major problem because the billing system for hydrocarbon transfers relies on oil and gas truck drivers accurately and completely filling out tickets. Unfortunately, the drivers have little incentive for such diligence because they are usually paid by the truckload. They earn their commission simply by delivering the shipment, regardless of the specific amount or quality of the oil they deposit or retrieve.
Additionally, most LACT units are located in remote and often harsh environments, far from conventional communication channels. As a result, skids lack the on-site infrastructure required for cost-effective data collection and transmission for invoice processing. The physical distances also increase the cost of supporting and maintain the LACTs.
The co-owners knew their customers would welcome a ticketless solution to improve billing accuracy and timing. In spring 2013, they turned to an automation and information solution provider to help them meet these goals. The outcome quickly ushered the LACT industry from the pre-information age to the height of modern automation and information technology.
Working closely with one of the companies to address the unique challenges with LACT operations, this manufacturer designed and developed a turnkey asset performance management solution, leveraging the Microsoft Windows Azure cloud platform. Data from the LACT’s existing programmable automation controller and information from an Endress+Hauser Coriolis mass flow meter and a sediment and water detector are displayed on a local human machine interface (HMI) or industrial PC screen and transmitted into the Windows Azure cloud.
Once in the cloud, the manufacturer’s software applications combine real-time and historical data into dashboards that provide contextualized information on transfers, overall oil quality and well productivity over time. These measured variables and diagnostics can be seen from any location through a secured Internet connection.
At the LACT skid, truck drivers enter an identification number into the HMI, start the transfer, and watch as their "tickets" are automatically populated when they unload or fill up the tanker with crude. This information is sent to the cloud through a cellular or satellite connection, depending on the LACT location and available cellular networks. An invoice is then immediately and automatically generated and sent to the customer’s address, which is linked to that identification number.
A condition-based monitoring interface and high-water content alarm alert on-site operators and remote stakeholders if any operational issues occur. If water content into the LACT is higher than set parameters (which vary across regions), the LACT automatically turns off the pump. Repeat offenders can have their identification numbers banned from transfers at certain units, providing a new level of quality protection in hydrocarbon transfers.
Using the cloud, everything the truck drivers see and do is also available to verified users in maintenance, operations and management. The immediate impact is to improve invoicing, maintenance and product quality, but the cloud-based solution also opens the door to a vast amount of untapped data that LACT units can offer customers.
In-field testing Trigg LACT skids with the ticketless automation solution reduced the time for some companies’ billing cycles. The accuracy of hydrocarbon-composition information improved compared to the manual systems. Because information is automatically pulled from the LACT control system to populate e-tickets, billing errors are virtually eliminated.
"Considering the vast amount of crude oil that a single LACT skid can transfer, the impact of errors can be truly enormous," Hutto said. "For example, consider an LACT unit with a daily lease production of 3,000 barrels. If the accuracy is off just a single percentage point, the annual loss of revenue at $100 per barrel of oil would top $1 million."
Maintenance is also less costly and timelier. With its proactive alarming capabilities, the Trigg LACT alerts users of urgent situations, via text or email, for immediate response. For example, in field testing a pump motor was shut down remotely when maintenance operators received an alert that the pump energy use parameters had been exceeded. When operators tapped into cloud-based trending capabilities, they determined a strainer filter was wearing, and they were able to schedule a routine maintenance checkup. This prevented a potential pump failure costing more than $5,000 and an unnecessary but costly emergency site visit. The cloud-based system also provides the flexibility to perform system updates or modifications centrally, with immediate impact across the network.
Trending capabilities also allow site and operation managers to better understand the type of oil coming from each well. They can also plan for long-term production across a number of wells, or they can mix oil from different wells to produce a more consistent product.
"Field testing has been extremely successful," Riggs said. "Now that our customers are starting to understand what they can do with this information, they are empowered, and they want more.
"We’ve had discussions about adding tablets and mobile phones or apps to the solution, so truck drivers have a direct connection to a dispatcher. That person can send them to the LACT with the shortest line to speed up loading and unloading," Riggs said. "Some folks are interested in adding hydrogen sulfide gas monitors, tracking and alarms for improved environmental safety. We’ve even begun discussing a system modification for saltwater-disposal operations. It’s like we’ve found the ‘easy button’ for custody transfer."
"We started this project trying to get invoices out more quickly and accurately," Hutto said. "But we’ve seen how the right control and information infrastructure can turn data into information. Contextualized, that information becomes knowledge that improves accountability and collaboration. This knowledge evolves into institutional wisdom."
Editor’s Note: The results mentioned above are specific to Trigg Technologies’ use of Rockwell Automation products and services in conjunction with other products. Specific results may vary for other customers. Microsoft and Windows Azure are trademarks of Microsoft Corporation.
Doug Weber is the engineering manager for Connected Services at Rockwell Automation. He has primary responsibility for implementing remote application monitoring solutions and IoT services. Most recently, he served as business development manager for the Low Voltage Drives Business. He holds Bachelor and Master of Science degrees in electrical engineering and a Master of Business Administration degree from Marquette University in Milwaukee, Wisconsin.