Comparative Analysis of Techniques for Unit Operation Cost Computation in Hydrocarbon Assets with Multiple Products

Abstract

Abstract One of the major challenges of the oil industry is the volatility of oil prices. To mitigate the impact of the oil price uncertainty, there are several techniques for monitoring the efficiency and profitability of an oil and gas asset, one of them being the Unit Operating Cost (UOC) analysis. The UOC is mathematically expressed as the ratio of total OPEX to the volume of hydrocarbon produced. This ratio is also the same for assets where both oil and gas are commercialised but would require a measure of equivalence of the various hydrocarbon types for the computation of the composite hydrocarbon volume. Some approaches have certain limitations, as the UOC computed does not reflect the actual performance that the cost-price margin presents. This paper provides a modified approach to derive accurate UOC for an asset commercialising multiple products - oil, wet gas, LPG, lean gas, NGLs, etc. Data from a field in the Niger Delta between 2019 to 2023 was used for this study. Two UOC economic models were built on a spreadsheet. One model considered the energy equivalence approach, and the other considered the price equivalence approach. The UOC results from both approaches were compared. The energy equivalence approach presented hydrocarbon volumes significantly higher than the price equivalence method ca. 62%. The corresponding UOC computed by the energy equivalence model was ca. 86% less than the price equivalence model. The sensitivity of oil price on the price equivalence model was investigated using the Monte Carlo sampling method. Results showed that lower UOC is driven by larger crude oil volumes and vice versa. Higher prices of crude oil do not favour lower UOC. This can be explained by the fact that higher prices create higher conversion factor which reduces the resulting barrel of oil equivalent. Higher volume and price for gas favours lower UOC. This research contributes to the ongoing dialogue surrounding UOC analysis and underscores the importance of adopting more sophisticated and economically rigorous methods in the evaluation of operational costs in the oil and gas sector. An analysis of operating costs and unit costs will allow industry to benchmark its performance over time in a clear, consistent and quantifiable way to ensure that cost benchmarking drives efficiencies into operations whilst maintaining high standards of health, safety and environmental management.