Brazil s Regulatory Regime: Management of the Mismeasurements Events in Petroleum and Natural Gas Measurement Systems

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1 Brazil s Regulatory Regime: Management of the Mismeasurements Events in Petroleum and Natural Gas Measurement Systems Joana França de Andrade, Leandro de Mello Silva, Marcus Vinícius Quintanilha Werner and Luiz Henrique de Oliveira Bispo, ANP (National Agency of Petroleum, Natural Gas and Biofuels) 1 INTRODUCTION The correct measurement of petroleum and natural gas volumes is a very significant issue for the Petroleum and Gas Industry in Brazil, as the suitable measurement ensures the integrity in the calculation of royalties and other taxes to be paid by concessionaires to the government, the states and municipalities. It is also important to consider that this guarantee a greater control and optimization of production by the petroleum companies, reducing losses and enabling to detect and resolve in a faster way any measurement problems. The ANP [1], with the National Institute of Metrology, Quality and Technology (Inmetro) approved on June 19, 2000, through the Joint ANP / Inmetro No. 1, the Technical Regulation of Petroleum and Natural Gas Measurement (RTM). The same was reviewed by ANP / Inmetro Joint Resolution No.1, on June 10, 2013 [2], and defines the minimum conditions and requirements that the measuring systems must display in order to ensure reliability of the measured volumes. Also, considering the importance of the subject to be treated, the publication of a complementary regulation about the mismeasurements events of petroleum and gas measurement systems was needed. The ANP approved on March 27, 2014, through ANP Resolution 18, Technical Regulation Defects Notification of Measurement Systems (RTNFSM) to be presented in this article. 2 TYPES OF PETROLEUM AND NATURAL GAS MEASUREMENTS The measurement types treated in the RTM are: fiscal, appropriation, operational and the measurement for custody transfer. The Measurement Standard Condition has to be respected: the measured volumes of petroleum or natural gas have to be converted to the absolute pressure, MPa, and a temperature of 20 C. The fiscal measurement is the measurement made at a measuring point of production referred to in item IV of art. 3 of Decree No. 2705/1998 [3]. It will be used to calculate the government taxes. It s also important to notice that when two or more production volumes fields mix before the measuring point, it s called shared fiscal measurement. The appropriation measurement is the measurement used to determine the production volumes to be allocated to each well in the same field or a set of fields with shared fiscal measurement. The operational measurement is the measurement used to control the production, since they do not have fiscal aim, which includes measurements of petroleum and 1

2 natural gas for use as fuel or for any other use within the field such as artificial lift and injection. The measurement at the point where ownership of the petroleum or gas is transferred from the seller to the buyer in accordance with the provisions agreed in the contract is named as custody transfer measurement. The RTM must be obeyed by all systems that measure, compute and show the volumes of petroleum and natural gas produced, processed, stored or transported and which are used for measuring production tax (land and sea); measurement of Extended Well Test or well test; operating measurement for production control, the input and output of natural gas processing units, handling in transport, export and import and for measuring the appropriation production. The RTNFSM applies to mismeasurement events of petroleum and natural gas measurements systems, and in cases which the basic sediments and water (BSW) percentage is superior than the approval and may be used for: fiscal measurement of petroleum and natural gas in the field production phase or Extended Well Tests; appropriation measuring of volumes produced in to the wells and the production field; measuring operational control of flaring gas and other operating meters unclassified when requested by the ANP. Even before the publication of the RTNFSM, in the first version of the RTM was already provided that the ANP must be notified of the occurrence of mismeasurement events in the production systems as well as any other operational incidents that may cause error in the measurement or when there is total or partial interruption of it. 3 NOTIFICATIONS OF MISMEASUREMENT EVENTS OF MEASUREMENT SYSTEMS The NFSM is the document that must be sent to the ANP considering the items in the RTNFSM that ANP refers to ANP Resolution 18, of March 27, 2014 and in compliance with items and with the minimum information requested by item of RTM, approved by ANP / Inmetro Joint Resolution No. 1/2013 in the case of mismeasurements events, presumed mismeasurements events and when the petroleum has more than the approved percentage of Basic Sediments and Water (BSW). By that, the concessionaire has to communicate the regulator all the noncompliance to the RTM. Events with no predictability that impact on the results of fiscal, appropriation or operational measures when determined by ANP are considered mismeasurement events and presumed mismeasurement events of petroleum and natural gas measurement. The mismeasurement events when the BSW percentage is above the approval are not considered predictable events. The value of BSW approved in RTM and RTNFSM is usually equal to 1%. Add to this, the events that have predictability should be preceded by authorization by formal request to the ANP, held at least 90 days in advance for review, and, in exceptional circumstances, the period for requesting the analysis may be changed, at the discretion of ANP, through technical basis of the regulated agent. 2

3 3.1 Types of Notifications of Mismeasurement Systems Notifications are classified into: (i) Initial, when declared before being corrected, (ii) Intermediate, sent by the end of the month and the mismeasurement has not been corrected, (iii) Final, if it has been declared after correction or report that some other type of notification had remedied the problem, (iv) Rectifier, when the intention is to repair another notification had sent earlier, and (v) Complementary, sent to add more information to a previous NFSM. It s important to notice that those classified as finals are the most present. In 2014, 4421 NFSMs of 8 different concessionaires, were received by ANP. As noted in Figure 1, the classification of 2014 NFSMs are exposed. Make clear the difference between a failure notification of Measuring Systems and Measurement Systems Failure Event is critical because not all NFSM is a mismeasurement event, since the notifications classified as Intermediate, Complementary, Rectifier and Finals that has the intention to inform a previously reported problem was fixed, not representing a new mismeasurement event. 3.2 Classification of Mismeasurement Events The nature of the events is quite varied, so there are many causes that motivate sending a NFSM. Mismeasurement events can be classified as: wrong configuration of flow computers, calibration failure, high difference in subsequent calibrations meter factor of meters, absence of measurement due to loss of communication, water content and average daily sediment higher than authorized, wrong volumes measured that do not correspond to the actual values, and when the file containing the production data display incorrect information. For cases that are not within this classification, there is the possibility of being reported as "other". 3

4 The nature of the events is quite varied, so there are many causes that motivate sending a NFSM. Mismeasurement events can be classified as: wrong configuration of flow computers, calibration failure, high difference in subsequent calibrations meter factor of meters, absence of measurement due to loss of communication, water content and average daily sediment higher than authorized, wrong volumes measured that do not correspond to the actual values, and when the file containing the production data display incorrect information. For cases that are not within this classification, there is the possibility of being reported as "other". Figure 2 presents statistical analysis of the predominant types and its frequency of mismeasurement events in The most frequents events reported were the BSW superior than approved and the wrong measurement. These two types correspond to more than 50% percent of the notifications received in the last year. Since 2010, more frequent activities in regulation and inspections of measuring systems of petroleum and gas production units, in addition to the needing of daily sending data of the production by the concessionaire, in order to verify compliance with the RTM, resulted in the issuance of notices of violation of the RTM that led to taxes of high values to concessionaires. Considering this intensify in inspections and the financial penalties, it was necessary a greater focus on meeting the RTM, culminating in an extraordinary growth in the number of notifications of mismeasurement of measurement systems reported to ANP as shown in Figure 3. 4

5 The high number of notifications Measurement System failure shows the existence of difficulties faced by the operators on the implementation of a correct measurement of fluid volumes produced and to maintain the percentage BSW of the petroleum within the approval percentage. In 2014, due to the implementation of the RTNFSM, that represents a more specific legislation on the issue of mismeasurement events, the number of notifications of mismeasurement systems increased. Nevertheless, a correct qualitative analysis measuring system for a facility shall not be made noting only that number, but the number of mismeasurement events in measurement systems. And based on 2014, the number of events corresponds to an average almost 70% of the reported NFSM. Table number 1 and table number 2, exposes the leading facilities in sending notifications and mismeasurement events. With this discrimination, a real analysis of measurement system status of a production unit is possible. Table 1 Number of notifications sent by production units in 2014 Top 10 Position Production Unit Annual Total 1º A 442 2º B 214 3º C 175 4º D 175 5º E 124 6º F 122 7º G 106 8º H 105 9º I º J 103 5

6 Table 2 Number of events sent by production units in 2014 Top 10 Position Production Unit Annual Total 1º A 354 2º B 122 3º D 112 4º C 106 5º I 81 6º K 77 7º J 71 8º H 67 9º L 66 10º J 103 An example of the importance of this differentiation is the case of E installation unit in 2014, that sent 124 notifications to the ANP and placed fifth regard to sending notification. A superficial analysis diagnose would be that the measurement system condition is extremely poor, which is not true taking into account that the installation is not even figuring among top 10 facilities in mismeasurement events. 4 TECHNICAL REGULATION DEFECTS NOTIFICATION OF MEASUREMENT SYSTEMS (RTNFSM) Given the importance of the issue, the ANP Resolution 18 of March 27, 2014, was published in the Official Government Journal of 1 April This was preceded by a Resolution Draft approved by the Board of Directors of ANP, by a Public Consultation Notice and the Public Hearing No. 35/2013. The resolution grants RTNFSM, which is attached to it. This regulation aims to establish the terms and procedures to be followed in reporting and the management of the mismeasurement events of petroleum and natural gas metering system and in cases when the percentage of BSW is superior than the approval. And consider the legal authority of the ANP, as the governmental agency responsible for monitoring and overseeing the petroleum industry's activities and approve the estimative methodology to calculate the volumes that would be produced in cases of mismeasurements events. Other responsibilities are given by the regulation in question: designate the units and magnitudes in which volumes should be expressed, establish a pattern of preparation and submission of notifications, determine the methodology to be used in specific cases to estimate the volume, specify the maximum time a measurement system can remain in failure, indicate the correct procedure for calibration of meters, delegate to ANP to analyze the reports and the monitoring of mismeasurement events, in addition to establishing the obligation of the concessionaire to implement a management system model. The ANP analyzes all the notifications received, and shall report the results within 90 days after the month of registration (the sending month of the notification) to the regulated agent. 6

7 The RTNFSM also provides that all documents indicated must be preserved for the purposes of audit for a minimum of 10 years and should be guaranteed the veracity and made available to the ANP on request. The Annual Mismeasurement Events of Measurement Systems must contain information such as (i) number of mismeasurements events for installation, fluid and measuring point for each month and year; (Ii) mean time between failures and mean time to failure, for installation, fluid and measuring point for each month and year; (Iii) main type of event that occurred in different measuring points of installation; and (iv) actions taken and planned to mitigate major fault events. Thus, the regulated agents have to perform a management model in order to reduce the number and the frequency of mismeasurement events has occurred in similar scenarios. Therefore, they should be presented in a report to be sent annually to ANP informing the result of applying the failure events management system model, in the previous year. This management model is requested in order to reduce the number of mismeasurement events, and ensure that the volumes of petroleum and natural gas are measured in a reliable way, to protect the interests of society, ensuring the correct measurement of volumes produced and consequently the correct calculation of government taxes. 5 CONCLUSION The RTNFSM defining clear and objective criteria for the characterization of the mismeasurement events in petroleum and gas measurement systems and the procedures to be taken, consisting of an important tool in the search for a correct measurement of volumes of petroleum and gas produced in Brazil. The standardization from the regulation would reduce doubts and questions about the subject providing agility and increasing the transparency in process. The existence of a reporting standard set by the ANP will avoid problems in the interpretation of information, facilitating and accelerating communication among all the operators. Moreover, the allocation imposed on operators for carrying out the management of the petroleum and natural gas and measurement system will result in gains such as no longer repetition in mismeasurement events occurring for the same scene, reduction of the response time, reducing the number of sent and nonapproved notifications and better preventive action. 7

8 6 REFERENCES [1] AGÊNCIA NACIONAL DE PETRÓLEO, GÁS NATURAL E BIOCOMBUSTÍVEIS [National Agency of Petroleum, Natural Gas and Biofuels]. Available from < >. [2] ANP / Inmetro Joint Resolution No.1, on June 10, 2013 Approves the Regulamento técnico de medição de petróleo e gás natural [Technical Regulation of Petroleum and Natural Gas Measurement]. Available from nj/2013/junho/rconj%201%20-% xml. [3] Decree No. 2705/1998. Available from < 8