Chapter OT05820
| Published date | 13 March 2016 |
| Record Number | OT05820 |
There are many instances in the UK or on the UK Continental Shelf where oil from different fields is blended, be it on a platform, in a pipeline system, or at an onshore terminal. At some point this blended stream will be loaded on to tankers (or more rarely pipeline delivered) and sold by the producers as a single standardised product. These blends can range from the large widely traded ones such as Forties and Brent down to two-field blends with one or two cargoes loading per chargeable period.
Commingling agreements between the various blend participators determine how much of a month’s blend production is attributable to each originating field (using hydrocarbon accounting to account for the quality differentials of the oil produced from different fields). FA87\S63 requires LB Oil & Gas approval that all the terms of these commingling agreements are acceptable for the purposes of PRT. If not then different terms may be imposed for tax purposes only. See OT05601 for more information.
Field joint venture agreements determine how this production is then allocated between the field participants at any time.
If all of a company’s oil production in the blend for a month was loaded on to one tanker every month the above agreements would be sufficient for PRT purposes to determine the field source of the blended oil. However some companies have sufficient production to entitle them to more than one lifting of a blend in a month. Also onshore terminals and some offshore blended oil installations have storage facilities whereby all the oil produced from the fields making up the blend may not actually be loaded on to tankers as it is delivered to the loading facility.
Therefore these agreements are not sufficient to provide a neutral determination of the field source (and quantities) in respect of a company’s lifting of oil in a blend.
At some of these loading facilities the operator will determine how a participator’s liftings in a particular month are allocated across its field interests. The allocation basis being based upon the participator’s actual or estimated share of available blended oil (opening stock and production) in the month in question. However the lifting agreements at most of the larger facilities (and some others) allow the producer a large degree of discretion over how a particular lifting of oil is allocated between its field interests. This means that a producer can assign more of a...
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