Custody transfer is a metering process that occurs when hydrocarbons are transferred from the ownership of one party to another. This is a necessary part of the production process, whether the materials in question are a raw good, or a refined product. Custody transfer can occur at almost any stage in the distribution system, including pipelines, trucks, tankers or any other storage vessel.
The term custody transfer is often interchangeable with fiscal metering; both refer to the measurement necessary to facilitate a change of ownership in product. The custody transfer process is designed to offer insight into the fluid volumes and properties necessary to confidently perform a transaction.
In order to accurately assess the legitimacy of a transaction, a high degree of accuracy is required across a wide variety of different metrics. To achieve this level of accuracy many different instruments, pieces of equipment, and measurement technologies are involved in the custody transfer process. Because the optimization and implementation of these different technologies is so complicated, some companies – often referred to as system integrators –offer preconfigured, turnkey fiscal metering skids in an effort to streamline and simplify the custody transfer process for all parties involved.
These pre-configured systems are integrated packages of instruments, pumps, piping, supports, controls, displays, and anything else that is required to measure the various properties of oil or gas as they are made available for sale between two parties.
The sale of crude oil is somewhat unique compared to many other goods, because there are multiple parties outside of the buyer and seller who have a vested interest in the transaction. The first of these parties is the government, which collects taxation on every sale – as well as overseeing the environmental regulations behind the transaction. The second is the owner of the land from which the resources were originally collected. These landowners (often being the government itself) are paid a royalty when these resources are sold. In Canada, this royalty is collected and managed by the government alongside the taxed funds.
The two parties with the highest vested interest in accurate fiscal metering are of course the buyer and the seller. The buyer’s obligation is simple: they need to know exactly what it is that they are paying for, from the exact volume, to the properties of the hydrocarbon in question.
The seller’s role is slightly more complicated. Not unlike the buyer, the seller must be aware of exactly what it is that they are selling. This is true for financial reasons, but also for issues of compliance. The oil and gas industry is heavily regulated, and as a result there are numerous environmental, legal, and regulatory obligations that must be adhered to in order to engage in the sale of oil and gas.
The details vary based on the country, and the exact commodity being sold, but in the sale of hydrocarbons parties are always required to provide traceability, and accurate fiscal metering provides this.
Due to the nature of the oil and gas industry it is best not to think of custody transfer as a single transaction, but rather as a continuous flow. The volume of hydrocarbon moving from one party to another is immense, and as such, any discrepancy in the transaction can easily have ramifications valuing in the billions.
Oil and gas is unique, because unlike most other industries the majority of the product being sold is seldom seen. Hydrocarbons are usually hidden away in a maze of steel pipes, tanks, ships, and trucks. Because of this we are unable to verify the quality of the product by means of touch, smell, sight, or any of our traditional senses.
This is why accurate fiscal metering is so important – it is a way of establishing trust. Trust in both the product being sold, as well as in the parties involved in that sale. This all-important trust is perhaps the most important currency in our diverse, global economy, and without it, trade would cease to function as we know it.
On-line watercut technology is only a piece of the puzzle, but it is a very important one. Excess water contamination in hydrocarbons can be problematic at every stage of the process. From lost profits to failure to meet environmental and contractual regulations, the inability to accurately measure water content has many serious ramifications.
Capacitive sensing technology can help to mitigate these problems by providing a clear, real-time picture of exactly how much water is present in a hydrocarbon at any given time, which is why many integrators trust it as a key component in their fiscal metering systems.