Allocation (oil and gas)

In the petroleum industry, Allocation is typically referred to as Production Allocation, which consists of two key components: commercial allocation and technical allocation. Commercial allocation ensures the accurate distribution of revenue and costs, while technical allocation refers to practices of breaking down measures of quantities of extracted hydrocarbons across various contributing sources. Allocation aids the attribution of ownerships of hydrocarbons as each contributing element to a commingled flow or to a storage of petroleum may have a unique ownership. Contributing sources in this context are typically producing petroleum wells delivering flows of petroleum or flows of natural gas to a commingled flow or storage.

The terms hydrocarbon accounting and allocation are sometimes used interchangeably. Hydrocarbon accounting has a wider scope, taking advantages of allocation results, it is the petroleum management process by which ownership of extracted hydrocarbons is determined and tracked from a point of sale or discharge back to the point of extraction. In this way, hydrocarbon accounting also covers inventory control, material balance, and practices to trace ownership of hydrocarbons being transported in a transportation system, e.g. through pipelines to customers distant from the production plant.

In an allocation problem, contributing sources are more widely natural gas streams, fluid flows or multiphase flows derived from formations or zones in a well, from wells, and from fields, unitised production entities or production facilities. In hydrocarbon accounting, quantities of extracted hydrocarbon can be further split by ownership, by "cost oil" or "profit oil" categories, and broken down to individual composition fraction types. Such components may be alkane hydrocarbons, boiling point fractions, and mole weight fractions.