Metering for billions

All petroleum which is produced and exported from the Norwegian continental shelf is metered in connection with purchase, sales, allocation and calculation of taxes.

The Norwegian Petroleum Directorate ensures that the fiscal meterings are sufficiently accurate. Even small deviations can amount to large sums.

On the way from the reservoir to consumption, the oil and the gas from the Norwegian shelf pass a series of meterings. Production volumes are metered, transport volumes are metered, sales volumes are metered and the volume of gas causing carbon dioxide (CO2) and nitrogen oxide (NOx) emissions are metered. The meterings form the revenue basis for the oil companies and for the State's collection of company tax, special tax and CO2/NOx taxes.

Gas metering pipes at the receiving terminal in Dornum in Northern Germany.  Dornum is the landfall for the Europipe I and II pipelines
Gas metering pipes at the receiving terminal in Dornum in Northern Germany.  Dornum is the landfall for the Europipe I and II pipelines.

The numbers are large. Overall export of petroleum from the Norwegian continental shelf in 2017 is expected to be about 1.6 million barrels (231 000 standard cubic metres, Sm3 o.e.) oil/day and about 330 million Sm3 gas. On top of this, there will be 350 000 barrels NGL/day and 35 000 barrels of condensate/day. The value of the overall production is about NOK 1.3 billion/day. A large portion of the values created by the petroleum activities are secured by the State through taxes and direct ownership. Net cash flow to the State from the petroleum activities amounted to about 20 per cent of the State's total revenues in 2015. This amounts to NOK 218 billion.

A typical major petroleum metering station measures 75 000 barrels (bbls) per day. The value of such a daily amount such as this (at an oil price of 55 US dollars per barrel and an exchange rate to the Norwegian krone of 8.7) is NOK 36 million. An incorrect metering of just 0.35 per cent will then amount to NOK 126 000 per day or NOK 882 000 per week. If the incorrect metering remains uncorrected for a whole month, the value of the incorrect metering will increase to close to NOK 4 million.Small deviations can, in other words, be costly, both for the State and for the petroleum industry.

The operators on the shelf have the daily responsibility for ensuring that the oil and gas volumes are metered in accordance with the regulatory requirements. The Norwegian Petroleum Directorate is the responsible authority for supervising the oil companies to ensure that the fiscal meterings have the required quality.

The work is carried out through participation in drawing up plans for development and operations (PDO) and by follow-up of design and testing of equipment.  In addition, the NPD follows up the operation of metering equipment on production and loading facilities offshore and at terminals onshore. Follow-up of design and operation is carried out as audits of the various facilities and as meetings with the oil companies and foreign metering authorities.

The Norwegian Petroleum Directorate currently has five employees who work with metering audits. The large number of metering points means that audits must be prioritised. The prioritisation is primarily based on the economic significance of the metering. Large petroleum volumes have the closest follow-up.

The most important sales points for oil and gas receive the highest priority. These points include the onshore facilities Kårstø in Rogaland, Mongstad and Sture in Hordaland and Snøhvit in Finnmark, and the export terminals Teesside, St. Fergus and Easington in the UK, Dunkerque in France, Zeebrugge in Belgium and Emden/Dornum in Germany, and the loading buoys on the Statfjord, Gullfaks, Heidrun, Åsgård, Goliat, Norne, Alvheim, Knarr and Skarv fields.

The internal control system took effect with the Metering Regulations in 1984. It places the responsibility for ensuring that the fiscal meterings are done in accordance with the regulatory requirements with the operating companies. Serious nonconformities are rare. In a few instances, however, the Norwegian Petroleum Directorate has had to issue notifications of orders due to the discovery of major nonconformities.

More about the supervision of fiscal volume metering
Supervision of fiscal volume metering has been delegated to the Norwegian Petroleum Directorate by the Ministry of Petroleum and Energy, and is regulated by the Regulations relating to metering of petroleum for fiscal purposes and for calculation of CO2 tax (the Metering Regulations). Calculation, reporting and payment of CO2 taxes are made by the oil companies to the Norwegian Petroleum Directorate, which then transfers the money to the Ministry of Finance.

The Metering Regulations were laid down on 1 April 1984 and have been updated on a regular basis since then. The main amendments were made in 1991, 1993 and in 2001. The regulations are sanctioned by the Petroleum Act, the regulations to the Petroleum Act and the CO2 Tax Act.

Map of pipelines and onshore facilities on the Norwegian continental shelf
Map of pipelines and onshore facilities on the Norwegian continental shelf

Contact in the NPD:
Eldbjørg Vaage Melberg, tel. +47 51 87 61 00