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What is API 18.2? What does “Custody Transfer of Crude Oil From Lease Tanks Using Alternative Measurement Methods” even mean? Why does it matter? Does anyone actually benefit? Who cares?

What is API 18.2?

API 18.2 is a shorthand reference for chapter 18.2 of the Manual of Petroleum Measurement Standards, which is published by the American Petroleum Institute, entitled “Custody Transfer of Crude Oil from Lease Tanks using Alternative Measurement Methods.” This chapter provides methods, procedures, and specifications for measuring crude oil immediately before and after it is transferred from a lease tank to a tanker truck. Perhaps more importantly, it provides alternatives to the methods and procedures from chapter 18.1, "Measurement Procedures for Crude Oil Gathered From Lease Tanks by Truck".

Why Measure the Oil?

The transfer of crude oil from temporary storage in a lease tank to a tanker truck almost always represents a change in ownership, i.e. custody, from the lease tank owner or lessee to the truck owner/operator or whomever has contracted the trucking company to pick up and deliver the oil. Everyone in this tangle of storage-conveyance-ownership-transference wants to know that the transaction was fair, particularly with regards to the amount and quality of the oil involved. To this end, API 18.2 Section 5 requires determining and documenting the following six characteristics of the oil to be transferred:

  1. Merchantability
  2. Indicated or observed volume
  3. Product temperature
  4. API gravity (for heavy vs light crude determination) and observed temperature
  5. Suspended Sediment and Water (S&W)
  6. Calculated volume, using both Gross Standard Volume (GSV) and Net Standard Volume (NSV)
These six characteristics, taken together, determine both the quantity (via volume and temperature) the quality (API gravity, S&W, merchantability) of the oil being transferred so that all parties can agree on the value of the shipment.

Why API 18.2?

The methods and procedures spelled out in API 18.1 are based on manual measurements made via an access hatch on the top of the lease storage tank, usually by the COTD. (API uses the term “crude oil truck driver”, since most of the lease tank measurements are taken by solo drivers, while acknowledging that some drivers are accompanied by a designated gauger to take the measurements.) The COTD climbs up to the top of the tank, at any and all hours of the day, in all kinds of weather, and opens the access hatch. The COTD then takes multiple samples from the tank for immediate physical quality evaluation, measures the total liquid level of the tank with at least three consecutive measurements within ¼” of each other, and takes a temperature reading from the middle of the oil. And then, just for good measure, takes another temperature and level reading after finishing pumping.

That’s a lot of precise work to do, in highly variable environmental conditions, on tanks with no degree of guaranteed maintenance, all by oneself. Additionally, opening the hatch on top of the tank releases high concentrations of hazardous gases and vapors, to the extent that multiple fatalities have been directly tied to those gases and vapors. So, while the measurements are essential to fair and transparent lease tank transactions, the methodologies of API 18.1 don’t account for the safety of the COTD performing the measurements, or for the inherent imprecision of the measurements and calculations they were used for.

By providing for the use of fully automatic, pre-installed sensors (ATGS, or Automated Tank Gauging Systems) to perform the measurements, API 18.2 greatly improves both the precision of the measurements and the safety of the persons recording the measurements. There’s no need for manual measurements, no opening hatches retaining malicious vapors, and no climbing ladders with dubious maintenance records.

Who Benefits from API 18.2?

Everyone wins with API 18.2! Well, at least nobody really loses, per se. The increase in safety and precision measurements are big wins for the truck drivers. Their physical risk is greatly decreased, and their subjectivity is no longer part of the measurement process. The oil producers and oil refiners, often the sellers and buyers, respectively, in the transaction, also win due to the increased accuracy of the measurements. And the increased accuracy and transparency justify the cost of the automatic measuring equipment.

How Does API 18.2 Benefit Stakeholders?

Rather than specifying the measurement procedure, as API 18.1 does, API 18.2 primarily specifies the characteristics to be measured. API 18.2 also delineates three zones—Tank Zone, Transition Zone, and Trailer or Truck Zone— and outlines what type of equipment/sensor can provide those measurements, based on where the equipment is located. From Section 5:

The methods and equipment that will be used are based on:
a) establishing a list/matrix of all the existing and/or available equipment in the tank, trailer, and transition zones and understanding all the potential uncertainty and bias of the equipment;
b) understanding and documenting the potential conditions that will exist during the loading of the product that may affect the equipment and process used to determine the quantity and quality of the product;
c) assessing all the data to determine the capability of developing a measurement method or process that will provide the lowest uncertainty and minimize any bias to an acceptable level utilizing the available equipment in any combination of the three zones.

And that’s the genius of API 18.2. A few measurements, such as the Quality Determination when taken in the Transition Zone (Section 10.2.1 – 10.2.4), have fully specified procedures. The rest of the nitty-gritty specifications pertain more to equipment manufacturers than to the COTD taking the measurements. How it gets done doesn’t matter, as long as the ATG outputs meet the guidelines. Which, again, means less of the custody transfer transaction is dependent on the measurement skills of the COTD.

In essence, API 18.2 increases the guarantee of equity for stakeholders in crude oil custody transfer from lease tanks to tanker trucks. COTDs get physical protection with the elimination of climbing on ladders and opening hatches with dangerous gases. Crude oil producers, buyers, and lease tank owners get protection from shoddy or rushed product measurements. API 18.2 accomplishes all this by primarily specifying the necessary characteristics of the product to be measured, rather than specifying the detailed process by which they are to be measured.

 

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