January 2006

Special Report: Gas Processing Developments

The design benefit method: Allocate joint costs among shared products

This accounting technique can provide more accurate results than traditional practices

Hahn, J., Jang, W. H., Department of Chemical Engineering, Texas A&M University; Hall, K. R., Texas A&M University

The market for natural gas (NG) has grown significantly in recent years, and NG frequently is a joint product with crude oil. NG is usually transported and processed via shared facilities to reduce net costs. If several gas producers share transportation or production facilities, they must also share costs as well as profits under contract.1 Because NG processes inherently yield multiple products, co-producers require a methodology for causal cost allocation associated with each product. This activity becomes even more important when plants can operate under multiple conditions, which also can produce different amounts of each product. The eventual cost assigned to co-producers should be p

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