Barrel of Oil Equivalent (BOE)
What Is a Barrel of Oil Equivalent (BOE)?
A barrel of oil equivalent (BOE) is a term used to sum up the amount of energy that is equivalent to the amount of energy found in a barrel of crude oil. By enveloping different types of energy resources into one figure, analysts, investors, and management can survey the total amount of energy the firm can access. This is otherwise called crude oil equivalent (COE).
Many oil companies produce both oil and gas, among other petroleum products, however the unit of measure for each is different. Oil is measured in barrels and natural gas is measured in billions of cubic feet (BCFE). To assist with working with like-for-like comparisons, the industry standardized natural gas production into "equivalent barrels" of oil. One barrel of oil is generally deemed to have a similar amount of energy content as 6,000 cubic feet of natural gas. So this quantity of natural gas is "equivalent" to one barrel of oil.
BOE can measure up to natural gas equivalent, which deciphers the energy in an amount of oil (or other energy product) into that of gas.
Understanding a Barrel of Oil Equivalent
The BOE is habitually used when exploration and production companies are reporting the total amount of reserves they have. Oil and natural gas are formed through similar geographical cycles; therefore, the two energy commodities are in many cases found together. Numerous energy companies have a mixed reserve base, and they need a method for conveying the total energy content of their reserves in a way that is effectively understood. They can achieve this by switching every one of their reserves over completely to BOE.
An energy company's primary asset is the amount of energy it claims, so an energy company bases its financial decisions and planning on its reserve base. For investors, a company's reserves are important in surveying the value of the company and determining whether the company is a good investment.
The two investors and companies need to see a company's total energy resource increase over the long haul. Addressing reserves in BOE works with the comparison of total energy assets over the long haul and against other comparative energy companies. It would be more complicated to compare a company's energy assets over the long haul and against different companies on the off chance that natural gas and oil were presented separately.
Working out Barrel of Oil Equivalents
Changing assets over completely to BOE is genuinely simple. In terms of volume, oil is represented per barrel, and natural gas is represented per thousand cubic feet (mcf). There are 42 gallons (roughly 159 liters) in one barrel of oil. The energy contained in a barrel of oil is roughly 5.8 million British warm units (MBtus) or 1,700 kilowatt-hours (kWh) of energy. This is a rough measure on the grounds that different grades of oil have somewhat different energy equivalents.
One Mcf of natural gas contains roughly one-6th of the energy of a barrel of oil; therefore, 6,000 cubic feet of natural gas (6 Mcf) have the energy equivalent of one barrel of oil. For large amounts of energy, BOE can be represented at kilo barrels of oil equivalent (kBOE), which is 1,000 BOE.
The Society of Petroleum Engineers provides conversion tables that assist with representing unit equivalencies and a portion of the factors that influence comparison and conversion.
Barrel of Oil Equivalents and Production
BOE likewise comes up while conveying daily energy production and consumption. This is expressed in barrels of oil equivalent per day (BOE/D). Barrels of oil equivalent each day is a term that is used frequently related to the production or distribution of crude oil and natural gas. BOE/D is important to the financial community since it is used as a method for deciding the value of a company.
There are several different metrics that equity and bond analysts use to assess the performance of an oil company. First is a company's total production, which is calculated on a total equivalent barrel basis. This assists with determining the scale of the business. Companies that produce little oil and a great deal of natural gas could be unreasonably evaluated in the event that equivalent barrels were not counted.
As often as possible Asked Questions
What is barrel of oil equivalents (BOE) in economics?
Oil is measured in barrels and natural gas is measured in cubic feet. To assist with working with like-for-like comparisons, the industry standardized natural gas production into "equivalent barrels" of oil.
How do I work out BOE?
One barrel of oil is standardized to have a similar amount of energy content as 6,000 cubic feet of natural gas. So this quantity of natural gas is "equivalent" to one barrel of oil.
For what reason is a barrel of oil 42 gallons?
The 42-gallon barrel was a commonly used standard prior to the eighteenth century. This sized compartment was used for transportation all that from fish, molasses, cleanser, spread, wine, and whale oil. When filled with oil instead of fish or different commodities, a 42-gallon "tierce" weighed 300 pounds. The 42-gallon oil barrel was authoritatively adopted in 1866.
How much crude oil does it take to make one gallon of gasoline?
Crude oil is refined into different end products, including gasoline used in cars. Treatment facilities utilize around 2.15 gallons of crude oil to create 1 gallon of gasoline.
Features
- Barrel of oil equivalent (BOE) is an approach to standardizing natural gas and other energy resources to a barrel of oil's energy.
- Calculated BOEs each day (BOE/D) is an important measurement for financial analysts and industry insiders to assess the performance of energy companies.
- This measurement switches gas production over completely to oil production on an energy-equivalent basis.
- One barrel of crude oil generally has around a similar energy content as 6,000 cubic feet of natural gas, so this quantity of natural gas is "equivalent" to one barrel of oil.
- It is additionally conceivable, however more uncommon, to see oil production reported in the equivalent volume of gas.
