BOE stands for barrel of oil equivalent. It’s a unit of energy essentially commonly used in the oil and gas industry, as a barrel is the standardized unit of crude oil in the US. BOE is also referred to as COE or crude oil equivalent.
This article will detail what BOE is, what it is used for, what other units it’s similar to, and list some quick conversions into other units.
What is BOE in Oil and Gas?
A barrel of oil equivalent (BOE) is based on the energy produced by burning one barrel of crude oil.
BOE isn’t just used for crude oil but a variety of other energy sources, especially natural gas. It essentially brings different resources under one unit by simply representing the energy they can produce.
For instance, 6000 cubic feet of natural gas is considered to produce the same amount of energy as one barrel of crude oil. So we can say that 6000 cubic feet of natural gas are equivalent to one barrel of oil or one BOE.
BOE as a unit of energy equivalency can also be used for other hydrocarbons besides natural gas.
Use of BOE
Oil and gas companies that explore and produce minerals, particularly natural gas, use BOE to report their reserves or the production rate of the wells they are operating. These companies often use BOE instead of just barrels (BBL) or thousand cubic feet (MCF) because oil and gas often occur together in formations.
Therefore, many companies produce crude oil and natural gas from reserves. BOE provides a uniform way to estimate the overall mineral reserves and production, including all kinds of minerals and their forms, such as crude oil, gas condensate, and natural gas. BOE helps present these resources in the form of energy, a usable and valuable product of the minerals.
For example, a company can easily report both crude oil reserves and natural gas reserves together in BOE. Suppose Company A produces 25,000 barrels of oil per day and 600,000 cubic feet of natural gas per day. Company A can report its production collectively in BOE, which in this example would roughly be 25,100 BOE.
To make it easier to compare resources, the industry often uses BOE to report crude oil and natural gas production or reserves. So BOE is common in oil and gas companies’ financial reports.
Investors and analysts are mainly interested in a company’s potential energy output or existing energy sources. The company may not necessarily be an energy company, but energy provides a reliable way for investors and analysts to estimate the value and performance of a company. While many products are made from crude oil, energy remains the most valuable outcome, so it serves as a useful way to gauge value.
Presenting the production or reserve values of crude oil and natural gas separately can be confusing as the units for both are pretty different. In the US, BBL is the unit for crude oil, whereas in other parts of the world is cubic meters. Similarly, in the US, MCF is the unit for natural gas, whereas MCM is the unit in other parts of the world.
A bigger unit derived from BOE is also used in the oil and gas industry KBOE, which is a thousand barrels of oil equivalent.
It’s worth noting that BOE doesn’t have any standard conversion factors, i.e., there is no single standard for conversions. This is because the real equivalency can vary based on conditions. Even BBL is only a standard oil unit under certain pressure and temperature conditions.
Therefore, there can be variations in conversions from one company to another. That said, generally, the following conversion rates are common.
- Six thousand cubic feet of natural gas equals a barrel of oil in terms of energy production. So, six MCF is equal to one BOE.
- One MCF of natural gas, which is 1,000 cubic feet, is equivalent to 0.16 BOE. Similarly, one MMCF of natural gas, which is 1,000,000 cubic feet, is equivalent to 166.66 BOE.
- One barrel of crude oil contains 42 US gallons and can produce approximately 5.8 million British Thermal Units (BTU) of energy. So, one BOE is equivalent to 5.8 million BTUs.
- One barrel of crude oil can produce approximately 1,700 kilowatt-hours (kWh) of energy. So, one BOE is equivalent to 1,700 kWh.
Outside the US, BBL is not the unit for crude oil, so by extension, BOE is not the preferred unit for measuring the energy equivalency of hydrocarbons. In the metric system, the counterpart of BOE is TOE (tonne of oil equivalent). More specifically, million tonnes of oil equivalent or MTOE is used in the countries that use the metric system.
Converting BOE to TOE or vice versa is not so straightforward. While BOE uses barrels, a volumetric unit, TOE uses ton, which is a unit of weight. So it’s best to use energy equivalencies for both instead. Here’s how that roughly plays out:
1 TOE = 39.68 million BTU
1 BOE = 5.8 million BTU
1 BOE = 0.14 TOE
1 TOE = 6.8 BOE
BOE or barrel of oil equivalent is a US-based unit used to measure the energy production of a mineral with one oil barrel as the baseline. You’ll mostly see its use in reports where companies that produce different minerals from the same reserves use it to estimate their overall reserves or production. It’s not a standard unit, so deviations can occur.