OIL’S CRUDE OIL SALES PROCESS & PRICING

SD /Oil & Gas Team , ERP DepartmentDate :8 Mar 2015

Enabling Processes Energizing OIL

OIL’ CRUDE OIL CUSTOMERS

0.650000000000002

31

2.35

Refinery Capacity (MTPA)

AODNRLGHTBGR

REFINERY DELIVERY TARGET

Yearly Prod. & Ref Delivery Target set by MOP&NG.

Monthly Prod. & Del Target set by OCC

Daily Del target prepared by PL (OM) section.

CRUDE OIL PIPELINE ROUTE ON INDIA’S MAP

FLOW

OIL OIL

ONGC ONGC Ref NRL

DLJ

MIXED CRUDE

AOD

REVERSE FLOW

MRN JHT

Ref BGRRef GHT

NRL GHT BGR BRN

IMPORTED CRUDE

OVERVIEW OF PROCESSJVC

OIL

TPS

557 KM

600 KM

DFD+AP

CUSTODY TRANSFER PROCESS FLOW UPSTREAM

Joint TK Dip O&C

/Temp

Fig. Post in ERP system

Sent to ONGCL

for validatio

n

Tank TKT generated by OIL

Sample collection & testing

Pumping into PL

Calculate Weekly

break up of delivered

qty

Sent to ONGCL &

NRLB2B

CUSTODY TRANSFER PROCESS FLOW DOWNSTREAM.(NRL)

Joint TK Dip O&C

/Temp

Fig Post in ERP system

Sent to NRL for validatio

n

Tank TKT generated by OIL

Sample collection & testing

Pumping into PL

Calculate Weekly

break up of delivered

qty

Sent to NRLB2B

B2B

INVOICE raised by

OILB2B

Sent to NRL

CRUDE OIL SALES PROCESSSales order

for the month

Delivery docs on

daily basis against weekly

order qty.

Good issue with every delivery

Raise weekly

invoice for cumulated

qty

Payment receipt

CRUDE OIL SALES ORDER

CRUDE OIL SALES ORDER

CRUDE OIL SALES ORDER

Base price

Adjustment for BS&W content

Provisional Discount

Transportation charges

Local Sales Tax

Crude Price:$/BBLEx-rate :$-INR monthly average

BSW calculated only at End of month

CRUDE OIL SALES ORDER

BILLING CYCLEInvoic

e

Week 1

Invoice

Week 2

Invoice

Week 3

With previous month’s $-INR exchange rate &

Avg. BS&W

Final Invoic

e

Week 4

Actual $-INR exchange and

BS&W at month end.Cr/Dr MemoAgains

t Week

1

Cr/Dr MemoAgains

t Week

2

Cr/Dr MemoAgains

t Week

3

CRUDE OIL PRICE DETERMINATION APM Pricing: Administered Pricing

Mechanism. 1977-1997.—Cost Plus Formula Pricing.

Dismantling of APM & Transition of APM to MDPM in a phase manner. From 1998 to 2002.I. 75% -1998-99, 77.5% - 1999-2000, 80%- 2000-2001

& 82.5% for 2001-2002. Price of Indigenous Crude Oil

Determined by Crude Oil sale Agreement (COSA) Between Producer & Refineries. (1st April 2002.)

BUILD UP PRICES UNDER APM The well head price of Indigenous crude oil

determined as Weighted avg ( exploration & production cost + 15% post tax return on capital employed) cost of production of OIL & ONGCL.

Refineries get uniform FOB price based on the pooled FOB price of Indigenous & Imported crude Price

Refinery Product price is determined by-Weighted avg. FOB price of indigenous & imported crude + Refining cost + 12% post tax return on the capital employed and product specific indices & some dynamic factors.

BENEFITS & DRAWBACKS OF APM An orderly growth of the oil industry Continuous availability of products to consumers at

fairly stable prices Insulation of marketing companies, refineries and oil

producers from international price fluctuations and protection of their market shares.

Achievement of socio-economic objectives of the government to a large extent.

BENEFITS:-

BENEFITS & DRAWBACKS OF APM The APM regime could not generate adequate financial resources for investment in the

upstream and downstream sectors.

Non-revision of the retail prices of petroleum products (charged to consumers) in line with the cost of production, these accounts started showing deficit.

The prices of politically sensitive products did not reflect their true economic cost. Result Huge Oil Pool Deficit.

The APM thus provided little incentive for cost minimization, technological up gradation and improved productivity.

In the upstream sector APM failed to generate sufficient incentives (since price of crude oil paid to the producers was lower than international price) to invest in risky ventures to develop oil and gas reserves.

Drawbacks :

BASE PRICE DETERMINATION Period (FY 2002-03) to FY 2007-08)-

MOU based pricing. Bench mark crude- Nigerian Bonny Light

crude Period (FY 2008-09 onwards) –Pricing

based on P & G Report. Bench mark crude – Basket containing no. of

internationally traded crudes and have three different basket for three different fields of crude (DIGBOI, NHK & MRN).

MOU BASED PRICING-(2002-2008)

Basic price

Premium/Discount

Compared to bonny light

crude

Adjustment for BS&W content

BS&W LEVEL DISCOUNT $/bbl0.2<BS&W ≤ 0.5 Vol % 0.100.5<BS&W ≤ 1.0 Vol % 0.15

Nigerian Bonny Light Crude

CRUDE OIL PRICING 2008-09 ONWARDS

Name of Crude Digboi Naharkatia Moran  (Wt in %) (Wt in %) (Wt in %)Qua Iboe 36.4481 62.4295  Ardjuna 1.8636 6.1138 13.5231Duri 28.3537 20.4244  Labuan 28.9291 5.049  Widuri 4.4055    Escravos   5.9833  Cabinda     36.388Attaka     41.2359Bach ho     8.853

Based on P&G Report

BENCH MARK CRUDE OIL :-Product Name API Gravity Sul. Cont. %

massLocation of Field

ASL Ardjuna 50.1 0.09 Saudi ArabiaAttaka 50.5 0.07 IndonesiaBach Ho 33.8 0.08 VietnamCabinda 32.4 0.13 AngolaDuri 20.8 0.20 IndonesiaEscravos 34.2 0.17 NigeriaLabuan 32.0 0.09 MalayasiaQua Iboe 36.3 0.14 NigeriaWiduri 33.2 0.07 Indonesia

CRUDE OIL PRICING 2008-09 ONWARDS

Digboi (Yield % Vol)

Naharkatia (Yield% Vol) Moran (Yield% Vol)

Refined Products OIL Crude Basket OIL Crude Basket OIL Crude Basket

LPG 0.32 0.70 1.10 1.10 2.10 3.19

Naphtha 18.71 18.16 22.10 22.10 32.60 28.34

Middle Distillate 36.14 36.51 35.60 35.60 32.80 34.91

Residue 44.83 44.63 41.20 41.20 32.50 33.56

CRUDE OIL PRICING 2008-09 ONWARDS

Sl no. Product Name Source

1 LPG Average of Propane & Butane Price

2 Naphtha Average FOB of Singapore Naphtha.

3 Middle Distillate Average FOB of Singapore Kerosene & Gasoil

4 Residue Average FOB of Singapore LSWR

CRUDE OIL PRICING 2008-09 ONWARDS

Basket Price

Yield Adjustment

Sulphur Adjustment

API Adjustment

OIL’s Base Price

CRUDE OIL PRICING- OIL

OIL’s Base Price

Digboi Crude Price

Naharkatia Crude Price

Moran Crude Price

CRUDE OIL PRICING -OILDigboi Crude Price

Naharkatia Crude Price

Moran Crude Price

AOD Refinery

Mixed Crude Price

NRL Refinery

GHT Refinery

BGR Refinery

NHK Price X NHK Qty % + MRN Price X MRN Qty %

100

Mixed Crude Price

THANK YOU

Enabling Processes Energizing OIL