OIL

BUSINESS
OIL BUSINESS

Ground Rules
Each company (comprising of max four participants) will
be awarded $2 billion at the start of the game.
Your main goal is to generate maximum profit from your
investments which will be evaluated at the end of
25 years.
A separate banking facility will be provided, from which
loans can be sanctioned any time with a 5% p.a.
simple interest.
The decision of the organizing committee will be final
and binding. No arguments to the contrary would be
accepted.

OIL BUSINESS

Round 1: Get your Land

There are five types of land blocks each having different
types of crudes and its corresponding volumes.
English auctioning of the lands will be done.
Hence, plan ahead with your group members.
The last block will cost 1.1 times the average price of the
first four blocks.

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English Bidding
Type of forward auction, in which usually a single
item is offered for sale. Bidding starts with a low
price, and is raised incrementally as
progressively higher bids are solicited, until
either the auction is closed or no higher bids are
received. Often the seller sets a reserve price
below which the item is not sold and the auction
is aborted.
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Land Blocks
Block
A
B
C
D
E

Remarks
Offshore Medium
Medium
Light
Condensate
Heavy

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Area (Acres)
8000
6000
10000
13000
16000

OIL BUSINESS

 The complete petrophysical properties and

other data of your block will be provided to
you after all the blocks have been sold.
Oil In Place (OIP) (in barrels) is given by:
7758 x (Area of field) x (payzone thickness) x
(porosity) x (1 - water saturation)

Once you have identified your crude oil

potential, you are all set to develop and
produce it. So plan your journey ahead.
OIL BUSINESS

Drilling Technologies
The amount of oil that one can recover will depend upon
the efficiency of the well design and completion strategy.
We shall provide you with a set of drilling and completion
technologies for which you must submit sealed bids.
You will be allowed to bid only for two technologies.
A particular technology will be awarded to the team which
bid the highest and the subsequent two highest bidders.
If however, a team manages to bid successfully for two
technologies, you shall be awarded the technology for
which you bid higher. The increment in the bid should
be in multiples of $ 0.5 million.

OIL BUSINESS

Drilling Technologies Available

Technology
D1
D2
D3
D4
D5

Cost per foot of

Drilling($/ft)
200
175
150
125
100

Recovery Factor
14
12
11
10
8

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Minimum Bid
Amount ($ million)
7
6
5
3
2

Manpower
The amount of crude you recover will also
depend on the quality of manpower you have!
Hence, heres the chance to further enhance
your reserves by choosing the best set of
employees.
This, however, will be a Dutch auction.

OIL BUSINESS

Dutch Bidding
It is a type of forward auction, in which a
seller of a large block of items seeks bids
within a specified price range for the whole
block. The auction begins with a high starting
price which is progressively lowered until the
seller finds an acceptable bid. The last
manpower unit will cost 1.1 times the
average price of the first four manpower
units.

OIL BUSINESS

Manpower Available
Manpower
M1
M2
M3
M4
M5

Salary per foot

($/ft)
150
125
110
100
80

Recovery Factor
10
7
6
4
3

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Minimum bid
amount ($ million)
6
5
4.5
4
3.5

Drill wells!
The volume of oil recoverable will also depend on
the number of wells you drill. Hence decide how
many wells you want to drill taking into account:
The drainage area per well
Recovery of oil per well per year.

Your net investment in drilling the wells will be:

(no. of wells) x (depth of payzone) x {(cost per
foot of drilling) + (salary per foot of drilling)}

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Block
A
B
C
D
E

Recovery of Oil per Well

per day (bbl/well/day)
100
160
95
54
40

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Your Crude Potential

The net recovery factor for your block will be
the sum of the recovery factors of your drilling
technology and your manpower.
Please note that the net recovery factor would
be applicable on a per well basis (it is not
applicable over the entire field).
Your crude potential (at the end of 15
years) will now be made known to you.
OIL BUSINESS

 In this round, you can sell and buy some part

of your land whose crude potential is known
to you.
However the amount you wan to sell or buy
will depend only on you. You also get to
decide the price of selling your land!

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 You have been given complete freedom.

Decide how much and with which team you
want to sell or buy and at which price.
You have 15 minutes for this.
Enter your transactions in the sheet given to
you in this round and submit it to the
computation desk within 15 minutes.
After 15 minutes no further transactions will
be entertained.
OIL BUSINESS

 Please keep in mind that the land you have

bought in this round has already been
developed by the seller, and hence you can
only use the technology employed by the
seller to extract the oil.

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Production
Now the wells will be produced for 15 years.
You shall have to bear the cost of production
for this period according to the table given.

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Production costs
Block
A
B
C
D
E

Cost of Recovery(per barrel)

6
7
5
8
9

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Refine your crude

Now that you have produced the crude, you
will need to refine it before you can sell it.
You shall have to bid for the following
refineries according to English auction rules.

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OIL BUSINESS

Minimum Bid Price ($

million)
650

Refinery
R1

Crude handling capacity

(bbl/day)
28000

R2

24500

600

R3

21000

500

R4

30000

750

R5

45000

1000

OIL BUSINESS

 While bidding for refineries, keep in mind that

you will also have to set up an infrastructure
for transportation and bear the transportation
costs.
Two options are available to you:
Pipeline
Road/Rail/Tanker

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Block Refinery Distances (in km)

A
B
C
D
E

R1
100
2600
530
1100
1200

R2
1100
1300
1250
200
1300

R3
1900
800
1700
1400
1200

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R4
1500
1900
1000
1900
350

R5
800
2800
300
1900
950

Investment for transportation

Mode Of Transportation Initial Investment ($/km)
Pipeline
8000
Roads/Rail/Ship
1000

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Cost( $/barrel/km )
0.01
0.025

 Depending upon the nature of crude that you

have extracted from your block/blocks, the
recovery of petroleum products will vary.
The following table describes the postprocessing products from 1 barrel of crude.

OIL BUSINESS

Refinery Output (per barrel)

Block
Gas(lt)

Petrol(lt) Kerosene(lt) Diesel(lt) Lubricant(lt) Coke(kg)

12.64

48.98

20.54

28.44

11.06

109.02

11.06

45.82

17.338

25.28

15.8

127.98

17.38

55.3

20.54

26.86

9.48

85.32

26.86

66.36

17.38

23.7

7.9

47.4

4.74

39.5

15.8

23.7

18.96

165.9

OIL BUSINESS

 Now that you have successfully refined your

crude, its time to make money!!
However, theres a catch you can only sell at
the markets which are closest to your refinery.
Refinery

City

R1
R2
R3
R4
R5

Mumbai
Visakhapatnam
Kolkata
Delhi
Ahmedabad

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Demand/day (lt/day)
Market
Delhi
Mumbai
Kolkata
Vizag

Gas
16000
11500
8300
7700

Ahmedabad 8000

Petroleum Kerosene
28200
15500
29800
17000
31800
15750
25500
16000

26000

13000

Diesel
16300
16500
17800
13000

14000

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Lubricant Coke(kg)
23000
175500
21200
197500
20500
210000
28500
220000

21700

167770

Sales
To ensure proper sales, you need to setup a proper sales
infrastructure. These are defined by two parameters:
Supply of component per pump station
Cost of setting up each station

So decide how much you want to sell and thus, decide your
investments. If you have a surplus of supply of a particular
petroleum by product, you can sell it to another team.
You can choose the amount of the byproduct you want
to sell, but its selling price is fixed according to slide 36 .
You will be given a 10 minutes window.

OIL BUSINESS

Supply per day per station

Delhi
Mumbai
Kolkata
Vizag

Gas(lt)
160
115
82
77

Ahmedabad

80

Petroleum Kerosene
Lubricant
(lt)
(lt)
Diesel (lt)
(lt)
282
155
192.5
230
298
170
191
212
318
157
181
205
255
160
222.5
285

260

130

173.5

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217

Coke(kg)
176
200
210
220

170

Cost of each station ($ 100,000)

Delhi
Mumbai
Kolkata
Vizag

Gas
1
0.8
0.7
0.5

Ahmedabad

0.2

Petroleum Kerosene Diesel(lt) Lubricant

1.5
0.75
1.125
2.3
1.8
1.3
1.55
2.1
2
0.75
1.375
2
1
0.75
0.875
2.5

1.2

0.5

0.85

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2.2

Coke
0.2
0.3
0.4
0.5

0.1

Sales
Now after all the hard slogging comes the
good times! Its time to earn your profits. The
prices have been set and your earnings are
over a period of 10 years.

OIL BUSINESS

Selling price
Price ($)

Gas(lt)
2

Petrol(lt) Kerosene(lt) Diesel(lt) Lubricant(lt) Coke/kg

7.5
4.2
15
0.5
3

OIL BUSINESS

Selling price for

Price ($)

Gas(lt)
1.5

inter-team sales

Petrol(lt) Kerosene(lt) Diesel(lt) Lubricant(lt) Coke/kg

2.5
12
0.3
6.5
3.8

OIL BUSINESS