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CRUDE OIL PRICING

MECHANISM
Thursday
21-Dec-2017
Crude oil pricing
 Crude oil pricing varies from one Petroleum Policy to another and from
one Crude Oil Sale Agreement (COSA) to another.

 Exploration and production company is bound in selling of crude oil as per


PCA.

 It is not a mandate of Exploration and production company to enter into


an agreement with refineries for selling crude oil.

 OGRA is a regulatory body, and it will decide to whom (Refinery),E&P


company will sell their crude oil.
Crude oil price determination
A sample calculation is given below
USD Per Barrel
Spot price for Dubai $ 55.725
Spot price for Upper Zakum $ 55.725
Spot price for Oman $ 55.738
Average Price of Dubai, Uppeer Zakum and Oman ($ 167.1888/3) $ 555.73
Add/ (less): Premium/ (Discount) for Asian Markets from Platts $ 0.30
FOB Price ($ 55.73 + $ 0.30) $ 56.03
Add: Marine Freight $ 4.00
C&F Price ($ 56.03 + $ 4) $ 60.03
Add/(less): Yield differential $ (3.00)
Add: Marine Insurance @ 0.9% of C&F price $ 0.54
Add: Wharf age @ 3.85% of C&F price $ 2.31
CIF Price $ 59.879
Price will be converted to PKR by applying applicable exchange rate
Gas Pricing
• The price of pipeline quality Natural Gas is computed and notified in United
States Dollars per MMBTU according to the following formula:
• Pg = Pm * Dz / Cf

• Where Pg is the Gas Price in USD per MMBTU.

• Pm is the Applicable Marker Price in USD per barrel determined as follows:

• Dz is the zonal index which shall have the value of 63.33% for Zone III;
66.5% for Zone II, 69.66% for Zone I.

• Cf is the Applicable Conversion Factor, the weighted average of the heating


values expressed in MMBTU per barrel for the basket of Arabian/Persian
Gulf Crude Oils imported in Pakistan.
$/BBL
Weighted average imported Crude Oil C & F Price (Assumed RCP) 140.00
Floor Price C & F 10.00
Ceiling Price 110.00

Apply sliding scale discounts to C&F crude oil price after floor & upto ceiling.

US$/BBL Applicable % of C&F Price US$/BBL


0 to 30 100% 30

Above 30 to 50 Plus 50% of incremental increase 10

Above 50 to 70 Plus 30% of incremental increase 6

Above 70 to 110 Plus 20% of incremental increase 8


Applicable C&F Price (A+B+C+D) 54

Marker Price Onshore Zone III* 63.33% of applicable C&F price $34.2
Conversion Factor assumed (MM Btu/bbl)
5.7

Zone III producer price for pipe line quality specification gas in US$/MMBtu
6

*Marker price for Onshore Zone II will be determined with 66.5% Applicable
percentage of C&F Price leading to a marker price of $ 35.91 and producer
price of $ 6.3

Marker price for Onshore Zone I will be determined with 69.66% Applicable
percentage of C&F Price leading to a marker price of $ 37.616 and producer
price of $ 6.6
Reference Crude Price greater than USD 45/bbl

Zone III price is equal to GPC + (RCP-RC45) x GPG x [(GPC - GP20) / (RC45 –
RC20)]

Where GPG (gas price gradient) is 0.2.

For example when RCP = USD 60/bbl

Zone III price (USD/MMBTU) = 3.00 + (60 - 45) x 0.20 x [(3.00 – 2.50)/ (45-20)]
Zone III price (USD/MMBTU) = 3.06