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OIL

OIL. BUSINESS. G r ound Rules E ach c ompa n y ( c ompr i sing of max four participa n t s ) will be a w a r d e d $2 billi o n a t the s t art of the g ame.

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OIL

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  1. OIL BUSINESS

  2. Ground Rules Eachcompany (comprising of maxfourparticipants)will beawarded$2billionatthestartof thegame. Yourmain goal is to generatemaximumprofit from yourinvestmentswhichwill be evaluatedattheendof 25years. A separatebankingfacilitywillbeprovided, from which • • • loanscanbesanctionedanytime witha simple interest. 5%p.a. • Thedecision of theorganizingcommittee willbefinal andbinding.No argumentsto thecontrarywouldbe accepted.

  3. Round 1: Get yourLand There are five types ofland blockseach havingdifferent types ofcrudesand itscorresponding volumes. Englishauctioningof thelands willbe done. Hence,plan ahead withyour group members. Thelast blockwill cost 1.1times the averagepriceof the first fourblocks.

  4. EnglishBidding Type offorwardauction,inwhichusuallya singleitemis offeredforsale.Biddingstarts with alow price, andis raisedincrementallyas progressivelyhigherbidsare solicited,until either the auctionis closed or nohigherbids are received. Often the seller sets areserve price belowwhichthe itemis notsold andthe auctionis aborted. •

  5. Land Blocks Block Remarks Area (Acres) A OffshoreMedium 8000 B Medium 6000 C Light 10000 D Condensate 13000 E Heavy 16000

  6. • The completepetrophysicalpropertiesand other dataof yourblock willbe providedto you The afterallthe blockshavebeensold. OilInPlace(OIP)(inbarrels)is givenby: (Areaof field)x (payzonethickness)x (porosity) • 7758x x (1– watersaturation) Once youhaveidentifiedyourcrude oil potential,youare allset to developand produceit.So planyour journey ahead. •

  7. DrillingTechnologies Theamountof oilthat onecan recoverwill depend upon theefficiencyof thewell design andcompletion strategy. We shallprovide you witha set ofdrilling andcompletion technologiesforwhich you must submitsealed bids. Youwill beallowed tobid onlyfortwo technologies. Aparticulartechnologywill beawarded tothe team which bidthe highest andthe subsequent twohighest bidders. Ifhowever,a team manages tobidsuccessfullyfor two technologies,you shallbe awarded the technologyfor whichyou bidhigher. Theincrementin the bidshouldbe in multiples of$ 0.5 million.

  8. DrillingTechnologiesAvailable Technology Costper footof RecoveryFactor MinimumBid Drilling($/ft) Amount($million) D1 200 14 7 D2 175 12 6 D3 150 11 5 D4 125 10 3 D5 100 8 2

  9. Manpower The amountofcrudeyourecoverwillalso dependon the qualityofmanpoweryouhave! Hence, here’sthe chancetofurther enhance your reserves bychoosingthe bestset of employees. This,however,willbe aDutchauction. • • •

  10. Dutch Bidding It isatype offorwardauction,inwhicha seller ofalargeblock ofitemsseeksbids withinaspecifiedprice rangeforthe whole block. Theauctionbeginswithahighstarting price whichis progressivelylowered untilthe seller findsanacceptablebid.The last manpower unit will cost 1.1 times the average price of the first four manpower units. •

  11. ManpowerAvailable Manpower Salaryperfoot RecoveryFactor Minimumbid ($/ft) amount($ million) M1 150 10 6 M2 125 7 5 M3 110 6 4.5 M4 100 4 4 M5 80 3 3.5

  12. Drill wells! Thevolumeof oil recoverablewill also dependon thenumber of wells youdrill. Hencedecidehow manywells youwant to drill takinginto account: –Thedrainageareaper well –Recoveryofoilper well per year. Your netinvestmentindrillingthewellswill be: (no. of wells) x (depthof payzone)x {(costper foot of drilling)+ (salary per foot of drilling)} • •

  13. Block RecoveryofOilperWell per day(bbl/well/day) A 100 B 160 C 95 D 54 E 40

  14. YourCrude Potential The netrecoveryfactorforyour block willbe the sumofthe recoveryfactorsofyourdrilling technologyandyour manpower. Please note thatthe netrecoveryfactorwould be applicableon aper wellbasis(itis not applicableover the entire field). Your crudepotential(atthe endof15 years)willnow be madeknownto you. • • •

  15. • Inthisround,youcansell ofyour landwhosecrude to you. Howeverthe amountyou andbuysome part potentialis known wanto sell or buy • willdependonlyon you.Youalsoget to decide the price ofsellingyour land!

  16. • You havebeengivencompletefreedom. Decide howmuchandwithwhichteamyou wanttosell or buyandatwhichprice. You have15minutesforthis. • • Enter your transactionsinthe sheet given you inthis roundandsubmitit to the computationdesk within15minutes. to • After15minutesnofurther transactionswill be entertained.

  17. • Please keep inmindthatthe landyou have boughtinthisroundhasalreadybeen developedbythe seller, andhence you can only use thetechnologyemployedbythe seller to extracttheoil.

  18. Production willbe producedfor15 years. to bearthe costofproduction accordingto thetablegiven. • • Now the wells You shallhave forthis period

  19. Productioncosts Block CostofRecovery(perbarrel) A 6 B 7 C 5 D 8 E 9

  20. Refine your crude Now thatyouhaveproducedthe crude,you willneed to refine itbeforeyoucansell it. You shallhaveto bidforthe following refineries accordingto Englishauctionrules. • •

  21. Crudehandlingcapacity MinimumBid Price($ Refinery (bbl/day) million) R1 28000650 R2 24500600 R3 21000500 R4 30000750 R5 450001000

  22. • Whilebiddingforrefineries, keep inmindthat you willalsohaveto set upaninfrastructure fortransportationandbearthe transportation costs. Two optionsare availableto you: –Pipeline –Road/Rail/Tanker •

  23. Block – Refinery Distances(in km) R1 R2 R3 R4 R5 A 100 1100 1900 1500 800 B 2600 1300 800 1900 2800 C 530 1250 1700 1000 300 D 1100 200 1400 1900 1900 E 1200 1300 1200 350 950

  24. Investment for transportation ModeOfTransportation InitialInvestment($/km) Cost($/barrel/km) Pipeline 8000 0.01 Roads/Rail/Ship1000 0.025

  25. • Dependinguponthe natureofcrudethatyou haveextractedfromyourblock/blocks,the recoveryofpetroleumproductswillvary. The followingtabledescribesthe post- processingproductsfrom 1barrel ofcrude. •

  26. Refinery Output (per barrel) Block Gas(lt) Petrol(lt) Kerosene(lt) Diesel(lt) Lubricant(lt) Coke(kg) A 12.64 48.98 20.54 28.44 11.06 109.02 B 11.06 45.82 17.338 25.28 15.8 127.98 C 17.38 55.3 20.54 26.86 9.48 85.32 D 26.86 66.36 17.38 23.7 7.9 47.4 E 4.74 39.5 15.8 23.7 18.96 165.9

  27. • Now that crude, its However, youhavesuccessfullyrefinedyour timeto make money!! there’sacatch–youcanonlysellat • the markets whichare closestto your refinery. Refinery City R1 Mumbai R2 Visakhapatnam R3 Kolkata R4 Delhi R5 Ahmedabad

  28. Demand/day(lt/day) Market Gas Petroleum Kerosene Diesel Lubricant Coke(kg) Delhi 16000 28200 15500 16300 23000 175500 Mumbai 11500 29800 17000 16500 21200 197500 Kolkata 8300 31800 15750 17800 20500 210000 Vizag 7700 25500 16000 13000 28500 220000 Ahmedabad 8000 26000 13000 14000 21700 167770

  29. Sales To ensurepropersales,you need to setup aproper salesinfrastructure.Thesearedefinedby two parameters: –Supply ofcomponentper pump station –Costof settingup each station So decidehow much you want to sell andthus,decide yourinvestments. Ifyou havea surplusof supplyofa particular petroleumby product,you cansell it to another team. You canchoosetheamountof thebyproduct you want tosell, but itssellingpriceis fixed accordingto slide 36 . You willbegiven a 10minuteswindow.

  30. Supply per day perstation PetroleumKeroseneLubricant Gas(lt) (lt) (lt) Diesel(lt) (lt) Coke(kg) Delhi 160 282 155 192.5 230 176 Mumbai 115 298 170 191 212 200 Kolkata 82 318 157 181 205 210 Vizag 77 255 160 222.5 285 220 Ahmedabad 80 260 130 173.5 217 170

  31. Cost of each station($ 100,000) Gas Petroleum Kerosene Diesel(lt) Lubricant Coke Delhi 1 1.5 0.75 1.125 2.3 0.2 Mumbai 0.8 1.8 1.3 1.55 2.1 0.3 Kolkata 0.7 2 0.75 1.375 2 0.4 Vizag 0.5 1 0.75 0.875 2.5 0.5 Ahmedabad0.2 1.2 0.5 0.85 2.2 0.1

  32. Sales Now afterallthe hardsloggingcomes the goodtimes! Itstime to earnyour profits.The prices havebeen set andyour earningsare overaperiodof10years. •

  33. Selling price Gas(lt) Petrol(lt) Kerosene(lt) Diesel(lt) Lubricant(lt) Coke/kg Price($) 2 7.5 3 4.2 15 0.5

  34. Selling price for inter-team sales Kerosene(lt) Gas(lt) Petrol(lt) Diesel(lt) Lubricant(lt) Coke/kg 2.5 12 0.3 Price($) 1.5 6.5 3.8

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