Lok Sabha Question No. 2444 (UNSTARRED), answered on 2016-08-01
Subject: Price of Crude Oil
Ministry: PETROLEUM AND NATURAL GAS
Asked by: MD. BADARIDDOZA KHAN, JOSE K. MANI, SURESH KODIKUNNIL, RAVINDRA BABU  PANDULA, BHAVANA GAWALI (PATIL), ARVIND GANPAT SAWANT

## LOK SABHA

## UNSTARRED QUESTION NO.2444

## TO BE ANSWERED ON 1 ST  AUGUST, 2016

## PRICE OF CRUDE OIL

## 2444.   SHRI MD. BADARUDDOZA KHAN:

SHRI JOSE K. MANI:

SHRI KODIKUNNIL SURESH:

DR. RAVINDRA BABU:

SHRIMATI BHAVANA PUNDALIKRAO GAWALI PATIL:

SHRI ARVIND SAWANT:

## isVªksfy;e vkSj izkÑfrd xSl ea=h

## Will the Minister of PETROLEUM AND NATURAL GAS be pleased to state:

- (a) the details of crude oil prices in the international market during the last two years and the current year;
- (b) the cost of production of crude oil per barrel for ONGC and Oil India Limited vis-a-vis private  sector  exploration  and  production  companies  and  other  oil  companies  across  the world along with the steps taken by the Government to reduce the cost of production of crude oil by public sector oil companies;
- (c) whether the cost of petroleum products are fixed on the basis of the price of crude oil in the international market and if so, the details thereof along with formula to fix the cost of production of petroleum products including petrol, diesel, LPG etc., product-wise;
- (d)  whether  ninety  per  cent  cost  is  incurred  to  manufacture  petrol  and  diesel  after  refining crude  oil  and  if  so,  the  details  thereof  along  with  the  procedures  followed  in  the  above process;
- (e) whether the cost during the process of refining is not estimated/calculated separately and if so, the details thereof and the reasons therefor along with the reaction of the Government thereto; and
- (f) the steps taken to bring down the prices of petrol at par with diesel to discourage the use of non-commercial diesel vehicles to curb the pollution level?

## ANSWER isVªksfy;e vkSj izkÑfrd xSl ea=h ( Lora= izHkkj ) ¼Jh /keZsUnz iz/kku½

## MINISTER OF STATE (I/C) IN THE MINISTRY OF PETROLEUM AND NATURAL GAS (SHRI DHARMENDRA PRADHAN)

- (a): The average price of Indian basket of crude oil during the last 2 years and the current year are given below:

|       |   2014-15 |   2015-16 |   2016-17 (up to 25.7.2016) |
|-------|-----------|-----------|-----------------------------|
| $/bbl |     84.16 |     46.17 |                       44.01 |

Note - The Indian basket of crude oil  represents a derived basket comprising of sour grade (Oman & Dubai average) and sweet grade (Brent Dated) of crude oil processed in Indian refineries in the ratio of 71.03:28.97 during 2015-16 (for 2016-17).

- (b): Cost  of  Production  of  crude  oil  of  ONGC/OIL  and  Private  Sector  Production  and Exploration companies (excluding levies) is as under:

(US$/bbl)

| Field/Year   |          |   2013-14 |   2014-15 |
|--------------|----------|-----------|-----------|
| ONGC(exl JV) |          |     20.85 |     19.62 |
| OIL(exl JV)  |          |     15.29 |     15.64 |
| Ravva        | Offshore |      9.53 |     17.08 |
| Panna &Mukta | Offshore |     14.63 |     16.85 |
| CB OS 2      | Offshore |     18.98 |     17.19 |
| RJ ON-90/1   | Offshore |     15.54 |     19.07 |

Production cost of some of the leading International oil companies as available in public domain is given below:

| Company                 |   Production Cost (in USD/bbl) |
|-------------------------|--------------------------------|
| BHP Billiton Group      |                          13.39 |
| BP p.i.c.               |                          19.23 |
| Chevron Corporation     |                          21.3  |
| Conoco Philips          |                          22.86 |
| Exxon Mobil Corporation |                          17.08 |

Source:

Ernst & Young's US oil and gas reserves study 2015

Steps  taken  by  public  sector  oil  companies  to  reduce  the  cost  of  production  of  crude  oil are:-

- i. Reduce operating cost, maximise utilization of resources, reduce equipment & technological obsolescence.
- ii. Cost effective rig operations with minimum non-productive time and liquidation of more sick wells with better rig fleet utilisation.
- iii. Implementation  of  advance  technologies  like  multi  stage  Hydro-fracturing, expandable  casing,  casing  with  drilling,  swell  packer,  high  performance  mud system, stimulation techniques etc.
- iv. Boosting R&D with focus on technology scouting and assimilation.
- v. Improved  Procurement  Practices,  enhanced  collaboration  with  technology owners/providers-Tie ups for technology absorption.
- vi. Reduce  survey  cost  by  Open  tendering  process  in  order  to  get  the  most competitive price.
- vii. Improvement of safe operational practices alongwith skill enhancement through specialized trainings.
- viii. Improving pipe line connectivity to stripper production installations to minimise transportation costs.
- ix. Outsourcing  of  capital  intensive  services  like  coiled  tubing  operation  and nitrogen pumping units.
10. (c): The  prices of  Petrol  and  Diesel  have  been  made  market  determined  by  the Government effective 26 th June, 2010 and 19 th October, 2014 respectively.   Since then, the Public  Sector  Oil  Marketing  Companies  (OMCs)  take  appropriate  decision  on  pricing  of Petrol  and  Diesel  in  line  with  their  international  prices  and  other  market  conditions.  The Government continues to modulate the effective price to consumer for Subsidized Domestic LPG and Retail Selling Price (RSP) of PDS Kerosene.  Public Sector OMCs are at present applying  Trade  Parity  Pricing  methodology  to  compute  the  Retail  Selling  Price  (RSP)  of Petrol  and  Diesel.    Import  Parity  Price  (IPP)  is  applied  for  pricing  of  PDS  Kerosene  and Domestic LPG.
11. (d) & (e): Refining of crude oil is a process industry, where crude oil constitutes around 90% of the total cost. Crude oil is processed through several processing units. Each of these units  produces  intermediate  products  streams,  which  require  further  reprocessing  and blending.  As it is difficult to apportion the total cost amongst individual refined products, product-wise costs are not identified separately.
12. (f): The difference in the Retail Selling Prices (RSP) of Petrol and Diesel in the country is mainly on account of lower taxes imposed by Central and State Government(s) on Diesel. As Diesel is used for bulk transportation, higher taxes on Diesel has a cascading effect on the inflation. Diesel has a weightage of 4.67 in the Whole Sale Price Index (WPI) and for each Rupee increase in Diesel price, the WPI index is estimated to increase by around 0.09%.