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PVU
PETROLEUM ECONOMICS
Chapter 5
Costs of Petroleum
Exploration and Production
Instructor: Hoang Hung, Ph.D.
Email: hungh@pvu.edu.vn
Mobile: 091 873 8 873
Subject Overview
Petroleum Economics
Chapter 1: Role and Characteristics of O&G Industry
Chapter 2: International Crude Oil Market
Chapter 3: International Gas market
Chapter 4: Petroleum E&P economics
Chapter 5: Costs in Petroleum E&P
Chapter 6: Tax and Law in O&G
Chapter 7: Main Trends of O&G market and Vietnam
Chapter 8: O&G industry in VN
Hoang Hung, PhD
Petroleum Economics
Content of Chapter 5
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Cost Bearer
(Cost Object)
Cost
Application/
Distribution
Cost
Accumulation
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2. Cost Classification
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VC
AVC
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Direct Cost
D
Cost
Application
Cost
Object
Indirect
Cost
tA
c
ire
nm
g
i
ss
t
en
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Di
st
rib
ut
io
n
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Sunk
Cost
Opportunity
Cost
The value of
the best
alternative
forgone.
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Money
already spent
and
permanently
lost. Sunk
costs are past
opportunity
costs that are
partially or
totally
irretrievable.
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Sunk
Cost in
O&G
Industry
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3.1. Cost
Structure
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TOE:
a unit of energy defined as the
amount of energy released by
burning one ton of crude oil. It is
approximately 42 gigajoules.
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Qj = Vj x Tj
Where:
Qj: Oil Equivalent Volume (Metric Ton)
Vj: PG/NG Volume (Cubic Meter)
Tj: Conversion Coefficient
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Conversion factors:
1 boe contains approximately 0.146 toe
(i.e. 1 toe = 6.841 boe).
1 t diesel
= 1.01 toe
1 m3 diesel = 0.98 toe
1 t petrol
= 1.05 toe
1 m3 petrol = 0.86 toe
1 t biodiesel = 0.86 toe
1 m3 biodiesel = 0.78 toe
1 t bioethanol = 0.64 toe
1m3 bioethanol = 0.51 toe
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An example:
Product
Unit
Volume
Conv. factor
TOE
Oil
Ton
200.000
1.00
200.000
PG
1.000 m3
40.000
1.25
50.000
NG
1.000 m3
250.000
0.80
200.000
Total
450.000
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bKj
Where:
J=1 3
J=1: Oil
J=2: PG
J=3: NG
Bkj: Cost of item K for j product
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- Work planning
- Discipline
- HSE
-
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Homework Assignments
End of Chapter 5
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