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The term netback refers to the gross profit per barrel of oil produced by an oil and gas company. A company calculates a netback by subtracting all of the costs of delivering a barrel of oil to the marketplace from all of the revenues produced from the sale of oil or hydrocarbon byproducts. Oil and gas companies use the netback value to compare costs against competitors and to plan strategically for exploration and production of products. Costs included in the netback calculation may include finding and extraction costs, refining and production costs, and distribution costs. Other costs involved with delivery of oil to the market include taxes, royalties, and marketing costs.
For example, Company ABC incurs a total cost of $135 US Dollars (USD) to produce and deliver the end products of one barrel of oil. If the company sells those products for a total of $160 USD, the netback is $25 USD. According to the Energy Information Administration (EIA), almost 75 percent of the total costs of hydrocarbon end products relates to the costs of exploration and extraction. Refining costs account for an additional 10 percent of costs, with marketing efforts and transportation expenses making up about five percent of the total.
Oil exploration involves highly sophisticated technology and personnel. Widely considered a high-risk venture, hydrocarbon exploration has become an extremely expensive operation with the possibility of little or no return. Typical onshore oil wells cost approximately $100,000 USD, but offshore drilling increases the costs considerably. Shallow offshore wells may cost as much as $30 million USD, and deep offshore wells may cost a company as much as $100 million USD or more.
Production costs associated with lifting the oil to the surface depend on a myriad of factors. Accessibility, depth of the well, and pressure in the reservoir are among the variables involved. These characteristics, which vary considerably with geographic location, determine the break-even price levels for oil and determine the overall costs included in the netback. A company can extract a barrel of oil in Kuwait for about $17 USD, while in the Canadian oil sands, the same barrel of oil costs $33 USD to lift. The EIA indicated that the offshore lifting cost per barrel of crude oil in the United States was, on average, $63.71 USD in 2008.
Refined hydrocarbon products include gasoline, diesel, home heating oil, and kerosene. One barrel of oil consists of about 42 gallons (158.98 liters) of crude oil, which is usually converted to anywhere between 19.74 to 27.72 gallons (74.72 to 104.93 liters) of gasoline — the exact amount of gasoline that can be refined from crude oil depends on the type of crude oil and the refining process. If a refiner pays $90 USD for a barrel of oil, it pays $4.55 USD per gallon (3.78 liters) of gasoline, assuming the crude oil only yields 19.75 gallons (74.72 liters) of gasoline. A gasoline pump price of $5.99 USD per gallon includes refining costs, taxes and distribution costs, totalling about 92 cents. The netback for the company is about 52 cents per gallon, with the average profit per gallon in the United States running between 30 and 60 cents per gallon.
Q.: When Saudi oil costs 2$ per barrel at the wellhead why are oil companies paying $100 a barrel?
A.: gsm cdma • 4 months ago •
Saudi Arabia has hedged its cost to United States for LifeLong, means, the cost price of Saudi to pump and make a barrel of crude, say $2 per barrel, it sells to United States for $2/Barrel. Saudi does not cost $100 to United States in an exclusive Oil Contract while forming Aramco (American Oil Company). But when Saudi Sells to other countries, it will be at rate at stock market price of Crude, the same situation is with New abducted Libya with NTC being dishonest to country by making pre-liberal libya having 35% of Libya Oil to only exclusive France, and hence, was the first Country who recognized NTC as an official government overthrowing a dictator who has ruled for 41 years.
Meanwhile, america try to rely on Oil of Arab countries to keep the American Oil wells intact and safe heaven for future generation. It is like keeping one owns wife virgin all lifelong and have the lay on girl's next door.
The price of refinery is solely an interim american refinery compiles based on US. US buys at 4 cents/gallon and if you are at least normal average school boy going mathematics at age of 8-10, you pretty much sure why the cost of selling gasoline at pumps are so astounding....
Originally posted by watchitburn
reply to post by meticulous
A more accurate portrayal of what the oil companies make from a barrel would need to be based off of profits from each product minus the costs of production, shipping, storage, and distributors and stuff like that. Also here in California anyway, about $.70 of a gallon of gas is taxes.
Figuring all that out might be a pain in the butt, not to mention time consuming. Good thread though, must have taken a while to find all that.
Originally posted by LaBTop
IMHOP, it did not cost a lot of time, in my case 0.002 seconds.
Your figures are based on 1995 average yields for U.S. refineries. They are VERY stale.
I copied this sentence of yours into a Google Search window.:
" amount of profit made on a single 42 gallon barrel of crude oil ".
The first hit contains your typed out list, it's your opening post at ATS in this forum.
The rest of the first ten hits on the first Google page give the answers to your query.
And most of your typed out and copied/pasted text.
It is good manners in science and on internet forums, to reference your work at the bottom of your thesis, or your posts, like this :
Originally posted by Murad
Proffit margins in the oil and gas industry are very very marginal. If you buy a barrel of crude at 90 dollars a barrel you will be lucky to sell it for 92 dollars a barrel. The reason they make make such proffits is due to the volume of output and demand. If you sell 30 million barrels one day, thats a lot off 2 dollars.
The oil companies are a masterwork of engineering in what they are capable off, they can bring you oil cheaper than bottled water of perfume, it is a feat of human ingenuity that should be truly marveled.
Oh yeah and "refinery gain" doesnt really exist, it is balanced out by "refinery loss" also, all it is, is the mathematical discrepancy between the correction factors used to calculate volume and weight in oil and gas transfers. Pretty much every refinery operates at a loss, they are simply there to service the markets for the traders who buy and sell it.edit on 21-8-2012 by Murad because: (no reason given)edit on 21-8-2012 by Murad because: (no reason given)
Robert Robinson, Emeritus Professor of Chemistry, University of Oxford.
Is the origin of petroleum organic or inorganic?
In a discourse to the Royal Institution on November 11 1966, Sir Robert Robinson argued that both theories are correct and that petroleum has a duplex origin. He went on to consider the carbonaceous constituents of certain meteorites and noted a possible implication relating to the origin of life on Earth.
There is widespread evidence that petroleum originates from biological processes. Whether hydrocarbons can also be produced from abiogenic precursor molecules under the high-pressure, high-temperature conditions characteristic of the upper mantle remains an open question. It has been proposed that hydrocarbons generated in the upper mantle could be transported through deep faults to shallower regions in the Earth’s crust, and contribute to petroleum reserves. Here we use in situ Raman spectroscopy in laser-heated diamond anvil cells to monitor the chemical reactivity of methane and ethane under upper-mantle conditions. We show that when methane is exposed to pressures higher than 2 GPa, and to temperatures in the range of 1,000–1,500 K, it partially reacts to form saturated hydrocarbons containing 2–4 carbons (ethane, propane and butane) and molecular hydrogen and graphite. Conversely, exposure of ethane to similar conditions results in the production of methane, suggesting that the synthesis of saturated hydrocarbons is reversible. Our results support the suggestion that hydrocarbons heavier than methane can be produced by abiogenic processes in the upper mantle.
Researchers at the Royal Institute of Technology (KTH) in Stockholm have managed to prove that fossils from animals and plants are not necessary for crude oil and natural gas to be generated. The findings are revolutionary since this means, on the one hand, that it will be much easier to find these sources of energy and, on the other hand, that they can be found all over the globe.
“Using our research we can even say where oil could be found in Sweden,” says Vladimir Kutcherov, a professor at the Division of Energy Technology at KTH.
Together with two research colleagues, Vladimir Kutcherov has simulated the process involving pressure and heat that occurs naturally in the inner layers of the earth, the process that generates hydrocarbon, the primary component in oil and natural gas.
According to Vladimir Kutcherov, the findings are a clear indication that the oil supply is not about to end, which researchers and experts in the field have long feared.
He adds that there is no way that fossil oil, with the help of gravity or other forces, could have seeped down to a depth of 10.5 kilometers in the state of Texas, for example, which is rich in oil deposits. As Vladimir Kutcherov sees it, this is further proof, alongside his own research findings, of the genesis of these energy sources – that they can be created in other ways than via fossils. This has long been a matter of lively discussion among scientists.
“There is no doubt that our research proves that crude oil and natural gas are generated without the involvement of fossils. All types of bedrock can serve as reservoirs of oil,” says Vladimir Kutcherov, who adds that this is true of land areas that have not yet been prospected for these energy sources.
But the discovery has more benefits. The degree of accuracy in finding oil is enhanced dramatically – from 20 to 70 percent. Since drilling for oil and natural gas is a very expensive process, the cost picture will be radically altered for petroleum companies, and in the end probably for consumers as well.
“The savings will be in the many billions,” says Vladimir Kutcherov.
To identify where it is worthwhile to drill for natural gas and oil, Vladimir Kutcherov has used his research to arrive at a new method. It involves dividing the globe into a finely meshed grid. The grid corresponds to fissures, so-called ‘migration channels,’ through underlying layers under the surface of the earth. Wherever these fissures meet, it is suitable to drill.
According to Vladimir Kutcherov, these research findings are extremely important, not least as 61 percent of the world’s energy consumption derives from crude oil and natural gas.
The next step in this research work will involve more experiments, but above all refining the method will make it easier to find places where it is suitable to drill for oil and natural gas.
Vladimir Kutcherov, Anton Kolesnikov, and Alexander Goncharov’s research work was recently published in the scientific journal Nature Geoscience.
jimmyx : it's always amazed me that the countries that charge the highest rate for gas and oil products, are the same ones that have private oil companies. the countries that have nationized their oil and gas, have the lowest cost to their citizens for the same products. so much for "competition"...because there is none between these oil corporations, it is a cabal, and they engage in price fixing among themselves and the representative governments around the world, don't do a damn thing about it.
Originally posted by LaBTop
To expand on my earlier contribution, here are some references in Journal articles, about the abiotic origins of crude oil.
Originally posted by meticulous
So, no one can come up with any solid numbers for the missing info without throwing costs or taxes out into the ring at the same time?
It was what I expected would happen. I just can’t fathom how the public can sit idly by and take what they are being told as fact without raising a single question as to the validity.
Big Oil is the ringmaster of this circus and you’re not really in the audience like you think you are. You’re the main act down on the floor jumping through flaming hoops while the ringmaster cracks the whip. The political clowns can’t help you because the ringmaster already paid them before the show started. They’re true purpose is to distract everyone with bright colors while they get the public to laugh at the political antics of them bashing each other time and time again.