About oil and oil production

Quality and pricing of oil

Crude oil from a specific field is analysed and its chemical constituents measured.
The two most important properties investigated are the density of the crude oil, which determines whether it is heavy or light, and its sulphur content. Heavy oil flows slowly through a reservoir and contains heavier constituents, metals or sulphur. It is therefore more difficult to produce than lighter oil and its combustion is more polluting. Light oil does not need as much specialist treatment during refining and the costs are therefore lower. In addition, light oil is less polluting when used. It therefore
commands higher prices when sold. The prices of three grades of crude oil – West Texas Intermediate (WTI), North Sea Brent Crude (Brent) and UAE Dubai Crude – are used as a benchmark for the entire oil industry. The quality of oil from an individual field is compared with one of these grades of crude oil and it is then priced relative to the price of WTI, Brent or UAE.

Seasonal variation

PA Resources’ production and sales do not vary significantly according to the
time of year or season. However, sales can vary from one quarter to the next due to
variation in the date of liftings, when the customer collects the oil produced. The
customer collects the oil when the cisterns have been filled, but the date will also
depend on when the customer is able to collect the oil. Variation in sales between
quarters is normal for the oil industry. 

Production costs

The costs of recovering crude oil vary greatly between the oil fields currently
in production. The least costly oil to recover is that produced onshore in the
deserts of the Middle East, where the oil often comes up to the surface simply
under its own pressure. Recovery from deep-water platforms in the North Sea
and recovery under Arctic conditions are considerably more expensive.