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Effects of crude price formula may be unexpected

08/02/2010
By M.D. Pawde and N.V. Sangeeta
The crude oil price escalation and de-escalation formula for change in API gravity may result in payment of a higher price for a crude oil as a result of the increase in API gravity, when the realizable value of the crude oil actually falls.Most crude oils are blends from different fields. The quality is influenced by such factors as aging of production reservoirs, change in relative field production rates, and injection of significantly different quality streams such as condensate and atmospheric residue from local refineries.Crude oil quality variation can never be eliminated and, for this reason, it may be that crude oil is generally traded based on quality available at the time of loa...
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