Total drilling cost for crude oil at a tapping rate of 0.8 million gallons per day was ₹12 lakh in 2002. Estimate the cost of drilling at a tapping rate of 2 million gallons per day as on today. Take the value of exponent for tapping rate ranging from 0.1to 20 million gallons per day as 0.24. The

Question

Total drilling cost for crude oil at a tapping rate of 0.8 million gallons per day was ₹12 lakh in 2002. Estimate the cost of drilling at a tapping rate of 2 million gallons per day as on today. Take the value of exponent for tapping rate ranging from 0.1to 20 million gallons per day as 0.24. The cost index of 15 in 2002 has been updated to 92 in the current year.

Accepted Answer

Equation (15.3) is used to estimate the cost of drilling crude oil in 2002, but it must be updated by the cost index to today’s rupee value. Equation (15.4) is used to estimate the updated cost by considering both operations. The estimated cost in the current year in rupee value is obtained as:

[latex]C_{2}=C_{1} \left(S_{2}/S_{1}\right)^{n}[/latex] (15.3)

[latex]C_{2}=C_{1} \left(S_{2}/S_{1}\right)^{n} \left(I_{t}/I_{o}\right)[/latex] (15.4)

[latex]C_{2}=12,00,000 \left(2.0/0.8\right)^{0.24} \left(92/15\right)= ₹91,70,297.32[/latex]

Question 15.3: Total drilling cost for crude oil at a tapping rate of 0.8 m...

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