10$ per Barrel - Unbelievable

Do you know that it takes as little as $4.50 in India to produce a barrel of oil which costs $138 in the international market? Cairn India, which operates the Ravva (offshore Andhra Pradesh) and Cambay (offshore Gujarat) oilfields, spends just that much to produce a barrel of oil equivalent (The term “oil equivalent” includes gas output, which in the case of Cairn, is minor).

The price inches up to $7.50 a barrel if you include royalty and cess that are statutory levies payable to the government. In fact, the field cost (salaries of all the production staff plus consumables) for a barrel of oil equivalent is just $1.5 for Cairn as revealed in its Annual Report for 2007. It builds up as you add other administrative, finance and general expenses.
Three observations

These numbers have to be read in the context of three observations. First, Cairn is one of the lowest cost producers in India today given that the Ravva field is just a few kilometres off the coast; the cost of oil produced by ONGC, the biggest producer in the country, may be higher than this.

Second, the Ravva field contributed just 48,000 barrels of oil a day to the country’s total consumption of 2.7 million barrels a day. So, the benefit of production efficiencies will not be felt at the overall level.

Finally, oil companies continuously spend on field redevelopment to enhance output. Cairn was no exception as it invested in redevelopment of the Ravva field to maintain plateau output at around 50,000 barrels a day. This expenditure will also have to be considered for determining the final cost of production. For instance, Cairn’s average cost of production was $10.50 a barrel in the fourth quarter of 2007 and this included a work-over cost of $ 4.25 a barrel.

Cairn’s Annual Report for 2007 also reveals that the company realised an average price of $74.50 a barrel last year with the fourth quarter seeing an average realisation of $90.20 a barrel.

Now they should share of that with me being a honest share holder throught all their lows :)

Contemplate this : Mobility restrictions for skilled labour

China still follows the "Hukou" system that discourages graduates and
skilled or semi-skilled labour based in remote provinces from working in more
developed areas. For example, a graduate from a second-tier city who wants to
work in Shanghai will have to overcome considerable obstacles, including
mobility restrictions. In general, employers are discouraged from hiring workers
from other regions. As a consequence, many employers tend to hire mostly local
graduates — a phenomenon that seriously compromises their search for the best talent

Now seriously that is little strange for me, Never heard of those things until i read it today. Cant even think of such a thing being implemented in india, even the policy level decision would not have consensus.

Shall i say, Hail democracy. He,He :)

Made in China at what Quality?

We all like to crib about how Indian made products are costlier when compared to cheap chinese products. Here is a small fact for some of you to explain you the real story.

William Loft an leading economist contacted 12 Companies and asked for quotes and then went back later asking for quotes but making it clear that an independent quality inspector would be employed to check the quality of the goods produced.

So what happened to the quotes? In 10 out of 12 cases they increased.

On average, Chinese manufacturers increased pricing 20% when told a 3 part inspection process was required. Williams Loft president, Will Robertson, reacts “It’s surprising, but not unexpected. We know that very fine products can come from China; we just need to have a system in place to guarantee quality.”

Possible answers for the price rise includes these

• These Companies usually cut corners allowing them to undercut rivals - an example of quality fade. Because the buyer is signalling its serious attitude to quality the firm provides the “real price” for a given level of quality
• The firm, by signalling its intention to employ independent inspectors, that it can afford to pay more and thus the price is hiked up on them. and
  
• The sellers increase their quotes as they see the buyer as “trouble” that will induce additional internal costs of monitoring and the potential for damage to its reputation from any returns or failed inspections. Thus the price rises to compensate for the extra hassle.

Do you still think India Inc. is doing too bad?

Future of Jaguar and Land Rover.

Ford today officially announced the tranfer of sale of the most prestgious brands Jaguar and Ford. Now its upto the Indian car maker to decide upon the fate of these brands.

Truly speaking these brands with their loyal supporters and TATA's expertise running things on a shoe-string budget augurs well for a bright future.

We also need to see what good things the Indian maker can bring to the table and what technology it takes back to its Indian stable.

Interesting times ahead.

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