General Example:

One oil company owns three category of wells (A), (B), (C) where category (A) produces crude oil, where category (B) produces natural gas, and category (C) produces both crude oil and natural gas.

If you know that:

1 - The cost of producing a barrel of oil in wells category (A) 1.5 $.

2 - The cost of producing a thousand cubic feet of the gas in wells category (B) 0.250 $.

3. Production volume of the wells in category (C) is as follows : 1 million crude oil 2000 million cubic feet of gas.

4 - Production costs in the third group 1470000 $.

5- The market price of oil barrel is 3 $ and the market price per thousand feet of gas is 0.3 $. 28 PREPARED BY DR, HANY ABDOU KHALIL

Required: Determine the cost of a barrel of crude oil & one thousandth of cubic feet of natural gas in the wells of category (C) by using the following methods :

1- British thermal unit method

2. Relative cost method.

3- Selling value method.