By

Hemant Kumar

Domain Consultant

Energy Practice

Fundamentals of Oil & GasIndustry

By the end of this presentation you’ll learn

• The importance of energy in our lives

• Overview of oil and gas supply chain

• What are hydrocarbons

• Where do crude oil and natural gas come from

• How are they produced

• How are petrol, diesel etc are produced

• How are they delivered to us

• Who are various players in the industry

Chapter- 1

Introduction to Energy

You check your mails on your PC and find that

you’ve won a quiz contestYou read about the increase in crude oil

prices in the newspaper

You store the delicious dish you cooked last night in your fridge

You spend quality time with your family watching

a movie “dog’s life”

You wash your most favourite T-shirt in washing machine

Picture This

Your house is sufficiently heated to protect you from cold weather. And light bulbs/tubes keep your house glowing at night

And all that needs electricity to keep your day to day life running smoothly.

The electricity comes from the power plant which runs on natural gas

or coal

Train for long distances

World is not so small and we require the means to move from one place to another. Fortunately we have various ways to do that

Our personal vehicles for outings

Public Transport for daily commutation

Planes for faster long distance travel

And we need roads for our vehicles to run on

And Picture This Also

…….And we need fuel for all these modes of transport. Unless of course you want to use a bicycle

To build roads we need TAR which is also called COAL TAR……

Thanks to cooking gas, preparing food is no more

inconvenient

Vegetables we love to eat also need fertilizer

We need fertilizer to grow the food crops

Plastic bags are widely used to carry the

vegetables and other food items

And can we live without food?

To cut a long story short..

The way, we live, needs lot of energy, for preparing foods, travelling, recreation, comfort and safety. The all-important energy comes from various sources like

Crude oil & Natural Gas

Wind

Water

Coal

Sun

Types of energy

Renewable Wind

Water

Sun

Renewable Energy is energy derived from resources that are regenerative (can be replenished in a short period of time) or for all practical purposes cannot be depletedRenewable energy accounts for about 14% of the world's energy consumption

The five renewable sources used most often include hydropower (water), solar, wind, geothermal, and biomass.

Geothermal

Biomass

Non Renewable

Crude oil & Natural Gas

Coal

Nonrenewable energy sources come out of the ground as liquids, gases and solids.

Non-renewable sources of energy can be divided into two types: fossil fuels and nuclear fuel

Coal, crude oil and natural gas are all considered fossil fuels because they formed from the buried remains of plants and animals that lived millions of years ago

Nuclear Fuel

Welcome to Oil and Gas industry

• Now that we have understood the importance of energy in its various forms, we also need to know where it comes from. Hydrocarbons (oil and gas), which are nonrenewable energy resources, contribute almost 50% of the total world energy requirement.

• In the next chapters we’ll try to know more about hydrocarbons which are very important source of energy and critical to our economicgrowth and survival.

• When we talk about hydrocarbons, we should know that they are found, produced and delivered to us by oil and gas companies whoengage in multiple activities which will be described in this presentation

• So let’s get ready to learn about oil and gas industry.

Transporting hydrocarbons

Finding & producing hydrocarbons

Refininghydrocarbons

Selling the petroleum by products

Truck

Wellhead Producers

PlatformProducers

PlatformProducers

PlatformProducers

Terminal/Storage/Hub Location

Refineries Bulk Terminal Storage

Gas Stations

Petroleum Value Chain

Upstream RetailDownstreamMidstream

Picture below gives an overview of the supply chain of the oil and gas industry. Industry is organized into three broad categories based on the activities performed therein. They are mainly a) Upstream (Finding & producing hydrocarbons) b) Downstream (Refining hydrocarbons and producing saleable petroleum byproducts) c) Retail (Selling the byproducts to all the users who need them).Midstream, though is not a very popular term is used to describe the transport part.

Source:http://www.adventuresinenergy.com

Chapter- 2

Origin of Oil & Gas

What Hydrocarbons are

• Hydrocarbons are naturally occurring chemicals that are made up of just two elements – carbon and hydrogen.

• Chemicals based on carbon and hydrogen are called as hydrocarbons

• The Simplest Hydrocarbon is methane (CH4) is made up of one carbon, four hydrogen atoms

• From now we’ll use terms hydrocarbons and oil & gas interchangeably (which is perfectly alright)

Origin of Oil and Gas

Hydrocarbon Formation

Oil was formed from the remains of animals and plants that lived millions of years ago in a marine (water) environment even before the dinosaurs. Over the years, the remains were covered by layers of sand, silt and mud. Heat and pressure from these layers helped the remains turn into what we today call crude oil . The word "petroleum" means "rock oil" or "oil from the earth." Nowadays the terms petroleum is used as a common denotation for crude oil and natural gas, i.e., the hydrocarbons.

Once the body of prehistoric animals and plants became trapped they partially decomposed using up the dissolved oxygen in the sediment. As soon as the oxygen is used up, decay stops and the remaining organic matter is preserved. Continued burial, subject the organic matter to higher temperatures and pressures, which cause physical and chemical changes in the organic. These produce tiny droplets of hydrocarbons

Source- http://www.eia.doe.gov/kids/energyfacts/sources/non-renewable/oil.html#How%20used

Facts

• Oil & gas do not occur in an underground pool but lies in the pore pace of the rocks which are also called the source rocks

• The oil & gas are forced through the rock on account of three reasons

•Expansion of the oil itself•Expansion of gas from above•Pressure of the encroaching water from below.

• Oil can be found with in the depth of ranging between 2km – 9km

Origin of Oil and Gas

What a petroleum bearing rock looks like

Origin of Oil and Gas-Do it yourself

You can visualize what a rock containing crude oil & natural gas would look like.

As shown in the picture below, take a bucket, a can of petrol and gas. Try mixing them together and resulting mixture would resemble a reservoir. Sounds simple!! Isn’t it? Except that a petroleum reservoir is more complicated in its nature and very difficult to find out.

A word of Caution: Don’t try it at home ☺

If it’s very difficult to do, don’t worry. You can imagine a sponge soaked with water or petrol. A rock will contain the hydrocarbon the same way; in its pores.

However a source rock as we call it will be no good on its own as oil & gas therein will leave the source rock and migrate to other areas. Does it make life difficult for those looking for large deposits of oil and gas? Not exactly!

Permeability is provided by the channels connecting different pores

Pore is a small open spacebetween the rock particles

As we learnt, oil and gas originate in source rock and once fully formed they start moving towards the surface through channels in the rocks surrounding the source rocks. Once their upwards movement is impeded by non permeable rocks also called trap or seal or cap rocks they tend to accumulate in the porous (containing pores) and permeable rocks also known as reservoir rocks.

Petroleum System-Is a oil & gas

bearing structure containing source, reservoir and cap

rocks.An oil & gas field consists of one or

many such petroleum systems

Source Rock

Petroleum System

Origin of Oil and Gas- Petroleum System

Chapter- 3

Oil & Gas Exploration & Production

Oil & gas fields are identified using seismic data which is obtained from Seismic Surveys

Seismic Data

Acquisition

Seismic Data obtained

from Seismic Survey

Seismic Data processed

at the Workstation

Computer

generated model

of underground rocks and

trapped oil&gas

reserves

Exploration- Finding Oil & Gas

Seismic Survey

To confirm the interpretations of the seismic data, drilling is done which is also called as exploratory drilling. Drilling is done using drilling rigs each adapted to different water depths (more than 2000 m in some cases)

Jack up Rig Semi-submersible Rig

Drill Ship

Sea Bed

Water Level

Semi-submersible Rig- floats and retains its

stabilized position by means of anchors fixed

on the seabed. Used in deep waters

Jack up Rig- is fitted with long support legs

(3 0r 4) which are lowered until they rest on

the sea bottom. This allows the working

platform to rest above the surface of the

water, as opposed to other floating rigs.

Used in shallow depth

Drill Ship- is a ship designed to carry out

the drilling operations in deep water. A drill

ship must stay relatively stationary on

location in the water for extended periods of

time. This positioning may be accomplished

with multiple anchors, dynamic propulsion

(thrusters) or a combination of these.

Exploration- Finding Oil & Gas

Once an area has been selected and the right to drill thereon has been obtained, actual drilling may begin. The most common method of drilling in use today is rotary drilling. Rotary drilling operates on the principle of boring a hole by continuous turning of a bit.

The bit, which is the most important part and also is hollow and very heavy, is attached to the drill string. A drill string is composed of hollow lengths of pipe leading to the surface. As the hole gets deeper, more lengths of pipe can be added at the top.

Drill Bit

Exploration- Exploratory Drilling

•Oil companies have to drill many exploratory wells before discovering a potential oil filed which is also called as prospect. The success rate also known as strike rate depends on the geological history of the particular region where exploratory activities are being performed. On an average the strike rate varies between 5% to 15%. For example a 10% strike rate would mean one prospect among 10 exploratory wells drilled. It also means the 9 of them would be dry holes.

• Drilling a well is a very costly activities especially in deep water. Oil companies are using the modern technologies to increase the strike rate during exploration

•Oil companies have to drill many exploratory wells before discovering a potential oil filed which is also called as prospect. The success rate also known as strike rate depends on the geological history of the particular region where exploratory activities are being performed. On an average the strike rate varies between 5% to 15%. For example a 10% strike rate would mean one prospect among 10 exploratory wells drilled. It also means the 9 of them would be dry holes.

• Drilling a well is a very costly activities especially in deep water. Oil companies are using the modern technologies to increase the strike rate during exploration

•Hydrocarbons discovered by the initial exploration wells are further confirmed by appraisal drilling i.e. drilling more wells in the area

•Following appraisal drilling, decision is taken whether to develop the field for commercial extraction or stop further activities in case the producible quantity of oil and gas do not justify the investment in development.

•Hydrocarbons discovered by the initial exploration wells are further confirmed by appraisal drilling i.e. drilling more wells in the area

•Following appraisal drilling, decision is taken whether to develop the field for commercial extraction or stop further activities in case the producible quantity of oil and gas do not justify the investment in development.

•Enormous thought goes into the best way of extracting the hydrocarbons, attempting to recover the maximum quantities of oil and gas in the safest conditions. These forecasts, studies and the eventual construction of the installations constitute the development stage of the field. Once everything is in place, extraction can start. The life of an oil field continues for many years

•Enormous thought goes into the best way of extracting the hydrocarbons, attempting to recover the maximum quantities of oil and gas in the safest conditions. These forecasts, studies and the eventual construction of the installations constitute the development stage of the field. Once everything is in place, extraction can start. The life of an oil field continues for many years

ExplorationExploration

ProductionProduction

Oil & Gas Production

Small Drainage Area for

Vertical Well

Reservoir

Large Drainage Area for Horizontal Well

Oil & Gas ProductionProduction consists of bringing the hydrocarbons contained in the subsurface to the surface. This requires the use of a large number of wells. Question is, how many wells are required? Imagine A field spreads over a vast area, at least several km² and sometimes more than 100 km²

•. A traditional well (vertical or slightly deviated) only draws oil or gas from a radius of a few tens of meters. Moreover, such wells only cross the reservoir over the limited height of a vertical or near vertical cross section. A large number of vertical wells would therefore be necessary to completely extract the contents of a reservoir.

The horizontal well has a much greater length of contact with the reservoir. Thus, the technique enables a significant reduction in the number of wells necessary for a given development. However drilling horizontal involves a lot of technical complexity and is also more costly

Oil & Gas Production- Development

It’s not enough to drill wells in a field to ensure production. To ensure safe production from the high pressure fields, safety equipments and other installations are set up. The picture below shows an offshore oil platform which takes production from 10-12 wells housed within the platform

Oil Wells

Chapter- 4

Oil & Gas Transportation

TransportationThe crude oil & gas transportation begins from the wells where production from different wells is taken to a large processing platforms via small diameter (2-8 inches) pipes.

At process platform oil, gas and water are separated and impurities like condensate, sulfur, hydrogen sulphide removed. After processing crude oil and gas are sent to the their respective destinations; refineries & gas processing units via pipelines or tankers (more about these later)

TransportationFPSO ( Floating Production Storage Offloading) are used where it’s not possible or economically justifiable to install sea bed pipelines or expensive process platforms. FPSO’s find their application in sub sea wells in remote and deep water fields. In a sub sea well wells are located on the seabed as opposed to the conventional wells at the surface

The FPSO is usually a de-commissioned oil tanker which has been stripped down and equipped with facilities to process and stabilize the crude oil and enable it to be connected to another oil tanker or transport tanker. Oil is processed and accumulated in the FPSO until there is sufficient to fill a transport tanker, at which point the transport tanker connects to the stern to the stern or bow of the FPSO and offloads the oil.

Oil Tanker

Sea Bed

Transportation

Many factors determine the choice of one mode of transport over another like cost, distance, volume, accessibility, time and availability. However in majority of the cases Maritime (large oil tankers) and Pipelines are the most preferred means of transport. Let’s learn a little more about them

Once the crude oil and natural gas are separated, the need to be sent to the refineries/processing units for further processing. Since most of crude oil & gas are found in remote places like deserts, sea or hills, transportation of crude oil to its destination (refineries) is sometimes very complicated. Sometimes many modes of transports are utilized to achieve this goal. Broadly there are four modes of oil & gas transportation Pipeline, Maritime, Railways & Trucks.

Maritime

Truck

Pipelines

Railways

Oil Transportation-PipelinesPipelines are large diameter tubes that can transport enormous quantities of oil, up to several tens of millions of tons per year. Since oil is produced in areas far away from major marketplaces where population and manufacturing centers are located, pipelines permit the movement of crude oil to these areas with little or no disruption to communities everywhere. The oil circulates by means of pressure maintained by pumping stations located every 60 to 100 km. The oil travels in the pipelines at speeds of around 2m/sec (7km/h). Due to the very nature pipelines are considered to be the safest, most efficient and economical way of transportation. Pipelines are owned by the oil companies or third party operators who lease the pipelines to the oil companies. Carrying capacity of a pipeline is expressed in terms of thousands barrel per day

The United States has the largest network of energy pipelines – both oil and natural gas -- of any nation in the world. The network of crude oil pipelines in the U.S. is extensive. There are approximately 55,000 miles of crude oil trunk lines (usually 8 - 24 inches in diameter) in the U.S. that connect regional markets

Pipeline shown in the picture is Trans Alaska Pipeline System (TAPS). 800 mile long, it’s one of the of the largest pipeline systems in the world. It’s also the most photographed pipeline as it, unlike most pipelines, has significant portions of the system above ground.

Oil Transportation-Maritime

Maritime transport involves transporting crude oil through large oil tankers. The oil tanker fleet in divided into six major categories, based on their carrying capacity. In order to benefit from economies of scale companies typically charter the largest possible vessel that can be accommodated in their arrival and discharge ports. The six categories of vessels are:

• ULCCs and VLCCs (Ultra and very large crude oil container) – Largest vessels used for long hauls(carrying capacity- 200,000 dwt and greater)

• Suezmax and Aframax- Mid size vessels used for short to medium hauls(carrying capacity- 80,000 to 200,000 dwt). These two are most commonly used.

• Panamax and Handysize- Small size vessels used for short hauls (carrying capacity- 10,000 to 80,000 dwt)

The seaborne crude oil transportation business is highly fragmented and is generally provided by two types of operators: independent ship owners and captive fleets of privately and state owned oil companies. Within the industry, independent owners account for approximately 80.4% of the tanker capacity, and the top ten owners account for 26.4% of the world tanker fleet

Gas TransportationOverall, the problems of transport and of storage of gas are the same as for oil; production and consumption points are far apart and gas has to be taken from one to the other. But in detail, things are quite different. Overland or underwater transport by gas pipeline is preferred.

Unlike oil, the gas is in a gaseous state at normal pressures and temperatures. This means that, for the same quantity of energy, it occupies a volume 600 times greater than that of oil. Therefore, there is no question of chartering vessels to transport gas in its gaseous state. That would cost … 600 times too much!

The most usual method of transportation is therefore by gas pipelines. These gas pipelines are not visible: for reasons of safety and security they are buried underground. The compressed gas circulates at high speed in a gas pipeline, with the aid of compression plants positioned at regular intervals along the network.

In certain cases where the construction of gas pipelines is technically impossible or too expensive, a method of maritime transport based on the liquefaction of the gas (LNG, liquefied natural gas) is used

Source- http://www.planete-energies.com/content/oil-gas/distribution/supply-storage-gas.html

Crude Oil Storage• At the marine terminal, the cargo of crude oil is discharged through pipelines to storage tanks

in the refinery

• Storage tanks come in varying size (more than 500,000 litres) and can often be buried underground due to safety and security reasons

• In addition, the developed countries have realized for a long time now the strategic importance of oil. They are committed to holding stocks of petroleum products (crude and finished products) equivalent to 3 months of import quantities. These commitments have been incumbent on members of the European Union since 1968.

• Depending on the country, the strategic stocks are managed by state or private organizations (or both)

Storage tanks at a marine terminal

Storage tank

Gas Storage• Due to reasons such as seasonal fluctuation or supply-demand change, storage of gas is

essential. There are two ways to store the natural gas; in LNG form in large tanks & underground reservoirs.

• Underground reservoirs offer enormous storage capacities to the extent of billions of m³. and there is no need to refrigerate the gas to liquefy it as in LNG. All one need is a suitable geological site which must must possess good reservoir and cap rock conditions and be located at a sufficiently shallow depth (around 500m), so that injection of the gas is not too expensive in energy terms. Only drawback is that such ideal sites are not numerous and in most of the cases liquefaction of gas to convert it into LNG is the only option

Ariel view of a LNG plant

Source- http://www.planete-energies.com/content/oil-gas/distribution/supply-storage-gas.html

Transportation & Storage-Safety Aspects• Whether oil is transported from production sites to the refineries by maritime or pipeline methods,

the main issues are those of safety, security and respect for the environment. At sea, everything must be done to avoid pollution; not only accidental oil spills but also the deliberate discharging of polluting products such as the residue from tank and bilge cleaning. On land the state of oil pipelines must be continually kept under surveillance and worn equipment replaced. Most dangerous are oil spills which pose enormous threat to the environment

• Same precautions go for storage also as enormous quantities of oil transported are not used immediately. Storage facilities ensuring total safety and security must therefore be planned for petroleum products.

The largest oil spill involving a U.S. vessel occurred when the Exxon Valdez oil tanker emptied 11 million gallons of crude oil into Prince William Sound off the coast of Alaska in 1989, killing hundreds of thousands of birds and marine animals and soiling more than 1,200 miles of rocky beach. It took company four summers, 10,000 workers, 1,000 boats, 100 airplanes & $1.2 billion to clean up the spill.

Pipeline LeakOil Spill

Chapter- 5

Oil Refining

We need to refine the crude oil because

• Crude oil is an unstable mixture of several hydrocarbons in varying quantities according to the density of the products

• There is not one type of crude oil but a multitude of different crudes

• Different crudes contain dissolved gases, sulphuric or acid products which are very corrosive for metals

Refining Crude Oil

Why do we need to refine the crude oil?

Why can’t we build engines that run on crude oil?

That is why the crude oils must be purified and transformed intoproducts having an almost constant composition, well adapted to their use. These transformations are carried out in refineries.

Let’s learn more about the refining and refineries…

Introduction to Petroleum Refinery

A refinery is a factory. Just as a paper mill turns lumber into paper, a refinery takes crude oil and turns it into gasoline and hundreds of other useful products. A typical refinery costs billions of dollars to build and millions more to maintain A refinery runs twenty-four hours a day, 365 days a year and requires a large number of employees to run. A refinery can occupy as much land as several hundred football fields. Workers ride bicycles to move from place to place inside the complex.

Typical refinery products are LPG, Gasoline, Kerosene, Diesel, Fuel oil, Lubricating oil, Paraffin wax, Asphalt and Tar

What does refining actually do?

Essentially, refining breaks crude oil down into its various components, which then are selectively reconfigured into new products. All refineries perform four basic steps: a) Separation (Distillation), b) Conversion (Cracking) and c) Reforming d) Blending & Treatment

Crude oil contains many components which differ in boiling points, relative solubility. Moreover crude oil can be categorized under

•Light•Heavy (Asphaltic)•Sweet (Non-sulfurous-less than 1% of sulfur)•Sour (Sulfurous-more than 1% of sulfur))

Crude oil processing consists of two partsPrimary Processing- Output is raw (primary) productsSecondary Processing- Output is commercial products which are used by us

PrimaryProcessingCrude Oil Secondary

Processing

Raw Products

CommercialProducts

Separation Conversion

Primary processing involves distillation at atmospheric pressure or under vacuum. Distillation causes separation of breaking up of crude oil into various petrochemicals

Primary Processing-Separation

Inside the towers, the liquids and vapors separate into components or fractions according to weight and boiling point. The lightest fractions, including gasoline and liquid petroleum gas (LPG), vaporize and rise to the top of the tower, where they condense back to liquids. Medium weight liquids, including kerosene and diesel oil distillates, stay in the middle. (Heavier liquids, called gas oils, separate lower down, while the heaviest fractions with the highest boiling points settle at the bottom.)

Source- http://www.eia.doe.gov/kids/energyfacts/sources/non-renewable/refinery.html

AS we learnt that distillation is done using two methodsa) Atmospheric distillation b) Vacuum Distillation

Atmospheric distillation

Primary Processing-Separation

Vacuum distillation

Secondary Processing-Conversion

Primary products require further adjustment of chemical composition in order to become suitable for sale or petrochemical processing. This transformation takes place during conversion stage. The most widely used conversion method is called cracking because it uses heat and pressure to "crack" heavy hydrocarbon molecules into lighter ones. A cracking unit consists of one or more tall, thick-walled, bullet-shaped reactors and a network of furnaces, heat exchangers and other vessels.

Conversion is directed towards maximum gasoline production

Cracking is not the only form of conversion. Other refinery processes, instead of splitting molecules, rearrange them to add value. Alkylation’s, for example, makes gasoline components by combining some of the gaseous byproducts of cracking.

The process, which essentially is cracking in reverse, takes place in a series of large, horizontal vessels and tall, skinny towers that loom above other refinery structures. Reforming uses heat, moderate pressure and catalysts to turn naphtha, a light, relatively low-value fraction, into high-octane gasoline components.We’ll learn more about these processes

Cracking unit

Source- http://www.eia.doe.gov/kids/energyfacts/sources/non-renewable/refinery.html

Secondary Processing-ConversionSome of the conversion processes are shown below

HYDROCRACKING

FLUID CATALYTIC CRACKING

DELAYED COKING

A mild form of thermal cracking, significantly lowers the viscosity of heavy crude-oil residue without affecting the boiling point range.

In delayed coking the heated charge (typically residuum from atmospheric distillation towers) is transferred to large coke drums which provide the long residence time needed to allow the cracking reactions to proceed to completion.

oil is cracked in the presence of a finely divided catalyst which is maintained in an aerated or fluidized state by the

oil vapors.

Hydrocracking is a two-stage process combining catalytic cracking and hydrogenation, wherein heavier feedstocks are cracked in the presence of hydrogen to produce more

desirable products.

VISBREAKING

ReformingReforming is another process designed to increase the volume of gasoline that can be produced from a barrel of crude oil. For example, Hydrocarbons in the Naptha (another petroleum byproduct) stream have roughly the same number of carbon atoms as those in gasoline, but their structure is generally more complex. Reforming rearranges Naptha hydrocarbons into Gasoline molecules

Catalytic reforming is an important process used to convert low-octane naphthas into high-octane gasoline blending components called reformates.

CATALYTIC REFORMING

Blending & TreatmentThe finishing touches occur during the final treatment. To make gasoline, refinery technicians carefully combine a variety of streams from the processing units. Among the variables that determine the blend are octane level, vapor pressure ratings and special considerations, such as whether the gasoline will be used at high altitudes. Impurities like Sulfur are also removed to make Gasoline as clean as possible

Catalytic hydrotreating is a hydrogenation process used to remove about 90% of contaminants such as nitrogen, sulfur, oxygen, and metals from liquid petroleum fractions.

CATALYTIC HYDROTREATING

Power Station

Lubricating Oil

Bottled Gas

Petrol

Chemical Works

Tar (bitumen

) for roads

Diesel Fuel

Jet Fuel

WaxFuel Oil

To Summarize every barrel of crude holds remarkable potential. It provides the building blocks for countless products we depend on every day. You can see below that petroleum in its more refined form contribute heavily to the modern economy.

Don’t be surprised to know that a barrel of crude oil after refining will provide slightly more than 1 barrel of petroleum products. This gain from processing the crude oil is similar to what happens to popcorn, it gets bigger after it is popped.

If you are still wondering how much of what is produced here is a general breakup of the quantity of petroleum products produced in a refinery. However the product mix can be changed as needed. For example, the same barrel can be processed to yield more heating oil in winter. However that would also mean something else will be produced less.

Some More About Refinery

Other Products

Liquefied Petroleum Gas (LPG)

Heavy Fuel Oil

Jet Fuel

Diesel Fuel & Heating Oil

Gasoline

Source- http://www.eia.doe.gov/kids/energyfacts/sources/non-renewable/oil.html#How%20used

Some More About Refinery

•Topping – CDU

•Hydroskimming – CDU + Reformer

•Cracking – CDU + Cracker

•Coking – CDU + Cracker + Coker

Types of refinery

Some of the refineries we may not have heard of

In India•Haldia Refinery (IOC) 116,000 bpd •Panipat Refinery (IOC), 240,000 bpd •Digboi Refinery(IOC), 13,000 bpd •Gujrat Refinery(IOC), 68,000 bpd •Barauni Refinery (IOC), 116,000 bpd •Guwahati Refinery (IOC), 20,000 bpd •Mathura Refinery (IOC), 156,000 bpd •Bongaigaon Refinery(BRPL), 48,000 bpd •Manali Refinery (CPCL), 185,000 bpd •Jamnagar Refinery (RIL), 660,000 bpd •Mumbai Refinery (HPCL), 107,000 bpd •Vizag Refinery (HPCL), 150,000 bpd •Mumbai Refinery (BPCL), 135,000 bpd •Kochi Refinery, 146,000 bpd •Numaligarh Refinery (NRL), 58,000 bpd •Mangalore Refinery (MRPL), 190,000 bpd

World's Largest Refineries•Paraguana Refining, Venezuela - 940,000 bpd•SK Corporation, South Korea - 817,000 bpd•Reliance I, India - 661,000 bpd•GS Caltex, South Korea - 650,000 bpd •Exxon Mobil, Singapore - 605,000 bpd•Reliance II, India (proposed) - 580,000 bpd •Exxon Mobil, Baytown, USA - 557,000 bpd•S-Oil, South Korea - 520,000 bpd•Hovensa LLC, Virgin Islands - 495,000 bpd •Exxon Mobil, Baton Rouge, USA - 493,500 bpd•Shell Eastern, Singapore - 458,000 bpd

Chapter- 6

Oil Distribution

Oil LogisticsEach one of us is a user of petroleum products. Between the refinery, where heating oil, diesel, petrol and gas are produced, and the end user, there is a distribution network that is responsible for getting these products to their final destination. Making available to each person the right product, at the right time, at the right place and at the lowest cost and in optimum conditions of safety and security, is the objective of petroleum logistics.

Am overview of petroleum distribution

network

Source- http://www.planete-energies.com/content/oil-gas/logistics-supply.html

Oil Logistics- Petroleum DepotsTaking the petroleum products directly from the refinery to the customer is a complicated task. In absence of any intermediary storage centres, it would require large numbers of road tankers covering enormous distances everyday to meet the consumption needs.

Petroleum depots are used as intermediate storage to serve a particular region. Other advantage of having depots is smoothening demand-supply imbalance caused by increased demand or disruption in supply. That’s where strategic stocks also come into picture

The petroleum products are taken from the refineries to the depots by bulk transport methods: pipelines, trains of tanker wagons, river/canal barges, boats. Depot capacities are very variable, on average between 10,000 and 300,000 m3. The principal products stored are heating oil, petrol and diesel, as well as special diesel fuels used by farmers and fishermen, and aviation fuel

A petroleum depot consists of 10 to 30 steel tanks. A tank can be as large as 60 000 m3. Each depot has 3 to 12 loading bays for the road tankers that will deliver the products to differentconsumers.

Ariel View of Petroleum Depots

The products are regularly inspected throughout the whole distribution chain, from the refinery to the end user, to guarantee the maintenance of product quality and the absence of contamination by mixing.

Source- http://www.planete-energies.com/content/oil-gas/logistics-supply.html

Oil Logistics-Delivering to the End User

For the other consumers like us, the distribution network involves intermediate stages. From petroleum depots, large numbers of road tankers deliver fuel to filling stations and heating oil and gas to individuals and to companies. Let’s know more about these filling/gas station.

Last step in petroleum supply chain is delivering the finished products to all the users who need them. The major users, industrial plants, are supplied directly from the refineries by rail (tanker wagons), by river and canal barges or even by pipelines carrying finished products.

Road Tankers

Petrol Pumps Petrol Pumps Petrol Pumps

Hypermarket

Refinery

Depots

Delivering fuel to the consumers

Source:http://www.adventuresinenergy.com

Oil Logistics-Gas Station

Filling station, fueling station, gas station or petrol station is a facility which sells fuel and lubricants for motor vehicles. The most common fuels sold are gasoline (petrol) or dieselfuel. Some stations carry specialty fuels such as liquified petroleum gas (LPG), compressed natural gas (CNG), hydrogen, biodiesel, ethanol, or kerosene.

The term "gas station" is mostly used in the United States and Canada, where petrol is known as "gas" or "gasoline.“ Elsewhere in the English-speaking world the form "petrol station" or "petrol pump" are used. In Australia, the term service station ("servo") describes any petrol station. In Japanese English, it is called a "gasoline stand". And finally in Indian English, it's called a Petrol Pump or petrol bunk.

Gas LogisticsThe products are regularly inspected throughout the whole distribution chain, from the refinery to the end user, to guarantee the maintenance of product quality and the absence of contamination by mixing.

Source- http://primis.phmsa.dot.gov/comm/PetroleumPipelineSystems.htm

Did you know that the price that you pay at the pump is a lot higher than the cost price of the products? Why this difference? It results from the fiscal policy in the consumer country.

Prices and Taxes

Figure shows the various components of price of a gallon (3.78 litre) at a petrol pump in US in 2004. As you can see, 12% of what you paid went to distribution & marketing, 18% to refining costs& profits, 23% to federal and state taxes and 47% to crude oil. Price of petroleum products vary from country to country as tax rates are different.

For example in Europe taxes on petroleum products are as high as 70% as a result of which a litre of petrol would be costlier in Europe than in US

Overall Oil & Gas Industry Supply Chain Till this point, you should have the understanding of the supply chain in Oil and Gas industry. Please go through the following picture to have a quick recap of what you have learnt so far.

Source- http://primis.phmsa.dot.gov/comm/PetroleumPipelineSystems.htm

We learnt so far

• The importance of energy in our lives

• Overview of oil and gas supply chain

• What are hydrocarbons

• Where do crude oil and natural gas come from

• How are they produced

• How are petrol, diesel etc are produced

• How are they delivered to us

A quick Recap before we move to the last section

Chapter- 7

Oil & Gas Producers

Oil & Gas CompaniesThere are numerous actors in the world of oil and gas. The best-known are, of course, the major oil companies and OPEC. But they are not the only ones. A myriad of companies, organizations and consultants all play a part in the “hydrocarbon universe”

•National companies, which, in many countries, manage oil production and defend national interests in the hydrocarbon sector. Example Suadi Aramco, the largest in terms of proven reserves and production.

•International Oil Companies, are also generally categorized as majors or supermajors. Examples include Exxon Mobil, Shell, BP, Total and Chevron/Texaco.

•Companies specializing in gas distribution, such as Gazprom, the largest gas producer in the world

•National agencies & government departments with responsibility for energy matters (For example DOE (Department of Energy) in the United States the DOE

•International organization, such as OPEC (the Organization of Petroleum Exporting Countries), OAPEC (the Organization of Arab Petroleum Exporting Countries) or the IEA (the International Energy Agency);

•Small independent oil companies, which take over oil fields near the end of their useful lives, or develop fields that have been abandoned by the major companies. Example- Maurel et Prom in France.

• Companies operating in the oil sector as suppliers of services to oil companies, mainly for exploration and production. Among the best known: Schlumberger, Halliburton,Goservices, Transocean Sedco Forex These companies are involved in specific technical areas (geophysical surveying and analysis, drilling, depth imaging, production equipment ), supplying oil companies with personnel and equipment that the latter do not own or employ themselves.

•Research institutes, which are often training centers too. For example French Oil Institute

•Independent consultants and other organizations or individuals who offer consultancy & design services and technical audits to the oil companies

Some Statistics on Oil MajorsLook at the graphs below to find out how the five majors compare with the other top companies in the world

Believe it or not, but Shell’s daily production is enough to meet India’s daily Energy consumption.

Profit (Million $) Revenue (Million $)

The Institutions and Other Organization

OPEC (Organization of Petroleum Exporting Countries)

•Was founded in 1960 by Iraq, Venezuela, Saudi Arabia, Kuwait and Iran. At the beginning, the main objective of this organization was to redress the split of income between the oil producing countries and the oil companies, in favor of the former.

•OPEC works on the principle of limiting oil production by means of the allocation of quotas (authorized maximum quantities) to each of its members according to their reserves. These quotas are adjusted, at regular or extraordinary conferences, to take account of the state of the world economy and its requirements. This system has allowed OPEC to fix a range for oil prices and thus to maintain price stability. But since 2004, OPEC production has been working at almost full capacity and the possibilities of increasing production further, (what is called excess capacity), have become very limited. As a result, OPEC has virtually lost its ability to control prices, which have tended to soar in the recent times

•Eleven members of OPEC are Saudi Arabia, Iraq, the United Arab Emirates (UAE), Kuwait, Libya, Qatar, Algeria, Iran, Venezuela,Nigeria and Indonesia

• IEA unlike OPEC is an association of consumer countries. In 2005, it had 26 members, all of which are industrialized countries and major hydrocarbon consumers. It is an intergovernmental organization for the co-ordination of energy polices.

• The IEA works towards security of energy supplies, economic growth and environmental protection. In addition, governments of the member countries have undertaken to implement joint measures to deal with emergency situations concerning petroleum supplies. They have also undertaken to pool information.

• The IEA keeps a sharp eye on the evolution of oil markets, and also plays a more and more important role in the protection of the environment. In a completely new and unexpected step, the IEA made a report public on the 28 th of April 2005, in which it recommended consumer countries to take preparatory steps to limit their oil consumption.

• The IEA is an autonomous unit within the Organization for Economic Co-operation and Development (the OECD). It was created in 1974, at the initiative of the United States, as a reaction, both to the OPEC offensive when petroleum prices rocketed at the end of 1973, and to the use of oil as an economic arm by Arab countries. With regards to the Kyoto protocol, the IEA seeks to establish common ground and compromise solutions between signatories and non-signatories (the United States and Australia) of the protocol.

The Institutions and Other Organization

The International Energy Agency (IEA)

Chapter- 8

Production & Consumption Pattern

ReservesMiddle East (Saudi Arabia, Iran, Iraq, Kuwait, UAE) boasts of 60% of total world oil reserves followed by Venezuela, Russia, Libya, Nigeria and rest of world. Total world oil consumption as of 1st Jan 2007 were 1,147,507 million barrels per day.

Million Barrels as on 1st Jan 2007

Source- World Oil and Gas Review

Consumption

Thousand Barrels per Day as on 1st Jan 2007

Source- World Oil and Gas Review

US is way ahead of the pack when it comes to oil consumption followed by China, Japan, Russia, Germany and India. Total world oil consumption as of 1st Jan 2007 was 84.5 million barrels per day.

Production

Thousand Barrels per Day as on 1st Jan 2007

Source- World Oil and Gas Review

Saudi Arabia claims the maximum contribution to the world oil production followed by Russia, US, Iran, Mexico and China. Total world oil consumption as of 1st Jan 2007 was 83.7 million barrels per day

Consumption, Production and Reserves Comparison Snapshot

A cross section of an oil tank Back

http://www.planete-energies.com/content/oil-gas/logistics-supply/depots.html

BackAn inside view of a petrol pump/station

You can visit these sites for more learning

• http://www.eia.doe.gov/basics/petroleum_basics.html

• http://www.planete-energies.com/content/oil-gas.html

• http://www.adventuresinenergy.com/interactive/all_5000.html

• http://science.howstuffworks.com/oil-drilling.html

• http://www.gravmag.com/oil.html