Introduction to Oil & Gas Industry

Introduction to Oil and Gas industry consists of the following sections: ◦ 1. Oil formation and Historical perspective◦ 2. Upstream & Downstream ◦ 3. Life cycle of oil field

Oil FormationOil was formed from the remains of animals and plants that lived millions of years ago in a marine (water) environment before the dinosaurs. Over the years, the remains were covered by layers of 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."

SCIENTIFIC DEFINITION: OIL AND GAS ARE CALLED HYDROCARBONS BECAUSE THEY ARE COMPOUND OF ATOMS OF HYDROGEN AND CARBON.

Methane (gas) – the simplest hydrocarbon with one carbon atom and four hydrogen atoms; is written as CH4.

H

HH

H

C

Historical Perspective

The use of oil based products were recorded in the earliest writing of man: ◦ Bitumen was used in the building of the tower of Babel◦ Sumerians used it for paving the Hanging Gardens of Babylon◦ In India, Burma pitch was used for buildings and as fuel for lamp◦ In North America native Indians had been collecting oil for use as a

medicine

Modern oil history started in:◦ 1848 the first well was drilled in Baku, Azerbaijan at Bibi-

Eybat place◦ 1859 “Colonel” Drake successfully drilled the well at a depth of

69 feet in Titusville, Pennsylvania. ◦ Around the same time, successful drilling for oil was

also taking place in Canada and Trinidad.

Oklahoma, 1930, Wild Mary & Sudik farm

Baku, 1890, oil wells in Sabuntchi field

This slide shows some of the product that we use in our everyday life and that are the result of refining process which is one of the main stages of the Downstream phase

2. Upstream and Downstream side of oil industry

The oil industry is divided into two major sectors. The sectors are defined to categorize the operations within each.

(1) Upstream: Exploration & Production or E&P. Involves operations in searching for underground or underwater oil and gas fields and drilling exploratory wells and at the same time, operating the wells that recover to re-direct the crude oil or raw natural gas to the surface.

JOBS IN OFFICE ENVIRONMENTWork, involved in both industry sectors, comprises not only of the oil field

jobs but also jobs within office environment. Oil traders

(Downstream jobs)Reservoir Engineers and Geoscientists(Upstream jobs)

BP HQ Mayfair, London Suncor Energy HQ,

Alberta, Canada LukOil HQ, Moscow

Global Headquarters of Oil Companies

What is Downstream? (2) Downstream: Includes operations that processes and stores, markets and transports crude oil, natural gas liquids like ethane, butane and propane.

The downstream sector includes:◦all oils refineries and petrochemical plants, ◦petroleum product distribution via the affiliated retail outlets◦and natural gas distribution companies, within the operations.

The downstream industry markets products such as petrol and diesel and jet fuel, asphalt, lubricants, plastics fertilizers, antifreeze and even pharmaceuticals and cosmetics.

Oil refineries are key to obtaining hydrocarbons. Oil in different parts of the world contains different proportions of the various hydrocarbons. There are refineries in many parts of the UK including Edinburgh, Liverpool and Milford Haven. North Sea oil is relatively high in naphtha, which is used for making plastics.

Refining process

Oil Refinery

Residual Fuel Oil

Gasoil/ Diesel

Jet/Kerosene

Naphtha

Gasoline

LPG

Refinery Gases

Fuel/Energy

Crude Oil

NGLs

Other Feedstocks (Naphtha, Residues, Blending

Components)

Fuel/Energy

3.Life cycle of processing of oil field consists of 5 stages:◦ Exploration ◦ Appraisal◦ Development◦ Production◦ Abandonment

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-10 -9 -8 -7 -6 -5 -4 -3 -2 -1 0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21

Year

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EXPLORATION

APPRAISAL

DEVELOPMENT

PRODUCTION

ABANDONMENT

OIL EXPLORATION• Exploration is about finding oil and gas fields. Main goal is to

identify and deliver commercially viable field development opportunities. The following geological and geophysical (G&G) activities would take place: – Conduct seismic surveys– Process and interpret the seismic data and map the potential reservoir– select exploration well locations– drill and evaluate exploration well data:– core analysis to establish porosity and permeability– logging data to determine porosity, water and hydrocarbon saturation– production test data to determine flow rates and maximum production

potential– PVT to allow reservoir fluid analysis and ascertain oil/gas quality and

the shrinkage or expansion factor– build a computer model of the reservoir and identify and where possible

remove major uncertainties by further data analysis, seismic reprocessing etc

Exploration phase of life cycle closely intertwines with the next stage of processing which is Appraisal. The objective of Appraisal is to obtain information about the reservoir in order to make a decision whether or not to proceed with development of the field. This stage comprises of the following activities:

– planning and execution of a data acquisition programme of additional seismic,

– reprocessing existing seismic data to obtain enhanced results and the drilling of

– appraisal wells– evaluation of the results from the seismic and appraisal drilling activities– using the information from the seismic and drilling programmes to update

the computer reservoir simulation models– conduct initial conceptual field development planning and an environmental

impact assessment (EIA) study of these conceptual plans

Development stageThe initial phase of field development planning could involve the assessment of more than one development option. Four components of a development plan can be used to describe each option:

1. Reservoir: number, location, type of wells; assessment of oil recovery mechanism; assessment of production over the development stage

2. Wells: the design of wells to meet production requirements3. Facilities: process facilities, infrastructure, terminal/export facilities4. Operating and Maintenance strategies: manning level, daily

production level, support requirements, for ex. helicopters, supply vessels

Production phase is targeted at bringing the well fluids to the surface and preparing them for use in refinery or processing plant. All production and maintenance activities would be carried out to meet strict safety and environmental policies and procedures. The main activities consist of the following:◦ regulate production and injection to meet approved plans for the quantity and

quality of product.◦ monitor and record all information to manage the reservoir, wells and facilities.◦ This could lead to further reservoir development or modifications to the facilities◦ plan and schedule all production and maintenance activities to minimise

production deferment and operating costs◦ carry out maintenance to safeguard the technical integrity of all wells and facilities

and ensure their availability over the life of the field.

Oil ProductionONSHORE OFFSHORE

DRILLING PLATFORMS• Offshore Drilling Platforms - 1

DRILLING PLATFORMS• Offshore Drilling Platforms - 2

Decommissioning/Abandonment phase

The end of the life of the field is when it is no longer economic for the operator to continue production, i.e. when the operating costs exceed the revenue from the sale of production. It is common around the world that operator might abandon the field prior to its depletion as a result of sale to other interested party. Such acquisition takes place between the super major operating company and independent oil company when production declines to the level not commercially attractive to the super-major.

It is becoming increasingly common around the world that offshore facilities must be dismantled and removed and the site restored to its original condition. The major activities during the decommissioning phase are:

– plug and abandon wells by putting cement plugs into the wells at various depths and remove the well-head and casing to a depth of about 2 metres below the surface or seabed

– dismantle and remove the jacket and all facilities from the site, ensuring that there is no contamination of the environment from any oil or waste material remaining in the process facilities

– restore the site to its original condition– conduct a final environmental impact study

APPENDIX

Complementary slides to enhance general overview about oil and gas industry

http://www.eia.doe.gov/energy_in_brief/world_oil_market.cfm#

• Typical oil well being produced by a pumpjack

http://videos.howstuffworks.com/hsw/8330-chemistry-at-work-drilling-for-oil-video.htmhttp://science.howstuffworks.com/offshore-drilling.htm/printable

Floating Production Storage and Offloading Vessel is a floating vessel used by the offshore industry for the processing and storage of oil and gas.The FPSO vessel is designed to receive oil or gas produced from nearby platforms or templates, process it, and store it until the oil or gas can be offloaded onto a tanker or transported through a pipeline.

FPSO - 2

‘Galaxy’ Jack Up Rig at Peterhead

• Production Phases

Time

Pro

duct

ion

rate Decline phasePlateau

phase

Developmentphase

Primary recovery

Secondaryrecovery

Tertiary recovery

• Drilling Costs in US (000$/well)

100

1,000

10,000

100,00019

80

1985

1990

1995

2000

2005

(000

$/w

ell)

OnshoreOffshore

PEAK OIL

Production Profiles of North Sea