Introduction to Oil & Gas Industry

Introduction to Oil and Gas industry consists of the following sections: 1. What is petroleum and crude oil?

2. Oil formation and Historical perspective

3. Upstream & Downstream

4- Life cycle of oil field

Introduction to Petroleum

The word ‘petroleum’ is derived from the Latin petra (which means rock) and oleum (which means oil). It is commonly used to refer to crude oil, but it may also refer to other related hydrocarbons.

Some hydrocarbons are gaseous, rather than liquid. Methane is the most common example of these hydrocarbon gases. This is the kind of natural gas that we most often use in our kitchens at home.

What is crude oil

Crude oil is an organic liquid substance often found below the Earth’s surface. It is made up of thousands of molecules composed of different hydrogen and carbon atoms. Such compounds are called hydrocarbons.

These hydrocarbons also contain different proportions of impurities likeoxygen, sulphur, nitrogen and heavy metal atoms.

Properties of Crude oil Crude oil is highly flammable. Crude oil is an excellent source of energy. Its ‘sister’

hydrocarbon, natural gas, is another sourceof energy.

Oil is called a non-renewable energy source because it cannot be replenished.

Petroleum deposits are often found in natural underground reservoirs called oil fields. The oil in these fields can then be extracted by drilling and pumping.

How is oil formed

Oil is formed from the accumulation of hydrocarbons, accumulate naturally,

thousand of feet below earth surface.

From decomposition of organic materials like plant and marine animals which died during Palaeozoic era. ((between 245 and 544 million years ago).

Trapped beneath the ground under enormous pressure and high temperatures.

these hydrocarbons were compressed and eventuallytransformed into crude oil after millions of years.

Underground oil accumulations are formed when three conditions are met.

1- there must be a ‘source’ rock rich in hydrocarbons and buried deep enough so that the heat from the Earth’s core can ‘cook’ them into oil.

2- there should be a porous rock nearby in which oil can accumulate (it is often sandstone or limestone). If the holes in the rock are interconnected, then oil can flow easily out of the rock. This condition is called permeability. The porous rock must have good permeability, which is why studying the structure of rocks is an important step to finding oil.

Underground oil accumulations are formed when three conditions are met.

there is usually a ‘cap rock’ or seal to trap the oil in the underground reservoirs and prevent it from seeping to the surface. Within these reservoirs, hydrocarbons are typically organized like a three-layer cake—with a layer of water below the oil and a layer of gas above it.

Much of the oil that escapes to the surface often evaporates into the air. But it can leave behind deposits of residual hydrocarbons called bitumen.

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.

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HH

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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.

Work, 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, CanadaLukOil 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 outletsand 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(evaluating)

Development

Production

Abandonment

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• 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

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 requirements

3. Facilities: process facilities, infrastructure, terminal/export facilities

4. 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 minimiseproduction 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

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

• Typical oil well being produced by a pumpjack

• Production Phases

Time

Pro

duct

ion

rate Decline phasePlateau

phase

Developmentphase

Primary recovery

Secondaryrecovery

Tertiary recovery

PEAK OIL