Professional Documents
Culture Documents
AND DOWNSTREAM
MANAGEMENT
Marinos Stylianou, PhD
Chemical Engineer
30 September 2015
Oil and Gas Upstream and Downstream Management
The role of the various organisations involved in the oil industry - governments,
oil companies, service companies, regulators and external (i.e. non-oil) bodies.
The concept of the Operator and how they discharge their legal and commercial
obligations (including e-commerce).
Review the risks faced by the industry and means of identifying and managing
them. Awareness of future oil and gas sources and social responsibility and
climate change issues.
Oil and Gas Upstream and Downstream Management
1.Evaluate the primary uses of oil and gas and the significance of oil and
gas within the global energy industry with the broad technical issues
involved in the location and development of oil and gas reserves
4.Evaluate the risks associated with the upstream oil & gas industry across
the life cycle of a development and/or life cycle of a basin.
Oil and Gas Upstream and Downstream Management
Textbook:
ASSESSMENT :
Percentage (%)
Midterm Examination 20
Final Examination 40
Assignments/Cases 30
Attendance/Class Participation 10
TOTAL 100%
INTRODUCTION TO THE OIL
AND NATURAL GAS
INDUSTRY
Marinos Stylianou, PhD
Chemical Engineer
30 September 2015
Course Content
Introduction
Historical facts on oil and natural gas
International conflicts
Introduction
Introduction
Introduction
During the last years, the industry has seen many turbulent events:
Chinese companies
Attempt of the oil-producing acquire exploration
rights in historically high Global warming
countries to exercise
greater control over their prices
resources
Technological advances in
Conflicts in oil exporting
deepwater drilling
countries
Fluctuation in
prices
All these while estimates talk about increase of the global demand for energy by
30% to 40% until 2030.
Historical Facts
Historical Facts – Reports about the
existence of oil
References on the existence of oil are made from
ancient times:
Old Testament: Noah uses asphalt for smearing the inside
and outside of the Ark (Asphalt is the oxidised oil
distillation residue)
Ancient Greece:
The ancient Greek doctors Hippocrates and Galenos
considered oil a valuable medicine.
Byzantium:
The Byzantines used the “liquid fire”, which was invented by Kalinikos Heliopolis in
688 AD.
Europe:
Marco Polo in his trips mentions the existence of oil in today’s Iran (1295 AD)
America:
The Indians were aware of the existence of tar in the swamps of south California
for thousands of years, and were using it to waterproof their canoes.
Historical Facts
http://www.scottishshale.co.uk/HistoryPages/Biographies/JamesYoung.html
http://www.makers.org.uk/penicuik/heatandlight
Historical Facts
http://www.scottishshale.co.uk/HistoryPages/Biographies/JamesYoung.html
http://www.makers.org.uk/penicuik/heatandlight
http://www.demonoid.ph/files/details/2642142/?load_bal=02414508838&show_files=1&page=2
Historical Facts – First Drilling
Although, the first intentional
attempt to drill an oil well begun in
April 1857 in Hamburg (and in the
same year two handcrafted wells
in Ploiesti Romania were
completed).
So, Thorla’s και McKee’s squeezed oil from the blankets was sold in bottles as medicine
called Seneca Oil
Their operation came to an end in 1831, when fire destroyed the construction that was
built in the area.
Historical Facts – First Drilling
Historical Facts – First Drilling
1891 – 22.500.000
Rockefeller – the Monopoly
The collection and organization of production
and utilization of oil went through its processing
and refining.
Initially it had the form of many hundred small
scale operations called ‘distilleries - refineries’
with limited mechanical means and many
operation methods.
Large losses
Bad product quality
Smoke and pollution in the areas (Pittsburgh,
Baltimore, Philadelphia, New York)
1879 - Standard Oil, shuts down operations in 31 out of 53 of its refineries and
concentrates production in 3 gigantic refineries.
1880 - The total number of refining companies in the USA did not exceed 100
and amongst them Standard Oil dominated, with a market share of almost 85%.
1882 – 39 companies created the Standard Oil Trust of Ohio, in which of course
the Rockefeller brothers dominated and their immediate associates – First major
company with a monopoly
Rockefeller – the Monopoly
1882 – Court in Ohio dissolves the monopoly, but its re-founded in New Jersey,
a state that accepts monopolies. The horizontal operation of the business is
abandoned and cooperate to establish a fully vertically integrated company.
1892 – The Congress for Sherman's anti-monopoly Law and Standard Oil is
re-founded again in New Jersey as a joint-stock company.
1900 - Standard Oil controls more than 90% of the oil products in the USA.
1911 – The re-naming and adjustments have exhausted their dynamics. The US
government imposed the dissolution of the Standard company partnership and
the careful breakdown of the company in competitive businesses.
Rockefeller – the Monopoly
The cleverness of Standard Oil was based on three
parameters:
Their ability to create alliances and agreements that
ensured them funds,
On the pursuit of technical innovation and those who
could apply it to production and
A pressure policy on all the factors that were affecting
the commercialization of their production and the final
product price.
The last factors were mainly transportation, railway, sea or
road.
Rockefeller – the Monopoly
The company almost immediately started using a variety of techniques
to obtain or destroy its competitors and therefore the ‘consolidation’ of
the industry:
(1) Lower prices than its competitors
1878 - The oil stove was presented at the International Exhibition of Paris.
Within a year half a million stoves were sold.
1879 – Thomas Edison invented the light bulb and electricity in combination
with cheap gas progressively started dominating in the lighting market.
Kerosene, although its quality and cost were significantly improved, it was
certain that it could not beat under the new conditions of competition.
1885 - Internal combustion engine. The invention of the petrol engine from
Daimler and Benz in 1885 brought the revolution in the use of petroleum
products as automotive fuel.
Technologies and events that have affected
the history of oil
1896 – 1903 – Ford creates the first car lab – factory which was now
based on the new engines, that of course were moving thanks to oil.
In 1907 the British company Shell Transport and Trading Company Ltd.
was united with the Dutch company Royal Dutch Petroleum Company
in order to cope the American companies. Royal Dutch Shell then
became one of the giants of the oil industry.
The British, however, continued their searches. In the 1908 the Anglo-
Persian Oil Company was founded – afterwards know as BP- in
order to take advantage of the Persian oil.
The history of Europe’s oil failure
1928 – ‘Red Line’ agreement
The 1928 Group Agreement was
a deal struck between several
American, British, and French oil
companies concerning the oil
resources within territories that
formerly comprised the Ottoman
Empire within the Middle East
Seven Sisters
OPEC (1960)
1914
The history of Europe’s oil failure
1939
The history of Europe’s oil failure
The history of Europe’s oil failure
Since 1878, oil pipelines transported crude oil from Baku on the
shores of the Black Sea, while gradually refining improved and the
sub-products multiplied. The Nobel company created in Baku an
entire community of scientists and technicians from Scandinavian
countries and Germany and the complex that was built, Villa
Petrolea , maintained until today, to some extend, in the capital of
Azerbaijan.
The history of Europe’s oil failure
The reason for this lies both in the initial conditions and the
peculiarity of Russia, as well as the social composition of
Azerbaijan.
source: http://dnr.louisiana.gov/assets/TAD/education/BGBB/5/prospects.html
Developments of the principles and techniques of
oil research
Around 1865, a great increase in demand for land on the hills
north and south of Oil Creek was noticed, in order to explore for
oil.
Productive sectors
at Benneoff Run
and Pioneer Run
proved that oil
could be found in
places other than
flat areas adjacent
to creeks, as
previously thought.
Source: http://explorepahistory.com/displayimage.php?imgId=1-2-33C
Historical facts on Natural
Gas
Historical facts on Natural Gas
The natural gas transportation method with pipelines was developed in the 1920s and
constituted a significant stage in the use of natural gas.
After the Second World War a period of huge consumption followed, which continues
until today.
In 1960 the global natural gas production reached 470 billion cubic meters and
In 1979 it was 1,459 trillion cubic meters
According to the estimates of the International Energy Agency (IEA) the natural gas
consumption will exceed the coal consumption after 2010 and around 2030 will
cover ¼ of the global energy needs.
Formation of Petroleum and
Natural Gas
Formation of Petroleum and Natural
Gas
Formation → 3 conditions:
(b) a rock – cover (‘trap’ – oil trap, cap rock) for oil.
Migration Trapping
Formation of Petroleum and Natural
Gas
Oil reservoirs can be formed in different ways:
Cycloalkanes - napthenes
Aromatic hydrocarbons
Elements Content (5)
Carbon 83-87
Hydrogen 10-14
Sulfur 0.06-8.0
Nitrogen 0.1-2
Oxygen 0.1-1.5
Metals (Fe, Ni, κ.α.) <0.1
Crude oil types
Colour: Yellow, green, brown, dark brown, black.
Age
Depth
Viscocity
Source: Cypraegean, 2013
USGS, 2002
Oil and Gas Reserves
Oil Reserves
Since the beginning of the oil industry, oil producers and
consumers were afraid that at some point oil will come to an
end.
The oil peak theory is based on the fact that the quantity of
oil is finite.
Oil Reserves
Hubbert Peak Theory
The peak theory of Hubbert states that for any geographical
area, from a single oil field to the planet as a whole, the rate of
oil production follows a bell-shaped curve.
At the beginning of the curve (before
the max value), the production rate
increases because of the rate of new
discoveries is increased as well as the
infrastructures.
The difficulty in determining the oil and gas reserves is that the real
reserves are a complex combination of:
technology,
price and
politics.
While technology changes and continues to reveal new oil and gas resources ,
the prices have shown less stability than ever, governments have attempted
more control on information on resources and access that ever.
As prices rise, reserves that were once considered non-profitable to develop
may be possible to develop, and vice versa.
Unproved Proved
Reserves (P90;
P=90%)
Possible Probable
Reserves (10%)[3P] Reserves (50%) [2P]
‘Consuming’
Oil and gas
industry Countries
‘Producing’
Countries
Big
developed Geopolitical
economies
Importers issues
Oil Reserves
STUDY GROUPS
1. RESERVES
2. PRODUCTION
3. CONSUMPTION
http://www.bp.com/en/global/corporate/about-bp/energy-
economics/statistical-review-of-world-energy.html
Oil Reserves
Excess Cyclical
Politicians
profit nature
Criticism
$$$$$
September 11th 2001
$2.5-$3.0/bbl
1948-1970
Seven Sisters
1950 Enrico Mattei, Eni
1. Anglo-Persian Oil Company (now BP);
2. Gulf Oil,
3. Standard Oil of California (SoCal),
4. Texaco (now Chevron);
5. Royal Dutch Shell;
6. Standard Oil of New Jersey (Esso) and
7. Standard Oil Company of New York (Socony)
(now ExxonMobil)
OPEC - Organization of the Petroleum Exporting Countries
9 Algeria 1969
10 Nigeria 1971
11 Ecuador 1973 Suspended its participation. Dec 1992 – Oct 2007
Gabon 1975 Departed in 1995
12 Angola 2007
OPEC - Organization of the Petroleum Exporting Countries
Mission
To coordinate and unify the petroleum policies of its
member countries
http://www.opec.org/
And ensure the stability of the oil market,
In order to ensure effective,
economic and regular petroleum supply to consumers,
Members
Discipline
PROBLEM!
OPEC - Organization of the Petroleum Exporting Countries
OPEC - Organization of the Petroleum Exporting Countries
“The resource curse”
The oil curse
Big
Reserves
The ‘Players’
National Oil
Private oil Companies
companies (NOCs )
Junior
Oil Major
Super Major
Transport and
Trade
(midstream)
Exploration and
Extraction
(upstream) Refining,
Processing and
Trading
(downstream)
Exploration and
Transport,
Extraction
Processing and
(upstream)
Trading
(midstream)
Transport, Trade
(downstream)
Source: API, 2013
Natural gas chain