PETROLEUM INDUSTRY by RESMI

CHAPTER-1
INTRODUCTION: THE PETROLEUM INDUSTRY

Petroleum industry is the main source of energy as well as economy today. The world consumes 30 billion barrels of oil per year and the largest consumers of petroleum are the developed countries. The development of the automobile gave petroleum a new role as the source of gasoline. Petroleum and its products have since been used as fuels for heating, for land, air, and sea transport, and for electric power generation and as petrochemical sources and lubricants. Crude oil and natural gas, produced mostly in Saudi Arabia, the U.S., and Russia, now account for about 60% of world energy consumption; the U.S. is by far the largest consumer.
Petroleum and Petroleum Products
Crude oil, properly termed petroleum is a greasy, thick, black liquid, flammable and insoluble in water, found in rock formation deep in the earth. It is a fossil fuel consisting of a complex mixture of hydrocarbons produced from the geological transformation and decomposition of plants and animals that lived hundreds of millions of years ago. Petroleum encompasses the liquid form which is crude oil, the gaseous form known as natural gas as well as the solid forms – bitumen and asphalt. But the term ‘petroleum’ is often restricted to liquid oil form.
Once refined, petroleum is the source of Liquefied Petroleum gas (LPG), gasoline or petrol, diesel fuels, kerosene, lubricating oils, naphtha, wax, asphalt, tar, sulphur and petroleum coke. Petroleum also yields petrochemicals that are used to make various products such as plastics, perfumes, petroleum jelly, hand lotions, candles, drugs, detergents, explosives, insecticides, textile fibres, antiseptics, alcohols, food additives, artificial rubber, etc.


A Brief History of Petroleum Industry

Though the term “petroleum” was first used by the German mineralogist Georg Bauer, in his treatise De Natura Fossilium (1546), petroleum, is not a modern discovery. Petroleum in its unrefined form has been utilized by man for more than 5000 years. In ancient times oil has been used for warfare and for lighting purposes. Asphalt has been used to caulk ships and pave roads. Oil was used by ancient societies of Persia and China. From the 8th and 9th centuries to the 18th century several oil industries began to emerge on various parts of the world. In North America, in Canada and United States, a petroleum industry emerged, fuelling the industrial revolution. Petroleum was in great demand by the 19th century when the processes of refining kerosene from crude oil was discovered and was used as lighting and heating fuel. In 1825, Imperial Russia produced 3,500 tons of oil and by the mid-century the output was doubled. After oil drilling began in Imperial Russia in Azerbaijan in 1848, two pipelines were also built for the transportation of oil. At the turn of 20th century, the Russian Empire dominated the world market as the Apsheron Peninsula accounted for half of the world’s oil production.
In 1878, the first oil tanker was launched on the Caspian Sea by Ludvig Nobel and his Branobel Company. Between 1854 and 1856 Ignacy Lukasiewicz built the first modern oil refineries near Jaslo, Poland. The first large oil refinery opened at Ploiesti in Romania in 1856.
In the mid 1800s petroleum began to replace whale oil in lamps, and the first well specifically to extract it was drilled in 1859. The first oil drilling in the United States began in 1859, when oil was successfully drilled in Titusville, Pennsylvania. In the first quarter of the 20th century U.S became the world’s largest oil producer. By the 1920s, oil fields had been established in Canada, the U.S and in many European countries. In 1947, the first offshore oil platform off the Gulf Coast of Louisiana was constructed by the Superior Oil Company.


CHAPTER-2
PETROLEUM INDUSTRY STRUCTURE

The petroleum industry can be divided into five sectors. They are:
1. Upstream
2. Downstream
3. Pipeline
4. Marine
5. Service and supply
Out of the five sectors there a three major sectors – the upstream sector, the downstream sector and the oil pipeline.
Upstream Oil Sector
The upstream oil sector is also called the ‘exploration and production sector’ or the E&P sector. It includes exploring and locating the oil and gas fields, drilling of exploratory wells, extraction and removal of usable petroleum or raw natural gas to the earth’s surface.
Oil prospectors search for areas that may contain oil and take measurements with instruments such as gravimeters and magnetometers. They carry out seismic surveys that reveal the underground rock structure. Some oil geologists also use remote-sensing satellites that can spot details of rock formation. Oil is extracted through boreholes drilled into the ground. Oil that is recoverable is determined by a number of factors including the permeability of the rocks, the strength of natural drives, and the viscosity of oil.
Downstream Oil Sector
The downstream oil sector includes refining of crude oil, selling and distribution of natural gas and products derived from crude oil.
The downstream sector includes oil refinery, petrochemical parts, petroleum product distribution, retail outlets and natural gas outlet companies. The downstream industry include oil refinery that processes and refines crude oil into useful petroleum products such as petrol, diesel, natural gas, jet fuel, heating oil and asphalt. This sector also touches the consumers through thousands of products such as such as petrol, diesel, jet fuel, natural gas, propane, heating oil, asphalt, lubricants, synthetic rubber, plastics, fertilizers, antifreeze, pesticides and pharmaceuticals. The oil refineries and natural gas processing plants produce by-product sulphur which constitutes the vast majority of sulphur produced worldwide.
The downstream sector also includes transportation of oil by means of tankers. Tankers or tank ships are used to carry oil across the oceans. Tankers are among the biggest ships afloat, and may carry more than 500,000 tonnes of oil. For safety, the crude oil cargo is carried in a series of separate tanks to prevent it surging, which would otherwise capsize the ship.
A major sector of the oil industry is the midstream sector. Midstream operations are usually included in the downstream sector. The midstream industry includes stores, markets and transportation of commodities such as crude oil, natural gas, natural gas liquids and sulphur.
Pipeline
An oil industry transport oil and natural gas by two main methods – tankers and pipelines. Pipelines are the major means of transport of oil over land just as tankers are major means of transport of oil and natural gas on sea or oceans. Pipelines are the most economical way to transport large quantities of oil and natural gas over land. Oil pipelines are often made of steel or plastic tubes with inner diameter typically from 10 to 120 cm. The oil is kept in motion by pump stations along the pipeline and usually flows at a speed of 1 to 6 m/s. Crude oil contains varying amounts of wax. During colder climates wax build up may occur within a pipeline. Often these pipelines are inspected and cleaned using pipeline injection gauges ‘pigs’ also known as scrapers or Go-devils.
The natural gas pipelines are of carbon steel. Depending on the type of pipeline the diameter varies from 2 inches to over 60 inches. The gas is pressurized by compressor stations.

Types of Pipelines
Pipelines can be classified into three types depending on their purpose.
1. Gathering Pipelines
These pipelines are a group shorter and smaller pipelines that are interconnected in the form of a complex networks. The purpose of these pipelines is to bring crude oil or natural gas from several nearby wells treatment plant or processing facility.
2. Transportation Pipelines
Transportation pipelines are long pipelines with large diameters. It is used to transport products between cities, countries and continents. These pipelines have several compressor stations if transporting gas or pump stations in gas lines and pump stations for transporting crude oil.
3. Distribution Pipelines
These pipelines are several interconnected pipelines of small diameters that are used to take the products to the final consumer. They distribute gas to homes and business downstream. The pipelines at terminals for distributing products to tanks and storage facilities are also distribution pipelines.
Pipeline companies face government regulation, environmental constraints and social situations.
Since oil and gas pipelines are an important asset of the economic development of almost any country; it has been required either by government regulations or internal policies to ensure the safety of these assets, the environment as well as people.
Pipelines can be target of vandalism, sabotage, or even terrorist attacks. In war, pipelines are often the target of military attacks, as destruction of pipelines can seriously disrupt enemy logistics.
Natural disasters such as earthquakes and volcanoes can also pose serious health concerns. Accidents like explosions can also result in critical health condition to death as petroleum and most of its products such as gasoline and LPG are highly flammable.


Chapter-3
PETROLEUM
AND
THE SOCIETY TODAY

Financial Impact of Petroleum Industry
Oil and gas drive the economies of the world. Oil and gas industries generate significant revenues for the national economy. Sound macroeconomic management and governance are required to ensure that these revenues are successfully converted into social capital and lead to broader-based overall economic development and poverty reduction for the country as a whole.
Employment in the Petroleum Industry
The petroleum industry offers challenging work, rewarding jobs and wide ranging career opportunities. Petroleum industries provide employment opportunities since the rise of demand for the production of oil began. Jobs in petroleum industry not only provide people to work in high-technology, high-data environment but also provide generous salary, flexible work schedule and company sponsored training. Some of the jobs offered by an oil industry are research geoscientists, palaeontologists and geochemistry specialists. Career paths in the petroleum industry form around different streams like science, drilling, business, operations, maintenance and engineering stream that are aligned with the industry sectors.
The petroleum-industry jobs often fluctuate with the rise and fall of oil prices. When the prices are high the employment in an oil industry is stable and when the prices are low the industry usually undergoes layoffs.


Major Players (World)
In the list of the world’s largest public and private businesses by gross revenues, with annual revenues exceeding 40 billion U.S. dollars the American oil and gas corporation, The Exxon Mobil Corporation is ranked 1. Among the top ten companies it 6 ranks were occupied by oil and gas industries.
1. The Exxon Mobil Corporation (USA)
2. Royal Dutch Shell plc (Netherlands/UK)
3. British Petroleum plc (UK)
4. Total S.A (France)
5. Chevron Corporation (USA)
6. ConocoPhillips (USA)
Together these companies are known as the ‘Supermajors’.
Major Players (India)
The leading petroleum companies of India as listed in the Forbes Global 2000 ranking for 2008 are:
1. Reliance Industries (India's largest private sector conglomerate and second largest in the world)
2. Oil and National Gas Corporation Limited (ONGC) (Public Sector)
3. Indian Oil Corporation (Public sector)
World Petroleum Price and Its Impact on India
There has been an unprecedented increase in the price of oil in the international market, in recent years. The spurt in the crude oil and petroleum products has created acute economic problems in most countries – developed and undeveloped.
Trends in World Oil Prices
In the New York Mercantile Exchange (NYMEX), a major international market for oil, the price of a barrel of crude oil was around $25 during the year 1985. By 2004, the price shot up to a range between $ 40 and $ 50 per barrel. During 2005, the price further increased to a range between $ 60 and $ 70 per barrel. During the period of one year ending May 2008, the price of crude oil had appreciated by over 100 per cent. By June 27, the price of crude oil touched an all-time high of $ 141.72 per barrel in August.
The hike in oil prices may be explained as a situation of supply and demand mismatch. On one hand, there has been slow growth in supply due to economic, social, political and international factors. On the other hand, there has been an unprecedented growth in demand for oil due to rapid development that has been taking place in developed as well as developing economies.
A host of unfavourable factors contribute to the slow-down of the supply of oil. The major economic factors are decline in the discovery of new oil fields, fall in global oil production, fall in underground oil reserves due to rapid extraction of oil, technical difficulties to extract remaining reserves etc. Secondly the deliberate policy of Organisation of Petroleum Exporting Companies (OPEC) that includes Iran, Iraq, Kuwait, Libya, Saudi Arabia, Venezuela, Algeria, Ecuador, Gabon, Indonesia, Nigeria, Qatar and UAE, not to increase oil production to get gains of high prices. Thirdly, political factors like American invasion on Iraq in 2003 and the constant political instability and uncertainty created in the Middle East oil producing countries. It is reported that due to the Iraq invasion in 2003, oil production in Iran declined to more than two to three million barrels per day. Fourthly the emergence of terrorist group targeting oil and gas installations in Africa and Asian countries also curtailed production and free transport of oil.
The hike in petroleum prices usually adversely affects prices of primary commodities such as fertilizers and fuel, all modes of transport, products which are substitutes of crude oil, other sources of energy like coal, electricity and gas etc. The additional foreign exchange needed to finance the import of oil due to price hike has created very severe balance of payment problems to the developing countries. Due to the spurt in oil prices, all countries which do not have oil resources and rely on oil exports are facing acute balance of payment problems.
Oil Price Hike in India and Its Impact on Indian Economy
In India the rise in oil prices has created severe consequences to its economy. It enhanced the modes of transport such as road, rail, water and air transport. Second, it has arrested the growth in automobile industry and air transport services and created a recession in transport and energy sectors. Thirdly, it has pushed up the inflation rates to double digit levels. Fourth, the price hike has created a situation of stagflation where the economy persistently suffers from both high inflation and high unemployment.

Environmental Impact of Petroleum Industry
Petroleum industry has significant social and economic impacts. Petroleum industry is one of the major contributors of pollution and global warming. The process of production of petroleum has caused severe impacts to soils, surface and ground waters, and the local ecosystems in the United States.
Pollution and Global Warming
Oil can cause damage to the environment. From accidents and routine activities such as seismic exploration, drilling, and generation of polluting wastes, greenhouse gases and climate change not produced by renewable energy. Oil pipelines may burst and pollute the land and tankers may collide with other vessels or run aground spilling their cargo into the sea. Beaches become dirty and wildlife is threatened. Burning fuel releases poisonous fumes to the atmosphere. Extraction of oil itself causes serious environmental threats. Offshore exploration and extraction of oil usually disturbs the surrounding marine environment. Extraction may involve dredging, which stirs up the seabed, killing the sea plants that marine creatures need to survive. But at the same time, offshore oil platforms also form micro-habitats for marine creatures.
Oil Spills
Crude oil and refined fuel spills from tanker ship accidents have damaged natural ecosystems in Alaska, the Galapagos Islands, France and many other places. The quantity of oil spilled during accidents has ranged from a few hundred tons to several hundred thousand tons. Smaller spills have already proven to have a great impact on ecosystems. Oil spills at sea are generally much more damaging than those on land, since they can spread for hundreds of nautical miles in a thin oil slick which can cover beaches with a thin coating of oil. This can kill sea birds, mammals, shellfish and other organisms it coats. Oil spills on land are more readily containable if a makeshift earth dam can be rapidly bulldozed around the spill site before most of the oil escapes, and land animals can avoid the oil more easily.
Whales
Years ago man used whale oil mainly for lighting purposes. The advent of petroleum-refined kerosene saved some species of great whales from extinction by providing an inexpensive substitute for whale oil, thus eliminating the economic imperative for open-boat whaling.
Counties and Oil
The biggest producer country of oil is Saudi Arabia followed by Russia and United States. The biggest consumer of oil is U.S. followed by China,
List of Countries by Oil Production
Rank Country/Region Oil - consumption
(bbl/day) Date of
Information
- World
80,290,000 2005 est.
1 United States
20,800,000 2005 est.
- European Union
14,580,000 2004
2 China
6,930,000 2007 est.
3 Japan
5,353,000 2005
4 Russia
2,916,000 2006
5 Germany
2,618,000 2005
6 India
2,438,000 2005 est.
7 Canada
2,290,000 2005
8 Korea, South
2,130,000 2006
9 Brazil
2,100,000 2006 est.
10 Mexico
2,078,000 2005 est.
Source: Wikipedia
List of Countries by Oil Production
Rank Country/Region Oil — production(bbl/day) Date of
Information
— World
78,900,000 2005 est.
— Arab League
26,111,746 2005
1 Saudi Arabia
11,000,000 2007 est.
2 Russia
9,876,000 2007
3 United States
8,457,000 2007 est.
4 Iran
4,033,000 2007 est.
5 China
3,730,000 2008 est.
6 Mexico
3,501,000 2007 est.
7 Canada
3,425,000 2007
8 United Arab Emirates
2,948,000 2007 est.
— European Union
2,868,000 2004
9 Venezuela
2,667,000 2007 est.
10 Kuwait
2,613,000 2007 est.
Source: Wikipedia

CHAPTER-4
FUTURE OF PETROLEUM INDUSTRY
AND
PETROLEUM PRODUCTION


Petroleum is a fossil fuel that is limited and non-renewable. At present rates of consumption, the known supply will be exhausted by the mid 21st century. But a growing number of senior oil industry geologists and analysts are starting to challenge this belief publicly. They believe that it is grossly optimistic, and dangerously misleading.

The future of petroleum as a fuel remains somewhat controversial. USA Today news reported in 2004 that there were 40 years of petroleum left in the ground. Some argue that because the total amount of petroleum is finite, the dire predictions of the 1970s have merely been postponed. Others claim that technology will continue to allow for the production of cheap hydrocarbons and that the earth has vast sources of unconventional petroleum reserves in the form of tar sands, bitumen fields and oil shale that will allow for petroleum use to continue in the future

Hubbert Peak Theory
According to the Hubbert peak theory, also known as peak oil, the future petroleum production will eventually peak and then decline at a similar rate to the rate of increase before the peak as these reserves are exhausted. It also suggests a method to calculate the timing of this peak, based on past production rates, the observed peak of past discovery rates, and proven oil reserves. The peak of oil discoveries was in 1965, and oil production per year has surpassed oil discoveries every year since 1980.]
In 1956, M. King Hubbert correctly predicted US oil production would peak around 1971. When this occurred and the US began losing its excess production capacity, OPEC gained the ability to manipulate oil prices, leading to the 1973 and 1979 oil crises. Since then, most other countries have also peaked. China has confirmed that two of its largest producing regions are in decline, and Mexico's national oil company, Pemex, has announced that Cantarell Field, one of the world's largest offshore fields, was expected to peak in 2006, and then decline 14% per annum.
Controversy surrounds predictions of the timing of the global peak, as these predictions are dependent on the past production and discovery data used in the calculation as well as how unconventional reserves are considered. However, while past understanding of total oil reserves changed with newer scientific understanding of petroleum geology, current estimates of total oil reserves has been in general agreement since the 1960s. Further, predictions regarding the timing of the peak are highly dependent on the past production and discovery data used in the calculation. It is difficult to predict the oil peak in any given region, due to the lack of transparency in accounting of global oil reserves.
Demand for Oil
The demand side of peak oil is concerned with the consumption over time, and the growth of this demand. As countries develop, industry, rapid urbanization and higher living standards drive up energy use, most often of oil. Thriving economies such as China and India are quickly becoming large oil consumers.
Population
A significant factor of petroleum demand has been human population growth. One factor that has so far helped ameliorate the effect of population growth on demand is the decline of population growth rate since the 1970s, although this is offset to a degree by increasing average longevity in developed nations. However, oil production is still outpacing population growth to meet demand
Oil Reserves and New Discoveries
In order to produce more oil new oil reserves need to be discovered first. This comes with a challenge as William J. Cummings, the Exxon Mobil company spokesman said, “All the easy oil and gas in the world has pretty much been found. Now comes the harder work in finding and producing oil from more challenging environments and work areas.”
Oil reserves are classified as proven, probable and possible. Proven reserves are generally intended to have at least 90% or 95% certainty of containing the amount specified.
List of Countries by Proven Oil Reserves

Country Reserves (bbl)
Share
1 Saudi Arabia
266,800,000,000 19.66%
2 Canada
178,600,000,000 13.16%
3 Iran
138,400,000,000 10.20%
4 Iraq
115,000,000,000 8.47%
5 Kuwait
104,000,000,000 7.66%
6 United Arab Emirates
97,800,000,000 7.21%
7 Venezuela
87,040,000,000 6.41%
8 Russia
79,000,000,000 5.82%
9 Libya
41,460,000,000 3.05%
10 Nigeria
36,220,000,000 2.67%
Source: Wikipedia



Alternatives to Petroleum
Petroleum is a non-renewable energy resource which may predictably ran out in the near future. The burning of fossil fuels has contributed to the rise of pollution and global warming. Since this is the 21st century new alternatives to petroleum should be introduced to reduce the rise of pollution.
Renewable energy is the energy generated from natural resources. Electricity and heat can be generated from different renewable resources. Wind power, water or hydro power, solar energy, wastewater, biofuel, liquid biofuel, solid biomass, biogas, geothermal energy, are some of the renewable energy that can be used as alternatives to oil.
Many countries and states have implemented incentives to encourage consumers to shift to renewable energy sources. Government grants fund for research in renewable technology to make the production cheaper and generation more efficient. Also oil peak and world petroleum crisis and inflation are helping to promote renewable energy.
Conclusion
Petroleum industry is one of the most profit making industries in the world today. Over the past decade they have formed a key part o the global economy, since petroleum has become our main source of energy. Petroleum, when refined, is also the source of petroleum products that are much in demand in the world market today. The oil industry has political, environmental as well as socio-economic impacts on the society today. Though oil has its own contribution to pollution and global warming it has positive aspects too. Petroleum industry is one of the largest employers in the world, catering to the global demand. It has almost rescued whales from being instinct as they were hunted for whale oil at a time. The future of petroleum industry depends on the production and availability of petroleum as well as discovery of new oil fields. Alternatives to petroleum, the renewable energy resources, may replace petroleum in the near future but till now petroleum industry remains as the solid source of energy and economy and perhaps the biggest industry ever known to man by far.