Fundamentals of Oil & Gas

Industry

By
Hemant Kumar
Domain Consultant
Energy Practice
 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
 Picture This
You check your mails on
your PC and find that You read about the
you’ve won a quiz contest increase in crude oil
prices in the newspaper

You wash your most

favourite T-shirt in
washing machine

You spend quality time

with your family watching
You store the delicious a movie “dog’s life”
dish you cooked last
night in your fridge
 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
 And Picture
This Also
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

Train for long

distances
Public Transport for
daily commutation

Planes for faster long

Our personal vehicles distance travel
for outings

And we need roads for

our vehicles to run on
 …….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……
 And can we live without
food?
Plastic bags are widely
used to carry the
Thanks to cooking gas, vegetables and other food
preparing food is no more items
inconvenient

Vegetables we love to eat

also need fertilizer

We need fertilizer to
grow the food crops
 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 Wind

Gas

Water Sun
Coal
 Types of energy
Renewable Biomas Wind
s
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 depleted Geothermal
Renewable energy accounts for about 14% Sun
of the world's energy consumption Water

The five renewable sources used most often

include hydropower (water), solar,
wind, geothermal, and biomass.

Crude oil & Natural

Gas
Non Renewable
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 Nuclear Fuel
Coal

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
 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 economic
growth and survival.
• When we talk about hydrocarbons, we should know that they are
found, produced and delivered to us by oil and gas companies who
engage in multiple activities which will be described in this presentation
• So let’s get ready to learn about oil and gas industry.

Finding & producing Transporting Refining Selling the petroleum

hydrocarbons hydrocarbons hydrocarbons by products
 Petroleum Value Chain
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.
Truck

Refineries Bulk Terminal Gas Stations

Storage

Wellhead Terminal/Storage/H
Producers ub Location

Platform
Producers

Platform
Producers
Source:http://www.adventuresinenergy.com
Platform
Producers

Upstream Midstream Downstream Retail

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
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.

Hydrocarbon Formation

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
 Origin of Oil and Gas

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
What a petroleum bearing rock looks like •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-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!
 Origin of Oil and Gas- Petroleum System
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
Petroleum System-
Is a oil & gas
bearing structure
containing source,
reservoir and cap
rocks.
An oil & gas field
consists of one or
Source Rock
many such
petroleum systems

Pore is a small open space Permeability is provided by the

between the rock particles channels connecting different pores
Chapter- 3
Oil & Gas Exploration &
Production
 Exploration- Finding Oil & Gas
Oil & gas fields are identified using seismic data which is obtained from Seismic Surveys

Seismic Data Seismic Data obtained

Acquisition from Seismic Survey

Seismic Survey

Computer
generated model
of underground
rocks and
trapped oil&gas
reserves

Seismic Data processed

at the Workstation
 Exploration- Finding Oil & Gas
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- is fitted with long support legs

(3 0r 4) which are lowered until they rest on
the sea bottom. This allows the working
Jack up Rig Semi- Drill platform to rest above the surface of the
submersible Rig Ship water, as opposed to other floating rigs.
Used in shallow depth

Semi-submersible Rig- floats and retains its

stabilized position by means of anchors fixed
on the seabed. Used in deep waters

Drill Ship- is a ship designed to carry out

the drilling operations in deep water. A drill
Sea Bed 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
Water Level (thrusters) or a combination of these.
 Exploration- Exploratory Drilling
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
 Oil & Gas Production
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 Oil & Gas Production
Production 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

•. The horizontal well has a

A traditional well (vertical
or slightly deviated) only much greater length of
draws oil or gas from a contact with the
radius of a few tens of reservoir. Thus, the
meters. Moreover, such technique enables a
wells only cross the significant reduction in
reservoir over the limited the number of wells
height of a vertical or necessary for a given
near vertical cross development. However
section. A large number drilling horizontal
of vertical wells would involves a lot of technical
therefore be necessary to complexity and is also
completely extract the more costly
contents of a reservoir.

Reservoir

Small Drainage Area for Large Drainage Area for Horizontal Well
Vertical Well
 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
 Transportation
The 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)
 Transportation
FPSO ( 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

Oil Tanker

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

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.

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
 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 Transportation
Overall, 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.

Oil Spill Pipeline Leak

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.
Chapter- 5
Oil Refining
 Refining Crude Oil
Why do we need to refine the crude oil?
Why can’t we build engines that run on crude oil?

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

That is why the crude oils must be purified and transformed into
products 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 parts

Primary Processing- Output is raw (primary) products
Secondary Processing- Output is commercial products which are used by us

Primary Raw Secondary Commercial

Crude Oil Processing Products Products
Processing

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

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
 Primary Processing-Separation
AS we learnt that distillation is done using two methods
a) Atmospheric distillation b) Vacuum Distillation

Atmospheric distillation 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 unit 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

Source- http://www.eia.doe.gov/kids/energyfacts/sources/non-renewable/refinery.html
 Secondary Processing-Conversion
Some of the conversion processes are shown below

VISBREAKING FLUID CATALYTIC CRACKING

oil is cracked
A mild form of in the
thermal cracking, presence of
significantly lowers a finely
the viscosity of heavy divided
crude-oil residue catalyst
without affecting the which is
boiling point range. maintained
in an
aerated or
fluidized
state by the
oil vapors.

HYDROCRACKING DELAYED COKING

Hydrocracking is a In delayed coking the

two-stage process heated charge
combining catalytic (typically residuum
cracking and from atmospheric
hydrogenation, distillation towers) is
wherein heavier transferred to large
feedstocks are coke drums which
cracked in the provide the long
presence of residence time needed
hydrogen to to allow the cracking
produce more reactions to proceed to
completion.
desirable products.
 Reforming
Reforming 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

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

Catalytic hydrotreating is a hydrogenation process used to remove about 90% of

contaminants such as nitrogen, sulfur, oxygen, and metals from liquid petroleum fractions.
 Some More About Refinery
To Summarize every barrel of crude holds
Don’t be surprised to know that a barrel of crude oil
remarkable potential. It provides the building
after refining will provide slightly more than 1 barrel
blocks for countless products we depend on
of petroleum products. This gain from processing
every day. You can see below that petroleum in
the crude oil is similar to what happens to popcorn,
its more refined form contribute heavily to the
it gets bigger after it is popped.
modern economy.

Bottled Gas

Petrol Other Products

Liquefied Petroleum Gas (LPG)

Chemical Works
Heavy Fuel Oil

Jet Fuel

Diesel Fuel & Heating Oil

Jet Fuel

Gasoline

Diesel Fuel
Lubricating Oil
If you are still wondering how much of what is
Wax produced here is a general breakup of the quantity of
Fuel Oil
Power Station
petroleum products produced in a refinery. However
Tar
the product mix can be changed as needed. For
(bitumen example, the same barrel can be processed to yield
) for more heating oil in winter. However that would also
roads
mean something else will be produced less.
Source- http://www.eia.doe.gov/kids/energyfacts/sources/non-renewable/oil.html#How%20used
 Some More About Refinery
Types of refinery
•Topping – CDU
•Hydroskimming – CDU + Reformer
•Cracking – CDU + Cracker
•Coking – CDU + Cracker + Coker

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 Logistics
Each 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 Depots
Taking 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 different
consumers.

The products are regularly inspected throughout the whole

Ariel View of
distribution chain, from the refinery to the end user, to guarantee the
Petroleum Depots
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
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.

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.

Refinery

Delivering fuel to the

consumers

Road Tankers
Depots

Hypermarket

Petrol Pumps Petrol Pumps Petrol Pumps

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 diesel
fuel. 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 Logistics
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://primis.phmsa.dot.gov/comm/PetroleumPipelineSystems.htm
 Prices and Taxes
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.

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
A quick Recap before we move to the last
section

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
Chapter- 7
Oil & Gas Producers
 Oil & Gas Companies
There 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 Majors
Look at the graphs below to find out how the five majors compare with the other top
companies in the world

Profit (Million $) Revenue (Million $)

Believe it or not, but Shell’s daily production is enough to meet India’s daily Energy
consumption.
 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
 The Institutions and Other Organization
The International Energy Agency (IEA)

• 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.
Chapter- 8
Production & Consumption
Pattern
 Reserves
Middle 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
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.

Thousand Barrels per Day as on 1st Jan 2007

Source- World Oil and Gas Review
 Production
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

Thousand Barrels per Day as on 1st Jan 2007

Source- World Oil and Gas Review
Consumption, Production and Reserves
Comparison Snapshot
 http://www.planete-energies.com/content/oil-gas/logistics-supply/depots.html

A cross section of an oil tank Back

An inside view of a petrol pump/station Back
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/intera
ctive/all_5000.html
• http://science.howstuffworks.com/oil-
drilling.html
• http://www.gravmag.com/oil.html