Introduction to Oil and Gas Industry Study Notes

Historical Overview and Composition of Petroleum

Ancient History of Petroleum Usage:
- First recorded use involves civilization groups such as the Egyptians, Chinese, and Babylonians.
- Evolution of Drilling Technology:
  - Chinese: Utilized bamboo structures for early drilling operations.
  - Americans: Developed and utilized the cable tool method.
- The industry has transitioned from initial niche applications to a massive global demand expansion.
Chemical Composition of Crude Oil:
- Elemental Breakdown: Generally, crude oil consists of:
  - Carbon ( $C$ ): Approximately $84\%$ .
  - Hydrogen ( $H$ ): Approximately $14\%$ .
  - Varying elements ( $S$ , $N$ , $O$ , and metals): Total between $1\%$ and $3\%$ .
  - Salts: Less than $1\%$ .
- Classification: Crude is generally categorized into Light crude and Heavy crude.
Standard Unit of Measurement (The Barrel):
- One barrel ( $1\,barrel$ ) is equivalent to exactly $42\,gallons$ .
- Refinement Yield (Approximate volumes per barrel):
  - Gasoline: $\approx 19\,gallons$
  - Diesel: $\approx 10\,gallons$
  - Jet fuel: $\approx 5\,gallons$
  - Heavy fuel oil: $\approx 5\,gallons$
  - Asphalt: $\approx 2\,gallons$
  - Liquefied Petroleum Gas (LPG): $\approx 1\,gallon$

The Nature and Origin of Oil Reservoirs

Subsurface Formation: Crude oil is located within subsurface rock formations termed reservoirs.
Association with Natural Gas: Oil is typically found in conjunction with natural gas, referred to in this context as associated natural gas.
Reservoir Composition: A petroleum reservoir may contain oil, natural gas, or a combination of both substances.
Reservoir Rock Properties: The rock layers holding the hydrocarbons must possess specific physical characteristics:
- Porosity: The rock must be porous to hold the fluid.
- Permeability: The rock must be permeable to allow the fluid to flow through it.

Global Oil Industry Statistics: Reserves and Consumption

Global Oil Reserves (2025 Ranking):
1. Venezuela
2. Saudi Arabia
3. Iran
4. Iraq
5. Kuwait
6. UAE (United Arab Emirates)
7. Russia
8. Libya
9. United States
10. Nigeria
World Oil Consumption (By Country):
- United States: $19.00\,million\,barrels\,per\,day$ ( $18.3\%$ of world share).
- China: $16.37\,million\,barrels\,per\,day$ ( $15.8\%$ of world share).
- India: $5.62\,million\,barrels\,per\,day$ ( $5.4\%$ of world share).
- Saudi Arabia: $3.96\,million\,barrels\,per\,day$ ( $3.8\%$ of world share).
- Russia: $3.85\,million\,barrels\,per\,day$ ( $3.7\%$ of world share).
- Japan: $3.24\,million\,barrels\,per\,day$ ( $3.1\%$ of world share).
- South Korea: $2.89\,million\,barrels\,per\,day$ ( $2.8\%$ of world share).
- Brazil: $2.58\,million\,barrels\,per\,day$ ( $2.5\%$ of world share).
- Canada: $2.33\,million\,barrels\,per\,day$ ( $2.3\%$ of world share).
- Germany: $2.05\,million\,barrels\,per\,day$ ( $2.0\%$ of world share).
- Total (Top 10): $61.89\,million\,barrels\,per\,day$ ( $59.7\%$ total share).

Business Drivers and Key Industry Players

Core Business Drivers:
- Daily Operational Excellence:
  - Cost Minimization: Streamlining expenditures across the upstream/downstream value chain to protect margins.
  - Production Maximization: Using technical efficiencies to increase daily throughput.
  - Competitive Advantage: Leveraging strategic or technological assets.
- Future Asset Growth:
  - Reserve Expansion: Identifying/securing new hydrocarbon volumes to replace consumed inventory.
  - Opportunity Generation: Moving into untapped basins and emerging markets.
- The Non-Negotiable Standard:
  - QHSE Integrity: Maintaining Quality, Health, Safety, and Environmental standards as the baseline for all operations.
Major Exploration & Production (E&P) Entities:
- National Oil Companies (NOCs) and Groups: Sinopec (China), PetroChina, Saudi Aramco, and OPEC (Organization of the Petroleum Exporting Countries).
- International Oil Companies (IOCs): BP, ExxonMobil, Total, and Chevron.

The Oil and Gas Value Chain and Reservoir Life Cycle

Segmented Value Chain:
- Upstream: Involves Exploration and Production.
- Midstream: Involves Processing and Transportation.
- Downstream (Gas): Involves Distribution.
- Downstream (Oil): Involves Transportation, Refining, and Distribution.
The 5 Stages of Reservoir Life Cycle:
1. Exploration: Searching for oil and gas deposits.
2. Appraisal: Investigating the volume and specific parameters of the discovered oil and gas.
3. Development: Installing oil rig equipment and drilling the well.
4. Production: The actual extraction of oil.
5. Abandonment: Removing surface facilities and plugging the well securely.

Exploration and Geophysical Survey Methods

Geological and Geophysical (G&G) Surveys: Used to locate economic accumulations of oil/gas and narrow down search areas.
- Gravity Survey: Measures variations in gravity to identify the nature and depth of rock layers based on their density.
- Magnetic Survey: Locates crystalline terrains (which generally do not contain oil) to exclude them from exploration.
- Seismic Survey: Applies a "shock" to the ground or sea; utilizes reflected sound waves to measure travel times and map the earth's subsurface.
Administrative Requirements: Requires obtaining a lease and drilling permissions from owners (onshore or offshore).

Reservoir Appraisal and Volumetric Calculations

Key Volumetric Terms:
- OOIP / STOIIP: Original Oil In Place or Stock-Tank Oil Initially In Place. This is the total volume of oil in the reservoir prior to any production.
- Oil Reserves: This is the producible fraction; the specific amount of oil technically and economically recoverable.
- Recovery Limitations: Total extraction is never possible due to technology limits and reservoir characteristics.
Calculating the OOIP (Imperial Units):
- Formula: $OOIP_{STB} = \frac{7758 \times A \times h \times \phi \times (1 - S_w)}{B_{oi}}$
- Variables:
  - $A$ : Drainage area or reservoir area ( $acre$ ).
  - $h$ : Reservoir thickness ( $ft$ ).
  - $\phi$ : Porosity (dimensionless ratio of void space to bulk volume).
  - $S_w$ : Water Saturation (volume fraction of pore space occupied by immobile/interstitial water).
  - $B_{oi}$ : Oil formation volume factor (coefficient relating reservoir barrel volume to stock-tank barrel volume under standard conditions, measured in $bbl/STB$ ).
  - Note: STB = Stock-Tank Barrel; bbl = barrel.

Production and Well Construction: Drilling and Cementing

Drilling Concepts:
- The Wildcat: An exploratory well drilled in an unproven or uncharted area to find new reserves.
- Model-Driven Initiation: Operations begin only when geological models suggest a high probability of source rock presence.
- Economic Characterization: Post-discovery appraisal wells and production tests quantify volume and flow capacity to justify development decisions.
Functional Objectives of Cementing:
- Mechanical Support: Provides structural support for the casing pipe in the wellbore.
- Zonal Isolation: Seals off fractured formations to prevent lost circulation or fluid migration.
- Shock Absorption: Protects the casing from high shock loads during deeper drilling.
- Corrosion Mitigation: Forms a chemical barrier against corrosive formation fluids and the steel casing.

Hydrocarbon Extraction: Rigs and Secondary/Tertiary Recovery

Types of Drilling Rigs:
- Land Rig: Traditional unit for land-based operations; includes a Derrick and Substructure.
- Fixed Platform: A massive, stable platform for permanent production/processing.
- Jack-Up Rig: Mobile unit with legs that lower to the seabed to elevate the hull; used in shallow waters.
- Semi-Submersible Rig (Moored): Large, stable mobile unit for deeper waters, utilizing mooring lines and submerged pontoons.
- Drillship: Self-propelled, highly mobile unit for deep and ultra-deep waters; features subsea thrusters and a specialized hull.
Enhanced Oil Recovery (EOR):
- Efficiency: Standard primary/secondary methods extract $20\%$ to $40\%$ of OOIP. EOR methods increase this to $30\%$ to $60\%$ or higher.
- Methods and Mechanisms:
  - Thermal Recovery: Uses heat (Steam, Hot Water, Combustible Air) to reduce oil viscosity.
  - Gas Injection: Uses gases ( $CO_2$ , $N_2$ , or Natural Gas) to expand oil volume and reduce interfacial tension.
  - Chemical Injection: Uses polymers, surfactants, or alkaline solutions to increase the sweep efficiency of waterfloods.
  - Microbial EOR: Deploys specialized bacteria and nutrient-rich slurries to produce biosurfactants/gases that mobilize oil droplets.

Surface Processing and Phase Separation

Purpose: To separate raw multi-phase production streams into oil, gas, and water for sale or disposal.
Process Requirements:
- Isolating associated natural gas from liquids to meet vapor pressure specifications.
- Removing contaminants to protect downstream infrastructure from scaling and corrosion.
Phase Partitioning:
- Operations utilize horizontal or vertical pressure vessels.
- Provides a retention period to allow fluid segregation.
- Gravity is the primary driver for phase partitioning based on density differentials.