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 Earths 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 like
oxygen, 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 source
of 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 eventually

transformed 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
Earths 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 threelayer cakewith 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.
H
H

Methane (gas) the simplest hydrocarbon

with one carbon atom and four hydrogen
atoms; is written as CH4.

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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.
Reservoir Engineers and Geoscientists
(Upstream jobs)

Oil traders
(Downstream jobs)

Global Headquarters of Oil Companies

BP HQ Mayfair,
London

Suncor Energy HQ,

Alberta, Canada

LukOil HQ, Moscow

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
outlets
and 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
Fuel/Energy
Refinery Gases

Crude
Oil

LPG

NGLs
Other
Feedstocks
(Naphtha,
Residues,
Blending
Components)

Oil
Refinery

Gasoline
Naphtha
Jet/Kerosene
Gasoil/ Diesel

Fuel/Energy

Residual
Fuel Oil

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 stage
The 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

minimise
production 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 Production
ONSHORE

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 supermajor.
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
Production rate

Plateau
phase

Decline phase

Tertiary recovery

Development
phase

Primary
recovery

Secondary
recovery

Time

PEAK OIL