Chapter 1,2 and 3: Introduction To Oil and Gas Industry and Sustainable Development
Chapter 1,2 and 3: Introduction To Oil and Gas Industry and Sustainable Development
1,2 AND 3: INTRODUCTION TO OIL AND GAS INDUSTRY AND SUSTAINABLE DEVELOPMENT 1
CHAPTER 1: INTRODUCTION TO ENERGY crude oil. The word “petroleum” means “rock oil” or “oil from the
earth.” Nowadays, the term petroleum used as a common
Oil and Gas in Our Life denotation for crude oil and natural gas, i.e. the hydrocarbons.
o Transportation Fuel
o Power Plant Fuel Hydrocarbon Formation
o Household Fuel
o Petrochemical Fuel
o Asphalt/Bitumen
Types of Energy
o Renewable Energy
Ø It 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. Renewable energy
accounts for about 14% of the world’s energy
consumption.
Ø The five renewable sources used most often Once the body of prehistoric animals and plants became
include hydropower, solar, wind, trapped they partially decomposed using up the dissolved oxygen
geothermal and biomass. in the sediment. As soon as the oxygen is used up, decay stops
o Non Renewable Energy and the remaining organic matter is preserved. Continued burial,
Ø These are sources come out of the ground as subject the organic matter to higher temperatures and pressures,
liquids, gases and solids. which cause physical and chemical changes in the organic. These
Ø Non-renewable sources of energy can be produce tiny droplets of hydrocarbons.
divided into two types: fossil fuels and
nuclear fuel. Origin of Oil and Gas – Petroleum System
Ø Coal, crude oil and natural gas are all As we learnt, oil and gas originate in source rock and
considered fossil fuels because they formed once fully formed they start moving towards the surface through
from the buried remains of plants and animals channels in the rocks surrounding the source rocks. Once their
that lived millions of years ago. upwards movement is impeded by non permeable rocks called
trap or seal or cap rocks they tend to accumulate in the porous
(containing pores) and permeable rocks also known as reservoir
rocks.
CHAPTER 2: ORIGIN OF OIL AND GAS Petroleum System is a oil and gas bearing structure containing
source, reservoir and cap rocks. An oil and gas field consists of
Origin of Oil and Gas one or many such petroleum system.
Oil was formed from the remains of animals and plants
that lived millions of years ago in a marine (water) environment Pore is a small open space between the rock particles.
even before the dinosaurs. Over the years, the remains were
covered by layers of sand, silt and mud. Heat and pressure from Permeability is provided by the channels connecting different
these layers helped the remains turn into what we today call pores.
CHAPTER 1,2 AND 3: INTRODUCTION TO OIL AND GAS INDUSTRY AND SUSTAINABLE DEVELOPMENT 2
Oil and Gas Formation Ø In North America, native Indians had been
o It is formed from the accumulation of decomposition of collecting oil for use as a medicine
plants and marine animals, which died million years ago
and trapped beneath the ground under high pressure Oil and Gas Early History
and temperatures. o Oil and gas had been used for centuries like ancient
o Oil and gas compound consist of carbon and hydrogen peoples worshipped sacred fires (eternal flame) fuelled
atom that’s why it is called hydrocarbon. by natural gas seeping to the surface through pores and
o Crude oil is liquid while natural gas is gaseous cracks.
hydrocarbon at room temperature. o About 6000 BC, thick gummy asphalt was used to
waterproof boats and heat homes.
o About 3000 BC, the Egyptians used asphalt in the
construction of the pyramids, to grease axles of the
Pharaoh’s chariots, and as an embalming agent for
mummies and medicines.
o When whale oil (extracted from whale fat), the main
source of lamp fuel in early 1980, became scarce, a new
source is introduced by distilling natural petroleum
seeps and coal into lamp oil/kerosene.
Birth of Modern Oil and Gas Industry
o First refinery begun in 1846 when Abraham Gessner of
Nova Scotia, Canada, invented a process to produce
kerosene for lamp from coal.
o In 1858, James Miller Williams, a 39-year-old carriage
maker from Ontario, Canada, made the first major
commercial oil discovery in North America at Oil
Springs, Ontario, Canada.
High o He struck oil at a depth of only 18m by drilling
temperature Oil and gas is in “gum beds” in Lambton County, 25km
Dead and pressure also called southeast of Sarnia. Williams refined the oil he
organism get transform Petroleum produced and sold the product as lamp oil.
trapped buried dead which means o In 1859, Colonel Edwin L. Drake discovered oil in
underground organism "Rock Oil" in Titusville, Pennsylvania by drilling to 21m. This
into oil and Latin word
discovery marked the birth of the modern petroleum
gas
industry in the United States.
o The invention of the gasoline engine (1885) and diesel
engine (1892) boosted the refineries industry to
Scientific Definition produce gasoline and diesel fuel.
o Oil and gas are called hydrocarbons because they are
compound of atoms of hydrogen and carbon. Depending
on the mixture of HC molecules, oil differs in color,
composition and consistency.
o Methane: CH4
o Ethane: C2H6 Drake Well
o Propane: C3H8
o Butane: C4H10
Historical Perspective Oil and Gas Industry Characteristics
o The use of oil based products were recorded in the o Large investment can reach billion of US dollars
earliest writing of man: o High risk in all aspects
Ø Bitumen was used in the building of the tower ü People safety
of Babel ü Environment
Ø Sumerians used it for paving the Hanging ü Investment
Gardens of Babylon ü Reputation
Ø In India, Burma pitch was used for buildings o High reward/return
and as fuel for lamp
CHAPTER 1,2 AND 3: INTRODUCTION TO OIL AND GAS INDUSTRY AND SUSTAINABLE DEVELOPMENT 3
o Long term business from initial investment until Drilling rigs each adapted to different water depths (more than
revenue generated, even longer until break even point 2000m in some cases).
(can be more than 20 years)
o Complex operation involves multidiscipline experts o Jack up Rig
from both technical and non-technical. o It is fitted with long support legs (3 or 4),
o Strategic value (economic and politic) which are lowered until they rest in the sea
o Global impact bottom. This allows the working platform to
rest above the surface of the water, as opposed
Pros in Working in Oil and Gas to other floating rigs. Used in shallow in depth.
ü Relatively High Compensation o Semi-submersible Rig
ü Multidiscipline o It floats and retains its stabilized position by
ü Dynamic Environment means of fixed anchors fixed on the seabed.
Used in deep waters.
Cons in Working in Oil and Gas o Drill Ship
ü High Risk o It is a ship designed to carry out the drilling
ü Remote Area operations in deep water. A drill ship must
ü Working during Holiday stay relatively stationary on location in the
water for extended periods of time. This
Oil and Gas Industry Sector positioning may be accomplished with
o Upstream multiple anchors, dynamic propulsion
o Finding, lifting and processing oil and gas from (thrusters) or a combination of these.
subsurface into surface and ready for
transportation. Also known as Exploration
and Production.
o Midstream
o Transportation and storage of crude oil and
natural from exploration and production plant
for further processing by pipeline, railway,
road or tanker.
o Downstream
o Further processing of crude oil and natural gas
into useful final product or raw material for
other industry. Also known as Refining and
Marketing.
CHAPTER 3 – OIL AND GAS EXPLORATION AND
PRODUCTION
Exploration – Finding Oil and Gas
Oil and gas fields are identified using seismic data which Exploration – Exploratory Drilling
is obtained from Seismic Surveys. 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.
Computer The bit, which is the most important part and also is
generated model
Seismic Data Seismic Data
of underground
hollow and very heavy, is attached to the drill string. A drill string
Seismic Data obtained from processed at the
Acquisition
Seismic Survey Workstation
rocks and is composed of hollow lengths of pipe leading to the surface. As
trapped oil and
gas reserves the hole gets deeper, more lengths of pipe can be added to the
top.
Oil and Gas Production – Development
It’s not enough to drill wells in a field to ensure
production. To ensure safe production from the high pressure
To confirm the interpretations of the seismic data, fields, safety equipments and other installations are set up.
drilling is done which is also called as exploratory drilling.
CHAPTER 1,2 AND 3: INTRODUCTION TO OIL AND GAS INDUSTRY AND SUSTAINABLE DEVELOPMENT 4
Oil and Gas Production UPSTREAM
o Oil companies have to drill many exploratory wells
before discovering potential oil filed which is also called Upstream Oil and Gas Life Cycle
as prospect. The success rate also known as strike rate o Licensing (Contract Signing)
depends on the geological history of the particular o Activities to offer the right to manage an area
region where the exploratory activities are being (block) which is expected to contain oil and
performed. On an average, the strike rate varies gas.
between 5% to 15%. For example, a 10% strike rate o Exploration (Discovery)
would mean one prospect among 10 exploratory wells o Activities to search for oil and gas deposits on
drilled. It also means 9 of them would be dry holes. the reservoir beneath the earth surface within
o Drilling a well is a very costly activity especially in deep the block’s boundary.
water. Oil companies are using modern technologies to o Appraisal (Project Sanction)
increase the strike rate during exploration. o Activities to define the oil and gas volume and
o Hydrocarbons discovered by the initial exploration characteristic more precisely after discovery.
wells are further confirmed by appraisal drilling i.e. o Development (First Oil/Gas)
drilling more wells in the area. o Activities to extract, process and export oil and
o Following appraisal drilling, decision is taken whether gas as per contract agreement.
to develop the field for commercial extraction or stop o Abandonment (Contract Expiry)
further activities in case the producible quantity of oil o Activities to plug wells permanently, remove
and gas do not justify the investment in development. surface facilities, and restore the block as per
o Enormous thought goes into the best way of extracting initial state.
the hydrocarbons, attempting to recover the maximum
quantities of oil and gas in the safest conditions. These Licensing Round
forecasts, studies and the eventual construction of the o Government has the area (including oil and gas beneath
installations constitute the development stage of the the surface) but no resource (money, man, power,
field. Once everything is in place, extraction can start. technology), while Oil Company have the resource but
The life in an oil field continues for many years. not the area.
o Government via host authority (government regulatory
body or national oil company) will offer certain area
known as “block” to Oil Companies in an activity called
“Licensing Round.”
o Government will offer raw data and petroleum
agreement to attract oil companies to invest for
exploration and production activities.
o Oil companies will compete each other in a
bidding/tender stage to obtain the right for exploration
and production in a certain block. The winner will be
granted the right (contract) to manage exploration and
production activities in a certain period and get
compensation based on the agreement.
o In this stage, government need to attract investment by
offering “interesting package” while keep protecting
o Traditional well (vertical or slightly deviated) only the national interest.
draws oil or gas from a radius of a few tens of meters.
Moreover, such wells only cross the reservoir over the Exploration
limited height of a vertical or near vertical cross section. o Activities to find oil and gas prospect beneath the earth
A large number of vertical wells would therefore be surface by means of gravity survey, magnetic survey
necessary to completely extract the contents of a and seismic reflection survey.
reservoir. o Once prospect is likely to be found, exploration
o Small drainage area for vertical well (wildcat) drilling will be conducted to determine the
o Horizontal well has a much greater length of contact presence of oil and gas reserve.
with the reservoir. Thus, the technique enables a o Most wildcat drilling fail to find oil and gas (dry hole),
significant reduction in the number of wells necessary only few (less than 25%) hits oil and gas layer
for a given development. However, drilling horizontal (discovery).
involves a lot of technical complexity and is also more o After discovery, more drilling is required to “appraise”
costly. the reservoir.
o Large drainage area for horizontal well
CHAPTER 1,2 AND 3: INTRODUCTION TO OIL AND GAS INDUSTRY AND SUSTAINABLE DEVELOPMENT 5
Appraisal o Possible (2P): Unproved reserves which
o It is required to determine the reservoir size, which analysis of technical data suggests are more
defines the volume, and to get better characteristic of oil likely than not to be recoverable. At least a
and gas. 50% probability (P50) that the quantities
o Volume will be measured in million barrels (MMbbls) actually recovered will equal or exceed the
oil and billion-ft3 (Bcf) gas, both original in place volume sum of estimated proved plus probable
(Oil Initial In Place/OIIP and Gas Initial In Place/GIIP) reserves.
and recoverable volume. o Probable (3P): Unproved reserve which
o Important characteristic includes pressure, analysis of technical data suggests is less likely
temperature, oil viscosity, hydrocarbon composition, to be recoverable than probable reserves. At
compartmentalization and contaminants. least a 10% probability (P10) that the
quantities actually recovered will equal or
Seismic and Drilling exceed the sum of estimated proved plus
probable plus possible reserves.
Seismic 2D Further
Seismic imaging modelling Drilling Field Development Plan (FDP)
o Once the estimated recoverable value is determined, the
Company will prepare a plan to monetize the reserve,
called Field Development Plan/Plan of Development
(PoD).
o FDP shall contain at least:
o Subsurface characteristic (OIIP, GIIP,
contaminants, etc)
o Recoverable reserve in P90-P50-P10
o Production Rate and Field Life
o Production Facilities (number and type of
wells, surface facilities type)
o Project Plan (including Cost, Schedule, Quality)
o Project Economics
o Other aspects like Risk, Health Safety
Environment (HSE)
o FDP shall be approved by the host authority. Once
approved, the Company will conduct a tender for
facilities development.
o In the same time, Company will secure the hydrocarbon
sales, especially gas, known as Gas Scales Agreement
Reserve Type (GSA). While for oil, it will be absorbed by the market as
o Once appraisal conducted, it will determine the quantity per oil price trend.
of petroleum that can be recovered/produced. o Once the GSA secured and cost of development known
Typically, only 30% of oil and 70% of gas can be from proposed tender price, the Company will further
recovered, can be more if advanced technique applied calculate the project economic. If it meet the criteria, the
like water injection and submersible pump. Company will sanction (commit to invest money) he
o Proved (1P): Quantities of oil and gas, which by project, known as Final Investment Decision (FID).
analysis of geoscience and engineering data, can be
estimated with reasonable certainty to be economically Production Facilities
producible – from a given date forward, from known o A set of equipment to extract (lift) oil and gas from
reservoirs, and under existing economic conditions, subsurface to surface, process and export it to customer
operating methods, and government regulations. At as per requirement specified in the contract.
least 90% probability (P90) that the quantities actually o Based on the location, it consists of subsurface (wells)
recovered will be equal or exceed the estimate. and surface facilities.
o Unproved: Reserves are based on technical data similar o Optimum facilities size will depend on reservoir size
to that used in estimates of proved reserves; but and contract duration which will define the optimum
technical, contractual, economic or regulatory production rate.
uncertainties preclude such reserves being classified as
proved. Unproved reserves maybe further classified as
probable reserves and possible reserves.
CHAPTER 1,2 AND 3: INTRODUCTION TO OIL AND GAS INDUSTRY AND SUSTAINABLE DEVELOPMENT 6
o Once crude oil processed, it will be exported through
pipeline, oil tanker, truck or railway.
o For natural gas, it can only be exported by pipeline. If
the volume is too big or the distance is too far, gas has to
be liquefied and exported in liquid phase by LNG tanker.
o Based on the location, it can be placed on land
(onshore) or sea (offshore).
Derrick – drilling tower, sometimes built-in at profitable
Flare – gas incineration
Topside – processing, pumps, accommodation
Wellheads – top of wells
Oil and gas processing on lands
Jacket – the supporting structure
Risers for oil/gas to process plant
Drilling and Completion (Wells)
o A well is created by drilling a hole into the earth by Oil and gas pipeline for transport to land
using a drilling rig that rotates a drill bit. Drilling template, mounted over wells
o Once drilled, a steel pipe called casing is placed in the
Jacket Base – often mounted with piles
hole and secured with cement. This process is continued
by using smaller drill bit and casing until reach the
Offshore Facilities
reservoir target.
o Based on the substructure (the structure which
o After reaching the target, well must be “completed.” The
supports the equipment above called topside), offshore
process to prepare the well to produce oil and gas is
facilities is divided into:
called completion.
o Completion is designed to allow oil and gas to flow but
Bottom Supported and Vertically Moored Structure
block unwanted material like sand.
Floating Production and Subsea Systems
Surface Production Facilities
o Surface Facilities consist of wellhead, processing and
exporting facilities.
o Wellhead is the top part of the wells, which is used to
control the flow, protect from excessive pressure, and
interface between surface and reservoir.
o Main processing function is to separate the mixture of
oil, gas, water and other conteminants (CO2, H2S) and to
condition the crude oil and natural gas as per requires
sales specification.
CHAPTER 1,2 AND 3: INTRODUCTION TO OIL AND GAS INDUSTRY AND SUSTAINABLE DEVELOPMENT 7
Typical oil well being produced by a pumpjacked
Production Period
o Typical production phase start with ramp up period
(increase production rate up to peak, normally less than
a year), then plateau (maintain peak for several years,
for oil production normally less than 5 years while for
gas production between 5 to 10 years), then declining
until reach economic limit (timing when operating cost
is higher than production revenue) or end of
contractual period.
o Plateau and decline phase can be extended by applying
secondary recovery (i.e. gas injection and water
injection) and tertiary recovery (i.e. chemical injection
Floating Production Storage and Offloading Vessel be carefully calculated since secondary/tertiary
recovery is more expensive than primary recovery.
o It is a floating vessel used by the offshore industry for
the processing and storage of oil and gas.
o It is designed to receive oil or gas produced from nearby
platforms or templates, process it, and store it until the
oil or gas can be offloaded onto a tanker or transported
through a pipeline.
Abandonment
o The last phase in upstream life cycle is abandonment.
o The activities comprises well plug and abandonment
(P&A) and surface facilities removal.
o Well must be permanently closed and sealed, so no
more hydrocarbon can escape to the surface.
o Surface facilities must be removed until few meter
below seabed, or left on the seabed as an artificial reef
Oil and Gas Processing Facilities after free hydrocarbon condition reached.
o Oil-gas-water mixture is separated in separator. o Site must be restore to as close as its original condition.
o Oil will be stabilized by removing more gas, then
pumped to pipeline or FPSO.
o Gas will be treated to remove more liquid, then
compressed to pipeline. Special vessel to
o Water will be treated before disposed overboard/re- remove offshore
injected into reservoir platform
Oil refineries are key to
CHAPTER 1,2 AND 3: INTRODUCTION TO OIL AND GAS INDUSTRY AND SUSTAINABLE DEVELOPMENT 8
obtaining hydrocarbons. Oil in different parts of the world DRILLING CONTRACTOR
contains different proportions of the various hydrocarbons. Transocean (Independent)
There are refineries in many parts of the UK including Diamond Offshore
Edinburgh, Liverpool and Milford Haven. North Sea Oil is Noble
relatively high in naphtha, which is used for making plastics.
THIRD PARTY CONTRACTOR
Refining Process
Survey Engineer Directional Driller
Mud Logger Cementer
Mud Engineer Wireline/Testing
Measuring while Drilling Completion Engineer
OFFSHORE INSTALLATION MANAGER (OIM)
Ridge Supt. Assistant Driller
Tool Pusher Derrick Man
Tour Finisher Rough Necks
Driller Roustabout
COMPANY MAN
Drilling Engineer
Geologist
Fluids/Completion
CATERER / CAMP BOSS
Cook
Laundry Boy
Room Boy
Petroleum Economics
PETROLEUM SYSTEM
The Petroleum System consists of a mature source rock,
ADDITIONAL NOTES: migration pathway, reservoir rock, trap and seal. Appropriate
relative timing of formation of these elements and the processes
OIL COMPANIES (Owns the well) of generation, migration and accumulation are necessary for
Shell hydrocarbons to accumulate and be preserved.
Exxon Mobil
Total The components and critical timing relationships of a
BP petroleum system can be displayed in a chart that shows geologic
Chevron time along the horizontal axis and the petroleum system
elements along the vertical axis.
CHAPTER 1,2 AND 3: INTRODUCTION TO OIL AND GAS INDUSTRY AND SUSTAINABLE DEVELOPMENT 9
Exploration plays and prospects are typically developed Seal (cap rock)
in basins or regions in which a complete petroleum system has An impermeable rock that acts as a barrier to further
some likelihood of existing. migration of hydrocarbon liquids.
Source Rock Hydrocarbon Generation Rocks that forms a barrier or cap above and around
The formation of hydrocarbon liquids from an organic reservoir rock forming a trap such that fluids cannot migrate
rich source rock with kerogen and bitumen to accumulates as oil beyond the reservoir. The permeability of a seal capable of
or gas. retaining fluids through geologic time is ~ 10-6 to 10-
8 darcies. Commonly
Jack-Up Rigs.
Jack-up drilling rigs are similar to a drilling barge
because the complete drilling rig is built on a floating hull that
must be moved between locations with tug boats. Jack-ups are
the most common offshore bottom-supported type of drilling rig.
Once on location, a jack-up rig is raised above the water on legs
that extend to the seafloor for support. Jack-ups can operate in
open water or can be designed to move over and drill though
conductor pipes in a production platform. Jack-up rigs come with
various leg lengths and depth capabilities (based on load capacity