Chapter 1 .

Oil Basics

Underground oil
accumulations are formed when
three conditions are met. First,
there must be a ‘source’
rock rich in hydrocarbons and
buried deep enough so that
the heat from the Earth’s core can
‘cook’ them into oil.

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Gas Prof. Riggs

Oil
Water
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Ac erg
Oil Und
 Second,
there should be a porous rock nearby in which oil can
accumulate (it is often sandstone). 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.

Third,
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
17
three-layer cake—with 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.
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Oil Und
 Chapter 1 . Oil Basics

Oil properties

C   rude oil properties can vary widely depending on where the oil
is found and under what conditions it was formed. Its different
physical properties are used to design the right kind of refineries, classify
the oil (for example, West Texas Intermediate or Oman) and determine
an appropriate price for it.

The properties of oil include its density, called the API gravity (named
after the American Petroleum Institute), sulphur content, nitrogen
LIGHT content, carbon residue and distillation range.
CRUDE
Each of these properties is important for different reasons. For example,
the sulphur content of crude oil is important because it determines the
kind of treatment that it will require at a refinery. The higher the sulphur
level, the bigger the effect it will have on the environment—and the more
corrosive effect it will have on equipment.
API gravity is also important. It is essentially a measure of density. It
determines whether a specific type of crude oil has a higher or lower
18 boiling range (or distillate yields), which is important for separating and
extracting different parts (or fractions).
Different oil-producing areas produce different kinds of crude oil. And
depending on its mixture of hydrocarbons, crude oil can vary in colour,
composition and consistency.
 It is quite common to classify crude oil into different types or grades. The
following classifications are most common.

Light / Heavy
Crude oil can be classified as either light or heavy depending on its API
gravity (or density). Generally, the higher its API gravity, the lower its
density.
Oil that is lighter in colour, has a thin consistency and flows easily usually
contains less metals and sulphur compounds. It is known as light oil.
Oil that is high in metal and sulphur content is considered low-grade oil.
It generally has too much carbon, not enough hydrogen and is more time-
consuming to produce and hard to refine. It is known as heavy oil.

Sour / Sweet
Crude oil can also be classified as either sour or sweet, depending on the
amount of sulphur it contains.
Oil with a high sulphur content (0.5% and above, by weight) is considered
sour.
19
Sweet crude oil, on the other hand, has low amounts of these sulphur
compounds.

REFERENCE CRUDE OIL Some common crude oil types are used as a reference or benchmark
to determine the value of other crude oils. Some of these reference crude oils are:

Brent Blend Dubai-Oman Tapis Crude West Texas

A blend of several crude oils from fields in the North Used as a benchmark for Middle Oil produced in Malaysia Intermediate (WTI)
Sea region, located above Germany and the United East sour crude oil flowing to the that is used as a A very high-quality,
Kingdom. The price of oil produced in Africa, Europe Asia-Pacific region. reference for light oil sweet, light oil produced in
and the Middle East tends to be based on this oil. from East Asia. North America.
 Chapter 1 . Oil Basics

A brief history of the industry

T he world’s first oil wells were drilled in China around the 4th century
AD. The Chinese used simple bamboo poles to drill these
wells. The dark, sticky material they extracted was then used
primarily as a source of fuel.
In later centuries, oil was found across Asia and Europe.
Sometimes it accumulates in natural pools above the
ground. Travellers and settlers used the mysterious black
liquid for fuel, as well as for medical treatment.
The modern oil industry began in the mid-19th century.
On August 27, 1859, Colonel Edwin Drake discovered the
20 first underground oil reservoir near Titusville, Pennsylvania
(USA), after drilling a well only 21 metres (69 feet) deep. The
oil flowed easily. It was also easy to work with and distil. This oil
was known as a paraffin type of oil.
Drake worked for the Pennsylvania Rock Oil Company which
wanted to use the oil to light street lamps. Drake’s well initially
produced 30 barrels of oil per day (b/d). (One barrel is equal to 159
litres or 42 US gallons). Its success marked the beginning of the modern
oil industry.
Oil soon began to receive more attention from the scientific community.
After some research, a variety of products were eventually developed
from crude oil. For example, kerosene for heating was one of the first
products.
Soon other products (like gasoline and diesel to run engines) were
also on the market. In 1890, the mass production of automobiles
began creating a huge demand for gasoline and pushing companies
to find more oil fields.
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 Chapter 1 . Oil Basics

Why is oil important?

Crude oil is a central part of
modern life and the world’s most important energy
resource. We rely on it in many ways for the food we
eat, the clothes we wear and the electronics we use
at home and in the workplace. Without oil, we
would not be able to continue to enjoy the
same standard of living.

Tires
22 Gasoline

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 T he way people live, work and travel all depend on oil. Oil is, in fact,
the world’s most important transportation fuel. About 90% of all
transportation fuels come from crude oil.

Jet fuel

It is also the raw material from which other important products are made,
which have improved the quality of our lives over the past century and a half.
It has been used to keep people’s houses warm during the winter for centuries.

Artificial heart 23

Aspiri
n

Shampoo

Synthetic fibres
Lipstick
But oil is also used to make medicines, plastics and cleaning products. In
fact, modern life as we know it today would be impossible without oil and
its products. Many of the everyday items people use are either made from
oil or are dependent on oil for their production.
Some of these products include heating oil, jet fuel, kerosene, dentures,
diapers, fertilizers, lipstick, shampoo, deodorant, shaving cream, crayons,
musical devices, cameras, computers, glue, contact lenses, toothpaste,
synthetic fibres, tires, artificial hearts and even aspirin.
So now you have an idea of how important oil is in our daily life!
 Chapter 1 . Oil Basics

NORTH AMERICA

24

SOUTH AMERICA
EUROPE

ASIA & PACIFIC

How much Oil

25
AFRICA

does the world need?

T he world needs more energy as its population grows and as

countries become more economically prosperous.
The United States has the world’s largest demand for oil. Although
it has only about 5% of total world population, it uses nearly 25%
of the world’s total oil production and 45% of the world’s total
gasoline production.
And as the economies of countries like Brazil Russia, India and
China become richer, and their economies expand, their need for
more oil will grow.
To meet all this demand for oil without provoking market
imbalances, the right supply levels are needed. Measuring this
is always a challenge for the experts who work in the oil industry.
 Chapter 2

Finding Oil
Upstream

26
 A big adventure begins!

F inding oil and getting it out of the ground is a challenging and exciting
activity. It requires great effort and travel to distant lands—and the
results can often be surprising.

So how do we find oil?

It starts with the simple decision to explore for oil based on preliminary
survey data. Once oil is discovered, the initial results are tested. If the
results are good, then the development of a production well begins.
Because of the importance of oil in our lives, it is necessary to understand
how the industry as a whole works in both its upstream and downstream
sectors. For this, it is helpful to look at the oil industry by first considering
what is called the upstream sector.

Upstream
The upstream sector is the part of the oil industry involved with finding
oil fields and bringing oil up from the ground. Upstream activities include
exploratory work, such as the search for underground (or underwater)
oil and gas reservoirs, and the initial drilling, followed by the production 27
phase, which is the actual extraction of oil from the ground.
 Chapter 2 . Finding Oil (Upstream)

Exploration
E xploration is almost like detective work. It requires looking for
clues, careful observation of ground conditions, taking notes of
different information and the evaluation of survey data. This is the job
of petroleum geoscientists, who are experts on rocks.

Petroleum geoscientists working at oil companies begin looking for

places where there might be oil. They look for signs that may indicate
the presence of hydrocarbons underground and are responsible for
determining the best places to drill.

They start by examining the shapes of different underground layers

of rock. They have to use special tools in order to ‘see’ the rocks
underground. Thus, using advanced technology—and special tools
like aerial photography, satellite pictures and specialized machines
that measure variations in the Earth’s gravity and magnetic fields—
geoscientists try to identify likely crude oil fields.

28
 O il can also be found underground at the bottom of the sea. In this
case, special ships are used to look for these underwater oil fields.
Geoscientists use several special technical tools—such as sound waves
used in seismic technology—to form a clear picture of underwater
rock layers.

But the only way to be absolutely sure that there is oil in the ground is
simply to drill a well. This is a big gamble because not all wells result in
the discovery of oil. It may take the drilling of many different wells until
a new oil field is found. This costs a large amount of money because
sophisticated equipment is needed and many people need to be hired.

That is why the geoscientists then supply all their survey data to the
economists and financial planners at the oil companies, who help make
the decision whether or not to drill exploratory wells.

29

Surveyors record the seismic waves that are produced by

an explosion or sound generator. Since different rock types
reflect sound waves differently, the surveyor can create a
picture of the subterranean rocks.

eyor
Surv

Explo
sion

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Soun
 Chapter 2 . Finding Oil (Upstream)

Production

Once oil is found after

the preliminary exploration phase
and the drilling of exploratory wells, the Crude oil found underground is usually mixed
production phase can begin. There are two with water, sand, salt and natural gas. As it is
forms of drilling: onshore and offshore. extracted, the pressure of these different
substances must be kept at just the right
levels. This is done by turning valves
on and off at the surface level.
Because these valves are often
green in colour and the small dials
are red, much like the pine trees
decorated at Christmas time, this
assembly is often referred to as
30 a Christmas tree.

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Prof. Ri
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