GLOBAL STRUCTURE AND TRENDS IN THE OIL AND GAS INDUSTRIES

Thomas Akabzaa, Dept of Earth Science, University of Ghana

Petroleum Explained

Petroleum comes from the Greek word, Petroleum comes from the Greek word, PetroPetro-rock; -rock; and and oleumoleum-oil.-oil.

Two possible theories of the origin have been Two possible theories of the origin have been postulated; biogenic and abiogenic sources.postulated; biogenic and abiogenic sources.

Chemical composition of petroleum Petroleum - all naturally occurring hydro Petroleum - all naturally occurring hydro

carbons – gas, crude oil, bitumen and other carbons – gas, crude oil, bitumen and other some solid substancessome solid substances

– Main composition: Carbon, hydrogen, Main composition: Carbon, hydrogen, – Minor sulphur, nitrogen, oxygenMinor sulphur, nitrogen, oxygen– Petroleum – gas, liquid and solidPetroleum – gas, liquid and solid– Gas consists of lighter paraffinGas consists of lighter paraffin– Liquid Petroleum consist of heavier paraffin Liquid Petroleum consist of heavier paraffin

hydrocarbonshydrocarbons– Petroleum solids and semi solids are asphalts, Petroleum solids and semi solids are asphalts,

bitumen, tar, pitch etc. bitumen, tar, pitch etc.

Petroleum System Components of a Petroleum System:Components of a Petroleum System:

Mature Source Rock,Mature Source Rock,Migration PathwayMigration PathwayReservoir Rock,Reservoir Rock,Trap and Trap and Seal RockSeal Rock

Appropriate relative timing of formation of these Appropriate relative timing of formation of these elements and the processes of elements and the processes of generation, migration and migration and accumulation are necessary for are necessary for hydrocarbons to accumulate and be preserved. hydrocarbons to accumulate and be preserved. (Un(Unitization)itization)

Anticlinal trap

Crude oil include non carbon and hydrogen Crude oil include non carbon and hydrogen constituents namely: sulphur, nitrogen, helium, and constituents namely: sulphur, nitrogen, helium, and oxygen together with organic compounds of some oxygen together with organic compounds of some heavy metals, mainly vanadium and nickelheavy metals, mainly vanadium and nickel

Sulphur is present in nearly all crudes in quantities up Sulphur is present in nearly all crudes in quantities up to about 3%. to about 3%.

higher in heavier than in lighter oils higher in heavier than in lighter oils

• Most refineries would normally prefer lower Most refineries would normally prefer lower sulphur crudes.sulphur crudes.

• Average weight crude oils have °API of between Average weight crude oils have °API of between 25 – 35.25 – 35.

Classification of crudes

• Light oils have 35-45 °API, rich in gasoline and Light oils have 35-45 °API, rich in gasoline and are most valuable. are most valuable.

• Heavy oils have below 25 °API . Heavy oils have below 25 °API . Crude oils are classified as sweet and sour based Crude oils are classified as sweet and sour based

on their suphur content. on their suphur content.

Sweet crudes have less than 1% sulphur by Sweet crudes have less than 1% sulphur by weightweight

Sour crudes have more than 1% sulphur by Sour crudes have more than 1% sulphur by weight.weight.

The first function of all refineries is to separate The first function of all refineries is to separate the crude oil into fractions by fractional the crude oil into fractions by fractional distillation.distillation.

The break down of the heavy hydrocarbons in The break down of the heavy hydrocarbons in to lighter and more useful and more valuable to lighter and more useful and more valuable products is called products is called cracking. cracking.

Because of their compositional variation in Because of their compositional variation in different oilfields may have to be distilled in different oilfields may have to be distilled in specified refineries designed to process oils of specified refineries designed to process oils of particular specificationparticular specification

Basic consideration in the refining crude oil

Benchmark Crude Oils

It is a standard against which other crude oils are It is a standard against which other crude oils are compared and prices are set. compared and prices are set. In the United States, West Texas Intermediate (WTI) is In the United States, West Texas Intermediate (WTI) is 30 - 40 °API and 0.3% S30 - 40 °API and 0.3% S

• Brent , the benchmark crude oil for the North Sea is 38 Brent , the benchmark crude oil for the North Sea is 38 °API and 0.3% S. °API and 0.3% S. `̀

• Bonny light benchmark crude for Nigeria is 37.6 °API Bonny light benchmark crude for Nigeria is 37.6 °API and 0.13% S.and 0.13% S.

• Brass River benchmark crude for Nigeria is 43 °API Brass River benchmark crude for Nigeria is 43 °API and 0.08% S. and 0.08% S.

• Dubai benchmark crude oil for the Middle East. It is 31 Dubai benchmark crude oil for the Middle East. It is 31 °API and 2% S.°API and 2% S.

Global Structure of oil and gas industry

Independent upstream and downstream Independent upstream and downstream companiescompanies

Vertically integrated companiesVertically integrated companies National oil and gas and mining companiesNational oil and gas and mining companies Private oil and gas and mining companiesPrivate oil and gas and mining companies Commodity associationsCommodity associations Industry associations (ICME, GMI etc)Industry associations (ICME, GMI etc)

Investment in upstream prospects

Nominal upstream investment tripled between Nominal upstream investment tripled between 2000 and 2009, from an estimated $120 billion to 2000 and 2009, from an estimated $120 billion to $500 billion.$500 billion.

In real terms, investment in 2009 was over 300% In real terms, investment in 2009 was over 300% higher than in 2000. higher than in 2000.

The bulk of upstream investment will continue to The bulk of upstream investment will continue to be made by international companiesbe made by international companies ..

Investment in upstream prospects

Upstream investment by type of company

40% 41%

29% 27%

17% 18%

14% 14%

2000-2007 2008-2012

NOCs Super-majors IOCs E&P

State of the industry at 2006.

Recent boom meant more investment. Recent boom meant more investment.

Together with greater competition Together with greater competition among IOCs and NOCs, these among IOCs and NOCs, these conditions generated larger revenues for conditions generated larger revenues for producing countriesproducing countries. .

Global trends in the last two decades and their implications and effects Commodity cycles, demand and supply centresCommodity cycles, demand and supply centres Less emphasis on state owned companies for Less emphasis on state owned companies for

mining and increasing state involvement for oil mining and increasing state involvement for oil and gas.and gas.

Increasing mergers Increasing mergers Vertically integrated companiesVertically integrated companies Increasing role of Junior companies at exploration Increasing role of Junior companies at exploration

stagestage

Stake your opinions on the following:

Which countries are the major a) globally countries b) Which countries are the major a) globally countries b) Africa: i) oil and gas producers producing countriesAfrica: i) oil and gas producers producing countries

ii) List the countries you consider major consumers of ii) List the countries you consider major consumers of oil and gas iii) Provide reasons for this. oil and gas iii) Provide reasons for this.

Global Petroleum Demand

Consumption of petroleum

The US and OECD countries consume over The US and OECD countries consume over half the world petroleum resources. half the world petroleum resources.

However, China and other non-OECD However, China and other non-OECD countries have also increased their oil countries have also increased their oil consumption.consumption.

Petroleum Demand

0.00

5.00

10.00

15.00

20.00

25.00

30.00

2004 2008

United States Other OECD China

Former U.S.S.R. Other Non-OECD

Prices are random, the last boom just busted.

Oil Supply

OPEC countries produce over 40% of total OPEC countries produce over 40% of total world oil outputworld oil output

The USA and OECD countries are mature The USA and OECD countries are mature producersproducers

Future production will largely come from OPEC Future production will largely come from OPEC and other developing countriesand other developing countries

Oil Supply

0.00

5.00

10.00

15.00

20.00

25.00

30.00

35.00

2004 2008

United States Other OECD OPEC

Other Non-OECD Former U.S.S.R.

World proved oil reserves

Proved oil reserves are Proved oil reserves are concentrated in the Middle East concentrated in the Middle East and other OPEC countries.and other OPEC countries.

Most of oil reserves are located in Most of oil reserves are located in places out of reach for IOC. places out of reach for IOC.

Many oil rich countries have taken Many oil rich countries have taken the decision to create a NOC.the decision to create a NOC.

World Proved Oil Reserves

6%9%

12%

61%

9%3%

Total North America Total S. & Cent. America Total Europe & Eurasia

Total Middle East Total Africa Total Asia Pacif ic

Future production With non-OPEC production With non-OPEC production

capacity declining, future capacity declining, future production is expected to come production is expected to come from Saudi Arabia, Venezuela, from Saudi Arabia, Venezuela, Iran and Iraq.Iran and Iraq.

Lack of access is promoting Lack of access is promoting greater competition for acreage. greater competition for acreage. Between 2002 and 2009 over Between 2002 and 2009 over 35 countries increased their 35 countries increased their fiscal requirements for oil and fiscal requirements for oil and gas operations.gas operations.

National trends and their implications

Increasing role for the Breton Wood institutions and Increasing role for the Breton Wood institutions and multilateral donors in natural resource governance multilateral donors in natural resource governance of developing countries includingof developing countries including Design of sector policiesDesign of sector policies Facilitating privatization in the sectorFacilitating privatization in the sector Multi donor support Multi donor support Quest for transparency and accountabilityQuest for transparency and accountability Slow but increasing mainstreaming of sustainable Slow but increasing mainstreaming of sustainable

development conceptsdevelopment concepts

What have been the Implications and Impacts on development at your country level?

Employment Employment Livelihoods Livelihoods Conflicts Conflicts Human RightsHuman Rights Environmental Environmental Human healthHuman health PovertyPoverty

Trends and threats

Increased demand, surging commodity prices and Increased demand, surging commodity prices and their implicationstheir implications

Explosion of Junior and major companiesExplosion of Junior and major companies Invasion of countries emerging from war (tagged Invasion of countries emerging from war (tagged

virgin grounds)virgin grounds) Strategic Resource competition Strategic Resource competition The US and the Gulf of GuineaThe US and the Gulf of Guinea The Growing presence of Brazil, China, India etc.The Growing presence of Brazil, China, India etc. Growing call for good governance in the sectorGrowing call for good governance in the sector

Current state of the industry.

Recent boom meant more investment. Together with Recent boom meant more investment. Together with greater competition among IOCs and NOCs, these greater competition among IOCs and NOCs, these conditions generated larger revenues for producing conditions generated larger revenues for producing countries. countries.

Changes in Government Take 2002 to 2006

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

USA GOM

UK

Jordan

Ecuador

Nigeria

Angola

Kazakhstan

Algeria

Lybia

2002

2006

THANK YOUTHANK YOU