Overview of oil and gas industry

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OIL GAS OPERATIONS, INDUSTRY AND BUSINESS
PROCESSES AN OVERVIEW
Being paper presented by
Mr. Kayode Adebiyi MBA, FCA, ACTI MIoD
to 400 level students of
to 400 level students of DEPARTMENT OF
ACCOUNTING, COVENANT UNIVESITY, OTA
NOVEMBER 14, 2023
Mr. Kayode Adebiyi Managing Director HONEYROCK
MULTICONSULT LTD 18B, Bayo Ajayi Street, Off
Hakeem Balogun Street, Marwa Brooks Estate,
Alausa, Ikeja, Lagos. 08033181225,07064078211 Em
ail hmlconsultancy_at_outlook.com
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Introduction to Oil and Gas
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Crude Oil Characterization
Crude Oil Characterization
Main characteristics of crude oil and gas.
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Company Structure
Most oil and gas companies are segmented and
organized according to business segment, assets,
or function.
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Generally, this consists of
UPSTREAM
MIDSTREAM DOWNSTREAM
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Integrated/Supermajors (upstream and downstream)
Refinery
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Getting Raw Oil Gas to the Refinery
Getting Refined Products to the Consumers
A Fully-Integrated Oil Company (Example
ExxonMobil)
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Exploration
Refining
Production
Marketing

• This unit is on the Focus of Industry
• Industrys scope runs from finding oil and gas
  reservoirs to getting refined products to our
  customers

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MAIN ASPECT OF ENERGY BUSINESS VALUE CHAIN
MID STREAM
POWER STREAM
DOWN STREAM
UPSTREAM

• Pipeline
• Trucking
• Shipping
• LNG terminals

• Refining
• LNG
• Retail sales

• Exploration
• Production

• Industry
• Domestic

• Each business owns a value chain
• To operate in each of them gives an important
  position to a company compared to her competitors

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THE AMERICAN PETROLEUM INSTITUTE CLASSIFICATION
OF THE PETROLEUM INDUSTRY

• The American Petroleum Institute divides the
  petroleum industry into five sectors
• Upstream sector(exploration, development and
  production of crude oil or natural gas)
• Midstream sector
• Downstream (oil tankers, refiners, retailers and
  consumers)
• Pipeline sector and
• Service and supply sector

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Figure Production adding value
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Upstream EP
The upstream segment of the business is also
known as the exploration and production (EP)
sector.
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EP encompasses activities related to searching
for, recovering and producing crude oil and
natural gas.
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EP cycle
NIGERIAQIT
CAMEROUN
Abandonment Acreage acquisition
LAGO S
Reservoir Mgt
Operations
QI L
Basin analysis
Facilities installation
Exploration and Production Life Cycle
Prospect generation
Facilities construction
Facilities design
Economic analysis
ATA
Field development
Wildcat Drilling
Field Development Plan
Economic analysis
Appraisal drilling
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Exploration
Appraisal
Development
Production
Abandonment

• Exploration
• Find a new oil gas reservoir
• Appraisal
• Ensure new finding is commercially feasible
• Development
• Develop surface facilities to extract process
  oil gas from the reservoir
• Production
• Produce oil gas and maintain the facilities
  until end of field life / contract period
• Abandonment
• Close the production and return the field into
  original condition

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Its all about the
WELLS.
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Where to locate them, How deep and how far to
drill them, How to design, construct, operate
and manage them...
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...to deliver the greatest possible return on
investment with the lightest, safest and smallest
operational footprint.
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Exploration
The exploration sector involves obtaining a lease
and permission to drill.
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Drilling
Drilling is physically creating the borehole in
the ground that will eventually become an oil or
gas well. This work is done by rig contractors
and service companies in the Oilfield Services
business sector.
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Simple or Complex
Wells can be drilled on land or in miles of
water. They can be less than 100 feet (30
meters) deep and totally vertical, or 20,000
feet (6,000 meters) deep and horizontal.
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Drilling
There are even highly complex J and S
configurations with numerous branches, or
laterals, emanating from the original, or
mother, hole.
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Production
The production sector of the upstream segment
maximizes recovery of petroleum from subsurface
reservoirs. Production brings the oil to the
surface.
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Production - Decline Curve
The inevitable fact of every oil or gas field is
that production will eventually decline. The
question is how fast?
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Deepwater Drilling
Some of the largest oil and gas discoveries of
the last decade have been found in deep water
off the coasts of Africa and South America as
well as the Gulf of Mexico.
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Upstream Business Characteristics
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Unbelievably Complex
The upstream industry is arguably the most
complex of all the oil and gas business sectors.
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Who are the Players?
Independents, Majors, NOCs, Oilfield Services
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Independents
The companies that focus solely on Exploration
and Production are called Independents.
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Independents are known for their ability to make
decisions and move quicker than other industry
participants. They are also considered early
adopters of the more innovative drilling and
production technologies.
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Majors
Major Oil Companies (also called Integrated Oil
Companies - IOCs) also have assets in the
downstream - the refineries and service stations
that bring the products to the end-user
customers.
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These companies have the prominent and
advertisedbrands that you are familiar with
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NOCs
National Oil Companies (NOCs) are those industry
participants that are owned and managed by
governments around the world.
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Oilfield Service
The Oilfield Services sector of the Upstream
segment consists of companies that build the
infrastructure and provide the specialized
equipment.
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The Oilfield Services industry provides the
following support
Exploration services Drilling services Well
completion Production services Offshore
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Oilfield Services

• Oilfield services and supply companies do not
  typically produce oil and gas or own the assets
  that contain them.

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Oilfield Services

• At a typical drilling well site, there could be
  25-30 different oilfield service companies
  handling the mechanical, technical and analytic
  operations needed to successfully complete a
  well.

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Oil Reserves
Reserves, Reservoirs, Types of Crude Oil
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Oil Reserves
The vast amounts of crude oil and natural gas
trapped underground are referred to as reserves.
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Oil Reserves
Proven reserves are the estimated quantities
which geological and engineering data
demonstrate can be recovered in future years
from known reservoirs, assuming existing
economic, technical and operating conditions.
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Oil Gas Reservoir Characteristics
Oil and gas are not found in easy-to-access
underground pools or puddles but, instead, are
trapped in various rock formations and
geological structures.
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Oil Gas Reservoir Characteristics

• There are four key types of geological formations
  needed to have oil and gas reserves in place

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Source rock where the oil or gas was formed
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Reservoir where oil or gas reside, having
migrated through microscopic structures in the
surrounding rock
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Seal which is impermeable and stops the
migration of the oil and gas
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Trap which is the combination of the reservoirs
and seals
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Types of Crude Oil
Heavy, Light, Sweet, Sour
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Types of Crude Oil
There are hundreds of different grades of crude
oil that come out of the ground. Most commonly,
the crude will be described as light or heavy
and sweet or sour.
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Types of Crude Oil
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EP Projects Life Cycle
The life-cycle of an EP project could be shown
simply in figure below and need decision for each
stage
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Main EP Project Risks

• Exploration
• Existence of Hydrocarbons
• Magnitude of Discovery
• Type of Hydrocarbon
• Development
• Technical Risk
• Reservoir Development
• Fiscal
• Changes in fiscal terms
• Economic Risks
• Exploration and development costs
• Hydrocarbon prices
• Political risk
• Nationalization
• Policy and Rule Changes

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Petroleum Refining Process
Content of a Typical Barrel of Crude Oil From
Distillation Only From Modern Refining Process
Gasoline 25
Kerosine 12 Distillate Fuels 25
Gasoline 58
Kerosine 8 Distillate Fuels 24 Residual Oil 10
Residual Oil 39
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