An Introduction to Petroleum Technology, Economics, and Politics

James G. Speight

• Publisher: Wiley-Scrivener
• Year: 2011
• Print ISBN: 9781118012994
• eBook ISBN: 9781118192542
• Edition: 1
• Topic: Tecnologia e ingegneria
• Subtopic: Ingegneria chimica e biochimica

The perfect primer for both the layperson and the engineer, for the new hire and the old hand, describing, in easy-to-understand language, one of the biggest and most lucrative industries in the world.

There is only one substance known to mankind that can cause wars, influence global economies, and make entire countries rich: petroleum. One teaspoon of the stuff carries enough energy to power a ton truck up a hill. It's in the news every single day, it influences our lives in ways that we cannot fathom, and it is the most important commodity in the world. But how much does the average person, even the average engineer, know about it?

This book describes the petroleum industry, in easy-to-understand language, for both the layperson and engineer alike. From the economics of searching for oil and gas to the pitfalls of drilling and production, getting it out of the ground, into pipelines, into refineries, and, finally, into your gas tank, this book covers the petroleum industry like no other treatment before. There is coverage of pricing and the economics of this very important resource, as well, which is useful not only to engineers, but to economists and, really, anyone who uses it.

From jet fuel to gasoline to natural gas and plastics, petroleum is one of the integral products of our lives. We are practically bathed it in from birth, our food is protected by it, and it even has healing properties. Learn all about this incredible substance and its fascinating history and highly debated future.

An Introduction to Petroleum Technology, Economics, and Politics:

• Gives a thorough summary of the petroleum and natural gas industry, from prospect to production to pipeline
• New technologies, such as directional and underbalanced drilling, are covered, in easy-to-understand language
• Useful not only for newcomers and laypersons, but for engineers and students, particularly those for whom English is a second language
• Examines the basics of pricing and valuation

Chapter 1

History and Terminology of Crude Oil

Geology and time have created reservoirs of crude oil (petroleum) in various parts of the world. Until the mid-1800s, this vast untapped wealth lay mostly hidden below the surface of the earth. Some oil naturally seeped to the earth’s surface and formed shallow pools that were used as a source of medicinal liquids, illuminating oil, and, after evaporation of the volatile components, as a caulking for boats and a building mastic (Speight, 2007). For centuries, demand was limited but better refining techniques and surging demand for kerosene and lubricants in the late 19th century changed this.

Crude oil is the major source of fuel used by people today. Because crude oil is liquid, it is easy to recover by drilling and pumping, rather than excavation, and it is easy to transport in tankers and pipelines. In fact, the rapid rise in crude prices in the past years has strengthened calls for renewed initiatives on energy security for petroleum importing countries. While there has been a convergence of factors contributing to the current high oil prices, oil supply and demand fundamentals, the role of speculative forces, and structural bottlenecks in the downstream sector have emerged as the main areas of concern.

The demand for gasoline and middle distillates (including aviation fuels) has risen significantly while refining capacity has only shown a modest increase, if any. This growth in demand over and above the increase in refining capacity has significantly raised refinery utilization rates and tightened the downstream market, raising serious concerns over a potential supply gap in the downstream oil market. This issue is particularly prevalent in the United States, where low surplus refining capacity and stringent oil product specifications have resulted in reduced flexibility in the refining sector to adjust to changes in seasonal demand patterns.

The economics of oil must take into account that it is a depleting non-renewable resource and the cost of extraction of a nonrenewable resource depends not only on the current rate of production but also on the amount of cumulative production. Crude oil prices behave much as any other commodity with wide price swings in times of shortage or oversupply. The crude oil price cycle may extend over several years responding to changes in demand as well as supply. Many pundits believe that the projections of running out of oil are based on geology, not price. Every existing oil reservoir has more than half of the original oil in place, many with more. These are resources that we know exist; we know where they are and what the oil looks like. Much of the crude oil that is left is trapped in tiny pores and cannot be recovered by simple pumping, and more advanced and expensive procedures are necessary to recover the crude oil.

Another aspect of crude oil economics is the cost of refining. Refining high-sulfur crude oil also requires greater expenditures for energy. In fact, energy accounts for approximately half of the refinery cost. Refinery location is yet another variable. The closer a refinery is to the crude oil source and the demand, the lower the transportation costs. Otherwise, the refinery must factor in the added cost of getting the products to market. Obviously, the ultimate variable in crude oil economics is the price of crude oil. Crude oil quality is another key variable. High viscosity, high-sulfur crude oil can cost up to one-third less than low viscosity, low-sulfur crude oil. However, because high-sulfur crude oil requires more processing, refineries that buy primarily cheap crude oil incurs more fixed expenses for equipment and labor.

While there is a growing need to address these issues, there exist barriers and constraints to the older oil person and the neophyte alike, as well as the economist. Often the terminology employed by the industry is so confusing that the ensuing issues and the issues involved in oil pricing and oil product pricing are a mystery. In addition, many economists are unable to explain the economics of oil and oil product pricing without recourse to higher mathematics. The result is the development of complex equations that are often difficult to understand, and, for the technical person in industry, appear to bear little relationship to what he understands in terms of oil properties.

Thus, it is appropriate to commence this book with a description of the historical uses of crude oil and crude oil terminology, leading the reader to a better understanding of the terminology of crude oil and the means by which it is described.

1.1 Historical Perspectives

Petroleum is the most important raw material used in modern society insofar as it provides not only raw materials for fuel manufacture and energy, but also starting materials for plastics and other products.

The word petroleum, derived from the Latin petra and oleum, literally means rock oil and refers to hydrocarbons that occur widely in the sedimentary rocks in the form of gases, liquids, semisolids, or solids. From a chemical standpoint, petroleum is an extremely complex mixture of hydrocarbon compounds, usually with minor amounts of nitrogen-, oxygen-, and sulfur-containing compounds, as well as varying amounts of metal-containing compounds (Speight, 2007).

The fuels that are derived from petroleum supply more than half of the world’s total supply of energy. Gasoline, kerosene, and diesel oil provide fuel for automobiles, tractors/trucks, aircraft, and ships. Fuel oil and natural gas are used to heat homes and commercial buildings, as well as to generate electricity. Petroleum products are the basic materials used for the manufacture of synthetic fibers for clothing and in plastics, paints, fertilizers, insecticides, soaps, and synthetic rubber. The uses of petroleum as a source of raw material in manufacturing are central to the functioning of modern industry.

Petroleum is a carbon-based resource, so the geochemical carbon cycle is also of interest to fossil fuel usage in terms of petroleum formation, use, and the buildup of atmospheric carbon dioxide. Thus, the more efficient use of petroleum is of paramount importance. Petroleum technology, in one form or another, will be with us until suitable alternative forms of energy are readily available (Boyle, 1996; Ramage, 1997). Therefore, a thorough understanding of the benefits and limitations of petroleum recovery and processing is necessary, and hopefully can be introduced within the pages of this book.

The history of any subject is the means by which the subject is studied in the hopes that much can be learned from the events of the past. In the current context, the occurrence and use of petroleum, petroleum derivatives (naphtha), heavy oil, and bitumen is not new. The use of petroleum and its derivatives was practiced in pre-Christian times and is known largely through historical use in many of the older civilizations (Henry, 1873; Abraham, 1945; Forbes, 1958a, 1958b; James and Thorpe, 1994; Krishnan and Rajagopal, 2003). Thus, the use of petroleum and the development of related technology is not such a modern subject as we are inclined to believe. However, the petroleum industry is essentially a 20th century industry but to understand the evolution of the industry, it is essential to have a brief understanding of the first uses of petroleum.

The Tigris-Euphrates valley, in what is now Iraq, was inhabited as early as 4000 BC by the people known as the Sumerians, who established one of the first great cultures of the civilized world. The Sumerians devised the cuneiform script, built the temple towers known as ziggurats, an impressive law, literature, and mythology. As the culture developed, bitumen or asphalt was frequently used in construction and in ornamental works.

Although it is possible to differentiate between the words bitumen and asphalt in modern use, the occurrence of these words in older texts offers no such possibility. It is significant that the early use of bitumen was in the nature of cement for securing or joining together various objects, and it therefore seems likely that the name itself was expressive of this application.

The word asphalt is derived from the Akkadian term asphaltu or sphallo, meaning to split. It was later adopted by the Homeric Greeks in the form of the adjective

signifying firm, stable, secure, and the corresponding verb

meaning to make firm or stable, to secure. Just like bitumen, the first use of asphalt by the ancients was in the nature of cement for securing or joining together various objects, such as the bricks used for building, so it seems likely that the name itself was also expressive of this application. From the Greek, the word passed into Latin (asphaltum, aspaltum), and thence into French (asphalte) and English (aspaltoun).

The origin of the word bitumen is more difficult to trace and subject to considerable speculation. The word was proposed to have originated in the Sanskrit, where we find the words jatu, meaning pitch, and jatukrit, meaning pitch creating. From the Sanskrit, the word jatu was incorporated into the Latin language as gwitu and is believed to have eventually become gwitumen (pertaining to pitch). Another word, pixtumen (exuding or bubbling pitch) is also reputed to have been in the Latin language, although the construction of this Latin word form from which the word bitumen was reputedly derived, is certainly suspect. There is the suggestion that subsequent derivation of the word led to a shortened version, which eventually became the modern version, called bitumen, thence passing via French into English. From the same root is derived the Anglo Saxon word cwidu (mastic, adhesive), the German work kitt (cement or mastic) and the equivalent word kvada, which is found in the old Norse language as being descriptive of the material used to waterproof the long ships and other sea-going vessels. It is just as likely that the word is derived from the Celtic bethe or beithe or bedw that was the birch tree that was used as a source of resin. The word appears in Middle English as bithumen. In summary, a variety of terms exist in ancient language that from their described use in texts can be proposed as meaning bitumen or asphalt (Abraham, 1945).

Using these ancient words as a guide, it is possible to trace the use of petroleum and its derivatives as described in ancient texts. And, preparing derivatives of petroleum was well within the area of expertise of the early scientists since alchemy (early chemistry) was known to consist of four sub-routines: dissolving, melting, combining, and distilling (Cobb and Goldwhite, 1995).

Early references to petroleum and its derivatives occur in the Bible, although by the time the various books of the Bible were written, the use of petroleum and bitumen was established and it is apparent that bitumen and petroleum derivatives were items of commerce. The exact prices paid are unknown and may even have been given as a tribute to the local king. Nevertheless, in s...

Table of contents

• Cover
• Half Title page
• Title page
• Copyright page
• Preface
• Chapter 1: History and Terminology of Crude Oil
• Chapter 2: Origin and Occurrence of Oil
• Chapter 3: Exploration, Recovery, and Transportation
• Chapter 4: Crude Oil Classification and Benchmarks
• Chapter 5: The Petroleum Culture
• Chapter 6: Oil Prices
• Chapter 7: The Crude Oil Market
• Chapter 8: Oil Supply
• Chapter 9: The Future
• Conversion Factors
• Glossary
• Index