Oil

An Overview of the Petroleum Industry

Robert D. Grace

• Publisher: Gulf Publishing Company
• Year: 2013
• Print ISBN: 9781933762012
• eBook ISBN: 9780127999777
• Edition: 6
• Topic: Technology & Engineering
• Subtopic: Chemical & Biochemical Engineering
• Index: Technology & Engineering

Now in its sixth edition, this guide to the oil industry, written in non-technical language, is a must-read for anyone involved in or curious about the oil industry. Engineers, executives, managers and laypersons will all find this to be a valuable, entertaining and informative guide that presents a practical study of the operations involved in oil exploration, drilling and production. Since the book's original publication in 1958, this handy volume has taught thousands about this constantly evolving industry that is so important for our everyday energy needs. A true must have!

1

World Oil

This book always has been and will continue to be a short, comprehensive overview of oil operations, excluding refining and marketing. It is not intended to be technical. It is intended to educate those interested in the basics of the industry.

This is a fun book to write. I find myself updating the third edition, which was written in 1975. It is fun to read the predictions made then and compare those predictions with actual events. Then, too, I get to look into my crystal ball and forecast what the future holds for all of us. By the time anyone figures out whether I was right or wrong, I will either be departed from this world or too old to care.

It was 17 years from the first to the third edition and now 31 years between the third and sixth editions. A lot has happened in our business in the last 31 years—more than I ever dreamed I would see. In 1975, Tenneco was a big player in the domestic oil business and now few remember the name. Who would believe that Amoco, Gulf, and Mobil would disappear? The USSR has fallen along with the Berlin Wall.

The energy industry has always had a history of “booms” and “busts”—chicken one day and feathers the next. As a small boy, I always enjoyed roaming the fields of central Oklahoma and hearing stories from my father and his family about the oil boom towns that sprung up and disappeared. They were wild and woolly places!

The early 1970s marked the beginning of the biggest boom/bust cycle in the history of the industry. By 1981, more than 4500 drilling rigs were running in the United States. “Busts” always followed “booms” and by the mid 1980s the industry was in the depths of the worst depression we had ever seen. It was said that the biggest employer of geologists in Houston was Yellow Cab. It was estimated that over a half million jobs had been lost. In the 31 years since the 1975 addition, we witnessed the demise of one of the finest, most capable industries the world has ever known!

The energy industry remained in the depths of depression with few lights until just recently. It is now 2006 and we are finally in another “boom” period. Oil reached $75 per barrel and natural gas above $10 per million standard cubic feet. Gasoline prices have been driven up close to $3 per gallon nationwide.

What is the significance of all of this for the common man? What does the future hold for us, our children and our grandchildren?

Make no mistake, the progress of civilization is closely tied to energy and its availability. The progress in human culture has been fueled by the exploitation of energy resources. About 100 years ago, the major source of energy shifted to hydrocarbons—oil and natural gas. The quality of life has advanced more in the last 100 years than in all of recorded history. Economic prosperity is aligned with energy consumption.

The United States of 2006 is the most prosperous nation the world has ever seen. It is also the world’s biggest glutton of energy. The U.S. population today of approximately 300 million is 4.5 percent of the world’s total population of about 6 billion. Yet, energy consumption in the United States is roughly 25 percent of the world’s total of 83 million of barrels per day. We are energy addicts!

Currently, the energy atmosphere is grim in the United States and aggravated by the political climate. Litigation and the threat of litigation discourage exploration and development. In one instance, I witnessed a court battle in Oklahoma where a jury gave a farmer $5 millions for about 1 acre of dry land that was never worth more than a few dollars. That is discouraging.

Then, too, the environmentalists and liberal politicians have successfully blocked drilling and exploration in many regions of the country. “Don’t drill on the East Coast, don’t drill on the West Coast, don’t drill in Florida, don’t drill in Alaska, and don’t drill in my backyard” seems to be the slogan of the environmentalists. I was on a talk show some years ago with a member of the Sierra Club. The topic for discussion was drilling in Mobile Bay. Of course, the representative of the Sierra Club was against drilling. At one final point, the moderator asked the Sierra Club representative if there was anything the oil industry could say or do which would satisfy his concerns and would change his position. Without hesitation, he replied, “No!” The sad part of that scenario is that the inconvenience, if any, is for only a generation or a little longer as history has proven there is no long-term impact on the environment.

I grew up in Oklahoma, and we all had oil wells in our backyards. Now, the oil wells are gone, along with the footprints. It didn’t hurt us. There are more quail and deer than ever. The fresh water aquifers are intact. The farms are prosperous. And, the world is a better, more prosperous place because of the energy provided.

Oil is used by all the 220 nations of the world but produced in significant amounts in only 42. Only 38 nations export significant quantities. It is an inescapable conclusion that the majority of the oil remaining in the world is in Moslem countries, with the preponderance being in the Middle East.

Unfortunately, hydrocarbon resources are limited. Oil and natural gas are fossil fuels, naturally occurring in nature and, as such, one day will be depleted. Just as the killing of whales depleted the supply of whale oil, so will drilling and producing oil and gas resources deplete their supply. From the beginning of time until now, the world has used approximately 1 trillion barrels of crude oil. Pursuant to studies conducted by the United States Geologic Society and the Energy Information Agency, about 2 trillion barrels of oil remain to be produced. At present, the world consumes 83 million barrels of oil every day or 30.3 billion barrels every year. In addition, the thirst for oil grows at an average rate of roughly 2 percent per year.

So far in human history, supply has exceeded demand and productive capacity has kept pace with demand; but the cushion is growing smaller. T...

Table of contents

• Cover image
• Title page
• Table of Contents
• Copyright
• Preface
• Chapter 1: World Oil
• Chapter 2: Where Does Oil Come From?
• Chapter 3: How Do We Get It? Drilling for Oil
• Chapter 4: To Market! Production and Reservoir Engineering
• Appendix A: Abbreviations Used In Making Oil Reports
• Appendix B: Regional Stratigraphie Terminology
• Appendix C: Sample Leases and Deeds
• Appendix D: Energy Equivalents
• An Oil Dictionary