An Introduction to Petroleum Technology, Economics, and Politics E-Book

James G. Speight

• Herausgeber: John Wiley & Sons
• Kategorie: Wissenschaft und neue Technologien
• Sprache: Englisch

Seitenzahl: 554

Veröffentlichungsjahr: 2011

Beschreibung

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

Leseprobe

Contents

Cover

Half Title page

Title page

Copyright page

Preface

Chapter 1: History and Terminology of Crude Oil

1.1 Historical Perspectives

1.2 Modern Perspectives

1.3 Oil Companies

1.4 Definitions and Terminology

1.5 References

Chapter 2: Origin and Occurrence of Oil

2.1 The Formation of Oil

2.2 Reservoirs

2.3 Reservoir Classification

2.4 Reservoir Evaluation

2.5 Estimation of Reserves in Place

2.6 Reserves

2.7 References

Chapter 3: Exploration, Recovery, and Transportation

3.1 Exploration

3.2 Drilling

3.3 Recovery

3.4 Bitumen Recovery

3.5 Transportation

3.6 Products and Product Quality

3.7 References

Chapter 4: Crude Oil Classification and Benchmarks

4.1 Crude Oil Classification

4.2 Classification of Reserves

4.3 Benchmark Crude Oils

4.4 References

Chapter 5: The Petroleum Culture

5.1 The Petroleum Culture

5.2 Oil in Perspective

5.3 The Seven Sisters

5.4 Reserve Estimates

5.5 References

Chapter 6: Oil Prices

6.1 Oil Price History

6.2 Pricing Strategies

6.3 Oil Price and Analysis

6.4 The Anatomy of Crude Oil Prices

6.5 The Anatomy of Gasoline Prices

6.6 Effect of Refining Capacity

6.7 Outlook

6.8 References

Chapter 7: The Crude Oil Market

7.1 The Crude Oil Market

7.2 Global Oil Consumption

7.3 Refining and The Markets

7.4 Profitability

7.5 References

Chapter 8: Oil Supply

8.1 Physical Factors

8.2 Technological Factors

8.3 Economic Factors

8.4 Geopolitical Factors

8.5 Peak Oil

8.6 The Impact of Heavy Oil and Tar Sand Bitumen

8.7 References

Chapter 9: The Future

9.1 Undiscovered Oil

9.2 Coal

9.3 Oil Shale

9.4 Liquids from Biomass

9.5 Energy Independence

9.6 Energy Security

9.7 References

Conversion Factors

Glossary

Index

An Introduction to Petroleum Technology, Economics, and Politics

Scrivener Publishing3 Winter Street, Suite 3Salem, MA 01970

Scrivener Publishing Collections Editors

James E. R. Couper        Ken DragoonRichard ErdlacRafiq IslamPradip KhaladkarVitthal KulkarniNorman LiebermanPeter MartinW. Kent MuhlbauerAndrew Y. C. NeeS. A. SherifJames G. Speight

Publishers at ScrivenerMartin Scrivener ([e-mail])Phillip Carmical ([e-mail])

Copyright © 2011 by Scrivener Publishing LLC. All rights reserved.

Co-published by John Wiley & Sons, Inc. Hoboken, New Jersey, and Scrivener Publishing LLC, Salem, Massachusetts.Published simultaneously in Canada.

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Library of Congress Cataloging-in-Publication Data:

ISBN 978-1-118-01299-4

Preface

Crude oil is the major source of fuel used in the modern world. It is generally in a liquid state and is recovered by drilling and pumping, after which it is transported in tankers and pipelines.

The crude oil sector is the largest and most dominant economic sector of business in the United States. It is increasingly apparent that responsibility for the long-term consequences of economic and technological development decisions is extremely important and the logic of looking after the short term and letting the future take care of itself seems harder and harder to justify or sustain. Solving the supply problem requires innovative approaches, economic attractiveness, environmental appeal, and social responsibility. Such a course of action calls for background knowledge of the character of crude oil and the various factors that contribute to the price.

In fact, the market price on which contractual arrangements are settled is full of unknowns, concealing everything about trends in the costs of production. In the surplus, represented by the difference between the sale price obtained and the costs incurred, there is the shareholders’ expected return on their investment (ROI), which determines whether, when, and on what terms petroleum-pricing influences the market.

The economics of crude oil pricing is one of the most complex and variable mechanisms in the commodities market. It is affected by a host of different factors, and it can be extremely difficult to determine which factors have the greatest impact on the actual spot price at any given point in time. In the past year, the crude oil markets have been extremely volatile; there have been claims that they have been subject to manipulation but the evidence is sorely lacking. On the other hand, if manipulation does not drive the oil markets, there is no evidence either that it does not take place. The whole issue is so debatable that the true drivers of the market may never be known with any degree of certainty.

One way for scientists, engineers, and people of lesser technical backgrounds to remove themselves from the dark shadow of economic guesswork is to understand, to some extent, the technological and political factors that are involved in crude oil economics.

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. Indeed, the economics of oil must take into account that it is a depleting non-renewable resource and the cost of extraction of a non-renewable resource depends not only on the current rate of production but also the amount of cumulative production. The poignant question that always remains relates to the lifetime of current crude oil reserves and whether there are years or decades of reserves remaining.

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, 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. The ultimate variable in crude oil economics is the price of crude oil, along with crude oil quality. 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 incur more fixed expenses for equipment and labor.

After decades of stable — even cheap — crude oil during the first three-quarters of the 20th century, the geopolitical upsets of the 1970s led to rapid surges in crude oil prices. In the past five years, these surges have been magnified with crude oil process topping $147 per barrel in the summer of 2008, after which prices seemed to stabilize at approximately $80 per barrel. However, instability within the oil producing nations has, at the time of writing (March 2011), caused a surge in crude oil price to a figure in excess of $100 per barrel. There are opinions that such prices surges are merely bubbles that will burst and oil prices will return to lower levels.

However, many economists are unable to explain the economics of crude oil pricing without recourse to higher mathematics. The result is the development of complex equations that are not only difficult to understand but also bear little relationship to reality. In fact, when oil prices flip-flop, explanations are invoked and justified, using the remarkable facet of 20/20 hindsight with very little foresight or even knowledge of the workings of the industry.

This book will introduce the reader to the factors that influence the price of crude oil insofar as crude oil economics involves a combination of several factors, not the least of which are:

1. Crude oil availability from the reservoir

2. Crude oil quality

3. Crude oil extraction

4. Crude oil quality

5. Geopolitics.

The book also includes the reader to oil classification, recovery, and properties, which are not usually included in works related to politics and economics but are an essential part of for understanding oil pricing and politics.

Dr. James G. SpeightLaramie, WyomingMarch 2011

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.