Oil

What is it

OIL
Life without oil would be very different. From crude oil we obtain petrol for our cars, diesel
fuel for our ships and jet fuel for our planes. We use oil to generate electricity, to heat
factories, hospitals and offices and to lubricate machinery. The chemical industry uses oilderived feedstocks to make plastics, synthetic fibres, detergents, rubbers and many
agrochemicals.
Oil has transformed the lives of individuals and the economies of nations. The discovery
of oil creates wealth: modern, industrial towns thrive where once there was only desert and
new jobs are brought to areas of high unemployment.
Oil has become a key issue in world politics, as the two oil crises of the 1970s
demonstrated. Questions of oil supply and demand, prices, alternatives to oil and energy
efficiency are constantly debated. Taxes on crude oil production and the sale of oil
products enable governments to finance their expenditure plans. Oil is rarely out of the
headlines.
This booklet describes where oil comes from, how it is produces and converted into
thousands of useful products and how it is transported to millions of customers around the
world. It outlines some of the measures taken to ensure that the environment is not
harmed by oil operations. And last but not least, it describes why oil has become so
crucial to the worlds economy and discusses its prospects as a source of energy for the
future.
The search for oil
Oil is a mixture of organic chemicals derived mainly from the remains of microscopic plants
and animals that lived in the seas millions of years ago. Special conditions and great
lengths of time were needed for these remains to undergo complex chemical changes to
form oil and gas. These are sometimes concentrated in accumulations which man can
detect and exploit.
Oil exploration began more that a hundred years ago, when drilling was carried out near oil
seeps, which indicated that oil, lay below the surface. Today, much more sophisticated
techniques are employed, such as seismic surveying and satellite imaging. Powerful
computers assist geologists in interpreting their findings. At the end of the day, however,
only the drill can determine whether or not oil lies below the ground.
Millions of years ago, countless microscopic plants and animals known as phytoplankton
and zooplankton floated in the surface waters of ancient seas. After death, the remains of
these minute organisms settled to the sea bed where, together with mud and sild, they
formed, over millions of years, organic-rich sedimentary layers.
The continued
accumulation of younger sediments buried the organic layers to depths of thousands of
metres, compressing them into a rock that was to become the source for oil. As the depth
of burial increased, the temperature rose. Under such conditions, and over long periods
of time, the original organic material changed, breaking down into simpler substances
called hydrocarbons compounds of hydrogen and carbon. The result was oil, a complex
mixture of hydrocarbons.

Oil naturally tries to flow upwards, from high to low pressure conditions. Where possible, it
makes its way to the earths surface and escapes in seeps. Fortunately for the modern
world, some of it has been trapped along the way in reservoirs.
An oil reservoir, contrary to popular belief, is not an enormous underground lake. Very
often, it is a seemingly solid rock, which on close inspection contains myriads of minute
spaces or pores. By moving from on space to the next, and sometimes by flowing through
fractures, oil migrates slowly upwards. When the migrating oil comes up against an
impermeable layer or seal, it backs up in the pores of the reservoir rock and an oil
accumulation forms.
Oil from seeps has been used in the form of pitch for many hundreds of years as a furl, to
caulk wooden ships and even for medicinal purposes. However, the first serious attempts
to drill for oil were not made until the mid nineteenth century. In 1859, Edwin Drake scored
the first success when he struck oil in Pennsylvania in the United States at a depth of only
21 meters. Others followed his example, first in the USA, then in South America, Russia,
the Far East and the Middle East. Many companies were set up to produce, transport and
market this new commodity. Oil has since been found in every continent except
Antarctica.
In the early days, the search for oil was very haphazard. Apart from drilling in places
where oil seeped to the surface, many 'wildcat' wells were sunk on the basis of a hunch,
often with disappointing results. Nowadays, exploration for oil has become much more
scientific, but even with modern technology and the know how of highly skilled geologists
and geophysicists, the search for oil remains fraught with uncertainties.
Oil exploration has to contend with an earth surface, which has had a complicated history.
Geoscientists know that parts of the earths crust, involving whole continents and oceans,
move relative to one another. When continents moved apart, areas which used to be land
subsided below the sea: such areas became sites of oil source rock deposition. When
collisions occurred, immense forces built mountain chains, crumpling the rocks into folds
and thrusting them over each other to form complex structures. Some of these are
favourable to the collection of oil.
One of the commonest structures is the anticline, where rocks have the form of a dome or
arch. Oil may be present in a reservoir below the anticline, sealed in by an impermeable
layer. If a well is drilled through this layer, down to the reservoir, the oil may be brought to
the surface.
Essentially, the task in oil exploration is to locate sites where there are geological
structures in which oil might have been trapped. The first step for the survey team is to
study all the available geological and geographical information about the area under
investigation and to prepare detailed maps. Aerial photographic surveys are often
undertaken, especially in remote locations where little exploration and mapping has
previously taken place. Today, increasing use is made of satellite images. Although these
are taken from several hundred kilometres up in space they are able to show features only
a few metres in size. Besides showing the structures on the earths surface, they also
record information, invisible to the human eye, which can be processed to reveal subtle
variations in soil type, moisture content, mineral and vegetation distribution, all of which
can help the geologist to construct a picture of regional geology.

Certain areas are then chosen fro more detailed survey. Geologists study rock outcrops
and analyse rock specimens and the fossils they may contain for clues to their origins and
ages. Geophysical surveys provide additional information, indicating how the rocks are
disposed below ground. Such surveys include measurements of the earths gravitational
and magnetic fields, because these are affected by the types and distribution of rocks in
the earths crust. Much more important these days, however, is the seismic survey.
In this type of survey, sound waves are sent into the earth where they become reflected by
the different rock layers present. The time taken for them to return to the surface is
measured. This reveals how deep the reflecting layers are: the greater the time intervals,
the greater the depth. Such surveys can also indicate what kinds of rock lie beneath the
surface, since different rocks transmit sound at different rates.
In remote areas, the sound waves may be produced by dynamite, detonated a few meters
below the ground surface. In densely populated or environmentally sensitive areas, where
explosions are not practical, vibrator trucks are used. Before any drilling, a seismic survey
is the only way to gather detailed information from areas lying below water. Dynamite
used to be the seismic source employed at sea, but nowadays air guns are used. These
generate sound waves by releasing large bubbles of compressed air below the water
surface.
The most sophisticated seismic surveys are three-dimensional, in which the seismic lines
are laid out in a very dense grid, precisely located by the latest navigational techniques.
The recorded data are processed in advanced computers to give a very accurate, 3-D
picture of the formations and structures below the survey area. The process is very
expensive: an offshore 3-D seismic survey can cost $15 000 per square kilometre,
depending upon the location and conditions. Drilling a well, on the other hand, can cost
millions of pounds, so time and money spent on accurate surveys are good investments,
since they help to locate the wells correctly and minimise the waste of dry holes.
Drilling and Production
Drilling for oil is a highly skilled operation often carried out in remote or difficult terrain. If
the find is promising and commercial conditions are right, a field will be developed and
brought into production.
During the production phase, good reservoir management ensures that the oil is produced
as efficiently as possible. In recent years, increasing attention has been focused on
finding and producing oil offshore, where, thanks to engineering and technological
advances, it is possible to operate in deeper and more hostile waters than ever before.
Wells are drilled with rotary drilling tools, which work on the same principle as the
carpenters brace and bit. The cutting tool is the drilling bit which has tough metal or
sometimes diamond teeth that can bore through the hardest rock. The bit is suspended on
a drilling string consisting of lengths of pipe, which are added to as the bit goes deeper.
The bit is turned either by a rotary table on the drill floor or, increasingly, by a downhole
motor.
In time, the bit gets worn and has to be replaced. The whole drilling string, sometimes
weighing over 100 tonnes, must then be hauled to the surface and dismantled section by
section as it emerges. The new bit is fitted and slowly lowered as the drill pipe sections

are reassembled. This operation, known as a round trip, can, in a deep well, take most of
a 12-hour shift. Until recently, the drilling string was mostly manhandled by the drilling
crew. In order to improve safety and reduce drilling costs, automated drilling rigs with
mechanised pipe handling and computerised controls are being introduced.
One of the essential supplies for the drilling crew is mud, or drilling fluid. This is a special
mixture of clay, various chemicals and water, which is constantly pumped down through
the drill pipe and comes out through nozzles in the drilling bit. The stream of mud returns
upwards through the space between the drilling string and the borehole, carrying with it
rock fragments cut away by the bit. At the top, the returned mud is sieved and then
recirculated through a pump. The cuttings left on the sieve indicate the kind of rock the
kind of rock the drill is passing through and they may show traces of oil as the bit nears an
oil-bearing formation. The drilling mud keeps the bit cool and prevents the escape of gas
or oil when the bit enters an oil trap.
The drilling rig is a substantial piece of equipment and before drilling can start in remote
areas, roads may have to be built through jungle and across desert to provide access. To
reduce transport cost, initial exploration wells in remote areas may nowadays be drilled by
much smaller, slimhole rigs.
The rate of drilling varies with the hardness of the rock. Sometimes the bit may cut
through as much as 60 meters an hour, but in a very hard layer progress may be a little at
30 centimetres an hour. Most oil wells are between 900 and 5000 meters deep but wells
as deep as seven or eight kilometres are sometimes drilled.
Wherever possible, wells are drilled vertically, but sometimes, especially offshore, wells
have to be drilled which deviate from the vertical in order to reach a wide spread of targets
from a single platform. This is known as deviated drilling. Recent developments have
made it possible to deviate as much as 90 degrees from the vertical. Known as horizontal
drilling, this technique can, in some instances, increase the productivity of a well.
Special care is needed during drilling as the bit nears a formation containing oil and gas.
The high pressure in an oil tap may force oil and gas up to the surface in a violent surge as
the drill breaks through the impermeable rock. Such blow outs or gushers were common
in the early days of the oil industry, but drilling technicians are now trained to prevent
them, as they pollute the environment, carry a high fire risk and waste hydrocarbons. The
drilling supervisor in charge of drilling can anticipate the danger of a blowout occurring
when rock chippings from the bottom of the well show traces of oil, or when instruments on
the derrick floor show rising pressures in the well. He can pump down heavier drilling mud
to hold back the oil or close special valves, known as blowout preventers, fitted to the top
of the well casing.
During drilling operations, valuable information about the field at various depths is
collected by a procedure known as logging. Drill cuttings which are returned to the
surface are examined for traces of hydrocarbons and for their fossil content. Wireline logs
examine the electrical, acoustic and radioactive properties of the rock, which gives clues
as to the rock type, its porosity and how much fluid it contains.
Sometimes, pieces of rocks called core samples are extracted for examination in a
laboratory.

The first well to be drilled in an area is known as an exploration well. If oil is discovered,
further wells are drilled to establish the limits of the field. These are appraisal wells. If
the field is developed, some of these appraisal wells may be used as production wells.
However, there are many factors to consider before a field is taken into production. How
much oil does a reservoir contain and how much will it cost to extract? (Costs depend,
among other things, on depth and how easily the oil flows to the surface). How close is
the field to potential markets? How many wells will be needed and where should they be
located? What treatment facilities will be required?
When development wells are drilled an assembly of pipes and valves, called a Christmas
tree is installed on each wellhead to control the flow of oil from the well. Under certain
conditions, the oil flows to the surface naturally by reservoir pressure, but sometimes
beam pumps the well-known nodding donkeys or other methods to lift the fluids
artificially have to be installed. From the wellhead the oil flows through a pipeline to a
gathering station, where oil from several wells is collected. Equipment at the station
separates gas from oil and drains off the water.
Once a field has been brought into production, good reservoir management is needed to
ensure that as much oil as possible is recovered. Sometimes, the simplest way of
increasing production is to drill additional infill wells. At other times, reservoir pressure
has to be maintained by injecting water or compressed gas into the reservoir through
special injector wells.
Oil production offshore
It is estimated that nearly one third of the worlds oil comes from offshore fields, and in
particular from the North Sea, the Arabian Gulf and the Gulf of Mexico, where one of the
worlds first offshore platforms was built, in 1947, in just seven meters of water. Thanks to
great advances in engineering, it is now possible to build platforms taller than most of the
worlds skyscrapers and anchored to the seabed in more than 400 meters of water. These
platforms contain thousands of tons of equipment and can accommodate hundreds of men
who work in shifts to ensure that oil is produced, stored and pumped ashore around the
clock.
In smaller fields, such huge fixed structures may not be economically justifiable.
Engineers have developed ingenious alternatives, such as floating production systems.
These are converted semi-submersible drilling vessels or tankers which are used to treat
and store the oil which flows through risers linking the vessels to wells on the seabed.
With subsea production systems, there is no dedicated platform. Instead, oil is pumped fro
wells and manifolds on the seabed to a platform in a nearby field. In the future, many
smaller fields in areas like the North Sea might be produced as satellites using such
systems.
Pipelines and Tankers
Crude oils is transported by pipeline or tanker to a refinery to be made into products which,
in turn, are transported to distribution centres or end users.
Over land and short distances across the sea, crude can be transmitted by pipeline. A
pipeline requires huge capital investment but, once constructed, labour and maintenance
costs are relatively low. The capital investment in a tanker, on the other hand, is less but
operating costs labour, fuel and maintenance - are higher. For long distance transport

by sea, tankers are indispensable and todays vessels are designed to operate flexibly and
efficiently to the highest technical and safety standards.
Moving oil and oil products around the world is a huge undertaking. Oil accounts for
almost half of the worlds seaborne trade. The world tanker fleet totals more than 250 000
million dwt, a third of which is owned by major oil companies. Pipeline networks criss-cross
most continents: in Europe alone there are 200 lines stretching for more than 17 000
kilometres.
In the early days of the industry, crude oil was generally refined close to where it was
produced. As demand for greater variety of products grew, however, it became more
practical to transport the crude oil to refineries in the consumer countries. At first, oil was
transported in wooden barrels on ordinary cargo ships (hence the term barrel as a unit of
measurement where one barrel = 35 imperial gallons or 159 litres). Then Marcus Samuel,
the founder of Shell Transport and Trading, adopted the idea of building ships, which were
in effect floating tanks. This signalled the birth of the oil tanker.
The main design feature of an oil tanker is the division of the oil-carrying space into
separate tanks, which segregate different types of oil or oil products and prevent excessive
movement of the cargo at sea. Engines, living quarters and the navigating bridge are
generally in the after parts of the ship. This arrangement keeps the machinery and
accommodation away from the inflammable cargo.
Modern tankers are efficient and flexible, capable of carrying crude oils or products such
as fuel oil, gas oil, jet fuels or lubricating oils. Crude oils are often moved long distances in
large tankers the largest can carry 400 000 tonnes of oil. Products, on the other hand,
are generally carried shorter distances on smaller tankers, about 30 000 dwt. These
vessels have a large number of tanks and more complex pumping and piping
arrangements to keep the cargo types separate. Some carriers can carry both black and
white products. These tend to be larger: for instance, 80 000 dwt tankers are used to
export products from the new refineries in the Middle East.
Ten years ago, the average 250 000 dwt tanker consumed 190 tonnes of fuel per day at
full speed. Todays new tankers consume less that a third of that and fuel consumption
can be cut even further by reducing speeds. Since fuel accounts for one-third of operating
costs, such savings are important. Manning costs are also kept under close scrutiny, with
crews averaging only 20 people, but without compromising high technical and safety
standards.
The most convenient way to move oil overland is to pump it through a pipeline. Crude oil
pipelines are generally large in diameter (sometimes more than a meter) and pumping
stations built at regular intervals along the line ensure that the oil is kept moving at around
five kilometres an hour. Constructing a pipeline which may have to cross mountains,
rivers or deserts is an immense engineering task, usually undertaken jointly by several
companies who share the burden of the huge capital investment required.
As offshore production grows, more underwater pipelines are being constructed. These
are laid from special pipe-laying barges on which the lengths of steel pipe are welded
together before being laid on the seabed. With small diameter lines, the pipe may be
unwound from a giant spool directly on to the seabed, thus avoiding the need for offshore
welding. Lines transporting heavy oil may need to be insulated to ensure that the oil flows

freely. Smaller pipelines are usually laid in a trench to protect them from damage by
fishing gear.

Oil Refining
Oil is a mixture of liquids and dissolved gases, which is of little use in its crude state.
In a refinery, crude oil is converted by physical and chemical processes into a wide range
of useful products. There are more than 900 refineries in operation around the world,
more than a quarter of which are in the USA. Many have sophisticated conversion
facilities, which enable them to handle different types of crude and provide the range of
products each market needs.
The first process in oil refining is the distillation of crude oil to separate it into its different
constituents. This happens in a tall steel tower known as a fractionating column, so called
because each constituent is known as a fraction. The column is kept very hot at the
bottom, but the temperature gradually drops towards the top. The inside of the column is
divided at intervals by horizontal trays. These can be either perforated trays or valve trays.
Valve trays can accommodate a wider range of loadings that perforated trays: as the
vapour load in the column increases, so does the number of valves, which open on each
tray. Each tray is cooler than the one below it, thus providing a temperature gradient on
which separate vapours can condense.
The crude oil is first heated by a furnace and then passed into the lower part of the
column. Since most of the fractions in the oil are already boiling, they vaporise and rise up
the column through the valve trays. As each fraction reaches the tray where the
temperature is just below its own boiling point, it condenses and changes back into liquid.
As the fractions condense on their separate trays they are drawn off by pipes. Distillation
is continuous, with hot crude oil flowing in near the base of the column and the separate
fractions flowing out at each level.
The fractions that rise highest in the column are called light fractions and those that
condense on the lower trays are called heavy fractions. The very lightest fraction is
refinery gas, which remains a vapour and is used as a fuel in the refinery. Other light
fractions are liquefied petroleum gases (LPG), gasoline (petrol) and naphtha, a major
feedstock for the chemical industry. The heavier fractions include kerosine (jet fuel) and
gas oil, which is used for heating and as a fuel for diesel engines. The heaviest fractions
are drawn off from the base of the column as fuel oils or residues.
Following distillation, many of the separated products are processed to purify them. The
heavy residues are redistilled under vacuum to provide the raw materials for lubricating
oils, bitumen and feedstock for further processing.
However distillation processes rarely yield products in the proportions required by the
market. Fuel oil generally accounts for between a third and a half of the yield from
distillation, whereas demand from customers is predominantly for the lighter fractions.
Modern refineries therefore use chemical conversion to enable the yield of products to be
reshaped to match market demand,
Important among these are the various cracking processes by which the large molecules
of heavy fractions are broken up into smaller, more valuable molecules. With thermal

cracking techniques such as visbreaking, the molecules are broken down under heat.
Visbreaking reduces the viscosity of the residue feed, so that a saleable fuel oil can be
made which requires less blending with higher value product. In catalytic cracking (catcracking) processes, the heavy processes are broken up in the presence of a catalyst, a
substance which causes a chemical change but is not itself changed in the process.
Conversion techniques can also be applied at the lighter end of the barrel. Naphtha can
be converted in the presence of a platinum-containing catalyst into high quality gasoline
components by a process known as reforming: the plant is known as a platformer. This
also produces hydrogen, which is useful in other refinery processes.
Recently, efforts have concentrated on converting refinery residues into useable products.
In residue hydroconversion (Hycon), hydrogen, extracted from natural gas or produced as
a by-product from platforming, is added to the residue. Residues may also be processed
by removing carbon, which is the basis of many coking techniques, which yield coke for
burning as a fuel.
The techniques used in a refinery depend on the types of crude to be processed and the
requirements of the market. More than a hundred different crudes are internationally
traded and a modern refinery may have to process as many as 20 grades during the
course of a year.
Different markets require different products. In the USA, almost a fifth of all households
owns three or more vehicles: a refinery serving the US market therefore needs to produce
a high proportion of gasoline. Markets are constantly changing as people conserve energy
or switch to other fuels. In recent years, many refineries have invested considerably in
conversion facilities, installed computers to process refinery operations and introduced
energy management schemes, all measures designed to enhance their flexibility, enabling
them to meet market demands.
Products from Oil
Once the products are manufactured from oil, there remains the complex task of
distributing them to the customers.
Freight rates, product quantities and distances between distribution points and customers
all have to be taken into account in selecting the best ways to transport products. The
main uses for oil products are transportation, heating, lighting and power generation.
However, oil is an extremely versatile commodity: lubricants, waxes, polishes, many
pharmaceuticals and cosmetics require oil as a feedstock. The petrochemical industry,
too, provides us with innumerable products of great value to industry and to our daily lives.
Oil products usually leave the refinery in bulk loads, though some are packed in cans or
drums ready for use by consumers. Large consumers, such as power stations or chemical
manufacturers, may be supplied directly from the refinery by pipeline, road, rail or sea.
Smaller customers are generally supplied via storage and distribution centres known as
terminals or bulk plants. From these centres, products are transported to customers in
product ships or barges, road tankers or rail tank wagons. It is a complex task for the
distribution organisation of an oil company to ensure that the right products are delivered
to the right place on time and in the quantities needed. Furthermore, much research and

effort is devoted to providing customers with quality products and technical advice and
services.
Seven or eight main product groups can be distinguished, although within each group
there are many different grades, depending on the application. Products made from the
light fractions are used mainly for transportation, heating and lighting: naphtha is a major
feedstock for the petrochemical industry.
LPG is generally supplied in cylinders or bottles and is widely used in homes, hotels,
restaurants and other businesses for cooking and heating. In a few countries such as
Algeria and the Netherlands, it is used as an automotive fuel; and in Japan most taxis are
run on LPG.
However, the fuel most associated with the motorcar is of course gasoline. Todays
motorist expects a car to start on cold mornings and run smoothly. A modern gasoline
therefore contains a sophisticated blend of additives such as de-icing agents, antiknock
additives and detergents. Oil companies work in close contact with engine manufacturers
to develop fuels appropriate to modern engine design.
In the early days, gasoline was just one product among many sold in hardware or
provision stores. As demand grew, special filling stations were established, some with
repair workshops. In the modern service station the emphasis is on speed and
convenience: some are open 24 hours a day with self-service pumps which operate on a
direct debit credit card system. In addition to selling a range of car accessories, many
service stations sell convenience foods, flowers or offer dry-cleaning services and
cafeteria facilities.
Kerosine is used to fuel the worlds civil airlines. Since aircraft fly more than 1500 billion
kilometres around the world on passenger routes every year, that represents a sizeable
market. In many developing countries, kerosine is widely used for lighting and heating as
an alternative to scarce natural resources such as firewood.
Gas oil is used in the diesel engines of lorries, buses, vans, trains and ships and also find
an application in industry and in power generation. Fuel oil is used for heating, power
generation and in ships driven by steam turbines. The heaviest residue, bitumen, is widely
used for road resurfacing and for waterproofing dams, tunnels and reservoirs.
Residues also provide the feedstocks for base oils used in the manufacture of lubricants.
The base oils are transported in bulk to a lubricants blending plant where they are mixed
with certain chemicals according to a specific formulation. All machines, from a small
domestic fridge to a huge car assembly plant, need lubrication. The market is therefore
huge but also very complex, requiring tailor-made products for each application.
One group of products deserves a special mention: many chemicals are derived from oil.
The petrochemical industry is closely allied to the oil industry indeed many petrochemical
plants share facilities with oil refineries. Petrochemicals provide products which compete
with products made from scarce natural resources: synthetic rubbers instead of natural
rubbers, detergents instead of soap. They also provide entirely new products which have
transformed our daily lives: plastic household products, packaging in supermarkets, easycare fabrics, dyes, adhesives and paints. The chemical industry depends on supplies of
oil as feedstocks for the manufacture of thousands of products which contribute to the
comfort and convenience of our modern lifestyle.

Protecting the Environment

Oil industry concern for its environment is not new. The oil business requires large-scale
operations huge rigs, tankers, refineries, thousands or miles of pipelines all of which
affect the environment.
For many years, oil companies have devoted considerable time and resources to finding
ways of reducing their impact on the environment. In the final analysis, however, it is a
question of balance between the need for energy and the desire to have and undisturbed
environment. Oil companies and governments cooperate on both, and on an international
scale to ensure this balance is reached.
In the last few years, there has been widespread, debate about the effects of industrial
processes on the environment. These may be short term eg, oil or product spills, but also
longer term, eg, the greenhouse effect (warming of the earths atmosphere) or damage to
the ozone layer which will affect the world that future generations will inherit.
Every industry, by the mere fact of its existence, has an impact on the environment and
the oil industry is no exception. Nevertheless, considerable effort is made in all oil
operations to ensure that this impact is minimised and that regulations are met.
During exploration, for instance, special measures may be taken to protect the
environment such as acoustic screening. Before production facilities are constructed, and
environmental impact assessment is normally conducted to decide, for example, the best
method of handling wastes and effluents. During production, regular tests are made to
monitor any pollution caused by operations. Recently attention has focused on how best
to dismantle offshore platforms, which are no longer, required.
At one time, tankers discharged dirty ballast water into the sea. Improvements have since
been made in tanker design to ensure cleaner operations and discharge of oily water is
now illegal. Some tankers use the Load-on-top system, whereby oily water is treated on
board, and increasing numbers have Segregates Ballast Tanks tanks used solely for
ballast and never for cargo, so that oil and water are kept apart. Others use crude oil
rather than water for tank washing, thus avoiding the problem os contaminated water.
Where pipelines run under-ground, considerable excavation work has to be carried out
when a new pipeline is laid. However, following construction, care is taken to ensure that
the land is carefully reinstated: the landscape should look the same as before work
started. A pipeline is checked regularly for corrosion or leaks using an intelligent pig.
This is a device fitted with sensors or recorders, which picks up any signs of corrosion or
other defects as it is passed through the pipeline.
Like any other large industrial complex, a refinery could pose a threat to the environment
through noise and pollution of the air, water and soil. Improved machinery design helps to
reduce noise levels and where possible, refineries are sited at a suitable distance from
inhabited areas. Waste water is treated before disposal and there are strict controls on
gaseous emissions. Strenuous efforts are made to contain the crude oil and oil products,
thus avoiding soil pollution.
Accident prevention is an important element in environmental conservation. Rigorous
attention is paid to safety in plant design and operation, but the most common cause of

accidents is human error. Many jobs in the oil industry involve contact with potentially
dangerous equipment or products: safety guidance, training and, above all, a safety
conscious attitude among all employees are vital.
Lead has traditionally been added to gasoline to prevent engine knock. As a result of the
possible health hazards of lead in the atmosphere, gasolines with lower leat contents and
unleaded gasoline have been introduced. In some countries, many service stations sell
unleaded and some governments have offered tax incentives to enable it to be sold more
cheaply than leaded gasoline.
Environmental protection is an issue at both national and international levels. There are
various organisations through which industry cooperates with governments to produce
measures to safeguard the environment.
Oil Economics
Oil economics is more than just a question of the supply and demand of the worlds main
source of primary energy.
The oil business is subject to many influences, in particular the government policies of oil
producing and consuming nations and fiscal regimes. Oil prices have generally been
extremely volatile, except for a brief period of stability in the 1950s and early 1960s. At
that time, the world oil scene was dominated by large integrated oil companies but since
then, the oil producers, especially OPEC countries, have exerted more control on oil
production and pricing.
When Edwin Drake first sold oil from his well in Pennsylvania, it fetched $20 a barrel.
Within a short time, the price had fallen to a few cents. The oil business has generally
been volatile, characterised by sudden changes in demand and price.
Nevertheless, the 1950s and 1960s were a period of relative stability. Oil was inexpensive
and much in demand as a fuel for the increasing volumes of road, rail, air and sea traffic
and as a feedstock for the burgeoning petrochemical industry. The international oil market
was dominated by the major oil companies Esso, Shell, BP, Gulf, Chevron, Texaco, and
Mobil - nicknamed the seven sisters. Their operations were integrated, ie, they managed
all stages of oil supply from exploration and production through to final deliver to the
customer. Oil was generally sold under long term contracts at posted prices.
Around the end of the 1960s, however, the producer countries became more dominant:
many nationalised the oil companies concessions or negotiated agreements to control oil
production. OPEC (the Organisation of Petroleum Exporting Countries) had been founded
in 1960 by Iran, Iraq, Kuwait, Saudi Arabia and Venezuela to promote the interests of
member countries regarding their oil production and the revenues they gained from it. The
disruption to oil supplies and the huge price rises resulting from the Arab producers
policies during the Arab/Israeli war of 1973/74 and the Iranian revolution of 1978 indicated
just how powerful OPEC, especially the Middle Eastern countries, had become.
By the early 1980s, economic recession and consumer reactions, which included the
substitution of oil and energy conservation measures, had resulted in lower oil
consumption. The surplus of oil production capacity increased. OPEC, which now
included countries in the Far East and Africa, made several attempts to impose quotas

limiting production, with limited success. In addition, production from certain non-OPEC
countries especially, the UK, Norway and Mexico, increased. Oil production in the
Communist countries is also significant: oil exports from the Soviet Union, the worlds
largest oil producer, bring in valuable hard currency.
The world oil scene is still characterised by surplus production capacity and volatile prices.
Oil pricing has become extremely complex. Most oil is now traded in relation to the spot
price of certain marker crudes, such as North Sea Brent, Dubai from the Middle East or
Alaskan North Slope. The spot price is the price of an individual cargo of crude traded at a
particular location. Futures markets have been established in London and New York
where oil brokers trade in paper barrels, negotiation contracts to supply a cargo of oil at
some specific time in the future. No oil actually needs to change hands in such deals.
At times, OPEC producers have favoured netback deals whereby the price of the crude is
negotiated on the basis of the expected value of the refined product made from it. In 1986,
the price of major internationally traded oil fell below $10 a barrel as OPEC producers
competed for market share. They subsequently reintroduced production quotas and
official selling prices in an effort to raise prices and bring stability to the market.
A stable oil market is of general benefit. Sudden price rises mean higher energy costs to
industrial and domestic customers, while a sudden fall in prices leads to a loss of tax
revenue to governments and difficulties for producing countries, whose economies often
depended on revenues from oil. Price fluctuations are also a problem for oil companies
whose projects require huge investments over several years. In the North Sea, for
instance, Shell, in partnership with Esso, has invested over 15 billion since 1969 in oil
and gas exploration and production. The larger fields have probably all been discovered
and efforts are now concentrated on the smaller, more marginal fields. Here the oil price
can be crucial to the decision to develop a field a sudden fall in price can mean a project
is no longer economically viable.
In short, therefore, the economics of oil are complex and subject to many diverse
influences decisions by OPEC, the behaviour of non-OPEC producing countries,
changes in fiscal regimes, investment decisions by oil and power companies, to name but
a few. Under such conditions, uncertainty is inevitable and it is a factor which participants
in the world oil scene are gradually accepting, albeit reluctantly.
The Future
Oil is the worlds largest source of energy, supplying nearly half of the total primary energy
demand. Three quarters of world oil reserves are in OPEC countries and of these, two
thirds are in just four countries: Iran, Iraq, Saudi Arabia and Kuwait. It might be expected
that priority would be given to producing Middle East oil, given its abundance and the fact
that it is relatively cheap to produce. However, as a result of economic, political and
strategic considerations, the search for oil has extended into remote parts of the earth,
both onshore and, increasingly, offshore.
Exploring for and producing oil offshore is both difficult and expensive. Oil companies will
continue to seek technical innovations needed to make such activities cost-effective.
Improved geological and seismic data have led to more accurate estimates of oil reserves.
In some cases, reservoirs have been re-assessed and reserves upgraded in the light of
prevailing economics. On the production side, improved drilling techniques and the use of

lighter materials on platforms have cut costs considerably, sometimes by as much as a

third.
Oil supply can be augmented by unconventional sources such as oil shale and tar sands.
There are major oil shale deposits in the Western United States, Australia and Morocco,
and tar sands occur in Canada, Venezuela and Madagascar. Such sources are more
expensive to produce than conventional oil and therefore tend to be uneconomic to
develop in times of low oil prices.
So much for oil supply. But what about oil demand in the future? Demand in developed
countries is likely to show little growth, due to energy conservation measures and moves
towards greater energy efficiency and alternative energy sources. Well-insulated homes
require less heating, modern car engines use gasoline more efficiently. Demand in the
developing countries, on the other hand, is likely to increase, owing to greater
industrialisation and population growth, especially in urban areas. As people become
more affluent, there are more cars on the road and demand for oil still the main transport
fuel therefore increases.
In the early 1970s, there were concerns that the worlds oil might be running out. This
view has now changed and it is believed that with todays technology there is enough oil to
last well into the next century. Public debate is now focused on the environment and the
term sustainable growth has become increasingly familiar. People want a higher
standard of living, but not at the expense of permanent damage to the environment. The
use of all fossil fuels, including oil, will depend not only on technical, political and economic
decisions but, increasingly, on environmental considerations.
Glossary
Acreage
Additive
Agrochemicals
API gravity

Appraisal well
Arabian Light
Avgas
Barrel
Base chemicals
Biomass
Bitumen
Black products
Blow-out

Area covered by a lease granted for oil exploration

Special chemical added to a product to improve its characteristics
Chemicals used in agriculture (excluding fertilisers) generally for crop
protection eg, insecticides, herbicides, and fungicides
Scale adopted by the American Petroleum Institute to express the
specific gravity of oils:
API gravity =
141.5
- 131.5
Specific gravity
15C/15C
A well drilled as part of a drilling program conducted to determine the
extent, reserves and likely yield of an oil field
The worlds most prolific grade of crude oil formerly used as a marker
to fix the prices of other crudes.
Aviation gasoline used in piston type aeroengines
Unit of measurement used for oil and oil production (1 barrel = 35
Imperial gallons, 159 litres)
Raw materials (aromatics and olefins) produced from crude oil and
processed into other chemicals eg, polymers
A general term for any plant, vegetation or tree used either directly or
indirectly to provide energy
Heavy oil residue used for roads and roofing
Diesel oils and fuel oils
Escape of gas, oil or water from a reservoir as a result of a release of

Bottled gas
Brent crude
Bulk cargo
Bunker
Calorific value
Carbon black
Catalyst

Cetane number
CHP

Christmas tree
Combined carrier
Continental shelf
Daisy chain
Demise-hire

Derrick
Derv fuel
Deviation well
Dope
Downstream
Dry Hole
Dwt
EOR

Equity crude
Essential oils
Flaring
Futures-oil

pressure not properly container (see: Christmas Tree)

Generally Liquefied Petroleum Gas (LPG) stored in a pressure
container
A crude oil from the Brent field used as a marker for other North Sea
crudes
A liquid or solid cargo loaded on to a vessel without packaging (eg,
oil, grain)
Supplies of fuels and lubricants to ships and aircraft
A measure of energy released in the form of heat when a fuel is
burned
A carbon product obtained from liquid hydrocarbon
A substance which promotes a chemical reaction without forming part
of the final product and which remains unchanged at the end of the
reaction
A scale used to specify the ignition quality of diesel fuels (see: octane
number)
Combined heat and power. A method of using a proportion of fuel
input energy, which would otherwise be discarded. In district heating
schemes, hot water from power stations is used for domestic or
commercial heating purposes
Equipment at a wellhead which controls the flow of oil and gas to
prevent blow-outs (see: blow-out)
Vessel which can carry either oil or dry bulk cargoes
The shallow submerged platform (max. depth 200 metres) bordering
the land of a continent
The situation whereby a cargo of oil or oil products is sold many
times before final delivery to the consumer
A method by which the owner of a vessel hires it for a specified
period to a ship operating company which is responsible for operating
costs and obtaining the crew
A steel structure used to support the drill pipe and other equipment
which has to be raised or lowered during well drilling operations
Diesel Engine Road Vehicle fuel a medium/light fuel derived from
gas oil
A well drilled at an angle to the vertical to cover the maximum area of
an offshore field that can be produced from a single platform
Slang term for additive
Activities relating to oil product trading, transport, refining, distribution
and marketing
A well which shows no signs of oil or gas
Dead weight tonnage. The weight of cargo, stores, bunkers and
water which a vessel carries when fully loaded
Enhanced Oil Recovery. A process to recover oil by adding
chemicals, steam etc. when neither primary nor secondary recovery
is appropriate
The proportion of crude oil production to which a producing company
is entitled through its financial contribution
Hydrocarbons and oxygenated compounds extracted from crude oil
or plants. Also known as volatile oils
Burning off gas produced in association with oil which, for technical or
commercial reasons, cannot be utilised
The sale and purchase of oil at a price agreed upon in advance for

Geothermal
energy
IEA

Jet A-1
Joule
Kerogen
Knocking
Load-on-top

Majors
Mercaptans
Naphtha
Natural Gas
Octane number
Petrodollar
Pig

Pour point
Primary recovery
Proved
resources
Pyrolysis
gasoline
Renewable
energy
Reservoir rock
Secondary
recovery
Shale oil
Sour oils

Spot market
Straight run

delivery at a future date

Energy obtained from the heat below the earths surface
International Energy Agency. Established in 1974 to monitor the
world energy situation, promote good relations between producer and
consumer countries and develop a strategy for energy supplies in
times of emergency
The standard aviation kerosine fuel
The recommended unit for measuring energy and heat
The organic matter in source rocks from which oil and gas are
derived. Also the main organic compound of shale
A metallic sound in an engine caused by a mismatch between the
fuel and the engines compression ratio (often known as pinking)
System of cleaning tanks in an oil tanker by collecting washings in
one 'slop' tank, allowing the water to separate from the oil, then
discharging the water overboard, leaving the oil residues in the tank
The collective name used for the worlds largest oil companied
(Exxon, Shell, Socal, Texaco, Mobil and BP)
Strong-smelling compound of carbon, hydrogen and sulphur found in
oil and gas. Sometimes used as odorants in natural gas
Straight-run gasoline fractions boiling below kerosine. Used as a
feedstock for refinery conversion and as a chemical feedstock
A mixture of methane and ethane found in the earths crust, often in
association with oil
A method of specifying the anti-knock qualities of motor spirits
A dollar belonging to a resident of an oil exporting country. Term
coined after the first oil price shock in 1974
A device used for cleaning a pipeline or for separating two liquids
passed down the same line. An intelligent pig is fitted with sensors
or recorders to check for corrosion or similar defects
The temperature below which an oil solidifies and does not flow freely
Production of oil under natural drive mechanisms ie, oil displaced by
fluids naturally present in the reservoir
The quantity of oil and gas estimated to be recoverable from known
fields under existing economic and operating conditions
Gasoline obtained as a by-product from a steam or ethylene cracker
Energy resources which are continually replenished ie, solar energy,
wind power, wave power, biomass, hydroelectric, geothermal energy
The rock in which oil and gas occurs commonly sandstone,
limestone, dolomite
Displacement of oil from the reservoir by injection of water or gas
through special injection wells
A compact sedimentary rock containing kerogen which yields oil
when heated
Oils containing high concentrations of hydrogen sulphide gas or
mercaptans. Treatment of such oils to convert them into marketable
products is known as sweetening
A market in which oil or oil products are traded for immediate delivery
and at the current price (ie, spot price)
A term applied to a product of crude oil made by distillation without
chemical conversion

Swing
production
Tar sands
Tertiary recovery
Time charter
Ullage
Upstream
Viscosity index
White products

Oil production of an area, which acts as a balancing region. Saudi

Arabia has often been a swing producer for OPEC
Mixture of sand, water and bitumen: an additional (but expensive to
produce) source of oil
Injection of an enhanced recovery fluid through special injection wells
to extract oil left behind by primary or secondary recovery methods
A charter for a tanker for a fixed period of time
The space in a tank not occupied by its contents. Used as a
measure of whether a tank can hold additional (oil) stocks
Activities relating to crude oil exploration, production and delivery to
export terminal
A method of indicating the viscosity/temperature of an oil
Gasolines, naphthas, kerosines and gasoils (see: black products)