ASSIGNMENT

CMT 668
THE IMPORTANCE OF CRUDE OIL REFINING IN THE
ENERGY SECTOR
PREPARED BY:
KHAIRUN NIESA BINTI ABDULLAH
2013633154 (AS245 6M)
PREPARED FOR:
AP DR RUSNAH HAJI SAMSUDDIN
SUBMISSION DATE: 29TH APRIL 2016

TABLE OF CONTENT

TITLE

PAGES

1.0 INTRODUCTION
1.1 Background of Petroleum in Malaysia
1.2 Crude oil refinery
1.3 Oil and Gas reserves

2.0 LITERATURE REVIEW

2.1 Crude Oil
2.2 Oil refinery
2.2.1 Introduction
2.2.2 Operation

3.0 CONTENT
3.1 Reason why crude oil need to be refined
3.2 Refinement Operation
3.3 Petrochemicals Industry

10

4.0 DISCCUSION

18

5.0 CONCLUSION

20

6.0 RECOMMENDATION

20

7.0 REFERENCES

21

1.0 INTRODUCTION
1.1 Background of Petroleum In Malaysia
Oil history in Malaysia had its beginning in the 19th century. The people of Sabah and
Sarawak had long known of the existence of oil seepages or earth oil as it was
called then, in various parts of the States, especially around Miri village. This oil was
collected by the local Malays and was used first for medicinal purposes and later for
lighting lamps and as a resin mixture for caulking boats. However, commercial
exploitation of Miri oil did not begin until the turn of the century when the Anglo
Saxon Petroleum Company was granted the sole right to explore for petroleum
resources throughout Sarawak. Drilling began in August 1910 and oil was struck in
December that same year. Although initial daily production was merely 83 barrels,
this nonetheless is generally taken as the starting point of the Malaysian petroleum
industry. The Miri success encouraged further attempts to discover other onshore
fields in Sabah and Sarawak. Although traces of oil-bearing formations were
encountered, no accumulations were found that were large enough to justify drilling
activities. To date, the Miri field is Malaysias only onshore field and during its lifespan of about 62 years, it has yielded over 80 million barrels of oil. By the 1950s, the
search for oil had been diverted to the offshore areas.
The move offshore began to show results in the early 1960s when significant
quantities of oil were discovered in two areas offshore Sarawak. Other discoveries of
oil and gas fields followed in rapid succession in the waters off Sarawak which came
onstream in June 1968. In the years following the incorporation of PETRONAS or
Petroliam Nasional Berhad on 17th August 1974 as the national petroleum
corporation, Malaysias reserves of crude oil and natural gas have increased steadily.
As at 1st January 1985, the nations proven oil reserves were estimated at 3.1 billion
barrels, while natural gas reserves were estimated at 53 trillion cubic feet.Crude oil
production in 1984 averaged 440,000 barrels per day. Natural gas now also features
prominently in the economy of the nation. In 1984, Malaysia produced 1,090 million
cubic feet of gas per day, most of which was processed into liquefied natural gas or
LNG, for export. Malaysia is now a net exporter of petroleum, a status she achieved in
1976.

1.2 Crude Oil Refinery

A petroleum refinery is an installation that manufactures finished petroleum
products from crude oil, unfinished oils, natural gas liquids, other hydrocarbons,
and alcohol. Refined petroleum products include but are not limited to gasolines,
kerosene, distillate fuel oils (including No. 2 fuel oil), liquefied petroleum
gas, asphalt, lubricating oils, diesel fuels, and residual fuels.

The core refining process is simple distillation (Figure 1). Because crude oil is
made up of a mixture of hydrocarbons, this first and basic refining process is
aimed at separating the crude oil into its "fractions," the broad categories of its
component hydrocarbons. Crude oil is heated and put into a stilla distillation
columnand different products boil off and can be recovered at different
temperatures. The lighter productsliquid petroleum gases (LPG), naphtha, and
so-called "straight run" gasolineare recovered at the lowest temperatures.
Middle distillatesjet fuel, kerosene, distillates (such as home heating oil and
diesel fuel)come next. Finally, the heaviest products (residuum or residual fuel
oil) are recovered, sometimes at temperatures over 1000 degrees F. The simplest
refineries stop at this point. Other refineries reprocess the heavier fractions into
lighter products to maximize the output of the most desirable products.
1.3 Oil and Gas reserves
Malaysias oil reserves are the fifth highest in the Asia-Pacific region after China,
India, Vietnam and Indonesia and the 28th in the world. As of January 2011,

Malaysias proven oil reserves was 4 billion barrels. Nearly all of Malaysia's oil
comes from offshore fields.
Malaysias continental shelf is divided into three producing basins:
Peninsula Malaysia: The Malay Basin,
Sarawak: The Sarawak Basin, and
Sabah: The Sabah Basin
Most of the countrys oil reserves are located in the Malay basin and tend to be of
high quality. Malaysias benchmark crude oil, Tapis Blend, is of the light and
sweet variety with an API gravity of 44 and sulfur content of 0.08 percent by
weight. With a total proven natural gas reserves of 2400 billion cubic metres,
Malaysia is ranked the 13th largest in the world. Most of the countrys natural gas
reserves are in its eastern areas, predominantly offshore Sarawak.

2.0 LITERATURE REVIEW

2.1 Crude Oil
Crude oil is a naturally occurring, unrefined petroleum product composed of
hydrocarbon deposits and other organic materials. Crude oil can be refined to
produce usable products such as gasoline, diesel and various forms of
petrochemicals. It is a nonrenewable resource, also known as a fossil fuel, which
means that it can't be replaced naturally at the rate we consume it and is therefore
a limited resource.
Crude oil is typically obtained through oil drilling, where it is usually found
alongside other resources, such as natural gas (which is lighter, and therefore sits
above the crude oil) and saline water (which is denser, and sinks below). It is then
refined and processed into a variety of forms, such as gasoline, kerosene, and
asphalt, and sold to consumers.

Although it is often called "black gold," crude oil has ranging viscosity and can
vary in color to various shades of black and yellow depending on its hydrocarbon
composition. Distillation, the process by which oil is heated and separated in
different components, is the the first stage in refining.
Although fossil fuels like coal have been harvested in one way or another for
centuries, crude oil was first discovered and developed during the Industrial
Revolution, and it's industrial uses were first developed in the 19th century.
Newly invented machines revolutionized the way we do work, and they depended
on these resources to run. Today, the world's economy is largely dependent on
fossil fuels such as crude oil, and the demand for these resources often spark
political unrest, since a small number of countries control the largest reservoirs.
Like any industry, supply and demand heavily affects the prices and profitability
of crude oil. The United States, Saudi Arabia, and Russia are the leading
producers of oil in the world.
The Organization of Petroleum Exporting Countries (OPEC), which consists of
the worlds largest producers of crude oil by volume, used to be the most
influential oil producers in the world, and as such, they had a lot of economic
leverage in determining supply and therefore oil prices. In the late 19th and early
20th centuries, however, the United States was one of the world's leading oil
producers, and U.S. companies developed the technology to make oil into useful
products like gasoline. During the middle and last decades of the century, U.S. oil
production fell dramatically, and the U.S. became an energy importer. In the early
21st century, the development of new technology, particularly hydro-fracturing,
has created a second U.S. energy boom, largely decreasing the importance and
influence of OPEC.
Adverse Effects of Reliance on Oil - Heavy reliance on fossil fuels is cited as one
of the main causes of global warming, a topic that has gained traction in the past
twenty years. Risks surrounding oil drilling include oil spills and ocean
acidification, which damage the ecosystem. Many manufacturers have begun
creating products that rely on alternative sources of energy, such as cars run by
electricity, homes powered by solar panels, and communities powered by wind
turbines (Investopedia,2009).

2.2 Oil refinery

2.2.1 Introduction
An oil refinery or petroleum refinery is an industrial process plant where crude oil
is processed and refined into more useful products such as petroleum naphtha,
gasoline, diesel fuel, asphalt base, heating oil, kerosene and liquefied petroleum
gas.Oil refineries are typically large, sprawling industrial complexes with
extensive piping running throughout, carrying streams of fluids between large
chemical processing units. In many ways, oil refineries use much of the
technology of, and can be thought of, as types of chemical plants. The crude oil
feedstock has typically been processed by an oil production plant. There is
usually an oil depot (tank farm) at or near an oil refinery for the storage of
incoming crude oil feedstock as well as bulk liquid products. An oil refinery is
considered an essential part of the downstream side of the petroleum industry
(Gary et al., (1984)

2.2.2 Operation
Raw or unprocessed crude oil is not generally useful in industrial applications,
although "light, sweet" (low viscosity, low sulfur) crude oil has been used directly
as a burner fuel to produce steam for the propulsion of seagoing vessels. The
lighter elements, however, form explosive vapors in the fuel tanks and are
therefore hazardous, especially in warships. Instead, the hundreds of different
hydrocarbon molecules in crude oil are separated in a refinery into components
which can be used as fuels, lubricants, and as feedstocks in petrochemical
processes that manufacture such products as plastics, detergents, solvents,
elastomers and fibers such as nylon and polyesters.
Petroleum fossil fuels are burned in internal combustion engines to provide power
for ships, automobiles, aircraft engines, lawn mowers, chainsaws, and other
machines. Different boiling points allow the hydrocarbons to be separated by
distillation. Since the lighter liquid products are in great demand for use in
internal combustion engines, a modern refinery will convert heavy hydrocarbons
and lighter gaseous elements into these higher value products. Oil can be used in
a variety of ways because it contains hydrocarbons of varying molecular masses,
forms and lengths such as paraffins, aromatics, naphthenes (or cycloalkanes),
alkenes, dienes, and alkynes. While the molecules in crude oil include different

atoms such as sulfur and nitrogen, the hydrocarbons are the most common form
of molecules, which are molecules of varying lengths and complexity made of
hydrogen and carbon atoms, and a small number of oxygen atoms. The
differences in the structure of these molecules account for their varying physical
and chemical properties, and it is this variety that makes crude oil useful in a
broad range of several applications.
Once separated and purified of any contaminants and impurities, the fuel or
lubricant can be sold without further processing. Smaller molecules such as
isobutane and propylene or butylenes can be recombined to meet specific octane
requirements by processes such as alkylation, or more commonly, dimerization.
Octane grade of gasoline can also be improved by catalytic reforming, which
involves removing hydrogen from hydrocarbons producing compounds with
higher octane ratings such as aromatics. Intermediate products such as gasoils can
even be reprocessed to break a heavy, long-chained oil into a lighter shortchained one, by various forms of cracking such as fluid catalytic cracking,
thermal cracking, and hydrocracking. The final step in gasoline production is the
blending of fuels with different octane ratings, vapor pressures, and other
properties to meet product specifications. Oil refineries are large scale plants,
processing about a hundred thousand to several hundred thousand barrels of crude
oil a day. Because of the high capacity, many of the units operate continuously, as
opposed to processing in batches, at steady state or nearly steady state for months
to years. The high capacity also makes process optimization and advanced
process control very desirable (Leffler, W.L. (1985).

3.0 CONTENT
3.1 Reason why crude oil need to be refined
Crude oil is a highly variable mixture of heavy and light hydrocarbons that need to be
separated in a refinery to turn them into usable products.
The gasoline or diesel we put in our car, the fuel oil we burn to heat our homes in winter
and the natural gas we use to cook are all fuels and sources of heat derived from oil and
gas extracted from deposits across the globe.
Roughly speaking, crude oil is a mixture of all these energy products. To meet user
requirements, it must be separated, converted and treated in a process known as refining.
Could crude oil be used directly if only we had the right kinds of engines and boilers?
The answer is no, because each crude oil is very different and made up of a large number
of hydrocarbon molecules. The lightest molecules, dissolved gases, have 1 to 4 carbon
atoms, while the heaviest have over 20. These molecules are present in varying
proportions depending on the deposit, meaning that each oil has its own composition and
properties. Some crudes are black and viscous and contain a lot of heavy molecules;
others are brown, more fluid and lighter. Each also contains a certain amount of
dissolved gas and highly corrosive products, such as sulfur or acids, which can
sometimes be toxic.
Since the demand for petroleum products has changed significantly since the mid-20th
century. In industrialized countries, the development of road and air transportation has
accelerated, leading to stronger demand for light products, such as fuel. At the same time,
the consumption of heavy fuel oil has declined as other energy sources, such as gas and
nuclear power, are being used for heating and power generation.
Today, global demand for petroleum products breaks down roughly as follows:
40% for light distillates (fuel).
40% for middle distillates (fuel oil, diesel).
20% for heavy distillates (wax, asphalt).

The only crude oil that more or less matches these percentages before refining is
Algerias light Saharan Blend. All other crudes contain a larger percentage of heavy
products. The average breakdown of distillates obtained by separation of crude oil is
significantly different from the breakdown in demand:

 25% for light distillates.

35% for middle distillates.
40% for heavy distillates.
To align production with demand, it is therefore necessary to convert some of the heavy
products into light products before bringing them to market. These lighter products are
more expensive than crude oil, because their price includes refining costs. To obtain
products that satisfy current consumer and industry demand, specially designed
production and conversion units featuring innovative refining processes have been built.

3.2 Refinement Operation

Crude oil needs to undergo a refinement process in order to become refined products for
end users. Crude oil is composed of mixtures or fractions of molecules. The refinement
process is basically to isolate the fractions according to the their boiling point range.
Refined products are produced by combining fractions from the raw crude oil with those
from various refinery processing units. The most important refined product is petrol, fuel
for motor vehicles. Other equally important products are diesel oil, heating oil, jet fuel,
and lubricants. Crude oil is also the raw material in the production of asphalt, plastics,
solvents, fertilizers, pesticides and pharmaceuticals.
Malaysias energy supply mainly came from crude oil, natural gas, coal and hydropower.
Most of the crude oil and natural gas supply in Malaysia came from domestic production,
whereas the vast majority of coal was imported. Besides, Malaysia is a net energy
exporting country, whereas crude oil and natural gas were the main energy types
exported, and 97% of natural gas was exported in LNG form. However, though Malaysia
was a net exporter of crude oil, it was a net importer of oil products, especially petrol
(gasoline). Half of the petrol consumed in the end-use sectors was imported, and no
petrol was exported.
Crude oil refinery are important in the energy sector because the electricity supply of
Malaysia mainly relied on domestic power generation, and most of the natural gas (74%
of the supply), most of the coal (88% of the supply) and all the hydropower were used
for electricity generation.
Here is the percentage of main energy in Malaysia:
Electricity (49%)
oil products (41%)
natural gas (7%)
coal (3%)
Those were the main energy forms for end-use. Each main end-use sector, including the
transportation sector, industrial sector and domestic sector (residential, commercial and
agriculture), accounted for approximately one-third of the energy consumption. The vast

majority of oil products (69%) were consumed in the transportation sector.(Chong, Ni,
Ma, Liu, & Li, 2015)
Table 1.0 lists out some of the refined products of crude oil.
Refined Products

Uses

Petrol

Fuel for vehicles

Diesel fuels

Fuel for trucks, buses, ship, trains

Jet fuel

Fuel for Airlines

Heating oil

for

heating:

homes,

business

premises
Residual fuel oil

as boiler fuel
-in
industrial

plants

for

manufacturing processes
- in tankers
Lubricants

as lubricant
- engine parts
- turbine in power plants
to make salves, ointments, and

Asphalt

to pave roads

Petroleum coke

to

aluminum
as a raw material to manufacture

make

electrodes

to

produce

steel.

Refined products are exported to international markets. In domestic market, they are
traded and marketed either as wholesale or retail . Refined products are moved from
refineries to markets by means of various transportation modes. Tankers are used to for
transport to international markets. Products are distributed in domestic market by means
of pipelines, rails and roads. Domestic consumers are industry, commercial, and
residential.
Petrol and diesel are two most visible products of crude oil. In domestic market, petrol
and diesel are distributed to petrol service stations which then sell them to motorists as
fuels for their vehicles. Retail prices of petrol RON 95 and diesel are set lower than their
market prices as the government subsidises these two products.

Petrochemicals manufacturers are end users for aromatic compounds in crude oil such as
benzene, toluene and xylene. They are used as the chemical building blocks in the
manufacture of petrochemical products such as plastics, agricultural, chemicals, and
pharmaceuticals.

3.3 Petrochemicals Industry

The petroleum and petrochemicals industry is one of the leading industries in Malaysia.
The industry covers petroleum products, natural gas and petrochemicals. The total
investment in the petroleum and petrochemicals industry stood at RM60.7 billion in
2011. Malaysia is today an exporter of major petrochemicals products within the ASEAN
region, exporting both commodity grade polymers, as well as petrochemical derivatives.
Natural gas, natural gas liquids, and petroleum refinery products are used as feedstock in
the production of petrochemicals products. Among petrochemicals products produced in
Malaysia are:

commodity grade plastic resins, such as polyethylene (PE) resins, polypropylene

(PP) resins, polyvinyl chloride (PVC) resins and polystyrene (PS) resins;
engineering grade plastic resins, such as acrylonitrile-butadiene (ABS),

polyoxymethylene (POM) resins and polyester co-polymer (PETG) resins;

petrochemical derivatives, such as ethylene oxide (EO), butanols and acetic acid;

and
specialised and fine chemicals, such as food additives and raw materials for
pharmaceuticals.

The development of petrochemicals industry has been in great progress since the
early 1990s. There are three integrated petrochemicals complexes (IPCs) established
in Kerteh, Terengganu; Gebeng, Pahang, and Pasir Gudang-Tanjung Langsat, Johor.
Aromatic plants in Kerteh use condensates as the raw material to produce paraxylene
and benzene. Ethylene-based products are also produced in Kerteh. Propane is used
as the raw material for the propane dehydrogenation plant in Gebeng. Naphta
obtained from petroleum refining provides feedstock for plants in Pasir GudangTanjung Langsat. Other petrochemicals plants are located in Bintulu, Sarawak;
Gurun, Kedah; Penang, Labuan and Kluang, Johor. Table 1.1 shows the
petrochemicals zones in Malaysia, while Table 1.2 shows the producers of
petrochemicals feedstocks.

Table 1.1

Table 1.2
The petrochemicals industry has foreign and local investors. The source of
foreign investment is multinational corporations (MNCs) from the USA,
Germany and Japan. There are also joint-venture set-ups between local investors

and MNCs. PETRONAS is the major domestic investor in the industry.

PETRONAS has contributed significantly to the development of support
infrastructure, dedicated utilities and services to the petrochemicals zones in
Kerteh and Gebeng. PETRONAS has also established joint-ventures with various
MNCs, which include BASF, BP Chemicals, Eastman Chemical, Idemitsu
Petrochemical, Mitsui, DSM and Dow Chemical Company. The significant
investments by PETRONAS and MNCs have made the local petrochemicals
industry well diversified with the availability of a wide range of products.
Malaysia also imports petrochemicals which are not locally produced to be used
as raw material for the production of other downstream petrochemical products.
For example, ethylene dichloride is imported for the production of vinyl chloride
and subsequent production of polyvinyl chloride resins.
Malaysian petrochemicals companies face competition to gain greater access to
the ASEAN market as there are other ASEAN countries such as Singapore,
Thailand and Indonesia developing their own petrochemicals industries. Malaysia
will need to increase the volume of production and provide a more conducive
environment to promote investments in a wider range of high value-added
products to capture the ASEAN market.(Hartmann, 2016)

4.0 DISCUSSION
The energy system today is highly dependent on fossil fuels, with coal, oil and gas
accounting for about 80% of world primary energy demand. A number of physical and
economic activities are involved to capture the energy and to deliver it in a
usable form to the users. The chain of systems or activities required to ensure supply of
energy is known as the energy supply system. The supply system is made up of the
supply sector, the energy transforming sector and the energy consuming sector. The
supply involves indigenous production, imports or exports of fuel and changes in stock
levels (either stock pileup or stock draw down).

Transformation converts different forms of primary energies to secondary energies for

ease of use by consumers. Transformation processes normally involve a significant
amount of losses. Transportation and transmission of energy also involve losses. The
final users utilise various forms of energies to meet the needs of cooling, heating,
lighting, motive power, etc. The relative importance of the above segments varies from
one country to another and even from one fuel to another depending, to a large extent, on
the availability of resources in a particular country. For a resource-rich country, the
supply segment is evidently well developed, while for a resource-poor country the
transformation and final use segments tend to be more developed.
The activities vary by the type of energy. For non-renewable energies, exploration,
development and production of fuel(s) constitute the first step. A variety of exploratory
techniques are used to identify the location of the resource but drilling a hole only can
confirm the existence of the stock. Upon confirmation of the economic viability and
technical feasibility of extraction of the stock, the field is developed and production
follows. The fuel so produced often requires cleaning, beneficiation and processing to
make it usable. Cleaning and beneficiation processes are used to remove impurities using
simple cleaning processes. The fuel is then transported to the centres of conversion or
use. Most forms of energies cannot be used as such and require processing such as crude
oil to petroleum products.
Similarly, depending on consumers demand, fuels also undergo conversion processes to
convert them in preferred form such as electricity, lubricants and so on.
When we think of oil, we tend to think of fuel for our cars, trucks, and planes, and
heating oil. However, there are a myriad of uses for crude oil that affects our lives
which means that reducing our dependence on oil may not be as easy as buying
a hybrid car.
Gasoline (Used to fuel cars) 44%
Heating Oil (Used to heat buildings), and Diesel Fuel 19%
Other Products 15%
Jet Fuel 8%
Propane 6%
Residual Fuel Oil (powering factories, fueling large ships, and making
electricity) 5%
Asphalt 3%
As we can see, there are a lot of important uses for crude oil besides just fueling
your car which are plastic, furniture, clothing, insulation, food, kitchen items, and

cars. Therefore we have seen clearly the importance of crude oil refining in the
energy sector.
As in Malaysia, crude oil undergoes refinement operation to create several refined
products that are useful to our daily lives. Petrol fuel, diesel fuel, jet fuel, heating
oil, lubricants, residual fuel oil, asphalt and also petroleum coke are the example
of refined products that produced by crude oil refining in Malaysia. Basically, all
the product that produced by crude oil refining are really important in energy
sector. For example, petrol, diesel, and jet fuels are really important in
transportation sector where all the vehicles, buses, trucks, trains or airplane need
those fuels to give them energy to operate. Besides, crude oil also are important
in petrochemical industry in Malaysia.
The petroleum and petrochemicals industry is one of the leading industries in
Malaysia.

The

industry

covers

petroleum

products,

natural

gas

and

petrochemicals.
They are used as the chemical building blocks in the manufacture of
petrochemical

products

such

as

plastics,

agricultural,

chemicals,

and

pharmaceuticals (Wauquier, 1995)

5.0 CONCLUSION
As a conclusion, the price of crude oil means a lot more to us than just paying a
few dollars more at the pump. As we can see, oil is important to the production
and transportation of many of the items that we use on a regular basis. This
means that many sectors of the economy will be adversely affected by increasing
oil prices, or helped when they go down.

6.0 RECOMMENDATION
I think we should start to find other alternative to replace the uses of crude oil because in
the future it will be really hard for us to find any crude oil that still left in this earth.
Besides, the prices of fuels are a bit costly nowadays .Therefore, I think we should start
buying hybrid car.

7.0 REFERENCES
1. Crude Oil Definition | Investopedia. (2009). Retrieved April 26, 2016, from
http://www.investopedia.com/terms/c/crude-oil.asp
2. Oil
refinery.
(n.d.).
Retrieved
April

26,

2016,

from

http://research.omicsgroup.org/index.php/Oil_refinery
3. Gary, J.H. and Handwerk, G.E. (1984). Petroleum Refining Technology and
Economics (2nd ed.). Marcel Dekker, Inc. ISBN 0-8247-7150-8.
4. Leffler, W.L. (1985). Petroleum refining for the nontechnical person (2nd
ed.). PennWell Books. ISBN 0-87814-280-0.
5. Petroleum refining. (n.d.). Retrieved

April

26,

2016,

from

http://www.eoearth.org/view/article/15520
6. Industries in Malaysia: Petrochemical and polymer industry. Retrieved from
MIDA

website:

page=petrochemical
7. Petrochemical
industry.

http://www.mida.gov.my/env3/index.php?
Retrieved

from

MPA

website:

http://www.mpa.org.my/industry.html
8. Hartmann, D. L. (2016). Chapter 2 - The Global Energy Balance Global
Physical Climatology (Second Edition) (pp. 25-48). Boston: Elsevier.
9. Wauquier, J. P. (1995). Petroleum Refining: Crude oil, petroleum products,
process flowsheets (Vol. 1). ditions Technip.