I.

OIL AND GAS MANUFACTURING (PETROLEUM PRODUCTION)

Definition
Petroleum production, recovery of crude oil and, often, associated natural gas from
Earth. Petroleum is a naturally occurring hydrocarbon material that is believed to have formed
from animal and vegetable debris in deep sedimentary beds. The petroleum, being less dense than
the surrounding water, was expelled from the source beds and migrated upward through porous
rock such as sandstone and some limestone until it was finally blocked by nonporous rock such as
shale or dense limestone. In this way, petroleum deposits came to be trapped by geologic features
caused by the folding, faulting, and erosion of Earth’s crust.

Petroleum may exist in gaseous, liquid, or near-solid phases either alone or in

combination. The liquid phase is commonly called crude oil, while the more-solid phase may be
called bitumen, tar, pitch, or asphalt. When these phases occur together, gas usually overlies the
liquid, and the liquid overlies the more-solid phase. Occasionally, petroleum deposits elevated
during the formation of mountain ranges have been exposed by erosion to form tar deposits. Some
of these deposits have been known and exploited throughout recorded history. Other near-surface
deposits of liquid petroleum seep slowly to the surface through natural fissures in the overlying
rock. Accumulations from these seeps, called rock oil, were used commercially in the 19th century
to make lamp oil by simple distillation. The vast majority of petroleum deposits, however, lie
trapped in the pores of natural rock at depths from 150 to 7,600 meters below the surface of the
ground. As a general rule, the deeper deposits have higher internal pressures and contain greater
quantities of gaseous hydrocarbons.

History
The first oil had actually been discovered by the Chinese in 600 B.C. and transported in
pipelines made from bamboo. However, Colonel Drake’s heralded discovery of oil in
Pennsylvania in 1859 and the Spindletop discovery in Texas in 1901 set the stage for the new oil
economy. Petroleum was much more adaptable and flexible than coal. Additionally, the kerosene
that was refined originally from crude provided a reliable and relatively inexpensive alternative to
“coal-oils” and whale oil for fueling lamps. Most of the other products were discarded. With the
technological breakthroughs of the 20th century, oil emerged as the preferred energy source. The
key drivers of that transformation were the electric light bulb and the automobile. Automobile
ownership and demand for electricity grew exponentially and, with them, the demand for oil.

By 1919, gasoline sales exceeded those of kerosene. Oil-powered ships, trucks and tanks,
and military airplanes in World War I proved the role of oil as not only a strategic energy source,
but also a critical military asset. Prior to the 1920s, the natural gas that was produced along with
oil was burned (or flared) as a waste by-product. Eventually, gas began to be used as fuel for
industrial and residential heating and power. As its value was realized, natural gas became a prized
product in its own right.
Oil and Gas Supply Chain
The oil and gas global supply-chain includes activities such as domestic and international
transportation, ordering and inventory visibility and control, materials handling, import/export
facilitation and information technology. Every Supply Chain in large industries involves
configuration, management and continuous improvement of sequential set of operations that
includes multiple parties. The goal in Supply Chain Management (SCM) is to deliver maximum
service to the customer at the lowest cost possible.
The Oil and Gas Supply Chain can be analyzed through three different industry sectors:

1. Upstream Sector – The upstream sector is also known as the E&P (Exploration and
Production) sector. It is consisted of processes and operations that involve searching for
potential underground or underwater crude oil and natural gas fields, drilling of exploratory
wells, and subsequently drilling and operating the wells that recover and bring the crude
oil and/or raw natural gas to the surface. In recent years, there is an evident shift towards
the inclusion of unconventional gas as part of the Upstream sector. This also affects the
developments in processing and transporting Liquefied Natural Gas (LNG).

2. Midstream Sector – The midstream sector is usually combined in the literature with the
downstream sector. This segment in the supply chain, involves the transportation, storage
and marketing of various oil and gas products. Transportation options can vary from small
connector pipelines to massive cargo ships making trans-ocean crossings, depending on
the commodity and distance covered. When discussing the transportation of oil and natural
gas, most oil can be transported in the current state, while the natural gas must be liquefied
or compressed.

3. Downstream Sector – it encompasses the refining, processing, distillation and purification

before turning it into usable, sell-able and consumable products e.g. fuels, raw chemicals
and finished products etc. All the aforementioned services transform crude oil into usable
products such as gasoline, fuel oils, and petroleum-based products. Retail marketing
activities help move the finished products from energy companies to retailers or end users.

Application
Oil and gas are used widely in modern life. Oil fuels the cars, trucks and planes that
underpin modern economies and lifestyles. By-products from oil refining are used in the
production of plastics and chemicals, as well as many lubricants, waxes, tars and asphalts. Nearly
all pesticides and many fertilizers are made from oil or oil byproducts. Gas provides electricity
and is also used for cooking, heating houses and buildings, and heating water. It is also important
for fueling many industrial operations, including glass and steel foundries, aluminum or nickel
smelters, and many manufacturing industries. Gas is used in producing fertilizers and a wide range
of industrial products, including plastics and polymers, textiles and paints and dyes. It can also be
used in the form of compressed natural gas (CNG) or liquefied natural gas (LNG) as a
transportation fuel.

II. MANUFACTURING PROCESS

 Upstream Sector
Prospecting and Drilling
Today, exploring for oil requires integration of information collected from seismic surveys,
geologic framing, geochemistry, petrophysics, geographic information systems (GIS) data
gathering, geostatistics, drilling, reservoir engineering, and other surface and subsurface
investigative techniques. Geophysical exploration including seismic analysis is the primary
method of exploring for petroleum. Gravity and magnetic field methods are also historically
reliable evaluation methods carrying over into more complex and challenging exploration
environments, such as sub-salt structures and deep water. Beginning with GIS, gravity, magnetic,
and seismic surveys allow geoscientists to efficiently focus the search for target assets to explore,
thus lowering the risks associated with exploration drilling.

There are three major types of exploration methods: (1) surface methods, such as geologic
feature mapping, enabled by GIS, (2) area surveys of gravity and magnetic fields, and (3)
seismographic methods. These methods indicate the presence or absence of subsurface features
that are favorable for petroleum accumulations.

The hoisting equipment that is used to raise and lower the drill pipe, along with the
machinery for rotating the pipe, is contained in the tall derrick that is characteristic of rotary
drilling rigs. While early derricks were constructed at the drilling site, modern rigs can be moved
from one site to the next. The drill bit wears out quickly and requires frequent replacement, often
once a day. This makes it necessary to pull the entire drill string (the column of drill pipe) from
the well and stand all the joints of the drill pipe vertically at one side of the derrick. Joints are
usually 9 meters long. While the bit is being changed, sections of two or three joints are separated
and stacked. Drilling mud is left in the hole during this time to prevent excessive flow of fluids
into the well.
Pa-elaborate ng techniques for prospecting and drilling

Extraction and Recovery

Petroleum reservoirs usually start with a formation pressure high enough to force crude oil
into the well and sometimes to the surface through the tubing. This is called Primary Recovery.
However, since production is invariably accompanied by a decline in reservoir pressure, “primary
recovery” through natural drive soon comes to an end. In addition, many oil reservoirs enter
production with a formation pressure high enough to push the oil into the well but not up to the
surface through the tubing. In these cases, some means of “artificial lift” must be installed. The
most common installation uses a pump at the bottom of the production tubing that is operated by
a motor and a “walking beam” on the surface. A string of solid metal “sucker rods” connects the
walking beam to the piston of the pump. Another method, called gas lift, uses gas bubbles to lower
the density of the oil, allowing the reservoir pressure to push it to the surface. Usually, the gas is
injected down the annulus between the casing and the production tubing and through a special
valve at the bottom of the tubing. In a third type of artificial lift, produced oil is forced down the
well at high pressure to operate a pump at the bottom of the well.

When a large part of the crude oil in a reservoir cannot be recovered by primary means, a
method for supplying extra energy must be found. Most reservoirs have some gas in a miscible
state, similar to that of a soda bottled under pressure before the gas bubbles are released when the
cap is opened. As the reservoir produces under primary conditions, the solution gas escapes, which
lowers the pressure of the reservoir. A “secondary recovery” is required to reenergize or “pressure
up” the reservoir. This is accomplished by injecting gas or water into the reservoir to replace
produced fluids and thus maintain or increase the reservoir pressure. When gas alone is injected,
it is usually put into the top of the reservoir, where petroleum gases normally collect to form a gas
cap. Gas injection can be a very effective recovery method in reservoirs where the oil is able to
flow freely to the bottom by gravity. When this gravity segregation does not occur, however, other
means must be sought. An even more widely practiced secondary recovery method is
waterflooding. After being treated to remove any material that might interfere with its movement
in the reservoir, water is injected through some of the wells in an oil field. It then moves through
the formation, pushing oil toward the remaining production wells. The wells to be used for
injecting water are usually located in a pattern that will best push oil toward the production wells.
Water injection often increases oil recovery to twice that expected from primary means alone.
Some oil reservoirs are connected to large, active water reservoirs, or aquifers, in the same
formation. In such cases it is necessary only to reinject water into the aquifer in order to help
maintain reservoir pressure.

 Midstream Sector
Midstream activities are commonly included as part of other operations for much of the
global oil and gas industry. The midstream and downstream activities take place after the initial
production phase, known as upstream, and through to the endpoint of sale. Many oil and gas
companies are considered integrated because of their ability to combine upstream, midstream, and
downstream activities as part of their overall operations.

 Downstream Sector