Mapúa University

School of Mechanical and Manufacturing Engineering

Research Work no. 1

Oil Industry

10; JAPUS, ALEXIS S. DATE OF PERFORMANCE:

AUGUST 24, 2019
ME139L – E01
DATE OF SUBMISSION:
GROUP NO. 2
SEPTEMBER 27, 2019

Engr. Manuel Ventura

Instructor

Grade
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Table of Contents
I. Objectives...........................................................................................................................................2
II. Introduction...................................................................................................................................2
III. History of Oil Industry..................................................................................................................2
IV. Crude Oil Detection.......................................................................................................................3
V. Crude Oil Recovery...........................................................................................................................4
VI. Transport.......................................................................................................................................5
VII. Refinery..........................................................................................................................................8
VIII. Finished Products....................................................................................................................10
IX. Advantages and Disadvantages of the Industry to Global Issues.............................................11
X. Safety and Accidents.......................................................................................................................11
XI. Historic Accidents........................................................................................................................12
XII. Oil Industry in the Philippines....................................................................................................13
XIII. Conclusion................................................................................................................................14
XIV. References................................................................................................................................15
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I. Objectives

1. To be familiarized with the processes in oil industry.

2. To have a brief knowledge about the history of oil industry.
3. To determine the advantages and disadvantages of producing oil products.

II. Introduction

The oil industry, also known as the petroleum industry, includes the exploration,
production, refining, and transportation of crude and petroleum products via rail,
road, pipelines or sea by tankers and marketing of petroleum products. It has large
role in the global economy in any nation because it promotes industrialization. The oil
industry is divided into three major components, upstream, midstream, and
downstream. The upstream sector is involved with well completions and drilling
operations. In this sector, exploration and production organizations would perform
seismic surveys of the ground to search for hydrocarbon formations of crude oil and
natural gas. The midstream sector is involved with the transportation of oil or refined
petroleum products to various refineries or industries for further processing or usage
mainly through rail, tankers, and pipelines. Lastly, the downstream sector includes the
refineries that process crude oil into petroleum products like LPG, jet kerosene, high
speed diesel, and heavy products. Marketing agencies or oil marketing companies
would sell these petroleum products, once they are produced, to various geographical
locations.

III. History of Oil Industry

The history of oil industry is long, lasting over thousands of years. As its
development has evolved over time, its numerous uses also expanded and became an
integral part of today’s economy. Its uses eventually replaced coal as the world’s
primary source of industrial power in the early twentieth century. It has played a
major role in significant events such as in both the World Wars and continues to be a
critical fuel source that powers industry and transportation. Asides from the modern
times, it also played an important role throughout world history, such as that it was
used in ancient cultures as a substance for binding materials and as a sealant for
waterproofing various surfaces. It was even recognized for its importance and
potential use by the Chinese around 500 B.C. By that time, it was described by
ancient Chinese history how there were wells over 100 feet deep containing water and
natural gas along the Tibetan border.
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The modern oil industry started in the late 19th century. In the early 1800’s,
merchant would build dams that allowed oil to float to the water’s surface in an area
within western Pennsylvania using technique that uses blankets employed in the
water, letting them be soaked with oil and then retrieved by wringing out the blankets.
The invention of the kerosene lamp in the mid 1850’s led to the establishment of the
first US oil company, but it wasn’t until 1870 that John D. Rockefeller founded the
major oil company, Standard Oil Company. By 1909, as a result of antitrust laws, the
federal court ordered the company to be separated into 34 separate companies.
Standard Oil dominated the first two decades of the oil industry and made the US
accounted for more than half of the world’s production until around 1950, in which
world markets in Europe, Russia, and Asia began to play a bigger role.

By the beginning of the 20th century, oil production was dominated by three
regions: US, Russia and the Dutch East Indies. However, during the first decade of
the 20th century, major efforts were underway to explore and develop oil in the
Middle East region, in which began in Persia (known as Iran in the modern times)
followed by Turkey. In the late 1930’s, the Burgan oilfield was discovered in Kuwait.
A decade later, the Ghawar oilfield was then discovered in Saudi Arabia, in which
remains the largest oil field ever discovered. After World War II, joint American and
Saudi commercial oil enterprises were formed creating conglomerates, such as
CASCO (California Arabian Standard Oil Company), Caltex (California Texas Oil
Company). Eventually Esso (Exxon) and Mobil joined the Standard Oil Company of
California to form Aramco (Arabian American Oil Company).

IV. Crude Oil Detection

Employed directly by an oil company or under contract from a private firm,

geologists are the people responsible for detecting oil. It is their task to find the right
conditions for an oil trap – the right source rock, reservoir rock and entrapment. Many
years ago, they would interpret surface features, surface rock and soil types, and
perhaps some small core samples obtained by shallow drilling. In modern times, they
also examine surface rocks and terrain, with the additional help of satellite images.
They can use sensitive gravity meters to measure tiny changes in the Earth’s
gravitational field that could indicate flowing oil, as well as sensitive magnetometers
to measure tiny changes in the Earth’s magnetic field caused by flowing oil. They can
also detect the smell of hydrocarbons using sniffers. Lastly, the most common method
is that they use seismology, creating shock waves that pass through hidden rock
layers and interpreting the waves that will be reflected back to the surface.

In seismic surveys, a shock wave is created by the following: a compressed-air

gun that shoots pulses of air into the water, a thumper truck that slams heavy plates
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into the ground, or explosives that is detonated after being drilled into the ground or
thrown overboard. The reflections travel at different speeds depending on the type or
density of rock layers through which they must pass through. Sensitive microphones
or vibration detectors will detect the reflections of the shock waves like hydrophones
over water, seismometers over land. Seismologists interpret the readings for signs of
oil and gas traps. Once geologists find a prospective oil strike, they would mark the
location using GPS coordinates on land or by marker buoys on water.

V. Crude Oil Recovery

Oil recovery is separated into three phases. Primary oil recovery is limited only to
hydrocarbons that naturally rise to the surface, or those that use artificial lift devices.
Secondary recovery uses water and gas injection, displacing the oil and driving it to
the surface. It is observed by the US Department of Energy that using these two
methods of recovery can leave up to 75% of the oil in the well. To further increase oil
recovery, the tertiary recovery method or Enhanced Oil Recovery (EOR) is used.
Although it is expensive to use, it would cover the remaining 75%, at maximum.
EOR is used in fields that exhibit heavy oil, poor permeability and irregular fault lines
as it changes the actual properties of the hydrocarbons, which would distinguish this
type of recovery from the secondary method. Producers do use this method on all
wells and reservoirs as it increases the cost of development along the hydrocarbons
brought to the surface. Each field must be heavily evaluated first to determine which
type of EOR would best work on the reservoir, which is done reservoir
characterization, screening, scoping, and reservoir modeling and simulation.

There are three main types of EOR, which includes chemical flooding, gas
injection and thermal recovery. In thermal recovery, heat is introduced to the
reservoir to reduce the viscosity of the oil. Many times, steam is applied to the
reservoir, thinning the oil and enhancing its ability to flow. Chemical injection EOR
helps free the trapped oil within the reservoir. It introduces long-chained molecules
called polymers into the reservoir to increase the efficiency of waterflooding or
boosts the effectiveness of surfactants, which are cleansers that help lower surface
tension that inhibits the flow of oil through the reservoir. Gas injection is used as a
tertiary method of recovery that involves injecting natural gas, nitrogen or carbon
dioxide into the reservoir. The gases will either expand and push gases through the
reservoir, or mix with or dissolve within the oil, decreasing the viscosity and
increasing the flow. Carbon dioxide EOR is the method that is most popular. Initially,
CO2-EOR developments used naturally occurring carbon dioxide deposits. However,
technologies have been developed to inject CO2 created as byproducts from industrial
purposes.
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VI. Transport

The transportation of oil is a part of the midstream industry. After it has been
extracted from the ground, it requires transportation and distribution to refineries and
upgraders that convert oil into usable components. After refining and upgrading, the
usable petroleum products are then transported again to distribution locations all
over the world. Oil transportation is classified in several different methods, all of
which have been becoming increasingly important. Advances in exploration and
extraction techniques indicates that oil is being located and recovered from
increasingly remote location across the globe. This coupled with an increasing
demand for petroleum products has resulted in oil extraction and refining and being
very far from where people are using gasoline, diesel, and kerosene. This separation
of supply and demand makes transportation of oil very important in the petroleum
industry.

There are several different ways used for the transportation of oil worldwide in
large quantities, and each type has their own set of benefits and drawbacks. One of
them is transporting crude oil via oil tankers. These are large ships used to transport
crude oil from the Middle East, Africa, and Latin America to refineries all over the
world. Tankers that carry refined products are known as product tankers, and they
carry refined petroleum products from refineries to distribution locations. Oil tankers
can vary in size, although there are smaller vessels that are generally used to
transport refined petroleum products whereas much larger tankers are used to
transport crude oil. The larger ships are used more for crude oil as they reduce the
cost per barrel of transport of the oil. The sizes of tankers are expressed in terms of
cargo tonnes – or how much cargo they can carry. Larger crude oil tankers carry
significantly more and are generally utilized in the international crude oil trade.
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Figure 1. Commercial Oil Tanker

Another method of oil transportation is via pipelines. They are pipes that are
usually underground and used in the transportation and distribution of fluids. When
discussing about pipelines in an energy context, the fluids are usually either oil, oil
products or natural gas. Within the energy sector, there are two major types of
pipelines, liquid and natural gas pipelines. Liquid pipelines are used to transport
crude oil or natural gas in their liquid form to refineries where they would undergo
distillation and other production processes. They are very versatile and can transport
a variety of grades or varieties of crude oil and crude oil products. Natural gas
pipelines are used solely for the transport of natural gas to processing plants and are
used for distribution.

In terms of their operation, liquid pipelines that transport crude oil and liquefied
petroleum products use small diameter gathering lines to collect the product from
where it was extracted. After moving to a gathering facility, it moves to the feeder
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pipelines with relatively large diameters which transports the product to refineries.
Transmission lines are used when oil and liquids must travel long distances. To push
the liquid through the pipe, powerful pumps are used and move oil at around
walking speed. The process for natural gas pipelines is similar to liquid pipelines –
extracted natural gas is transported for processing in gathering and feeder lines, them
moves into large transmission pipelines. Gas is able to flow as it moves from areas
of high pressure to low pressure. This pressure difference is obtained using
compressors that increase the pressure of the gas, pushing it along. Once the gas
reaches a distribution, companies will reduce the pressure of the gas and distribute it
through small distribution pipelines.

Oil can also be transported via rail. They can be transported on long cargo trains
equipped with special tanker cars, and rail transport is used most commonly in areas
without pipelines. In contrast to oil tankers, which can hold a significant amount of
crude oil in a small number of holding tanks, rail cars can only transport the required
large quantities of oil in multiple cars. After extraction, oil is loaded onto these
railcars and moved across pre-existing tracks to the refinery. Although more cars are
required to transport significant amounts of oil, rail transport is a fairly cost-effective
method of moving oil. Similar to pipelines and oil tankers, it can also be used to
transport refined petroleum products to distribution locations.

Figure 2. A tank car used in transport of oil by rail

Another type of oil transport would be via tanker trucks. Like in rail
transportation, several large trucks with equipped oil tanks are needed to move
significant quantities of oil. Generally, they are used to carry small quantities of oil
in short distances and rarely used in carrying crude oil. Instead, they are more
commonly used to move refined petroleum such as gasoline to distribution such as
gas stations. Unlike railways, trucks can operate more freely as they only require
roadways to travel.
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Figure 3. An oil tanker truck

While there are various transportation options for oil, the decision of which
method to use usually depends on the cost and location. For example, short distance
transportation is usually done by feeder or distribution pipelines and, in some cases,
trucks. When land routes are unavailable, tankers are the only option for delivering
oil to the market. It is expected that these transportation methods will continue to be
used, unless a radically new method is found. Therefore, most of the technology
development in oil transportation methods is aimed at reducing emission, increasing
efficiency, or preventing spills and leaks.

VII. Refinery

Petroleum refineries are large-scale complexes that produce saleable petroleum

products from crude oil and sometimes other feedstocks such as biomass. Operations
within the refinery differ from location to location, but virtually all refineries share
two basic processes for separating crude oil into the various product component. The
first process is known as distillation. In the distillation process, crude oil is heated and
fed into a distillation column. As the temperature of the crude oil in the distillation
column rises, the crude oil will separate itself into different components, called
“fractions.” They are then captured separately. Each fraction corresponds to a
different type of petroleum product, depending on the temperature at which that
fraction boils off the crude oil mixture.
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Figure 4. Schematic of distillation column

The second process is known as cracking and reforming. The heaviest fractions,
including the gas oils and residual oils, are lower in value than some of the lighter
fractions, so refiners will go through a process called “cracking” to break apart the
molecules in these fractions. The process can produce some higher-value products
from heavier fraction. Cracking is most often utilized to produce gasoline and jet fuel
from heavy gas oils. Reforming is typically utilized on lower-value light fractions,
again to produce more gasoline. The reforming process involves inducing chemical
reactions under pressure to change the composition of the hydrocarbon chain.
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Figure 5. Important processes of a refinery

VIII. Finished Products

Almost every item that is used today are made from petroleum, and most of them
are common, daily products used for daily needs. Some of these products are the
following:

 Plastics  Bug Killer

 Ink  Ammonia
 Paint  Tires
 Shoe Polish  Asphalt
 Nylons  Crayons
 Cosmetics  Paper Cups
 Candles  Wax Paper
 Vaseline
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IX. Advantages and Disadvantages of the Industry to Global Issues

One of the advantages of the oil industry is that oil has energy density in which a
small amount of natural gas is enough to generate an enormous amount of energy
needed to run machines. Oil is easily available especially that there are efficient
transport systems available, like it can be transported by ships, tankers, pipelines, etc.
It is also used in most industries as all goods used have been produced using oil input
at some stage of the production process. Lastly, oil is a constant power source, as it
has always been proven to be always reliable in producing energy and that most
engines that use oil as fuel have been designed using mature technology to ensure that
they are less likely to break down.

Asides from its advantages, the oil industry has its own share of disadvantages.
One of them is that they emit greenhouse gases. After combustion, oil would release
gases such as carbon dioxide and other greenhouse emissions, which are harmful to
the ozone layer as their accumulation continues to deteriorate the ozone layer and that
it would eventually cause global warming. Another disadvantage would be that it
causes water pollution. As water transport is often the viable option for its transport,
there would always be the possibility of oil spills which would destroy aquatic life.
Lastly, refining oil would also produce highly toxic substances as it is primarily a
mixture of various hydrocarbons. As these hydrocarbons have to be refined before
being used, various toxic gases such as carbon monoxide and solid such as plastic are
emitted while being refined.

X. Safety and Accidents

Workers in the oil and gas extraction industry continue to be one of the highest
people at risk of injuries and fatalities on the job compared to other industries. In a
statistic data in the US, out of the 120 workplace deaths in the mining, oil and gas
extraction industry, 74 of them occurred within the support activities for oil and gas
operations. Most of these accidents would involve vehicle collisions, explosions and
fires, falls, confined spaces, ergonomic hazards, high pressure lines and equipment,
electrical and other hazardous energy, machine hazards, and many more. Due to the
constant pressure of efficient productivity from the high costs of the drilling projects,
long work days, and high physical demands, workers would receive a huge toll on
themselves which affects their safety by causing an increase in human error especially
in the misuse of equipment and inconsistent procedures that leads to higher chances
of accidents. With these reasons, safe programs and behavior would be re-evaluated
by their importance to effective address worker safety issues and reducing the rate of
injuries and accidents in the industry.
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One such tip in improving worker safety would be to develop a relationship with
the local emergency response organization and to establish a consistent flow of
communication to provide a higher level of overall safety. Emergency responders, rig,
and safety and health professionals must work together to utilize their resources to be
ready to handle emergencies swiftly and successfully. Another would be to encourage
an environment of open communication and respect. Embrace a personal approach to
safety training and dedicate time to allow workers to get to know each other which
will inherently build trust and comradery when out in the field to improve overall
safety. Also, it is important for everyone who will be conducting work to understand
their role, possible hazards, and all safety precautions. Other such important safety
tips would to actively monitor the mental health of the workers, having a consistent
housekeeping on the work areas, conducting regular maintenance checks on the
machinery, take time to assess that signs and labels are in the correct areas and
communicate present hazards and procedures before beginning the next project.

XI. Historic Accidents

Working in the oil industry has its own risks, especially when it comes to drilling
for oil. Oil rig workers are among the most skilled and most at-risk workers in the
world. Oil companies and rig workers must take extreme precaution during all parts
of the process to avoid disaster. One mistake or one missed safety procedure can lead
to a catastrophic blowout. Even though the risks are given, some companies,
unfortunately, cut corners to save time and money, in which the workers’ lives
would be at risk. Fires and explosions that occur on oil rigs are some of the most
devastating types of offshore accidents that can possibly happen. The injuries
workers sustain from oil rig accidents may result into long-term consequences for
themselves and their families.

One such example of an oil rig accident is the Santa Barbara oil spill that occurred
on January 1969. What happened was that after Union Oil began drilling a fifth oil
well on their offshore Platform A, five miles from the coast of Santa Barbara, CA,
the well blew out, spewing oil and gas. The explosion cracked the sea floor and
released 1000 gallons of oil an hour. A second blow out also occurred days away
from the first one. It resulted in the California coastline being devastated by 3
million gallons of crude, which became the largest oil spill until the Exxon Valdez
accident that happened 20 years later. The spill then led to the signing of the
National Environmental Policy Act, which required the creation of environmental
impact reports on major projects.

Another example would be the Alexander L. Kielland disaster that occurred on

March 1980, in which occurred due to a fatigue crack caused by a bad weld job. On
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the night of March 27, while the workers were enjoying their off hours, the wind
outside the oil platform has picked up to 45 miles per hour with 40-foot waves. It
was then reported that the men reported hearing a loud crack, which was later
determined to be the snapping of 5 anchor cables. The sixth cable barely held on,
preventing the platform from capsizing until 20 minutes later. However, because
there was a poor command structure aboard the platform, most of the worker did not
attempt to escape the platform. Of the seven 50-man lifeboats and twenty 20-man
raft, only 1 lifeboat and 2 rafts were able to be released from the lowering cables, in
which resulted the death of 123 out of 212 men aboard. The tragedy led to new
requirements for lifeboat hooks and new command structures to facilitate faster
abandonment of sinking vessels.

XII. Oil Industry in the Philippines

In the Philippines, petroleum exploration starts back at 1896 with the drilling of
Toledo-1 well in Cebu Island. Widespread exploration activities were carried out
from the 1950s to 1970s. By that time, exploration is then governed by the Petroleum
Act of 1949 (RA 387) which ushered in the era of the concession system. The current
Service Contract System took effect in 1973 with the enactment of the Oil
Exploration and Development Act of 1972. Due to its attractive contractual terms and
liberal fiscal regime that are favorable to offshore exploration, activities shifted to
offshore areas like the Northwest Palawan Shelf where the first oil field was
discovered, in which several small fields were subsequently discovered and produced.
After that, a relatively large field was in offshore Northwest Palawan when the
Camago-1 well was drilled by Occidental Philippines (Oxy). The Camago Structure
revealed the presence of oil and thick layer of natural gas with associated condensate.
In 1990, the West Linapacan field was discovered by Alcorn Philippines, in which the
field commenced production after two years and ceased production in 1996. In 1991,
Shell Philippine Exploration B.V. and Oxy drilled the Malampaya gas field which, so
far, the largest gas discovery in the country with proven reserves of 2.7 to 3.2 Trillion
cubic of gas (Tcf) and that the natural gas is enough to provide clean fuel for five
power plants in Batangas. It started its production in 2001 and by December 2017, it
has produced a total of 1.96 Tcf of gas and 75 million barrels of associated
condensate. In 2001-2992, the oil leg was tested and produced 1.9 million barrels of
crude oil.

Under the Oil Exploration and Development Act of 1972, petroleum service
contractors are provided with following incentives: service fee up to 40% of net
production, cost reimbursement up to 70% gross production with carry-forward of
unrecovered costs, FPIA grants of up to 7.5% of the gross proceeds for service
contract with minimum Filipino company participation of 15%, exemption from all
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taxes except income tax, income tax obligation paid out of government’s share, easy
repatriation of investments and profits, special income tax of 8% of gross Philippine
income for subcontractors, and etc.

XIII. Conclusion

Oil is a resource that became usable for long time. However, it became popularly
used starting from the industrial revolution in which it was used for fuel, household
items and other such applications. Over time, its uses continue to expand, and it even
became an integral part of today’s economy. To be able to use it, its source must be
discovered first and its thanks to geologists that the discovery of oil made the
resource easier to obtain than before, as they continue to find methods in its detection
to become faster and more accurate. After its discovery, it must be recovered using
either of the three processes depending on the location of the oil field. This stage of
the oil production must be done carefully and accurately, as one mistake could affect
not just the lives of the workers, but also the environment as well. Only then, would
the production of saleable petroleum products, such as plastics, ink, pain, fuel, tires,
and many more; and sometimes other feedstocks, such as biomass, can be done.
Operations are also to be done carefully especially due to the location of the refinery
has to be considered.

In the refinery, crude oil would be separated into various product component.
Even though the oil industry has become an integral part in every nation’s economy,
it has its own set of advantages and disadvantages. Advantages such as that it is easily
available, and it can be used in most industries as it is used at some stage of the
production process. However, its disadvantages would have to be considered as well,
such that they could destroy the Earth’s atmosphere or that it produces toxic gases
that are bad for the health. Based from the assessment of its advantages and
disadvantages, officials would propose multiple safety precautions to counter the
disadvantages to take advantage of the usage of the resource. However, there would
always be times that companies would risk the workers’ lives by taking shortcuts to
lessen the costs of production. Taking these risks could be advantageous and at the
same time disadvantageous. In terms of being disadvantageous, it has already been
proven that accidents would occur, based from those that are recorded especially that
are well-known.

In terms of oil transportation, transportation is involved in the delivery of crude

oil to refineries and in the delivery of crude oil products to distribution centers. The
selection of the method of transportation depends on the cost and the location. There
are several methods involving oil transportation, each having their own benefits and
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disadvantages. Some of these methods are via pipelines, oil tankers, railways, and
truck tankers. As extraction and refining methods are still developing, people are also
researching for ways to transport oil with less emission, increased efficiency, and
prevention of hazards such as spills or leaks

Like almost every other country, Philippines has oil as an integral part to its
economy since the discovery of the resource back at 1896. Integral that it is second to
coal in amount that is used to generate power for the whole country. In addition, it
provided a lot of opportunities like the potential number of workers that could be
hired and that the industry would also help in providing high income for its workers
and their families. In short, the usability oil varies for various types of industries and
that it advantageous in one aspect and disadvantageous in another aspect.

XIV. References

 (n.d.). What is Oil Industry? - Definition from Petropedia. Retrieved from

https://www.petropedia.com/definition/7092/oil-industry
 (n.d.). The Oil & Gas Industry. Retrieved from
https://www.loc.gov/rr/business/BERA/issue5/history.html
 Craig Freudenrich, P. D., & Strickland, J. (2018, June 28). How Oil Drilling
Works. Retrieved from
https://science.howstuffworks.com/environmental/energy/oil-drilling2.htm
 (n.d.). What Is EOR, and How Does It Work? Retrieved from
https://www.rigzone.com/training/insight.asp?insight_id=313&c_id=
 Transportation of oil. (0AD). Retrieved September 27, 2019, from
https://energyeducation.ca/encyclopedia/Transportation_of_oil.
 Oil Transport. (0AD). Retrieved September 27, 2019, from
https://www.studentenergy.org/topics/ff-transport.
 (n.d.). The process of crude oil refining. Retrieved from https://www.e-
education.psu.edu/eme801/node/470
 (2017, September 12). Products Made from Petroleum. Retrieved from
http://www.earthsciweek.org/classroom-activities/products-made-petroleum
 (2018, April 9). Advantages and Disadvantages of Using Oil Energy. Retrieved
from http://www.4gas.com/advantages-disadvantages-using-oil-energy/
 Rzepecki, K. (2018, August 7). 10 Safety Tips For Oil & Gas Industry Workers.
Retrieved from https://www.manufacturing.net/article/2017/12/10-safety-tips-oil-
gas-industry-workers
 (n.d.). UNITED STATES DEPARTMENT OF LABOR. Retrieved from
https://www.osha.gov/SLTC/oilgaswelldrilling/safetyhazards.html
 (n.d.). Major Offshore Accidents of the 20th & 21st Century. Retrieved from
https://www.arnolditkin.com/oil-rig-explosions/major-oil-rig-disasters/
 (n.d.). Oil and Gas History: Department of Energy Philippines. Retrieved from
https://www.doe.gov.ph/oil-and-gas-overview
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