The Global Oil Industry

BADM 381: September 30, 2008Kelley Sheehan

Kailyin Young

Caleb Ganzer

Caroline Bobrecki

Proven World Oil Reserves

Rank CountryOil - proved reserves

(bbl) Date of Information

World 1,331,000,000,000 1 January 2006 est.

1 Saudi Arabia 264,300,000,000 2007 est.

2 Canada 178,800,000,000 1 January 2006 est.

3 Iran 138,400,000,000 2007 est.

4 Iraq 115,000,000,000 1 January 2007 est.

5 Kuwait 101,500,000,000 2007 est.

6United Arab

Emirates 97,800,000,000 2007 est.

7 Venezuela 79,140,000,000 2007 est.

8 Russia 60,000,000,000 1 January 2006 est.

9 Libya 45,000,000,000 2007 est.

10 Nigeria 37,250,000,000 2007 est.

12 United States 21,760,000,000 1 January 2006 est.

https://www.cia.gov/library/publications/the-world-factbook/rankorder/2178rank.html

Petroleum Intelligence Weekly's Ranking of Top Oil Companies

Rank2006

Rank2005

 Company CountryState

Ownership %

1 1  Saudi Aramco  Saudi Arabia  100

2 3  NIOC  Iran 100

3 2  Exxon Mobil  US  

4 5  BP  UK  

5 4  PDV  Venezuela 100

6 6  Royal Dutch Shell  UK/Netherlands  

7 7  CNPC  China 100

8 11  ConocoPhillips  US  

9 8  Chevron  US  

10 8  Total  France  

Published December of 2007https://www.cia.gov/library/publications/the-world-factbook/rankorder/2178rank.html

Saudi Aramco

• Operations in:– Exploration, production, refining, marketing, and

international shipping.

• The company has approximately one fourth of world oil reserves

• The company is headquartered in Dhahran, Saudi Arabia and employs about 52,100 people.

• State Owned

National Iranian Oil Company(NIOC)

• State owned

• Involved in:– exploration, refining, and transportation of oil, gas,

and petroleum products. The company primarily operates in Iran where it is headquartered in Tehran, Iran

• NIOC produces more than 3.9 million barrels of crude oil per day from its 138.4 billion barrels of reserves.

Exxon Mobil• Engaged in

– exploration and production, refining, and marketing of oil and natural gas. The company is also engaged in the production of chemicals, commodity petrochemicals, and electricity generation.

• Exxon also set an annual profit record by earning $40.61 billion last year – nearly $1,300 per second in 2007.

Organization of Petroleum Exporting Countries (OPEC)

• Created in 1960

• Original Member Countries– Iran– Iraq– Kuwait– Saudi Arabia– Venezuela

• Objective statement

• Conference of OPEC members met on the 9th and

10th of September • Non-OPEC members attended 

– Minister of Petroleum of Egypt, the Deputy Prime Minister of the Russian Federation and the Minister of Energy & Mining of the Republic of Sudan,

• Discussed– energy market stability and security, enhancing

socio-economic development, alleviating poverty and protecting the environment, recognizing that energy is central to the achievement of the Millennium Development Goals

OPEC 149th Conference

US Oil ImportsCrude Oil Imports (Top 5 Countries)

(Thousand Barrels per Day)

Country Jul-08 Jun-08 YTD 2008 Jul-07 YTD 2007

CANADA 1,960 1,883 1,899 1,818 1,872

SAUDI ARABIA 1,661 1,479 1,543 1,434 1,411

MEXICO 1,200 1,124 1,194 1,469 1,457

VENEZUELA 1,187 1,085 1,038 1,167 1,117

NIGERIA 741 946 993 890 1,003

Total Imports of Petroleum (Top 5 Countries)(Thousand Barrels per Day)

Country Jul-08 Jun-08 YTD 2008 Jul-07 YTD 2007

CANADA 2,383 2,359 2,459 2,386 2,458

SAUDI ARABIA 1,673 1,493 1,558 1,436 1,435

VENEZUELA 1,340 1,215 1,196 1,399 1,363

MEXICO 1,290 1,254 1,302 1,611 1,593

NIGERIA 822 1,020 1,052 906 1,054

China Oil Imports• Half of its imports is from the Middle East

• In 2006, one-third of its oil imports from Africa,

– Angola, the Republic of Congo, Equatorial Guinea, and Sudan

– It has also sought supplies from Chad, Nigeria, Algeria, and Gabon.

• The International Energy Agency projects China's net oil imports will jump to 13.1 million barrels per day by 2030 from 3.5 million barrels per day in 2006.

Oil Consumption and Consumer Responses to Oil prices

Did you know?

• The United States alone consumes about 20,687 barrels of petroleum products each day almost half in the form of gasoline?

• Next in line is China with about 7,201• Although the United States is the world’s third

largest crude oil producer, less than 35 percent of the crude oil used by U.S. refineries was produced in the United States. • We are the 3rd largest crude oil producer, but most

of the petroleum we use is imported.

Did You Know?

• The United States produces about 10% of the world’s petroleum and consumes 24%.o About 20.7 millions barrels per day, making us

the world’s largest petroleum consumer. (2007)

                                  

How dependent are we on foreign oil?

• The United States imported about 58% of the petroleum, that we consumed during 2007. About half of these imports came from the Western Hemisphere.

   .764   -.793.725  California

   .784   -.773.693West Coast

   .834   -.1033.651Rocky Mountain

   .973   -.793.678Gulf Coast

   .893   -.1923.754Midwest

   1.034   -.1363.821  Lower Atlantic

   .878   -.383.634  Central Atlantic

   .862   -.543.601  New England

   .952   -.883.721East Coast

   .906   -.1173.718U.S.

Year AgoWeek AgoPrice 

Change from09/22/08

Gasoline  (Cents per Gallon)

Gas Prices nowIn the U.S.

Average: $3.73

$8.68Iceland

$8.69Sweden

$8.85Portugal

9.03Belgium

$9.09Italy

$9.27Findland

$9.29Denmark

$9.88Zambia

$9.95Norway

$9.97Netherlands

$11.18Turkey

*****$26.50****Gaza Strip

Price in USD Regular/Gallon

Nation

A look around the World

$0.41Iran

$0.47Saudi Arabia

$0.50Liby

$0.73Qatar

$1.14Yemen

$1.18Oman

$1.24Egypt

$1.40Ecuador

$1.44Iraq

$1.95Bolivia

Price in USD Regular/Gall

on

Nation

http://www.portfolio.com/interactive-features/2008/08/Gas-Prices-Around-the-World

The winner goes to….

Venezuela: $0.12 per gallon

Venezuela has the world's cheapest gas.• Motorists love it. They're buying cars at a record pace.

BUT• The nation's capital, Caracas, is having a problem

with clogged streets and air pollution.

Why Such a big difference?

• The main factor in price disparities between countries is government policy, Many European nations tax gasoline heavily, with taxes making up as much as 75 percent of the cost of a gallon of gasoline.

• Many of the low prices such as in Venezuela are the result of a big government subsidy.

• In a few Latin America and Middle-East nations, such as Venezuela and Saudi Arabia, oil is produced by a government-owned company and local gasoline prices are kept low as a benefit to the nation's citizens.

What now?

• Since many consumers around the world are paying outrageous prices for gas, they are urging foro Changes in policieso Finding and investing in alternative sources for fuel

• Besides the economic need there is also needs because of environmental, geopolitical and sustainability concerns .o Environmental groups have for years been arguing that we shall

all have to live radically different lives when the oil reserves are finally exhausted. The benefit of the present oil price hikes could be to focus attention

on the possibility of a world less dependent on oil. The truth is that they probably never will be. Oil will simply become

too expensive to compete with other fuels.

Renewable Resources• Renewable energy is energy generated from natural resources

which are renewable (naturally replenished)• Success Stories

• Germany

Requiring utilities to buy renewable power

A good idea          80%A bad idea   20%

Biomass

Wind

HydropowerSolar Power

Ethanol

• Ethanol is a renewable fuel made from various plant materials, which are called "biomass.”o Examples: Switchgrass, hemp, corn, willow,

sugarcaneo biofuels emit far fewer greenhouse gasses

• United Stateso corn grain

o Food versus fuel debate

• Brazilo sugar cane

Using more biofuelsA good idea    45%A bad idea    55%

Total responses to this question: 41876

Hybrids

• A hybrid vehicle is a vehicle that uses two or more distinct power sources to propel the vehicle. Power sources include:o On-board or out-board

rechargeable energy storage system (RESS)

o Gasolineo Hydrogen

• The term most commonly refers to Hybrid-electric vehicle (HEV) which includes internal combustion engines and electric motors

Nuclear Power• Some people still put their hopes in

nuclear power, which makes far less of a contribution to global warming

• Today, more than 15% of the world's electricity comes from nuclear power

• The long-term radioactive waste storage problems of nuclear power have not been solved.o Concerns about health risks

• The world's nuclear industry has had serious accidents. Many people therefore reject new nuclear plants in the belief that more accidents are inevitable. Building more nuclear plants

A good idea         79%A bad idea

    21%Total responses to this question: 43308

Conservation• Some people suggest that

greater concentration on conservation is keyo Most of us all over

the world still waste fuel on a excessive scale, and the savings we could make by greater efficiency, and by just switching off, are immense.

QuickTime™ and aTIFF (Uncompressed) decompressor

are needed to see this picture.

The Heated Debate on Drilling

The heated debate on drilling: • The debate on drilling has been going on since 2004.

When Americans began weighing the pros and cons to offshore and Alaskan drilling.

• A few pro's:– Lower fuel prices– Less dependency on foreign oil

• Con's:– Continue to destroy the environment

•  • Natural disasters here has spurred even more talk on this

debate. Generally because hurricanes in the paths of oil production rigs  because they create imbalances to supply and demand which affect the price of gas.

 Political Standpoints on Drilling:Republicans:• promote supply-side solutions like drilling offshore and in an

Alaska wildlife refuge.  At the Republican National Conference Presidential Nominee John McCain calls for "Drill Baby Drill" and "Drill Now".      Democrats: • mostly push demand-side ideas such as renewable energy

sources.• opposition comes from the idea that drilling will affect natural

habitats and have a small impact on gas prices. 

Democratic Presidential Nominee Barack Obama encouraged inflating tires to the proper level instead of drilling. But in August shifted his opposition to drilling saying he could support the new drilling proposal drafted by Congress (Saine).  

1)Exploration- Seismic exploration locates hydrocarbons on land or under the sea 2) Preparing the Drill3) Drill to receive the resources4) Extracting the oil5) Production and Transport:The oil and gas are then transported, either by ship or pipeline, to processing facilities. Facilities remove impurities and convert oil and gas to refined products  and petrochemicals we use daily.  6) Market- at the gas pump

 

      

The Oil and Natural Gas Value Chain

1) Seismic Exploration• Seismic waves reflect off rock formations

and travel back to hydrophone receivers. • Geologists then estimate the structure and

types of formations under land by measuring travel times of the returned energy. 

• This tells them where to drill. 

2) Preparing to drill requires: • Clearing the land and building access

roads.• Have a source of water nearby, or drill a

water well.• Digging a reserve pit for rock and mud that

comes up in the drilling process.

Drilling off the coast of Cuba.

The Discoverer Deep Seas drill ship sits off the coast of Louisiana as Chevron drills for oil in the Gulf of Mexico.

Examples of drill ships

continued value chain3) Drilling:• Drill the surface hole, and after reaching the pre-

set depth, cement the casing so it does not collapse.

• Drilling continues in stages: They drill, then run and cement new casings, then drill again. 

• Run tests to make sure they are at the right depth.

4) Extracting the Oil:• Remove the drill, and place a pump on the well

head.The pump system forces the pump up and down, creating a suction that draws oil up through the well. 

• If the oil is too heavy a second hole is drilled where steam pressure is injected.

• Heat from the steam thins the oil, and the pressure pushes it up the well.

. 

5) Production  • Gas and oil are gathered and transported, through pipelines or ships, to processing

facilities.  • Gasoline and natural gas are used as fuel in the transportation sector. • Oil can be stored in specially built tanks before being processed into products or

exported. • Oil and gas can be used as fuel in the generation of electrical power. • Oil and gas are exported either as refined products or crude oil in specialized tankers.

6) Social and Economic BenefitThe activities of the oil value chain create wealth in the form of taxes, and dividends for countries and help provide more employment opportunities.

Oil Barrel Politics: Running on Volatility

The ‘Oil Curse’

• 1970so Oil Boomo Fast Growth among

OPEC nations• 2005

o After decades of sluggish growth, if not recession, over 50% of countries poorer

Dutch Disease

• 1960s

Oil’s Political Effects

1) Economic and Political Instability• Volatile prices = volatile job

market• When people are out of

work they are more susceptible to violence

Oil’s Political Effects

2) Supports Insurgents• Steal & Sell• Extortion• Political Alliances

Oil’s Political Effects

3) Increases Separatism• Massive revenues, little

disbursement of wealth• Underrepresented locals

bear brunt of costs

The Oil Producing Countries is relatively fixed, right?

Wrong!:(

Countries contending for Arctic Ocean Drilling & Shipping Rights

• Canada• Denmark• Russia• Finland• USA

Russia staking its claim

• Russia petitioned UN to extend continental shelf - seeking exclusive exploration rights

• 2007, Russia planted a flag on the extreme edge of its continental shelf, under the North Pole

Works Cited  Freundenrich Ph.D., Craig. "How Oil Drilling Works". 2008       http://science.howstuffworks.com/oil-drilling3.htm National Gas Company of Trinidad and Tobago. "Natural Gas Value Chain". 2007      http://www.ngc.co.tt/knowledge/knowledge_value_chain.htm   Reuters, Thomas. "Five Questions about U.S. offshore Drilling" 14 July 2008.     http://www.reuters.com/article/newsOne/idUSN1443189420080715?sp=true   Saine, Cindy. "Obama Softens His Stance on Offshore Oil Drilling" 02 August 2008    http://www.voanews.com/english/archive/2008-08/2008-08-02-voa7.cfm?CFID=42787907        &CFTOKEN=5617557  UTC Energy Investment Series. "The Energy Value Chain"     http://www.ttutc.com/news/article/energy/value_chain.pdfhttp://money.cnn.com/2008/02/01/news/companies/exxon_earnings/http://www.energyintel.com/documentdetail.asp?document_id=218175https://www.cia.gov/library/publications/the-world-factbook/rankorder/2178rank.htmlhttp://www.washingtonpost.com/wp-dyn/content/article/2008/06/09/AR2008060900714.htmlhttp://www.saudiaramco.com/irj/portal/anonymoushttp://library.marketlineinfo.com.proxy2.library.uiuc.edu/library/http://www.opec.org/aboutus/history/history.htmhttp://www.businessspectator.com.au/bs.nsf/Article/Statement-from-149th-Meeting-of-the-OPEC-Conferenc-JC58W?OpenDocument

Sources

• Borgerson, Scott. “Arctic Meltdown”. Foreign Affairs, March/April 2008

• Carbon-cutters.com (Oily World Image)• Ebrahim-zadeh, Christine . Finance &

Development. IMF. V40, 1. March 2003.• media.washingtontimes.com (background

image)• Nasa.gov (North Sea Image)• Ross, Michael. “Blood Barrels”. Foreign

Affairs, May/June 2008• Russia-ic.com• Wikimedia.org (OPEC image) • worldproutassembly.org (arctic sea image)

Sources

•http://72.3.136.90/NACS/Resource/PRToolkit/Campaigns/prtk_gp2008_Resources.htm

•http://www.npr.org/templates/story/story.php?storyId=6542617

•http://money.cnn.com/galleries/2008/news/0807/gallery.energy_solutions/13.html

•http://www.eia.doe.gov/oil_gas/petroleum/info_glance/Petroleum.html

•http://www.portfolio.com/interactive-features/2008/08/Gas-Prices-Around-the-World•http://www.nytimes.com/2006/04/10/world/americas/10brazil.html