Understanding the Oil & Gas Sector

Dharminder Dargan – Principal Cyber Security Architect Houston, Texas

0

20

40

60

80

100

120

1970 1975 1980 1985 1990 1995 2000 2005 2010

Oil Production CapacityO

il R

ate

MM

bd

World Production Capacity

World Demand

Source: BP Statistical Review, IEA WEIO, Salomon Smith Barney

ExcessCapacity

Oil Demand vs Production Capacity

E&P

Expe

nditu

res

$ Bi

llion

Oil Price $/B

E&P Expenditure

0102030405060708090

100110120

1970 1975 1980 1985 1990 1995 2000 2005 2010020406080100120140160180200220240

ExcessCapacity

Oil

Rate

MM

bd

Oil

Pri

ce $

/bb

l

WorldCapacity

Projected Demand growthat 1.6% per year

Source: BP Statistical Review, IEA Oil Market Annual Summary, OPEC Secretariat, Salomon Smith Barney. Data Revised January 2006.

WorldDemand

Source: BP Statistical Review, IEA WEIO, Salomon Smith Barney

Terminology Check…

• SCADA = Supervisory Control and Data Acquisition Systems

(these open and close valves, read flow, and give input into companies’ accounting systems)

• BTU = British Thermal Unit = Caloric Value = how natural gas is measured

0

100

200

300

400

500

600

700

0.4

5.9

47.3

17.4

28.9

%Share

Qu

ad

rillio

n B

tu

Nuclear

38.9

21.6

26.1

5.96.5

%Share

Coal

Hydro, Geothermal, Solar

24.4

6.3

7.0

%Share

22.1

25.9

%Share

15

3.5

8.1

47.5

0

600

700

0.4

5.9

47.3

17.4

28.9

%Share

%Share

38.9

21.6

26.1

5.96.5

%Share

%Share

%Share

Coal

Hydro, Geothermal, Solar

%Share

%Share

%Share

25.9

%Share

%Share

%Share

15

3.5

8.1

47.5

0

600

700

0.4

5.9

47.3

17.4

28.9

%Share

%Share

38.9

21.6

26.1

5.96.5

%Share

%Share

%Share

Coal

Hydro, Geothermal, Solar

6.8

%Share

%Share

%Share

25.9

%Share

%Share

%Share

15

3.5

8.1

47.5

0.4

5.9

47.3

17.4

28.9

%Share

%Share

1970 1988-2001 2001 2010 20201970 2010 20201970 2010 2020

38.9

21.6

26.1

5.96.5

%Share

%Share

%Share

%Share

Coal

38.7

23.7

7.0

%Share

%Share

%Share

%Share

22.7

Oil

Gas

%Share

%Share

%Share

%Share

15

3.5

8.1

47.5

%Share

%Share

15

3.5

8.1

47.5

Economides & Oligney: World Energy Consumption

Poll

• Question: Which term is used to refer to the Exploration and Production part of the oil cycle?

• Multiple Choice Answers:- Downstream

- Transcontinental

- Upstream

- Midstream

Where does Oil come from?

Oil Exploration & Extraction• Oil is a fossil fuel formed from the remains of

tiny plants and animals (plankton), 10 million-600 million years ago, which fell to the bottom of the sea.

• There, little or no oxygen was present, allowing microorganisms to break down the remains into carbon-rich compounds that form organic layers. The organic material mixed with the sediments to form fine-grained shale, or source rock.

• As the rocks layer, they exert extreme heat and pressure to distill the organic material into crude oil and natural gas.

• The oil then flows from the source rock and accumulates in thicker, more porous limestone or sandstone known as reservoir rock.

• When the earth moves the oil and natural gas is trapped in reservoir rocks, which are between layers of impermeable rock, or cap rock– usually granite or marble.

• The whole process takes millions of years.

Source:Howstuffworks.com

Finding Oil

• Government and Oil companies usually assign finding oil to contracted geologists

• The Geologists make an average of $100,230 making it an incentive to find new reserves

• Oil geologists examine surface features, surface rock, reservoir rock, entrapment, satellite images, sensitive gravity meters and magnometers. They can also detect the smell of hydrocarbons using electronic noses called sniffers.

• The most common technique for finding reserves is seismology which uses shock waves that interpret waves reflected back to the surface.

• Despite all the technology, modern oil exploration methods are only 10 percent successful.

Once the Site is Selected

Getting the land ready

• Area surveyed to determine boundaries.• Environmental studies done.• Land cleared and access roads built.• Water is drilled if no natural sources available.• A reserve pit is dug to dispose of rock cuttings and mud. It is lined with plastic to

“protect” the environment only if the area is considered to be “ecologically sensitive.”

Making way for the Rig

• Holes dug to make way for the rig and main hole• A rectangular pit (cellar) is dug around the location of the drilling hole. (This provides

a workspace.)• Crew drills a main hole • Additional holes dug to the side to store equipment

Source:Howstuffworks.com

Setting Up the Rig

Once the land is ready, several holes are dug to make way for the rig and main hole. A rectangular pit called a cellar is dug around the location of the actual drilling hole. The cellar provides a workspace around the hole. The crew then drills a main hole. Here’s how a rig is set up.

Drilling

• Drill bit, collar and drill pipe placed in the hole.

• Kelly and turntable attached; drilling begins.• As drilling progresses, mud is circulated

through the pipe and out of the bit to float the rock cutting out of the hole.

• New sections (joints) of drill pipes added as the hole gets deeper.

• Remove (trip out) the drill pipe, collar and bit when the pre-set depth (anywhere from a few hundred to a couple thousand feet) is reached. Photo courtesy Institute of Petroleum

Directional Drilling

Confirming the Presence of Oil

• After the pre-wet depth is reached, the workers run and cement the casing –pipe sections into the hole to prevent it from collapsing.

• Drilling continues in stages. • When the rock cuttings from the mud

reveal the oil sand from the reservoir rock, they may have reached the final depth.

• Then, they remove the drilling apparatus from the hole and perform several tests to confirm the presence of oil.

• These tests are Well Logging, Drill-stem Testing, and Core Samples.

Extracting the Oil• Once the well is completed, the operators

must start the flow of oil into the well. • For limestone reservoir rock, acid is pumped

down the well and out the perforations. • For sandstone reservoir rock, a special

blended fuel containing proppants is pumped down the well and out the perforations.

• The pressure from this fluid makes small fractures in the sandstone that allow oil to flow into the well, while the proppants hold these fractures open.

• Once the oil is flowing, the oilrig is removed from the site and production equipment is set up to extract the oil from the well.

Source:Howstuffworks.com

Extracting Oil

Source:Howstuffworks.com

Electric SubmersiblePump Systems

Production Logging

Oilfield Chemicals

Fishing Services

Workover Services

Progressing Cavity Pumps

Drill Bits

Directional Drilling

Drilling Fluids

Drilling Optimization

LoggingWhile Drilling

FluidSampling

IntegratedFormationEvaluation

Wireline

Logging

Coring

PerforatingIntelligent Well

Systems

ExpandableCompletions

FlawlessExecution

Sand ControlCompletions

PumpingServices

MultilateralSystems

Oilfield ServicesD

rilli

ng

Com

ple

tion

Pro

duct

ion

Form

ati

on E

valu

ati

on

Oil Refining - Cracking

• Further chemical processing is needed to make products such as gasoline of various grades, lubricating oils, kerosene, jet fuel, heating oil, chemicals for plastics and other polymers. It is possible to change one fraction into another through these three methods; cracking, unification, and alteration.

• Cracking takes large hydrocarbons and breaks them into smaller ones.

Oil Refining - Cracking

Poll

• Question: Which of these day-to-day activities is not touched by oil at some point?

• Multiple Choice Answers:- Air Travel

- Dry Cleaning

- Driving a Toyota Prius/Hybrid Car

- Paddling a Wooden Canoe

Products Produced from Crude

Pipeline System Sample Map

CO2 Pipelines

CO2 Field

Terminals

Products Pipelines

Products Pipeline Terminals

Transmix Facilities

Natural Gas Pipelines

Natural Gas Storage

Natural Gas Plants

Indicates # of Facilities(2,3,8)

NGPL

NGPL Storage

Natural Gas Pipelines

Natural Gas Storage

Gas-Fired Power Plants

Retail Natural Gas Division

2

2

2

4

8

2

2

2

2

KMCO2

PACIFIC COCHIN

PACIFIC

PACIFIC

CALNEV

NORTH

PLANTATION

CFPL

KMIGT

KMTP

KM TEJAS

2

NGPL

3

2

4

2

2

2

MONTERREY

2

Source: Kinder Morgan

Oil Exploration

Oilfield Development

Crude Oil Extraction

Refinery

Gasoline Retailing

Transportation / Storage

Downstream Distribution

Oilfield Data

• Pipeline Data, Operation, Security

• Well-head Data

• Seismic Data • Wireline and Logging Data

Land Land

streamer

OBC

land cable

Deep Water Shallow Water

Seismic Data Acquisition Overview

Seismic Data Utilization Overview

Well Mapping

Real-Time Decision3D Map creation

Visualization

Remote Well Operations & Completions

Onshore Facilities

Decision Centers

Offshore Facilities

Source: Peter Breunig (CVX)

Real-time Oil & Gas Operations

Integrated Global Operations

External Experts

Control Room Offshore

Service Company’sOnshore Operation Center

Decision Center

RemoteCollaboration

RoomRemote Monitoring

Business Challenges facing Oilfield Sector

1. Maintain high production while prices are high.2. Manage production decline at existing sources.3. Manage/effectively use huge amounts of data (seismic, wireline etc.).4. Integrate/manage continuous data from multiple sources5. Optimize production operations with real-time decision support.6. Applying technologies effectively, and not “owning” technology.7. Direct support and close collaboration with the industry and partners working on

the projects internationally.8. Staying compliant with accounting, privacy, safety, and environmental laws in the

countries where they are working.9. Managing the growing shortage of skilled workers.10. Securing data and information in a world of contract employees and multiple

partners on every job.

CA as a Player in Oil and Gas

• EITM is highly relevant to the industry- Security Management

- Project & Portfolio Management

- Compliance Management

- Records Management

- Service Management

• Upcoming webcasts will drill into these solutions with a number of use cases

Further Reading / Reference

• U.S. Energy Information Administration: Oil Market Basics http://www.eia.doe.gov/pub/oil_gas/petroleum/analysis_publications/oil_market_basics/default.htm

• UK Government Energy/Regulatory site – includes links to other useful sites http://www.dti.gov.uk/energy/statistics/index.html

• Society of Petroleum Engineers http://www.spe.org/spe-app/spe/index.jsp