MG672 Oil and Gas Management Summary 1

8/13/2019 MG672 Oil and Gas Management Summary 1

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MG672 Oil and Gas Management

Week 1

Global oil & gas industry

Oil and Gas formation &reserves


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What is petroleum?

Petroleum: A general term for allnaturally occurring hydrocarbons

(hydrogen + carbon)

Solid Hydrocarbons: Asphalt

Liquid Hydrocarbons: Crude oil

Gas Hydrocarbons: Natural Gas:

methane, butane, propane, etc.

The simplest hydrocarbon

is Methane (CH4)


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1. Source RocksOrganic Matter

Sedimentary rocks rich inorganic matter

0.5 - 2% by weight

Most commonlymicroscopic marinematerial, but it can beland based material

Organic material cannotdecay too much

It has to keep its carbon


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Petroleum source rocks

Petroleum source beds are fine grained, clay-

rich rocks (mudstones, shales) or dark

coloured carbonate rocks (limestones,

marlstones), which have generated and

effectively expelled hydrocarbons.


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Kerogen

The solid organic matter in source rocks which

is insoluble in low-boiling organic solvents is

called kerogen.

Kerogen is partly formed by the accumulation

of resistant macromolecular substances of

biological origin such as cellular lipids, algae

cell walls, membranes, cuticles, spores andpollen, etc.


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Diagenesis

Other parts of kerogen are formed in sedimentsduring a process called diagenesis:

The geochemical and mineralogical processes that

occur within the topmost interval of a sedimentarycolumn.

Organic matter is synthesized by living organisms inthe form of biopolymers such as carbohydrates,proteins, lignin, etc.

Kerogen is, however, not a polymer in a strictchemical sense, rather a complex mixture ofhigh molecular weight substances.


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van Krevelen diagram

Evolutionary pathways

In this way, thegreat varietyof kerogensoccurring in

nature can beclassified intothree broadcategoriesreferred to as

type I-, type II-and type III-kerogens.


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Fig. 4. Variation of elemental composition of naturallyoccurring kerogens in terms of their atomic H/C- and O/C-ratios

Classification of kerogens into three broad categories.

Elemental composition of organic matter in freshly

deposited sediments is plotted towards the upper rightend of each field (diagenesis stage).

With increasing burial, kerogen transformation proceedsduring the catagenesis and metagenesis stages.


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Incipient Oil Generation

Max. Oil Generated

Oil Floor

Wet Gas Floor

Dry Gas Floor

Max. Dry GasGenerated

(modified from Foster and Beaumont, 1991, after Dow and OConner, 1982)

VitriniteR

eflectance(Ro

)%

Weight%CarboninKero

gen

SporeColo

rationIndex(SCI)

PyrolysisT

(C)

max

0.2

0.3

0.4

0.5

4.0

3.0

2.0

1.3

1

2

3

4

56

789

10

430

450

465

65

70

75

80

85

90

95

0.60.70.80.91.01.2

OIL

Wet

Gas DryGas

Comparison of Several Commonly Used Maturity

Techniques and Their Correlation to Oil and Gas

Generation Limits


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Fig. 5. Diagram to

illustrate the main

conditions and

processes for

kerogen formation

from biological

precursor materialsand kerogen

transformation into

petroleum productswith increasing

maturation


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oil window

The temperature interval where oil

generation is in progress is referred to as the

liquid window or oil window.

It extends over the temperature interval of

about 80-150C.


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Origin (6): Cooking

www.oilandgasgeology.com/oil_gas_window.jpg

As Black Shale is buried, it is heated.

Kerogen

Gas

Oil

Organic matter is first changed by the

increase in temperature into kerogen,

which is a solidform of hydrocarbon

Around 90C, it is changed into a liquid

state, which we call oil

Around 150C, it is changed into a gas

A rock that has produced oil and gas in

this way is known as a Source Rock


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Origin (8): Ancient Earth Ron Blakey, Arizona FlagstaffDuring mid-Mesozoic times

around 150 million years ago,

conditions were just right

to build up huge thicknesses

of Black Shale source rocks

Ancient Earth

The worlds main oil deposits all formed in warm shallow seas

where plankton bloomed but bottom waters were deoxygenated


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Why is there oil in Texas?


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Where is

there oil in

NorthAmerica?


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II. A Strategic Natural Resource

National Geographic, 2002


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2. Transform organic matter

Add heat and pressure by burying it (Maturation)


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4. Traps If nothing stops oil from rising,

it will reach surface

Ex: The La Brea tar pits

Trapscan be rocks that do notallow fluids to pass throughthem, or folds and faults in therock can trap petroleum

Anticlinal Theory

Petroleum Accumulates inStructural Closure


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Migration of Petroleum (Traps)


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Fig. 1. Main geological conditions and geochemical processes requiredfor the formation of petroleum accumulations in sedimentary basins:

1) petroleum generation in source rocks;

2) primary migration of petroleum;

3) secondary migration of petroleum;4) accumulation of petroleum in a reservoir trap;

5) seepage of petroleum at the Earths surface as a consequence of afractured cap rock.


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Origin of petroleum

As a general rule, the origin of petroleum is

never in the reservoir accumulation from

which it is produced.

Instead, petroleums have experienced a long

series of processes prior to accumulation in

the reservoir.


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Petroleum accumulation forms in sedimentary

basins and can be discovered by exploration, if

the following geological conditions are met: Occurrence of source rocks which generate

petroleums under proper subsurface

temperature conditions. Sediment compaction leading to expulsion of

petroleum from the source and into the

reservoir rocks (primary migration).


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Occurrence of reservoir rocks of sufficient

porosity and permeability allowing flow of

petroleum through the pore system(secondary migration).

Structural configurations of sedimentary

strata whereby the reservoir rocks formtraps, i.e. closed containers in the subsurface

for the accumulation of petroleum.

Traps are sealed above by impermeable

sediment layers (cap rocks) in order to keep

petroleum accumulations in place.


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Reservoirrock

Seal

Migration route

Oil/watercontact (OWC)

Hydrocarbon

accumulationin thereservoir rock

Top of maturity

Source rock

Fault(impermeable)

Generation, Migration, and Trapping of

Hydrocarbons


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Cross Section Of A Petroleum System

Overburden Rock

Seal Rock

Reservoir Rock

Source Rock

Underburden Rock

Basement Rock

Top Oil Window

Top Gas Window

Geographic Extent of Petroleum System

Petroleum Reservoir (O)

Fold-and-Thrust Belt

(arrows indicate relative fault motion)

Essential

Elements

of

Petroleum

System

(Foreland Basin Example)

(modified from Magoon and Dow, 1994)

O O

Sedimentary

B

asinFill

O

Stratigraphic

Extent ofPetroleum

System

Pod of Active

Source Rock

Extent of Prospect/FieldExtent of Play


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Review: Where does petroleum come from?

1. Source rocksrich in organic matter

2. Transform the organic material with heat andpressure to into petroleum (Maturation)

3. Carrier bedsthat allow the generated petroleumto move

4. Trapsthat keep the petroleum below ground

5. Adequate reservoir bedsfrom which the

petroleum can be extracted6. Propertimingof events 1-5


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The First Pipeline

Transporting the oil was also a problem.

In 1865 Samuel Van Syckel, an oil buyer,began construction on a two-inch wide

pipelinedesigned to span the distance to therailroad depot five miles away.

Theteamsters, who had previously

transported the oil, didn't take to kindly toSyckel's plan, and they used pickaxes to breakapart the line.
http://en.wikipedia.org/wiki/File:George_Henry_Bissell_by_Gurney,_1860s.jpg


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George Bissell

Colonel Drake

In 1856, after seeing pictures ofderrick drilling for salt, Bissellconceived of the idea of drilling for oil,rather than mining it.

This was widely considered ludicrous

at the time but on August 27, 1859,the company first succeeded in strikingoil, on a farm in Titusville,Pennsylvania.

Bissell invested heavily in the

surrounding region and ended upbecoming a wealthy business man.

The company's agent, Edwin Drake, issometimes credited with the"discovery" of oil.
http://en.wikipedia.org/wiki/File:George_Henry_Bissell_by_Gurney,_1860s.jpghttp://en.wikipedia.org/wiki/File:Edwindrake.jpg


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Early Refining

By 1860there were 15 refineriesin operation.

Known as "tea kettle" stills, they consisted of a

large iron drumand a long tubewhich acted as

a condenser.

Capacity of these stills ranged from 1 to 100

barrels a day.

A coal fireheated the drum, and three fractionswere obtained during the distillation process.


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The first component to boil off was the highly

volatile naphtha.

Next came the kerosene, or "lamp oil", and

lastly came the heavy oils and tar which were

simply left in the bottom of the drum.

These early refineries produced about 75%

kerosene, which could be sold for high

profits.


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Kerosene was so valuablebecause of a whale shortagethat had began in 1845due

to heavy hunting. Sperm oilhad been the main

product of the whalingindustry and was used inlamps.

Candleswere made withanother whale product called

"spermaceti".
http://www.google.com.cy/url?sa=i&rct=j&q=&esrc=s&frm=1&source=images&cd=&cad=rja&docid=0-sknav6A09ewM&tbnid=2zshEtLg5X_MtM:&ved=0CAUQjRw&url=http://theresaromain.com/2010/12/09/r-is-for-research-lamps-lighting-and-spermaceti/&ei=F0tOUsChHYjUtQaD24GABQ&bvm=bv.53537100,d.d2k&psig=AFQjCNGBa_TD1vhlvVRBD0oUpUfaXfX2AQ&ust=1380949082741887


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In 1862John D. Rockefeller financed hisfirstrefineryas a side investment.

Anyone could drill a well, and overproductionplagued the early industry. At times this

overproduction meant that the crude oilwascheaper than water. Rockefeller saw early on,that refining and transportation, as opposed toproduction, were the keys to taking control of

the industry. And control the industry he did!


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In 1870he established Standard Oil, which

then controlled 10% of the refining capacity

in the country.

Transportationoften encompassed 20% of

the total production cost and Rockefeller

made under-the-table dealswith railroadsto

give him secret shipping rebates.
http://www.google.com.cy/url?sa=i&rct=j&q=&esrc=s&frm=1&source=images&cd=&cad=rja&docid=bi7Cx1YF6XgSlM&tbnid=2KvvLEPao-DWvM:&ved=0CAUQjRw&url=http://thepublici.blogspot.com/2010/06/to-light-one-candle.html&ei=pEtOUp-zEcKNtQafkoHoAQ&bvm=bv.53537100,d.d2k&psig=AFQjCNGBa_TD1vhlvVRBD0oUpUfaXfX2AQ&ust=1380949082741887


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This cheap transportation allowed Standard

to undercut its competitorsand Rockefeller

expanded aggressively, buying out

competitors left and right.

Soon Standard built a network of "iron

arteries" which delivered oil across the

Eastern U.S.


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This pipeline systemrelieved Standard'sdependence upon the railroads and reduced itstransportation costs even more.

By 1880Standard controlled 90% of the

country's refining capacity. Because of its massive size, it brought security

and stabilityto the oil business, guaranteeingcontinuous profits.

With Standard Oil, John D. Rockefellerbecamethe richest person in the World


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What do we get from oil?

1 barrel = 42 gallonsof crude oil

83% becomes fuel

Gasoline, diesel, jetfuel, heating oil, andliquefied petroleumgas (propane andbutane)

17% other Solvents, fertilizers,

pesticides, plastics

* These add up to 44.6 gallons

because volume is increased during

the refining process.

US Energy Information Administration


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How much oil do we use?

US consumes20,680,000 barrels ofoil each day (2007)

US motor gasolineconsumption9,286,000 b/d(390million gallons/day)(2007)

World consumes83,607,000 b/d (2005)


US oil consumption 1980-2006


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Where do we get our oil from?



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Oil exports by country

Barrels per day



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Oil imports by country

Barrels per day



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Are We Running Out of Oil?

Marion King Hubbert (1903-1989)

Shell geophysicist

HubbertsPeak and Curve


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Global Oil Flows

BP Statistical Review, 2008


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Documents

MG672 Oil and Gas Management Summary 1