Formation of Oil:

● Oil is created by fossils underground

● Typically, dead organisms die and fall onto the seafloor. For oil to form, it must be
in stagnant, low-oxygen water
● The reason for the requirement of anoxic conditions is so that the organisms do not
aerobically decompose
● Intense heat and pressure builds up as more organisms and sediment settles on the
sea floor, causing the organic matter to change
● First, the organic matter becomes a waxy mixture called kerogen
● Then with more heat into liquid and gaseous hydrocarbons via a process known as
catagenesis
● Conditions for oil reservoirs to form:
o a source rock rich in hydrocarbon material buried deeply enough for
subterranean heat to cook it into oil
o a porous and permeable reservoir rock where it can accumulate
o a caprock (seal) or other mechanism to prevent the oil from escaping to the
surface
● The Middle East has so much oil because:
o The area was once the Tethys Sea, which, in the day of the dinosaurs, was
extremely anoxic (oxygen-depleted)
o The anoxic environment also allowed for the flourishing of
photosynthesising organisms, who, when they died, became the sediment
o There were plenty of good source rocks and reservoir rock to allow for the
creation of large oil reservoirs
Detection of Oil Reserves:

● The most reliable method for finding oil is through the use of shock waves in a
process called seismology
● Oil geologists also study surface rocks and terrain to determine if oil is present
underground
● In a seismological survey a shock wave is aimed at the surface of the water or land
and the length of time it takes for the waves to reflect back to the sensor is recorded
by geologists
● The speed of the shock wave depends on the type of rock it travels through, and by
comparing the travel times to known densities of rock, seismologists can determine
what rocks are underground and predict if they might contain oil.
● While superior to other methods, seismological surveys have only a 10% success
rate of finding new oil sites
Drilling of Oil:

● Seismic surveys identify sites, but drilling must be done to determine whether oil or
gas is present
● A well is drilled and the oil is removed. Some of the oil will escape the trap under its
own pressure (called a gusher); the rest of it must be pumped out.
● The well is created by drilling a hole 13–76 cm wide into the earth with an oil rig
turning a drill bit.
● After the hole is drilled, a metal pipe slightly smaller than the hole size (called a
'casing') is run into the hole.
● The outside of the casing is then bonded and secured to the hole with cement. The
casing provides structural strength.
● The drill bit breaks up the rock, while drilling fluid is pumped down to cool, clean
and lubricates the bit. Rock cuttings are swept up by the drilling fluid and circulated
back to the surface.
Extracting the Oil:

● Often many wells will be drilled into the same reservoir, to ensure that the
extraction rate will be economically viable.
● Some wells may be used to pump water, steam, acids or various gas mixtures into
the reservoir to raise or maintain the reservoir pressure to maintain an economic
extraction rate.
● If the underground pressure in the oil reservoir is sufficient, then the oil will be
forced to the surface under this pressure. Gaseous fuels or natural gas may also be
present underground, which also supplies pressure
● Eventually, the pressure in the well will fall. If economical, the remaining oil in the
well is extracted using secondary oil recovery methods, especially in depleted fields
where the pressures have been lowered by other producing wells.
● Methods include installing smaller diameter tubing, downhole pumps, gas lift or
surface pumpjacks, also known as ‘nodding donkeys’
● These methods are called ‘secondary recovery’ in the oil industry

Offshore Oil Industry:

● The drilling rig contains all the equipment to circulate the drilling fluid, turn the
pipe, control downward pressure, remove cuttings and generate onsite power for
these operations.
● Generally, oil platforms are located on the continental shelf, although drilling and
production in deeper waters may become both feasible and profitable
● A typical platform may have around 30 wellheads located on the platform and
directional drilling allows reservoirs to be accessed at both different depths and at
remote positions up to 8 km from the platform
Well Abandonment:
 ● Eventually, when the well no longer produces or produces so poorly that it is a
liability to its owner, it is abandoned. The wellbore is plugged with cement to block
the flow path.
Refining of Oil:

● Transported to a refinery, crude oil is separated by molecular weight into different

compounds.
● The lightest compounds are further processed into solvents and fuels.
● The heavier compounds are then turned into greases and asphalt compounds
● Compounds in the middle range become lubricants.

Factors on the Production of Oil:

● Geological availability:
o Due to the very specific conditions for oil, oil is less widely distributed than
coal
o Production of oil is highly concentrated in the countries and regions that have
the highest reserves, namely the Middle East, Russia, and the USA.
● Technical availability:
o The Middle East has not only the most oil but also the most accessible, with
large, shallow reservoirs, making the oil cheap to produce
o Oil that is more technologically challenging to extract is more expensive to
produce.
o Unconventional oil sources such as tar sands or shale are expensive and
energy-intensive to produce, hence requiring a high global oil price to justify
production
● Transportation availability:
o Some areas are very remote, requiring investment in infrastructure projects to
transport the oil out
● Political availability
o Some regions with oil also face geopolitical challenges, such as unstable
political situations, which make it a less favourable place for energy TNCs
to invest and produce oil from, even though reserves are present – such as
Libya, Nigeria and Iraq.
OPEC:

● The Organization of the Petroleum Exporting Countries (OPEC) is an inter-

governmental organization of 15 nations
● The 15 countries accounted for an estimated 44% of global oil production and
81.5% of the world's "proven" oil reserves as well as ~40% of natural gas
reserves, giving it great power
● The current OPEC members are: Algeria, Angola, Ecuador, Equatorial Guinea,
Gabon, Iran, Iraq, Kuwait, Libya, Nigeria, Qatar, the Republic of the Congo, Saudi
Arabia (the de facto leader), United Arab Emirates, and Venezuela.
Stats:

● US produces 15999 thousand barrels per day; consumes 19531 thousand barrels
per day; and imports 7850 thousand barrels per day. Saudi Arabia is the No. 1
exporter of oil at 7334 thousand barrels per day, followed by Russia at 5114
thousand barrels per day. China is the second largest importer of oil at 7621
thousand barrels per day.
● Oil and gas account for ~60% of the primary energy supply

National vs Multinational Involvement in Production of Oil:

● A national oil company (NOC) is an oil and gas company fully or in the majority
owned by a national government. NOCs accounted for 75% of global oil
production and controlled 90% of proven oil reserves
● International Oil Companies (IOCs) are publicly traded oil and gas companies
such as ExxonMobil, BP or Shell.
● Due to their increasing dominance over global reserves, NOCs are also increasingly
investing outside their national borders
● More than 70% of world oil reserves, and an even greater percentage of the
remaining reserves of "easy oil" are held by national oil companies
Price of a Barrel of Oil:

● OPEC’s influence:
o As a cartel, OPEC members have a strong incentive to keep oil prices as
high as possible, while maintaining their shares of the global market.
o Typically, they reduce production, allow the price to rise due to demand,
then flood the market with easy oil, whilst increasing market share
o The advent of new technology such as fracking in the US has lessened
OPEC’s influence
● Prices rise due to global events. For instance, the price rose steeply when OPEC
decided to launch an embargo against the West in the 1970s for the USA’s suppor
of Israel during the Yom Kippur War. Prices collapsed during the Iran-Iraq War.
Prices also collapsed during the GFC of 2008
● Oil is paid for in USD, so the value of the USD has a huge impact on the price of a
barrel of oil.
● Extreme weather means extra heat or air conditioning, so prices rise up with
increased demand
● Oil spills also cause prices to rise