45 Days Long Virtual Internship on Oil & Gas Industrial Practices

Organised by

Petroleum Engineers Association

 COURSE CONTENT

Module # Domain of Discussion

1 Introduction to Petroleum Industry and Hydrocarbon Exploration Practices

2 Well Logging and Formation Evaluation

45 Days Long
3 Drilling Engineering
Virtual 4 Production Engineering
Internship on
5 Reservoir Engineering
Oil & Gas
Industrial 6 Enhanced Oil Recovery
Practices
7 Well Intervention

8 Workover Operations

9 Unconventional Hydrocarbon Resources

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Petroleum Engineers Association©
 DAY 1

Module# 1
45 Days Long
Virtual
Internship on Introduction to Petroleum
Oil & Gas
Industrial
Practices
Industry and Hydrocarbon
Exploration Practices

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Petroleum Engineers Association©
 O&G INDUSTRY = MULTIDISCIPLINARY EXPECTATIONS

45 Days Long
Virtual
Internship on
Oil & Gas
Industrial
Practices

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Petroleum Engineers Association©
 LIFE CYCLE OF O&G FIELD

45 Days Long
Virtual
Internship on
Oil & Gas
Industrial
Practices

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Petroleum Engineers Association©
 LIFE CYCLE OF O&G FIELD

45 Days Long
Virtual
Internship on
Oil & Gas
Industrial
Practices

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Petroleum Engineers Association©
 ENERGY MARKET IS INTERCONNECTED

45 Days Long
Virtual
Internship on
Oil & Gas
Industrial
Practices

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Petroleum Engineers Association©
 OIL & GAS (O&G) MOBILIZING THE WORLD

45 Days Long
Virtual
Internship on
Oil & Gas
Industrial
Practices

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Petroleum Engineers Association©
 GLOBAL OIL PRODUCERS

45 Days Long
Virtual
Internship on
Oil & Gas
Industrial
Practices

Courtesy: Colorado School of Mines

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Petroleum Engineers Association©
 CRUDE OIL SCENARIO

45 Days Long
Virtual
Internship on
Oil & Gas
Industrial
Practices

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Petroleum Engineers Association©
 CRUDE OIL SCENARIO

45 Days Long
Virtual
Internship on
Oil & Gas
Industrial
Practices

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Petroleum Engineers Association©
 OIL IS DIFFERENT BECAUSE IT IS ‘STRATEGIC’

› Modern economies require oil

› Modern military power requires oil

› States intervene when dealing with oil because price volatility creates distrust of markets and
politicians like to claim “solutions”

45 Days Long
Virtual
Internship on
Oil & Gas
Industrial
Practices

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Petroleum Engineers Association©
 OIL IS DIFFERENT BECAUSE IT IS ‘STRATEGIC’

45 Days Long
Virtual
Internship on
Oil & Gas
Industrial
Practices

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Petroleum Engineers Association©
 GLOBAL OIL DEMAND

45 Days Long
Virtual
Internship on
Oil & Gas
Industrial
Practices

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Petroleum Engineers Association©
 GLOBAL OIL DEMAND

45 Days Long
Virtual
Internship on
Oil & Gas
Industrial
Practices

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 GLOBAL OIL DEMAND - Oil Consumption per Capita by Region

45 Days Long
Virtual
Internship on
Oil & Gas
Industrial
Practices

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Petroleum Engineers Association©
 GLOBAL OIL DEMAND - Oil Consumption by Sector

45 Days Long
Virtual
Internship on
Oil & Gas
Industrial
Practices

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Petroleum Engineers Association©
 GLOBAL OIL DEMAND - Oil Consumption in the Developing World

45 Days Long
Virtual
Internship on
Oil & Gas
Industrial
Practices

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Petroleum Engineers Association©
 GOVERNMENT OR MARKETS? Understanding Recurrent Themes

› Oil demand is price inelastic and for fast growing economies, highly income elastic

› Over time, new sources of oil become harder to find and more costly to develop

› If oil were strictly a ‘market commodity,’ oil supply would be far more responsive to expanded
demand conditions, but oil is a ‘strategic resource’
45 Days Long
Virtual › Sources of ‘cheap reserves’ are under government control, making it virtually impossible for
Internship on
private companies to ignore governmental policies regarding oil supply development
Oil & Gas
Industrial
› The SPR undermines private incentives to hold private inventories (the law of unintended
Practices
consequences) creating conditions for even more price volatility

› ‘Crisis’ exists not only in crude supply but also in the supply of refined products. One can have
adequate crude and inadequate product supply, but high product prices invite bad policy!

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Petroleum Engineers Association©
 GEOPOLITICS OF O&G – FORMATION OF OPEC

45 Days Long
Virtual
Internship on
Oil & Gas
Industrial
Practices

› The Organization of the Petroleum Exporting Countries (OPEC) was founded in Baghdad, Iraq,
with the signing of an agreement in September 1960 by five countries namely Islamic Republic of Iran, Iraq,
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Kuwait, Saudi Arabia and Venezuela. Petroleum Engineers Association©
 THE “DARK SIDE” OF CHEAP OIL

› U.S. begins from a position of ‘independence,’ but gradually becomes a significant importer of
oil (after 1971)

› The Soviet Union’s interests in the Middle East during the Cold War becomes the context for
‘resource nationalism.’ US loses its absolute control over Middle East Oil, but not its interest in
45 Days Long a stable oil supply
Virtual
Internship on › OPEC tries to regulate oil prices but the cartel is unstable in the face of burgeoning non-OPEC
Oil & Gas
supplies. Saudi Arabia then imposes “discipline,” and oil falls below $10/barrel in 1986
Industrial
Practices undermining longer term reserve development

› The Soviet oil industry collapses under the price pressure and revenue losses hasten the collapse
of the entire Soviet state

› “Energy Independence” in the U.S. falls by the wayside but lingers as a continuing political
theme
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Petroleum Engineers Association©
 GEOPOLITICS OF O&G

45 Days Long
Virtual
Internship on
Oil & Gas
Industrial
Practices

Read more about this article here

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Petroleum Engineers Association©
 OIL TRANSIT CHOKEPOINTS

45 Days Long
Virtual
Internship on
Oil & Gas
Industrial
Practices

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Petroleum Engineers Association©
 GEOPOLITICS OVER THE STRAIT OF HORMUZ

45 Days Long
Virtual
Internship on
Oil & Gas
Industrial
Practices

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Petroleum Engineers Association©
 INDIA’S VITAL LINK TO THE MIDDLE EAST AND PERSIA

45 Days Long
Virtual
Internship on
Oil & Gas
Industrial
Practices

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Petroleum Engineers Association©
 DEMOGRAPHICS OF NEW OIL DEMAND

› USA-Iran bilateral ties for energy cooperation. Potential

threat to OPEC and Saudi Arabia.

› Possibility of USA overtaking Russia and Saudi Arabia in

terms of oil production, will make USA disengage itself
from the middle east. This would leave China or India to
45 Days Long establish power and security in the middle east. However,
Virtual
both are not diplomatically, economically and militarily
Internship on
Oil & Gas capable.
Industrial
› Instability in middle east –- ISIS (Syria, Libya and Iraq), Al
Practices
Qaeda (Yemen) and population increase in Oman.

› Russia’s dominance in European markets. 1/3 of Europe’s

and half of Ukraine’s gas supplies are from Russia.

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Petroleum Engineers Association©
 DEMOGRAPHICS OF NEW OIL DEMAND

› New Sources of oil demand growth include China and India

› China is responsible for some 40-50% of additional demand

› Other Asian Demand is also rising (India, South Korea, etc.)

45 Days Long
› Oil demands include transportation fuels and space heating (or power generation). Oil demand
Virtual in the emerging markets is highly income elastic and petroleum products are used less
Internship on
Oil & Gas
efficiently than in the developed countries
Industrial
Practices
› These sources of new demand are likely to continue rising

› Oil price instability leads these governments to adopt State-run oil reserve holding (adding to
demand) but undermining a market based solution

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Petroleum Engineers Association©
 WHY CAN’T THE MARKET DO THE JOB?

› Private Inventory Holding and the SPR

› New Government ‘strategic reserves’

45 Days Long
Virtual
› The financialization of oil markets
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Oil & Gas 1. Risk sharing and uncertainty
Industrial
Practices 2. Government can create uncertainty and undermine markets by state reserve-
holding

› Financialization plus insufficient ‘excess capacity’ produces additional price volatility

› Price volatility produces more political intervention

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Petroleum Engineers Association©
 SEE YOU TOMORROW!

45 Days Long
Virtual
Internship on
Oil & Gas
Industrial
Practices

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Petroleum Engineers Association©