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The Global Oil Industry

BADM 381: September 30, 2008


Kelley Sheehan
Kailyin Young
Caleb Ganzer
Caroline Bobrecki
Proven World Oil Reserves
Oil - proved reserves
Rank Country Date of Information
(bbl)
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.
United Arab
6 97,800,000,000 2007 est.
Emirates
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
Rank Rank State
Company Country
2006 2005 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
https://www.cia.gov/library/publications/the-world-factbook/rankorder/2178rank.html
Published December of 2007
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
OPEC 149th Conference
• 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
US Oil Imports
Crude 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.
Gasoline (Cents per Gallon)

09/22/08 Change from Gas Prices now


Price Week Ago Year Ago
U.S. 3.718 -.117 .906 In the U.S.
East Coast 3.721 -.88 .952

New England 3.601 -.54 .862

Central Atlantic 3.634 -.38 .878

Lower Atlantic 3.821 -.136 1.034

Midwest 3.754 -.192 .893

Gulf Coast 3.678 -.79 .973

Rocky Mountain 3.651 -.103 .834

West Coast 3.693 -.77 .784


Average: $3.73
California 3.725 -.79 .764
A look around the World
Nation Price in USD Nation Price in USD
Regular/Gallon Regular/Gall
on

Gaza Strip *****$26.50**** Bolivia $1.95

Turkey $11.18 Iraq $1.44

Netherlands $9.97 Ecuador $1.40


Norway $9.95 Egypt $1.24
Zambia $9.88
Oman $1.18
Denmark $9.29
Yemen $1.14
Findland $9.27
Italy $9.09 Qatar $0.73

Belgium 9.03 Liby $0.50


Portugal $8.85 Saudi Arabia $0.47
Sweden $8.69
Iran $0.41
Iceland $8.68

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 for
o Changes in policies
o 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
Hydropower
Solar Power

Wind

Biomass
Requiring utilities to buy
renewable power
A good idea
80%
A bad idea
20%
Ethanol
• Ethanol is a renewable fuel made from various
plant materials, which are called "biomass.”
o Examples: Switchgrass, hemp, corn, willow,
sugarcane
o biofuels emit far fewer greenhouse gasses
• United States
o corn grain
o Food versus fuel debate
• Brazil Using more biofuels
A good idea
o sugar cane 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 Gasoline
o 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 key
o Most of us all over
the world still waste
fuel on a excessive QuickTime™ and a
TIFF (Uncompressed) decompressor

scale, and the


are needed to see this picture.

savings we could
make by greater
efficiency, and by
just switching off,
are immense.
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).
The Oil and Natural Gas Value Chain
1)Exploration- Seismic exploration locates hydrocarbons on land or under the sea
2) Preparing the Drill
3) Drill to receive the resources
4) Extracting the oil
5) 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
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.
Examples of drill ships

The Discoverer Deep


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

Drilling off the


coast of Cuba.
continued value chain
3) 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 Benefit


The 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’

• 1970s
o Oil Boom
o 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?s
p=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.pdf
http://money.cnn.com/2008/02/01/news/companies/exxon_earnings/
http://www.energyintel.com/documentdetail.asp?document_id=218175
https://www.cia.gov/library/publications/the-world-
factbook/rankorder/2178rank.html
http://www.washingtonpost.com/wp-
dyn/content/article/2008/06/09/AR2008060900714.html
http://www.saudiaramco.com/irj/portal/anonymous
http://library.marketlineinfo.com.proxy2.library.uiuc.edu/library/
http://www.opec.org/aboutus/history/history.htm
http://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/Ca
mpaigns/prtk_gp2008_Resources.htm
•http://www.npr.org/templates/story/story.php?sto
ryId=6542617
•http://money.cnn.com/galleries/2008/news/0807/
gallery.energy_solutions/13.html
•http://www.eia.doe.gov/oil_gas/petroleum/info_g
lance/Petroleum.html
•http://www.portfolio.com/interactive-
features/2008/08/Gas-Prices-Around-the-
World
•http://www.nytimes.com/2006/04/10/world/ameri
cas/10brazil.html