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620257355-Introduction-to-Oil-Gas-Day1-pptx.pptx
- 1. Introduction to Oil& Gas
- 2. Outline • Introduction • Formationof Oil & Gas • Participants in Oil & Gas Industry • Structure of the Oil & Gas Industry • Legislative Environment • Oil & Gas Value Chain
- 3. How is Oiland Gas formed? • Crude oil and natural gas are mixtures of hydrocarbons-chemical molecules that contain only hydrogen and carbon. Crude oil is a liquid both underground and at normal surface conditions. Natural gas is a vapour at normal surface conditions; underground, it can exist either as a vapour or something like a bottle of carbonated soda-"in solution" with crude oil. • The term "petroleum" collectively refers to crude oil, natural gas and solid hydrocarbon mixtures like tar and asphalt. In addition to hydrocarbons, petroleum may contain impurities such as water, sulphur compounds, oxygen, nitrogen, carbon dioxide and traces of metals.
- 4. How Oil &Gas is formed • The simplest hydrocarbon molecule is methane. It is the essential ingredient of natural gas, and the source of the "blue flame" that we see when we turn on a gas stove or furnace. Methane consists of one carbon (C) atom and four hydrogen (H) atoms. Thus, its chemical formula is CH4 or, in abbreviated form, C1.
- 5. How Oil &Gas is Formed • Naturally occurring hydrocarbons come from the decomposed remains of ancient plants and animals. Through a sequence of geologic events that occurred over millions of years, organic material was deposited on the Earth's surface and then transported to depressions or basins, where it accumulates and gradually become buried at great depths under layers and layers of sediments. • There, in what geologists refer to as source rocks, it is subjected to much higher pressures and temperatures. Over time, and through a series of intermediate chemical reactions, some of this material eventually turn into petroleum. • In general, the deeper a rock formation is located in the Earth's crust, the higher its temperature will be. Thus, the type of petroleum that formed through these processes depended largely on the depth of the source rocks.
- 6. How is oiland gas formed ? • All living material contain hydrogen and carbon • Fish, shellfish, plankton and algae are common sea- based sources
- 7. How is oiland gas formed ? All living material contains hydrogen and carbon Plants are the most common land based source
- 8. How is oiland gas formed ? All living material contains hydrogen and carbon Animals are another common land based source
- 9. Petroleum Migration andAccumulation The source rocks in which petroleum forms millions of years ago are not the same rocks in which it is found today. Rather, oil and gas, being lighter than the water normally contained in rock formations, move upward by gravity forces from the source beds along permeable migration paths. Eventually, it accumulates in reservoirs contained within geologic traps, surrounded by impermeable cap rocks or seals that keep it from traveling any farther
- 10. Petroleum Reservoirs • Theterm "reservoir" brings to mind the image of a large pond or lake, so it is natural to hear the term petroleum reservoir and picture a huge underground "pool" of oil. • In reality, a petroleum reservoir is a porous, permeable rock formation, in which oil and gas are contained in the empty spaces between the rock grains. • These spaces are interconnected, thereby forming channels or conduits through which fluids can flow to a well, and from there to the surface.
- 11. Participants in theOil & Gas Industry
- 12. THE OIL BUSINESS-who’s who • National Governments • National Oil Companies • International Oil Companies • OPEC - www.opec.org • Others e.g. HSE, Environmentalists
- 13. Biggest Oil Companiesin The World • Now form the top Biggest Oil Companies • They want control over their reserves • Want share in economic rent-tax the industry heavily • Technology transfer • Have political objectives • Economic Objectives • Health, Safety and Environmental concerns
- 14. • Super Majors-Fullyintegrated oil and gas companies, e.g. BP, Shell, etc., (previously known as the 7 sisters) • Independent Oil companies, small to medium size-non integrated. They could be; • Investors - mostly oil companies and financial institutions such as Blackstone and JP Morgan, • Operators - usually small oil companies, e.g. Tullow Oil. • Service providers-service companies, contractors, vendors, big service companies such Schlumburger in Indonesia International Oil Companies(IOCs)
- 15. The Oil Business-Who’s Who Investors • Want market freedom • Sourcing products and services • Product prices • Minimise interference • Regulatory “advice” • Project timing • Details of plans • Sources of labour / mobile staff • Sale of product • Want stability • of tax regime • of government • of regulatory regime • No residual liability
- 16. The Oil Business-Who’s Who Regulators • Control the industry on behalf of the Government • Licence and Regulation function 1) Ministry of Energy 2) Ghana National Petroleum Corporation(GNPC) 3) National Petroleum Authority 4) Energy Commission 5) Ghana Maritime Authority 6) Petroleum Commission, Ghana • Health Safety and Environmental function 1) Environmental Protection Authority (EPA)
- 17. Structure of theOil & Gas Industry
- 18. Oil & GasIndustry Structure
- 19. Overview of theValue Chain • Value chain analysis, as popularized by Porter (1985), investigates the sequence of activities required to bring a product or service from conception and procurement through production and distribution to the final customer. • Such analysis can be done for individual firms, for clusters of firms whose value chains are interlinked— referred to as value systems by Porter and usually involving suppliers, distributors/sellers, and customers— or for selected industries (within or across national borders).
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- 22. Legislative Environment Ghana’sConstitution confers the rights of all petroleum resources found within its jurisdiction to the state. Ghana National Petroleum Corporation Act, 1983 (PNDCL. 64) The Petroleum (Exploration and Production) Act, 1984 (PNDCL. 84) Petroleum Revenue Management Act 2010, Act 815 Petroleum Commission Act 2011, Act 821 PSONR is a UN convention (1962) UNGA Res.1803 • The state asserts and confirms that all petroleum found within its territory, both onshore and offshore is the exclusive property of the State
- 23. •Continental Shelf isup to 200 Nautical Miles(NW) from the baseline •This can be extended by 150NM to a total of 350NM on approval by the International Court of Justice GHANA’S CONTINENTAL SHELF
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- 25. Risk sharing arrangements •It is common for oil and gas companies to share the risks associated with investment in oil and gas activities, and there are various ways in which this can be achieved. • The most common forms of arrangement are outlined below, though an Oil Company may enter into other arrangements depending on specific circumstances. • The most commonly accepted categories are: i. Joint ventures; ii. Carried interests; and iii. Production Sharing Agreements (PSA).
- 26. Joint ventures • Withinjoint ventures, participants conduct oil and gas activities on a joint basis, the arrangements for which are often set out in a Joint Operating Agreement (“JOA”). • Under this agreement, an Operator is elected to manage the assets and enter into contracts/incur costs on behalf of the other partners. Costs incurred are rechargeable to other participants.
- 27. Carried interests • Acarried interest is an arrangement under which one party (the carrying party) agrees to pay for a portion or all of the pre-production costs of another party (the carried party) on a licence in which both own a portion of the working interest.
- 28. Production sharing contracts •Production sharing contracts (“PSCs”) are generally agreements between foreign contractors (joint venture partners) and the Government/National Oil Company (“NOC”). • Whilst the detailed requirements vary from contract to contract, a key feature of nearly all PSC’s is that the foreign contractors agree to “carry” (pay) the exploration, development and operating costs on behalf of the NOC. • If exploration is successful and a development goes ahead, production is generally split between “cost oil or gas” (which reimburses the foreign contractors for costs it has incurred including those incurred on behalf of the NOC) and “profit oil or gas”, which is the contractor’s share of the remaining production.
- 29. Oil & GasLifecycle
- 30. Oil and Gasasset lifecycle • Exploration and evaluation (appraisal) phase • Exploration • An Oil Company identifies a potential area that it wishes to explore for oil or gas, bids for and (if successful) secures a license or other legal right to conduct exploration and evaluation activities. • The company will also set up the initial financing for the project, possibly enter into a Joint Venture arrangement, and carry out an exploration plan.
- 31. Exploration: Seismic Surveys •Seismic surveys are used to locate likely rock structures underground in which oil and gas might be found • Shock waves are fired into the ground. These bounce off layers of rock and reveal any structural domes that might contain oil Drill here!
- 32. • During theevaluation phase, the Oil Company will evaluate the seismic data and drilling results obtained during the exploration phase. • Additional appraisal drilling activities may be undertaken in order to understand in more detail the characteristics of a particular prospect. • • If technical feasibility and commercial viability are demonstrable on a particular prospect, a decision will be made on whether to develop the asset. Oil and Gas asset lifecycle
- 33. Evaluation: Drilling thewell • Once an oil or gas prospect has been identified, a hole is drilled to assess the potential • The cost of drilling is very high. On an offshore rig, it may cost $10,000 for each metre drilled. • A company incurs vast losses for every “dry hole” drilled
- 34. • The OilCompany will normally need to submit a development plan to the relevant government in which the particular oil and gas asset exists, and upon formal approval of this development plan, the development phase is entered. • Formal development plan approval is normally the trigger point for booking of oil and gas reserves and the commencement of interest capitalisation. In addition, field development plan approval will trigger various contracts within the upstream value chain Oil and Gas asset lifecycle
- 35. • The productionphase involves the extraction and sale of the oil and gas and the ongoing maintenance of the field • Once the reserves have been exhausted or the extraction ceases to be commercially viable (i.e. “economic cut off” has been reached), the asset will be decommissioned. • • The decommissioning phase involves removing equipment and restoring the field to its original state. Oil and Gas asset lifecycle
- 36. TYPES OF PRODUCTIONPLATFORMS •About 30% of global oil comes from offshore •There are 4 main types of floating platforms: •Fixed •Semi-Subs •FPSO •TLP
- 37. Oil & GasMarket Outlook
- 38. A world ofresource abundance This is leading to sustained lower oil prices and a focus on cost, efficiency, and speed. Talent is no longer scarce, exploration capability is less of a differentiator, megaprojects are not the only way to grow, and market opportunities may only be economical for the earliest movers in a basin. Meanwhile, conventional, Deepwater, unconventional, and renewable assets each require a distinct operating model that cannot be delivered optimally from a single corporate centre.
- 39. Profound technological advances •These are disrupting old ways of working and enabling step changes in productivity. Jobs, including knowledge work, are being replaced by automation on a large scale, and those that remain require increased human–machine interaction. • Data generation continues to grow exponentially, as every physical piece of equipment wants to connect with the cloud. This explosion of data—combined with advanced analytics and machine learning to harness it—creates opportunities to fundamentally reimagine how and where work gets done.
- 40. Demographic shifts • Employeesare demanding changes in the working environment and expressing concerns about the role of oil and gas companies in society. • Millennials will constitute a majority of the US workforce by the early 2020s and have already started their climb into management and even executive roles. “Digital natives” in the driver’s seat will bring their own expectations of technology, collaboration, pace, and accountability. • Oil and gas companies may need more profound changes to meet demands for meaningful work and social responsibility to attract the next generation of top engineering and leadership talent.
- 41. Crude Oil PricesReact to a Variety of Geopolitical and Economic Events
- 42. Crude oil pricesare the primary driver of petroleum product prices
- 43. Economic growth hasa strong impact on oil consumption
- 44. Changes in expectationsof economic growth in can affect oil prices
- 45. In OECD countries,price increases have coincided with lower consumption
- 46. Rising oil pricesheld down global oil consumption growth from 2005-2008, despite high economic growth
- 47. Changes in non-OPECproduction can affect oil prices
- 48. Non-OPEC supply expectationsindicate changes in market sentiment concerning oil supply
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Editor's Notes
- #31 Presenter notes: We’ve just established what kind of structures tend to trap oil and gas in the Earth’s crust, but how do we locate potential traps underground? One technique is to use seismic surveys. In this technique, a Vibrator Truck fires shock waves into the ground. The shock waves pass through some rock layers and bounce off others. By recording how long it takes for the shock waves to arrive back at the surface allows geologist to build a picture of the internal structure of the rocks beneath their feet. An example of a seismic survey is shown in the diagram on the right. It reveals a large underground dome in the rocks. As we have seen domes often trap oil and gas so this may be a potential site to drill. Background notes: The term seismic is derived from the Greek for “shake” (think earthquakes!)
- #33 Presenter notes: A potential oil trap is called a Prospect. Once a prospect has been identified, the next stage is to drill a hole into the top of the trap to see if it contains oil and gas. It is incredibly expensive to a drill hole. On an offshore rig is may cost $10,000 for every metre drilled. So if you are going to drill a hole 5000 metres underground it’s going to cost you 20 million pounds/ 25 million dollars! Consequently geologists have to be pretty confident that they going to hit oil. If they drill too many ‘dry holes’ they will soon lose their jobs!