Energy Sector

The energy sector is a category of stocks that relate to producing or supplying energy. The
energy sector or industry includes companies involved in the exploration and development of oil
or gas reserves, oil and gas drilling, and refining. The energy industry also includes integrated
power utility companies such as renewable energy and coal. Energy sector is directly and
indirectly involved in the production and distribution of energy needed to power the economy
and facilitate the means of production and transportation.

Non-renewable resources with chemical composition

A non-renewable resource is a natural resource that cannot be readily replaced by natural means
at a pace quick enough to keep up with consumption. There are four major types of
nonrenewable resources: oil, natural gas, coal, and nuclear energy. Oil, natural gas, and coal are
collectively called fossil fuels.

 Petroleum products and oil - 82–87% carbon, 11–15% hydrogen, with the balance being
oxygen, nitrogen, and sulfur.

 Natural gas- Natural gas is primarily composed of methane, but also contains ethane,
propane and heavier hydrocarbons.

 Gasoline - 4-8% alkanes; 2-5% alkenes; 25-40% isoalkanes; 3-7% cycloalkanes; l-4%
cycloalkenes; and 20-50% total aromatics (0.5-2.5% benzene)

 Diesel fuel -approximately composed of 75% aliphatic hydrocarbons (C10H20–C15H28)

and about 25% aromatic hydrocarbons (e.g. benzene, styrene).

 Heating oil- Heating oil consists of a mixture of petroleum-derived hydrocarbons in the

14- to 20-carbon atom range that condense between 250 and 350 °C

 Nuclear-The Nucleus of an atom consists of a tightly packed arrangement of protons and

neutrons.

 Coal- The organic compounds in coal are composed of the elements carbon, hydrogen,
oxygen, nitrogen, sulfur, and trace amounts of a variety of other elements.
 Renewable resources with chemical composition
Renewable resources are natural resources that can be regenerated or replaced relatively quickly,
often within a human timescale. Many renewable resources have chemical compositions that can
be harnessed for various applications. Here are some examples of renewable resources with their
chemical compositions:

Biomass
Biomass consists of organic materials derived from plants, animals, and microorganisms. It
primarily comprises carbon, hydrogen, and oxygen. Cellulose, a carbohydrate composed of
glucose molecules, is a major component of plant biomass.
Biomass can be used as a source of biofuels (e.g., ethanol and biodiesel), as feedstock for the
production of bio-based chemicals, and for energy generation through combustion or
bioconversion processes.

Solar Energy
Solar energy is harnessed from the sun's radiation, primarily consisting of electromagnetic waves
composed of photons. Solar panels often use photovoltaic cells, which typically consist of
silicon, a semiconductor, to convert sunlight into electricity. Solar energy is used for electricity
generation, water heating, and various other applications, reducing the reliance on fossil fuels for
energy production.

Wind Energy
Wind energy is the kinetic energy generated by the movement of air masses.The chemical
composition of wind energy is the composition of the Earth's atmosphere, primarily nitrogen,
oxygen, and trace gases like carbon dioxide and argon.Wind energy is harnessed using wind
turbines to generate electricity, particularly in areas with strong and consistent wind patterns.

Hydropower
Hydropower harnesses the kinetic energy of flowing water. The chemical composition of water
is H2O, comprising two hydrogen atoms and one oxygen atom.Hydropower is used to generate
electricity by directing the flow of water through turbines, as seen in dams and waterfalls.

Geothermal Energy
Geothermal energy is derived from the Earth's internal heat. It primarily involves harnessing the
heat generated from the decay of radioactive isotopes within the Earth's core. This process
includes various elements, such as uranium, thorium, and potassium, decaying to produce
thermal energy. Geothermal energy is used for electricity generation and direct heating
applications by tapping into the Earth's subsurface heat.

Tidal Energy
Tidal energy is generated by the gravitational interaction between the Earth, the moon, and the
sun, causing the movement of ocean tides. The composition of seawater primarily consists of
water (H2O) and dissolved salts, such as sodium chloride (NaCl).Tidal energy is harnessed using
turbines or other devices in tidal areas to generate electricity as tides ebb and flow.

Types of Energy-Sector Companies

Below are some of the types of companies found in the energy industry. Each has a distinct role
to play in bringing energy to businesses and consumers.

Oil and gas drilling and production

These are the companies that drill, pump, and produce oil and natural gas. Production typically
involves pulling oil out of the ground.

Pipeline and refining

Oil and natural gas must be delivered from the production site to a refinery to be refined into a
final product, such as gasoline. Companies within this portion of the energy sector are called
midstream providers.

Mining companies
Coal companies can be classified as energy companies since coal is used to power plants,
including nuclear.

Renewable energy
Clean energy has gained traction and investment dollars over the years and is likely to be a
growing part of the energy sector in the future. Examples of renewable energy include wind and
solar.

Chemicals
Some companies specialize in refining oil and gas into specialty chemicals, although many larger
oil producers such as Exxon Mobil are integrated energy producers, meaning they produce
multiple types of energy and control the entire process.

Main Energy Sectors

The Global Industry Classification Standard (GICS) breaks down the energy sector into two
industries: “energy equipment and services” and “oil, gas, and consumable fuels.” There are then
various sub-sectors:
The Global Industry Classification Standard (GICS) is a method for assigning companies to a
specific economic sector and industry group that best defines its business operations. It is one of
two rival systems that are used by investors, analysts, and economists to compare competing
companies.
 Oil and gas drilling-Drilling refers to the process of boring a hole through soil and rock to
access geologic reservoirs that contain oil and gas

 Oil and gas equipment & services- Oil and gas equipment and services is a massive and
lucrative industry that provides equipment, components, other supplies and professional
services to companies engaged in oil & gas exploration and production (E&P).

 Integrated oil and gas-An integrated oil and gas company is a business entity that engages
in the exploration, production, refinement, and distribution of oil and gas, as opposed to
companies that specialize in just one segment

 Oil and gas exploration & production- Exploration & production (E&P) is a specific
sector within the oil and gas industry linked to the early stage of energy production,
which generally involves searching for and extracting oil and gas.
 Oil and gas refining & marketing- Oil and gas marketing refers to the methods and
processes energy companies use to raise awareness of their organizations, establish their
brand, and drive customers and prospects toward doing business with them.

 Oil and gas storage & transportation- Crude oil moves from wellhead to refinery using
barges, tankers, over land, pipelines, trucks, and railroads. Natural gas is transported by
pipelines and liquefied natural gas (LNG) tankers.

Difference Between the Energy Sector and the Utility Sector

The energy sector primarily consists of companies that play a role in extracting, refining, or
producing sources of energy. Utility companies, on the other hand, focus on providing their
customers with electricity, water, and other public utilities. Both of these sectors offer customers
electricity in some way. However, their roles are different, with the components of the energy
sector responsible for providing the energy that utility companies then sell to the public.
The energy sector is a vast one. It covers various energy sources, including natural gas,
electricity, petroleum, coal, and renewable sources—and phases of getting energy to market,
from extraction all the way to transportation of the finished product and marketing.
This means the companies classified as belonging to the energy sector have prospects that can differ
considerably. Essentially, the only thing that ties them all together is that they are responsible in some
way for bringing a form of energy to market.
 Primary energy consumption and production by country in quadrillion
British Thermal Unit (BTU)

LIST OF TOTAL PRIMARY ENERGY TOTAL PRIMARY ENERGY

COUNTRIES PRODUCTION CONSUMPTION

ALGERIA 6.688 2.515

ANGOLA 3.793 0.389
CONGO 0.792 0.087
EQUATORIAL 0.573 0.067
GUINEA
GABON 0.443 0.059
IRAN 18.062 11.686
IRAQ 10.221 2.628
KUWAIT 6.909 1.645
LIBYA 2.517 0.626
NIGERIA 5.929 1.656
SAUDI ARABIA 29.545 10.175
UNITED ARAB 10.038 4.63
EMIRATES
VENEZUELA 4.961 2.654

OPEC + TOTAL PRIMARY TOTAL PRIMARY

COUNTRIES ENERGY ENERGY
PRODUCTION CONSUMPTION

AZERBAIJAN 2.402 0.608

BRUNEI 0.699 0.182
BAHRAIN 0.702 0.722
KAZAKHSTAN 8.364 3.746
MALAYSIA 4.521 3.794
MEXICO 6.285 7.997
OMAN 3.393 1.349
RUSSIA 63.463 33.304
SOUTH SUDAN 0.289 0.019
SUDAN 0.213 0.366
Russia has the largest natural gas reserves in the world and exports more natural gas than any
other country, shipping an estimated 238 billion cubic meters of gas in 2020. Natural gas for
automotive use is highly encouraged in Russia. Aftermarket kits are sold by companies and some
vehicles are manufactured to be fueled by natural gas. Gazprom, the state controlled natural
company, was projected to have 500 filling stations by the end of 2020.
Iran has the world's second-largest natural gas reserves. Iran is one of the most hydrocarbon-rich
areas in the world, with roughly 145 hydrocarbon fields and 297 oil and gas reservoirs
discovered so far and the potential for more. At present, Iran is utilizing only a small portion of
its gas reserves, making it one of the few countries capable of supplying much larger amounts of
natural gas in the future.
Qatar holds just over 13% of total world natural gas reserves. The majority of the country’s
reserves are located in the offshore North Field. In an effort to expand its natural gas export and
reclaim its place as the world’s top liquefied natural gas exporter, Qatar began drilling expansion
in North Field and plans on increasing output by 60%.
The United States has an abundance of natural gas reserves, the largest of which are located in
Texas, Oklahoma, and Louisiana. It is estimated that the United States has enough natural gas to
last at least another 60 years or more. In addition to its own natural gas production, the U.S. also
imports natural gas from Canada and Mexico in pipelines.
Saudi Arabia has the fifth-largest natural gas reserves in the world, mostly located in the Persian
Gulf. As the largest exporter of crude oil in the world, Saudi Arabia is planning to start exporting
natural gas as well. While the kingdom primarily runs on oil to produce power, it is planning on
making the switch to produce 70% of its power from natural gas and 30% from renewable
energy.
 Hydrocarbons

What are Hydrocarbons?

Any of the group of organic chemical compounds known as hydrocarbons consist only of the
elements hydrogen (H) and carbon (C). The hydrogen atoms bind to the carbon atoms in a
variety of ways to create the compound's structural framework. The main components of
petroleum and natural gas are hydrocarbons. They are used as lubricants, fuels, and raw materials
for making industrial chemicals, polymers, fibres, rubber, solvents, and explosives.
Based on their origins and characteristics, hydrocarbons are classified as either aliphatic or
aromatic. Aliphatic is a term used to describe hydrocarbons produced by the chemical
breakdown of fats or oils. A series of closely related compounds known as aromatic
hydrocarbons were created through the chemical breakdown of several fragrant plant extracts.
Modern nomenclature still uses the terms "aliphatic" and "aromatic," but it now distinguishes
between the substances they describe based on structure rather than origin.
Alkanes, Alkenes, Alkynes, Cycloalkanes, Alkadiene are the classes of aliphatic hydrocarbons,
which are separated based on the types of bonds they contain. Alkynes possess a carbon-carbon
triple bond, alkenes a carbon-carbon double bond, while alkanes only have single bonds.
Aromatic hydrocarbons are those that exhibit "special stability," or are substantially more stable
than their Lewis structures would imply.

Understanding Hydrocarbons
Hydrocarbons are produced by nature. They come from plant and animal fossils that were
created over thousands of years by the effects of weight and temperature. They are primarily
discovered in porous rock forms, such as sandstone, limestone, and shale, deep underground.
Large bodies of water frequently contain porous rock formations, therefore there is an enormous
number of hydrocarbons trapped deep beneath the oceans. Advanced engineering methods are
used by oil and gas exploration corporations to locate these potential reserves and bring their
resources to the surface for human use. Offshore oil platforms, directional drilling, and enhanced
oil recovery (EOR) methods are a few examples of such technology.
Hydrocarbons play a critical role in the modern economy. More than 80% of the world's energy
is consumed by them. Given that they are used for a variety of purposes in addition to providing
energy, this figure may significantly underestimate the economic contribution that hydrocarbons
make. For instance, numerous derivative materials that are essential to the global economy, such
plastics, solvents, and lubricants, have been made from refined petroleum.
Depending on the kind of reservoir and its location, various procedures are employed to extract
hydrocarbons. By employing pressurised fracking fluid to produce cracks through which the gas
can escape to the surface, hydraulic fracturing, sometimes known as fracking, is used to extract
natural gas from shale rock. Oil sands are unconventional crude oil reserves that are strongly
mixed with sand and sandstone. Mining is utilised to access these deposits.
Homologous Series
A homologous series is a sequence of compounds with the same functional group and similar
chemical properties in which the members of the series can be branched or unbranched, or differ
by molecular formula of CH2 and molecular mass of 14u. This can be the length of a carbon
chain, for example in the straight-chained alkanes (paraffins), or it could be the number of
monomers in a homopolymer such as amylose.

Hydrocarbon Companies
Because hydrocarbons are the largest energy source in the globe, some of the largest companies
in the world are hydrocarbon companies. These primarily include oil and gas companies that
mine hydrocarbons and convert them into the energy sources that the world uses to power almost
everything.
Out of the top 10 companies in the world, six of them are state-owned. Saudi Aramco is the
world's largest oil and gas company while Exxon Mobil (XOM), which is based in the United
States, is the world's largest public company. Other names in this space include:
 Chevron (CVX)
 Royal Dutch Shell (SHEL)
 PetroChina (PTR)
 National Iranian Oil Company
 Gazprom (GZPM)
 British Petroleum (BP)
The success of these companies and their ability to provide energy sources efficiently and
cheaply greatly impact the world's financial markets and economies.
The fluctuations in the price of oil have a great impact on the cost of gasoline for cars, jet fuel for
airlines, and gas for heating homes. These costs affect how consumers spend their money;
decisions that reverberate throughout the global economy.

Uses of Hydrocarbon
A hydrocarbon is an organic compound consisting of hydrogen and carbon found in crude oil,
natural gas, and coal. Hydrocarbons are highly combustible and the main energy source of the
world. Its uses consist of gasoline, jet fuel, propane, kerosene, and diesel, to name just a few.
List of Items made from hydrocarbons
1. Aspirin
Benzene is a hydrocarbon found in petroleum, which is then turned into phenol, before
being converted into salicylic acid and finally acetylsalicylic acid or ASA, more
commonly known as aspirin.
2. Food
Paraffin wax – a soft, colourless solid that’s made up of hydrocarbon molecules – is used
to coat these food products to prevent unwanted outcomes during preparation and transit.
Indeed, advanced techniques of food analysis reveal that paraffin wax is also used as the
base for chewing gum.
3. Lipstick
Paraffin wax isn’t just popular in the food and drink industry, either. It’s also used to
manufacture a wide range of cosmetic products, including lipsticks. Plus, it’s also a key
ingredient in scented candles.

4. False teeth
 Centuries ago, dentures were made from substances such as wood. Today, dentures are
made from nylon, porcelain, metal and acrylic resin, which is a hydrocarbon.
5. Dry shampoo
Dry shampoo offers users the convenience of being able to spray the product directly
onto their hair without the use of water. In order to achieve that, it must use liquified
petroleum gas, or LPG, which is a mixture of hydrocarbons like propane and butane.
6. CDs and DVDs
CDs and DVDs are manufactured from polycarbonate plastics, which are themselves
derived from hydrocarbons. However, they also require the use of sophisticated
petroleum-based lubricants in order to make sure the discs spin smoothly.
7. Solar panels
Hydrocarbons are also contained in the actual panels themselves, with synthetic plastic
parts a key part of the solar cells. However, it’s believed that these plastics will soon be
substituted for a more sustainable alternative in the shape of plant-based fibres.
8. Clothing
While some garments are made from purely wool or cotton, the majority (around 60%) of
all clothing worldwide contains an element of polyester in its makeup. This hydrocarbon-
based fibre is not biodegradable, meaning it’s not as good for the environment as more
organic alternatives.

Hydrocarbon fuels:
Hydrocarbon fuel is fuel that consists mostly of hydrocarbons. It may refer to:
· Fossil fuel, derived from coal, oil, or natural gas
· Biofuel, derived from plant or animal matter
· Synthetic fuel, derived from synthesis gas
· Electro-fuel, derived from carbon dioxide
· Peat, naturally occurring carbon-rich buildup of vegetation

Fossil Fuel:
A fossil fuel is a hydrocarbon-containing substance that is recovered and used as fuel that
naturally forms in the Earth's crust from the remains of dead plants and animals. Fossil fuels
include coal, oil, and natural gas. Fossil fuels can be used to produce energy, power engines (like
internal combustion engines in cars), or supply heat for immediate use (such for cooking or
heating). Before burning, some fossil fuels are processed to produce derivatives like kerosene,
gasoline, and propane. The anaerobic decomposition of buried deceased animals that contained
organic molecules produced by photosynthesis is the source of fossil fuels. The geological
process that transforms these elements into high-carbon fossil fuels often takes millions of years.
Biofuels:
Biofuel is a type of fuel that is created quickly from biomass, as opposed to the lengthy natural
processes that result in the development of fossil fuels like oil. Plants can be used to make
biofuel, as well as home, commercial, and agricultural biowaste.
The two most common types of biofuel are bioethanol and biodiesel.

Synthetic Fuel:
Synthetic fuel, also known as synfuel, is a liquid fuel that can also occasionally be gaseous.
Syngas is a mixture of carbon monoxide and hydrogen that is produced by gasifying solid
feedstocks like coal or biomass or by reforming natural gas.
The Fischer-Tropsch conversion, methanol to petrol conversion, and direct coal liquefaction are
common processes for refining synthetic fuels.

Electro-fuel:
A sort of drop-in replacement fuel is electro-fuels, commonly referred to as e-fuels, a group of
synthetic fuels. They are produced utilizing hydrogen obtained from environmentally friendly
electricity sources including wind, solar, and nuclear power along with collected carbon dioxide
or carbon monoxide.

Peat:
Peat is a deposit of partially decomposed organic material or plants. It only occurs in wetlands,
bogs, mires, moors, or muskegs in nature. The 3.7 million square kilometer (1.4 million square
mile) peatland ecosystem is the planet's most effective carbon sink because bog plants absorb
carbon dioxide (CO2) that is naturally emitted from the peat, keeping an equilibrium.

Impact of Hydrocarbons

Environmental
There is a serious environmental cost to using hydrocarbons as a primary source of energy.
Fossil fuel sources like crude oil, natural gas, and coal contain hydrogen and carbon. When
they're burned, they release greenhouse gasses into the air, mainly carbon dioxide. Releasing
them into the air contributes to climate change.
But it isn't just consumption that contributes to the deterioration of the environment. The process
of oil and gas extraction also does considerable damage to the surface environment and
surrounding groundwater of the extraction site by releasing pollutants. There is also a major
threat of unexpected spills, which also has a negative impact on marine and aquatic life.
Green House Effect: Greenhouse effect is the process by which radiations from the sun are
absorbed by the greenhouse gases and not reflected back into space. This insulates the surface of
the earth and prevents it from freezing. Greenhouse gases are the gases that absorb the infrared
radiations and create a greenhouse effect. For ex., carbon dioxide and chlorofluorocarbons.
The major contributors to the greenhouse gases are factories, automobiles, deforestation, etc. The
increased number of factories and automobiles increases the amount of these gases in the
atmosphere. The greenhouse gases never let the radiations escape from the earth and increase the
surface temperature of the earth. This then leads to global warming.

Economic
Not only does the use of hydrocarbons have an environmental impact but it also has economic
implications. Proponents say that this sector is a major economic driver because of how vital it is
in terms of the number of jobs it creates. And let's not forget how useful hydrocarbons are to
society. After all, consumers need energy sources to fuel their cars, heat their homes, and light up
their rooms.
But there's a clear downside. Many economists argue that hydrocarbon energy production
involves substantial negative externalities that are not sufficiently represented in the market price
of oil and gas. In fact, considering the mounting cost of climate-change-related phenomena,
many argue that these externalities significantly outweigh any cost savings associated with
hydrocarbons.

Alternatives to Hydrocarbons
To address the negative impact of hydrocarbon energy, there is a growing movement toward the
use of renewable energy sources, such as solar, wind, and geothermal power. Along with
innovations in battery technology and smart grid infrastructure, these new energy alternatives
may play a significantly larger role in global energy production in the years and decades ahead.

Solar
Solar power comes from the sun. The process transforms solar energy into thermal or electrical
energy that is used in powering homes, heating water for commercial and industrial use, and
providing electricity. Solar energy is considered to be the most abundant and cleanest energy
source in the world.
Solar power has gained prominence in the use of homes and office buildings. It functions via
solar panels that are placed on these structures that convert solar energy into electricity and other
uses. Solar panel companies are more common and a new part of the energy industry.
The top five solar power-producing countries are China, the United States, Japan, Germany, and
India.

Wind energy
Wind energy utilizes the wind to create power or electricity. Wind turbines are created to convert
the energy in wind to mechanical power, which is then used for a variety of industrial tasks as
well as in creating electricity through the use of a generator. Wind turbines can be found on both
land and water.
Geothermal
Geothermal energy taps into the heat that exists under the surface of the earth. The sources of
heat are trapped inside rocks and liquids under the surface as well as far down towards the earth's
core. Geothermal energy is created by digging wells into the earth's surface to access the steam
and hot water, which are used to power generators that create electricity.

Petrochemicals derived from oil and natural gas make the manufacturing of over 6,000 everyday
products and high-tech devices possible
 Crude Oil
Crude oil is a naturally occurring liquid petroleum substance made up of hydrocarbon deposits
and other organic elements that were created from the leftovers of ancient animals and plants.
After being exposed to heat, pressure, and layers of sand, silt, and rock, these organisms finally
evolved into a kind of fossil fuel that is refined into usable goods like petrol, diesel, liquefied
petroleum gasses, and feedstock for the petrochemical sector.
 Crude oil is a finite resource since it is a non-renewable resource that cannot be
replenished naturally at the rate with which we use it.
 The raw natural resource known as crude oil is taken from the earth and turned into goods
like jet fuel, petrol and other petroleum products.
 Crude oil is known more generally as petroleum.
 Hydrocarbon deposits and other organic compounds that were created from the remains
of extinct creatures and plants that lived millions of years ago make up its composition.
 A commodity that is traded on markets all around the world, both as spot oil and through
derivatives contracts, is crude oil.
 Considering that crude oil is currently the main source of energy production, many
economists consider it to be the most significant commodity in the entire world.

Components of Crude Oil

Although it also contains some nitrogen, sulphur, and oxygen, crude oil is mostly a mixture of
rather volatile liquid hydrocarbons. These substances combine to generate a wide range of
intricate molecular structures, some of which are difficult to distinguish. Almost all crude oil,
notwithstanding variances, contains between 12 and 15 percent hydrogen and 82 and 87 percent
carbon by weight.
The three types of hydrocarbon compounds that are most common in crude oils—paraffins,
naphthenes, and aromatics—are typically used to describe them. The most prevalent
hydrocarbons in crude oil are paraffins, which are highly prized since they are essential
components of petrol (petrol). Although naphthenes make up a significant portion of all liquid
refinery products, they also contribute to some of the heavier, asphalt-like by-products of the
process. Aromatics typically make up a very minor portion of most crudes. Benzene, a widely
used component in the petrochemical sector, is the most prevalent aromatic in crude oil.

Extraction and Processing of Crude Oil

Crude oil is produced underground at various pressures and can contain natural gas. It is
collected by surface equipment for separation. Clean crude oil is stored aboveground in
cylindrical steel tanks, which can be as large as 30 meters in diameter and 10 meters tall. It is
transported from production sites to treatment plants and refineries, often via pipelines. Crude
from isolated wells is collected in tank trucks and transported to pipeline terminals, with some
transport in specially constructed railroad cars.
A refinery is where most crude oil is sent after extraction. Any combination of the following
three fundamental processes is carried out there:
1. Dividing the numerous types of hydrocarbons present in crude oils into fractions of more
closely related properties
2. Chemically transforming the separated hydrocarbons into more desirable reaction
products
3. Purifying the products of unwanted elements and compounds.
Fractional distillation is the primary method for isolating the hydrocarbon parts of crude oil. The
distillation-separate crude oil fractions are then processed into a variety of goods, such as heating
oil, asphalt, petrol and diesel fuel.

Refining of Crude Oil

Crude oil is a mixture of various energy products, extracted from global deposits. It requires
separation, conversion, and treatment in refining to meet user requirements. Crude oil cannot be
used directly due to its unique composition and properties. Each oil has varying proportions of
hydrocarbon molecules, with some being black and viscous, while others are brown and lighter.
Additionally, each oil contains dissolved gas and highly corrosive products, such as sulfur or
acids, which can be toxic. Therefore, it is impossible to develop a universal boiler or engine
capable of running on all crude oils.
Before it can be utilized, crude oil needs to be refined. Separation, conversion, and treatment are
the three main types of operations carried out to refine the oil into finished goods.
Separation
The separation process in oil refining, also known as petroleum refining, is a crucial step in the
production of various petroleum products from crude oil. Crude oil is a complex mixture of
hydrocarbons, impurities, and various compounds, and refining is the process of separating and
purifying these components to obtain valuable products like gasoline, diesel, jet fuel, and more.
The separation process involves several key steps, including:
Distillation:
Crude oil is first heated in a distillation column or tower.
The crude oil is separated into different fractions based on their boiling points.
As the temperature increases from the bottom to the top of the distillation column, various
components with different boiling points vaporize and rise through the column.
The vaporized components are then condensed back into liquid form at different heights within
the column.
Lighter fractions with lower boiling points, like gasoline and naphtha, are collected at the top,
while heavier fractions, such as diesel, kerosene, and lubricating oil, are collected at lower levels.
The heaviest fraction, known as residue or atmospheric bottoms, remains at the bottom and may
undergo further processing.
Atmospheric Distillation:
Atmospheric distillation is the primary separation step in oil refining and is conducted at
atmospheric pressure.
Vacuum Distillation:
Some of the heavier fractions, like vacuum gas oil and vacuum residue, are subjected to further
distillation under reduced pressure (vacuum distillation) to avoid thermal cracking and
decomposition at high temperatures.
Desalting:
Before entering the distillation units, the crude oil is often treated to remove salt and water
impurities. This is done in the desalter unit, which uses electrostatic separation to remove these
contaminants.

Fractionation and Fractional Distillation:

The various fractions obtained from distillation are further processed in separate units called
fractionators or towers.
These fractionation units further separate the fractions into more specific product streams, such
as different grades of gasoline, diesel, and kerosene.
Hydrotreating and Hydrocracking:
Some of the fractions may undergo additional processes like hydrotreating and hydrocracking to
improve their properties and remove impurities like sulfur and nitrogen.
Hydrotreating uses hydrogen to remove impurities, while hydrocracking involves breaking down
large hydrocarbons into smaller, more valuable ones.
Fractional distillation
The distillation process is just the initial step in the complex refining of crude oil, and various
additional processes such as cracking, reforming, and treating are employed to produce a wide
range of petroleum products, including gasoline, diesel, jet fuel, and various petrochemical
feedstocks.

The distillation of crude oil, also known as fractional distillation, is a crucial refining process that
separates the various hydrocarbons and other compounds in crude oil into different fractions
based on their boiling points. This process is the initial step in the refining of crude oil and serves
as the foundation for the production of various petroleum products. Here's how it works:

1. Heating the Crude Oil: The first step is to heat the crude oil in a large, vertical column
called a distillation tower or fractionating column. The temperature within the column
increases from the bottom to the top.

2. Vaporization: As the crude oil is heated, it begins to vaporize. The vaporized crude oil
rises up through the column.

3. Fractional Separation: Within the column, there are a series of trays or packing materials
that serve to increase the contact between the rising vapor and the descending liquid. This
allows for the separation of the different components based on their boiling points.

4. Condensation: As the vapor rises through the column, it cools and condenses into liquid
fractions at different heights within the column. These fractions are collected on trays or
in collectors at various levels. The temperature at which each fraction condenses is
determined by its boiling point.

5. Collection of Fractions: The fractions are collected at different levels within the column
and are known as "cuts" or "fractions." These cuts are the various products derived from
the distillation process. The lower parts of the column produce heavier fractions, while
the upper parts produce lighter fractions.
6. Common Fractions The fractions obtained in a typical crude oil distillation process
include:
Naphtha-Used in gasoline production.
Kerosene: Used in aviation fuel and heating oil.
Diesel: Used in diesel fuel.
Lubricating Oils:Used in engine lubricants.
Heavy Gas Oil: Used in industrial processes or further refined into diesel and other
products.
Residuum: Heaviest fraction, used for asphalt, tar, and heavy fuel oil.
 7. Cooling and Condensation: The fractions collected at different heights within the
distillation column are then further cooled and condensed to form the final products. This
is often done in separate condensers.

8. Recovery of Uncondensed Gas: Some gases, such as methane, ethane, propane, and
butane, do not condense within the distillation column and are collected separately. These
are valuable gases and may be used for various purposes, including as fuel or feedstock
for the petrochemical industry.

9. Refining of Fractions: The individual fractions obtained from the distillation process may
undergo further refining, treatment, and processing to meet specific product requirements
and quality standards.

Isomerization and Reforming:

Isomerization and reforming processes are used to enhance the octane rating of gasoline
fractions, making them more suitable for use in engines.

Treating:
The final products from the refining process may also undergo treatment to meet specific quality
and environmental standards. This may include sulfur removal to reduce emissions or additives
to improve performance and stability.

Conversion
After the process of separation, further processing can turn heavier, lower-value distillation
fractions into lighter, higher-value goods like petrol. Fractions from the distillation units are now
converted into streams (intermediate components), which will later turn into final goods.The
most popular conversion technique is known as cracking because it transforms heavy
hydrocarbon molecules into lighter ones by applying heat, pressure, catalysts, and occasionally
hydrogen. A cracking unit is made up of a network of furnaces, heat exchangers, and other
vessels in addition to one or more tall, thick-walled, rocket-shaped reactors. One or more types
of crackers, such as fluid catalytic cracking units and hydrocracking/hydrocracker units, may be
present in complex refineries.There are more ways to convert crude oil besides cracking. Instead
of dividing molecules, other refining processes rearrange them to add value.
By mixing some of the gaseous byproducts of cracking, alkylation, for instance, creates
components for petrol. A series of broad, horizontal tubes and tall, slender towers are used for
the procedure, which is effectively cracking in reverse.The process of reforming transforms
naphtha, a light, low-value fraction, into high-octane petrol constituents using heat, moderate
pressure, and catalysts.

Treating
Oil goes through operations intended to get rid of caustic or harmful compounds, such sulfur,
during the treatment step. Kerosene, butane, and propane are "sweetened" with caustic soda and
thiols are removed. In order to raise the octane rating and change naphthenic hydrocarbons into
aromatic hydrocarbons, automotive fuels are treated with a catalyst.
Crude oil is ready to be marketed as refined petroleum products, such as LPG, petrol, naphtha
and lubricants, after going through the three steps of refining. Don't miss 2D-LC Solutions for
Petrochemical Applications, which highlights the application of two-dimensional liquid
chromatography, for a closer look at how natural resources are converted into global
commodities.

Types of Crude Oil

Oil investors are generally concerned with the quality of the oil they are investing in and the
location it comes from. This is because crude oil forms differently due to the geographical
makeup of the locations. Oil prices are based on geopolitics, natural events, and organizational
influences, which, in turn, dictate production, supply, and demand.
The oil industry and regulators use crude oil's density and sulfur content to classify it into several
categories. Oil can be grouped by sulfur content as either sweet or sour, or by density as either
heavy or light. Using these two groups—and by creating a group in between—oil is classified
into six classes by the industry and investors:
 Heavy/Sweet
 Heavy/Sour
 Medium/Sweet
 Medium Sour
 Light/Sweet
 Light/Sour

Heavy oils are used to make industrial products like asphalt and plastics. Medium oils have
sulfur content that falls somewhere between heavy and light. Light oils are generally used in
diesel, gasoline, and aviation fuel because they take less processing. Sour crude has more sulfur
and carbon than light crude and requires more refining; thus, it incurs more costs.

EPA Classifications for Crude Oil

The EPA ( Environmental Protection Agency's ) categorizes crude oil into four main types of
crude oil: Class A, Class B, Class C, and Class D. These are important for learning more about
general toxicity and physical state changes:

 Class A: Most refined products and many high-quality, light crude oils are included in
Class A. Despite how valuable they are, Class A oils can be extremely toxic to humans,
animals, and other organisms.

 Class B: These are waxy and oily in feel and are less toxic than Class A oils. They stick
more firmly to surfaces than Class A oils. As temperatures rise, they are more likely to
penetrate porous layers or surfaces.

 Class C: These are usually brown or black, have a similar density to water, and tend to
sink. This type of oil doesn't penetrate porous surfaces as quickly as other types of crude
oil. In the event of evaporation or weathering of volatiles in a Class C oil, it may produce
solid or tarry Class D oil. Even though Class C crude oil is less toxic, it can still harm
wildlife

 Class D: These are residual oils, heavy crude oils, select high paraffin-based oils, and
certain weathered oils. Typically, Class D oils are dark black or brown, and if they melt,
they can coat surfaces, making cleaning up a spill very difficult. Class D crude oil is
relatively nontoxic.
 Petrocurrency
A petrocurrency is a term used to describe a currency that derives a significant portion of its
value from the export of petroleum or oil-related products. This typically occurs in countries that
are major oil exporters. The value of their currency is closely tied to the price of oil on the
international market.
The term is often associated with countries in the Middle East, such as Saudi Arabia and the
United Arab Emirates, which are major oil producers and heavily rely on oil exports for their
economic well-being. When the price of oil is high, these countries tend to benefit economically,
and their currencies tend to strengthen. Conversely, when oil prices are low, their currencies may
weaken.
Petrocurrencies are not limited to the Middle East, as there are other oil-producing countries
around the world with currencies influenced by oil prices. The term highlights the economic
interdependence between a nation's currency value and its oil exports. Fluctuations in oil prices
can have a significant impact on a petrocurrency's exchange rate and overall economic stability.

Petrodollar
A petrodollar is a United States dollar that is used to buy oil. The term "petrodollar" refers to the
system in which the U.S. dollar is the global reserve currency and the primary currency used to
trade oil. The petrodollar system was established in the 1970s, when Saudi Arabia agreed to
accept only US dollars in payment for its oil exports. This agreement was made in exchange for
US military security guarantees. At the time, Saudi Arabia was the world's largest oil exporter,
and its decision to accept only US dollars had a major impact on the global oil market. The
petrodollar system has a number of benefits for the United States. First, it gives the US
government a great deal of influence over the global oil market. Second, it allows the US
government to finance its budget deficit by borrowing money from oil-exporting countries.
Third, it helps to support the value of the US dollar. However, the petrodollar system also has
some drawbacks. One drawback is that it makes oil-importing countries more vulnerable to US
economic sanctions. Another drawback is that it can lead to inflation in the United States, as the
US government prints more money to finance its budget deficit. In recent years, there have been
a number of challenges to the petrodollar system. China, for example, has been trying to promote
the use of its own currency, the renminbi, in international trade. Russia and Iran have also been
trying to reduce their reliance on the US dollar. It remains to be seen whether the petrodollar
system will be able to maintain its dominance in the long run. However, it is clear that the
petrodollar system has played a major role in shaping the global economy over the past few
decades.
The U.S. dollar is the standard currency used to pay for oil globally, prompted by an agreement
between the U.S. and Saudi Arabia in 1945. This agreement led to other oil-exporting countries
accepting the dollar as payment for oil, and the relationship between the dollar and oil began.
Some countries exported so much oil and accumulated such large amounts of U.S. dollars that
they couldn't spend them all. If the country accepting U.S. dollars as payment can't spend them
all, they are effectually removed from circulation. The dollars these countries could not spend
came to be known as petrodollars.
The petrodollar came into existence following the elimination of the gold standard. After World
War II, the United States held most of the world's supply of gold. It agreed to redeem any U.S.
dollar for its value in gold if the other countries pegged their currencies to the dollar. Other
countries signed onto this deal at the 1944 Bretton Woods conference. It established the U.S.
dollar as the world's reserve currency.
On February 14, 1945, President Franklin D. Roosevelt initiated the alliance with Saudi Arabia.
U.S. Army Corps of Engineers. "Laying the Foundation: Roosevelt Meets with King Abdul
Aziz,"
He met with Saudi King Abd al-Aziz. The United States built an airfield at Dhahran in return for
military and business training. This alliance was so critical that it survived subsequent years of
differences of opinion over the Arab-Israeli conflict.
 Reserves of Crude Oil
Oil reserves are an estimation of the amount of crude oil that could potentially be taken from a
specific economic location. Oil pools located in unreachable depths are not included in a nation's
reserves since reserves are determined on a proved probable basis.
 The amount of crude oil that may be recovered from a country or region is known as its
oil reserves.
 The top three nations with the highest oil reserves are Saudi Arabia, Venezuela, and
Canada.
 Global oil reserves are estimated to be 1.73 trillion barrels, according to market leader BP
plc.
 The Organization of the Petroleum Exporting Countries (OPEC) has around 80% of the
world's oil reserves.
 When there is a serious scarcity of oil in the United States, the Strategic Petroleum
Reserve (SPR) is a reserve of crude oil that can be used in an emergency.

At the end of 2022, global proved crude oil reserves totalled 1,564 billion barrels (bn b), an
increase of 17bn b, or 1.1%, over 2021 levels. Following a dip in 2021, proven crude oil reserves
of OPEC Member Countries marginally increased to 1,244 billion by the end of 2022. The
world's confirmed natural gas reserves rose by 2.4% by the end of 2022, reaching over 210.06
trillion standard cubic metres (tr s cu m). At the end of 2022, proven natural gas reserves in
OPEC member countries were 75.12 trillion cubic metres, an increase of 1.2% from the level at
the end of 2021.
Components of Oil Reserves
Hydrocarbon deposits, which make up petroleum reserves and resources, are most frequently
found in underground geologic formations. A reservoir, field, petroleum basin, or entire country
can be used to report reserves.

Proven and Unproven Oil Reserves

Proven Oil Reserves: Proven reserves are volumes of oil and gas that are reasonably certain to
be recoverable under existing economic and political conditions and technology. They are also
known as proven developed (PD) or proven undeveloped (PUD). PD reserves can be produced
with existing wells and perforations or from additional reservoirs with minimal additional
investment. PUD reserves require additional capital investment to bring the oil and/or gas to the
surface.

Accounting for production is crucial for businesses, as produced oil or gas that has been brought
to surface and sold on international markets or refined in-country is no longer considered
reserves and is removed from booking and company balance sheets. Until January 2010, "1P"
proven reserves were the only type allowed by the U.S. Securities and Exchange Commission
(SEC) to be reported to investors. Since then, companies can provide additional optional
information declaring 2P (both proven and probable) and 3P (proven plus probable plus possible)
with discretionary verification by qualified third party consultants.
Unproven Oil Reserve:
They are of two types –
1. Probable Reserves: The probabilistic cumulative sum of proved and probable reserves
(with a probability of P50), generally called in the industry as "2P" (proved plus
Probable), is where probable extra reserves are attributable. The P50 label denotes a
minimum 50% probability that the actual quantities retrieved will be equal to or greater
than the 2P estimate.

2. Possible Reserves: In comparison to probable reserves, known accumulations have a

lesser likelihood of recovery as potential additional reserves. reasons to give a reduced
probability Various geological interpretation, uncertainty resulting from reserve infill
(related with variation in seepage towards a production well from surrounding areas), and
estimated reserves based on future recovery techniques are all examples of potential
reserves. The industry uses the term "3P" (proven plus probable plus possibility) to
indicate the probabilistic cumulative sum of proved, probable, and possible reserves,
where there is a 10% chance of delivering or exceeding the P10 amount.
 Peak Oil
Peak oil describes the speculative time when the world's crude oil output will reach its maximum
level and begin to decline. The "peak theory," developed by geophysicist Marion King Hubbert,
claims that oil production follows a bell-shaped curve.
According to the conventional theory of peak oil, as the price of extracting additional reservoirs
rises, production declines faster. This would put strain on currently available reserves, which are
depleting over time. Peak oil has been achieved if new reserves are not made available faster
than the depletion of current reserves. Multiple times, peak oil has been predicted, but each
slowing has been shown to be premature due to new extraction technology like hydraulic
fracturing and improved surveying methods.
 Peak oil is a hypothetical scenario where oil production hits a maximum rate and begins
to decline.
 When peak oil is reached, the discovery of new reserves cannot keep pace with the
decline in existing reserves.
 Although declared several times, peak oil has not happened thanks to new technology
that helped sustain oil production, keeping global supplies flowing.
 Peak oil might also happen due to declining demand, which would result from more
efficient technologies and alternative energy sources.
 Studies of climate change suggest that a decline in oil consumption in favour of
alternative energy sources will be necessary in order to avert catastrophic climate change.

Possible Consequence of Peak Oil

Peak oil production has severe economic repercussions, such as a dramatic rise in prices and an
impact on sectors that depend on oil. Major businesses including agriculture, shipping,
transportation, the food industry, and manufacturing might all experience declines as a result of
this. Famine might happen in the worst-case scenario as a result of rising food prices. By
lowering the carbon footprints of oil-dependent businesses, which are significant contributors to
atmospheric carbon dioxide and a primary driver of global climate change, peak oil also has an
effect on the environment. Without "deep reductions" in carbon dioxide and other greenhouse
gas emissions, the Intergovernmental Panel on Climate Change (IPCC) warns, global
temperatures might rise by more than 2 degrees Celsius by 2100.
 OPEC and OPEC+
The term Organization of the Petroleum Exporting Countries (OPEC) refers to a group of 13 of
the world’s major oil-exporting nations. OPEC was founded in 1960 to coordinate the petroleum
policies of its members and to provide member states with technical and economic aid. OPEC is
a cartel that aims to manage the supply of oil in an effort to set the price of oil on the world
market, in order to avoid fluctuations that might affect the economies of both producing and
purchasing countries.
As a permanent intergovernmental body, the OPEC characterises itself. The organization's
mission statement is, "Coordinate and unify the petroleum policies of its Member Countries and
ensure the stabilisation of the oil markets." This guarantees a consistent supply for customers and
consistent revenue for petroleum producers.
After the Baghdad Conference, which included Iran, Iraq, Kuwait, Saudi Arabia, and Venezuela,
OPEC was established in Vienna in 1960. The organisation grew to ten nations in 1969, but
experienced difficulties when Arab members reduced their exports to the US and the Netherlands
and their production. After the embargo was removed in 1974, OPEC had 13 members in 1975.
The OPEC Fund for International Development was founded in 1976 and enables member
nations to offer loans and grants to non-member nations. Its headquarters are in Vienna, Austria,
where the OPEC Secretariat, the organization's executive body, manages day-to-day operations.

OPEC Mission and Objective

In order to provide an efficient, affordable, and consistent supply of petroleum to consumers,
producers, and investors, OPEC seeks to coordinate and harmonise petroleum policies across its
Member Countries and stabilise oil markets. Its dedication to keeping oil prices stable guarantees
that member countries maintain their interests while generating a consistent income from an
unbroken supply of crude oil. Full members are states that were founding members and those
that export considerable amounts of crude petroleum. A majority of the full members must vote
in favour of granting membership before associate memberships can be conferred.
The major objective of OPEC is to keep oil prices at a level that is lucrative for its members
while maintaining as little regulation as possible on the market. The group makes sure there is a
constant flow of oil so that its members can make a living.
OPEC Members

OPEC+
OPEC+ is a group made up of all 13 OPEC members as well as other nations that produce oil.
Azerbaijan, Bahrain, Brunei, Equatorial Guinea, Kazakhstan, Russia, Mexico, Malaysia, South
Sudan, Sudan, and Oman are some of these nations.
OPEC joined forces with other oil-exporting nations that were not members of the group in
December 2016, becoming an entity known as OPEC+, or OPEC Plus. Significant OPEC+
members include Kazakhstan, Mexico, and Russia. The organisation gains even greater sway
over international energy pricing and the world economy by cooperating with other oil-exporting
nations.
90% of the world's oil reserves are held by the OPEC+ countries together.

A Brief History
The Organization of the Petroleum Exporting Countries (OPEC) is a permanent,
intergovernmental organization established in 1960 by Iran, Iraq, Kuwait, Saudi Arabia, and
Venezuela. It has been joined by other countries, including Qatar, Indonesia, Libya, United Arab
Emirates, Algeria, Nigeria, Ecuador, Angola, Gabon, Equatorial Guinea, and Congo. OPEC's
goal is to coordinate and unify petroleum policies among member countries, ensuring fair prices
for producers, an efficient supply of petroleum to consuming nations, and a fair return on capital
for investors. The organization's headquarters were moved to Vienna, Austria, in 1965.
1960s: OPEC, formed in 1960 by five oil-producing developing countries, was formed during a
transitional period in the international economic and political landscape. The oil market was
dominated by multinational companies and separate from the former Soviet Union and centrally
planned economies. OPEC developed its vision, objectives, and Secretariat in Geneva and
Vienna. In 1968, it adopted a 'Declaratory Statement of Petroleum Policy in Member Countries',
emphasizing the right of all countries to exercise sovereignty over their natural resources.

1970s: OPEC gained international prominence in the 1970s as its Member Countries controlled
their domestic petroleum industries and played a greater role in world oil markets. The first
Summit of Heads of State and Government in Algiers in 1975 addressed the plight of poorer
nations and called for cooperation in international relations for economic development and
stability. The OPEC Fund for International Development was established in 1976.

1980s: In the 1980s, energy demand slumped and oil demand fell, leading to a market crash in
1986. OPEC's share of the oil market fell, causing economic instability in many Member
Countries. However, the oil market recovered in the late decade, supported by OPEC's group
production adjustment, pricing reference basket, and progress in dialogue and cooperation.
Environmental issues also became a priority on the international energy agenda.

1990s: OPEC's response to Middle East issues in 1990-91 reduced market impact, but excessive
volatility dominated the decade. The oil market returned to mid-1980 conditions in 1998-99, but
a solid recovery followed, focusing on globalisation and high-tech trends. Producer-consumer
dialogue breakthroughs matched advances in OPEC and non-OPEC relations. After the Earth
Summit of 1992, OPEC sought fairness, balance, and realism in oil supply treatment.

2000s: OPEC aimed to stabilize the global oil market in the early 2000s, but market forces and
speculation increased volatility in 2004. Oil became an asset class, leading to an unprecedented
increase in volatility in 2008 before the financial sector collapse. OPEC became prominent in
supporting the oil sector to address the economic crisis. It established stable energy markets,
sustainable development, and the environment as guiding themes and adopted a long-term
strategy in 2005.

2010s: The oil market faced risks due to global economic uncertainties and financial system
risks. Trade patterns shifted, with global oil demand growing, especially in the Asian region. The
Paris Agreement in 2015 led to the OPEC signing of the Paris Agreement. The Declaration of
Cooperation in 2016 and the Charter of Cooperation in 2019 were established to support market
stability. OPEC held international seminars to gather representatives from producing and
consuming nations, oil companies, journalists, and industry analysts. The decade saw increased
understanding of OPEC's role in stabilizing the global oil market.
2020s: The COVID-19 pandemic has significantly impacted the global economy and energy
sector, leading to significant demand decline and volatility in the oil market. OPEC and its
partners intensified their efforts to restore stability, resulting in the largest voluntary production
adjustments in the oil market's history. This has been recognized by various countries and
organizations, including G20 Energy Ministers, Argentina, Brazil, Canada, Colombia, Norway,
the African Petroleum Producers' Organization, the International Energy Agency, and the
International Energy Forum.

OPEC Basket
The OPEC Basket is a global average of oil prices from OPEC members, used as a benchmark
for monitoring oil prices and market stability. It is also known as the OPEC Reference Basket
(ORB) or the OPEC Reference Basket of Crude. Members of OPEC contribute data to form the
basket.
The weighted average of oil prices from the various OPEC members across the globe is known
as the "OPEC Basket."
Establishing and meeting OPEC price targets is the primary function of the OPEC Basket.
An OPEC Basket is not a kind of crude oil that companies may directly purchase because it is
only an average.
The OPEC Basket is a weighted average of crude oil prices from thirteen member states,
including Algeria, Angola, Congo, Equatorial Guinea, Gabon, Iran Heavy, Basra Light, Kuwait
Export, Es Sider, Nigeria, Saudi Arabia, UAE, and Venezuela. The basket is based on specific
petroleum blends from these countries and is generally lower than other oil reference prices due
to higher sulfur content. Other major oil producers, such as Russia, the United States, China, and
Canada, are not OPEC members. OPEC's member countries produce a significant portion of the
world's oil. Oil prices significantly impact the global economy, as petroleum fuels transportation,
agriculture, and transportation. OPEC allows oil-producing countries to establish stable market
conditions by raising or lowering production, ensuring the production of essential goods is
fueled.
OPEC Basket v/s other Crude Oil Benchmark
More than 200 different types of crude oil are represented by the numerous distinct benchmarks
for crude oil. Their overall quality and pricing points differ significantly. Several prominent
substitutes for the OPEC Basket consist of:
 Crude oil classified as West Texas Intermediate (WTI) is lighter and of superior grade.
It retails for roughly $5 to $6 more than the price of the OPEC Basket.
 In Northwestern Europe, the North Sea blend of Brent is typically refined. It is sold for
roughly $4 more than the OPEC Basket price.
 Natural Gas
Natural gas is a hydrocarbon mixture consisting primarily of saturated light paraffins such as
methane and ethane, both of which are gaseous under atmospheric conditions. The mixture also
may contain other hydrocarbons, such as propane, butane, pentane, and hexane.
Natural gas is a fossil fuel and non-renewable resource that is formed when layers of organic
matter (primarily marine microorganisms) decompose under anaerobic conditions and are
subjected to intense heat and pressure underground over millions of years. The energy that the
decayed organisms originally obtained from the sun via photosynthesis is stored as chemical
energy within the molecules of methane and other hydrocarbons.

Countries with highest production of Natural Gas (2023)

1. United States
Production: 1.027 trillion cubic meters
2. Russia
Production: 699 billion cubic meters
3. Iran
Production: 244 billion cubic meters
4. China
Production: 219 billion cubic meters
5. Canada
Production: 205 billion cubic meters
6. Qatar
Production: 170 billion cubic meters
7. Australia
Production: 162 billion cubic meters
8. Norway
Production: 128 billion cubic meters
9. Saudi Arabia
Production: 105 billion cubic meters
10. Algeria
Production: 102 billion cubic meters

Countries with highest consumption of Natural Gas (2023)

 United States — 832.0
 Russia — 411.1
 China — 330.6
 Iran — 233.1
 Canada — 112.6
 Saudi Arabia — 112.1
 Japan — 104.4
  Germany — 86.5
 Mexico — 86.3
 United Kingdom — 72.5

Production Process of Natural Gas

Natural gas production involves several steps, from exploration to distribution:

 Exploration: Geologists and geophysicists identify potential natural gas reserves by

studying rock formations and using seismic surveys. Once a promising location is found,
drilling operations begin.

 Drilling: A drilling rig is set up, and a well is drilled into the Earth's crust to reach the
gas reservoir. Sometimes, multiple wells are drilled from a single location to access the
reservoir more efficiently.

 Extraction: Once a well reaches the gas reservoir, the pressure forces the natural gas to
the surface. In some cases, pumps or compressors may be used to enhance the flow.

 Initial Processing: The extracted natural gas often contains impurities, such as water,
carbon dioxide, sulfur compounds, and other contaminants. These impurities must be
removed to meet safety and quality standards. This is typically done at or near the
wellhead at a facility called a gas processing plant.

 Transportation: Natural gas is transported through pipelines, either within a region or

across long distances. Compression stations along the pipeline route maintain the
pressure needed for efficient transportation.

 Storage: Natural gas is stored in underground reservoirs or above-ground tanks to ensure

a steady supply, especially during periods of high demand.

 Further Processing: If the natural gas contains valuable natural gas liquids (NGLs) like
ethane, propane, or butane, these are separated and processed at specialized facilities.

 Distribution: At this stage, the natural gas is ready for distribution to end-users. It's
delivered through pipelines to homes, businesses, and industrial facilities.

 End Use: Consumers use natural gas for various purposes, including heating, cooking,
electricity generation, and as a fuel for vehicles.
Throughout this process, safety and environmental regulations are closely followed to minimize
the impact on the environment and ensure the safety of workers and the public.

Chemical composition and geological distribution of natural gas

Natural gas is composed primarily of methane (70-90%) and a lesser percentage (0-20%) of
ethane, propane, or butane, topped off by small amounts of carbon dioxide (0-8%), nitrogen (0-
5%), hydrogen sulfide (0-5%), and trace amounts of helium, argon, neon, and/or xenon.
Natural gas is often classified according to where in the Earth's interior it is located.
Conventional natural gas is found in large cracks and spaces between layers of overlying rock.
By comparison, unconventional natural gas is found in pores within formations of shale,
sandstone, or other types of sedimentary rock and is also called shale gas or tight gas. Finally,
associated natural gas occurs alongside deposits of crude oil. Coalbed methane is a variation of
natural gas that is found in coal deposits.

Hydrocarbon content
Natural gas is a hydrocarbon mixture consisting primarily of saturated light paraffins such as
methane and ethane, both of which are gaseous under atmospheric conditions. The mixture also
may contain other hydrocarbons, such as propane, butane, pentane, and hexane. In natural gas
reservoirs even, the heavier hydrocarbons occur for the most part in gaseous form because of the
higher pressures. They usually liquefy at the surface (at atmospheric pressure) and are produced
separately as natural gas liquids (NGLs), either in field separators or in gas processing plants.
Once separated from the gas stream, the NGLs can be further separated into fractions, ranging
from the heaviest condensates (hexanes, pentanes, and butanes) through liquefied petroleum gas
(LPG; essentially butane and propane) to ethane. This source of light hydrocarbons is especially
prominent in the United States, where natural gas processing provides a major portion of the
ethane feedstock for olefin manufacture and the LPG for heating and commercial purposes.

Non-hydrocarbon content
Other gases that commonly occur in association with the hydrocarbon gases are nitrogen, carbon
dioxide, hydrogen, and such noble gases as helium and argon. Nitrogen and carbon dioxide are
noncombustible and may be found in substantial proportions. Nitrogen is inert, but, if present in
significant amounts, it reduces the heating value of the mixture; it must therefore be removed
before the gas is suitable for the commercial market. Carbon dioxide is removed in order to raise
heating value, reduce volume, and sustain even combustion properties.
Often natural gases contain substantial quantities of hydrogen sulfide or other organic sulfur
compounds. In this case, the gas is known as “sour gas.” Sulfur compounds are removed in
processing, as they are toxic when breathed, are corrosive to plant and pipeline facilities, and are
serious pollutants if burned in products made from sour gas. However, after sulfur removal a
minute quantity of a noxious mercaptan odorant is always added to commercial natural gas in
order to ensure the rapid detection of any leakage that may occur in transport or use.
Because natural gas and formation water occur together in the reservoir, gas recovered from a
well contains water vapour, which is partially condensed during transmission to the processing
plant.

Thermal and physical properties

Commercial natural gas stripped of NGL and sold for heating purposes usually contains 85 to 90
percent methane, with the remainder mainly nitrogen and ethane. It usually has a calorific, or
heating, value of approximately 38 megajoules (MJ; million joules) per cubic metre or about
1,050 British thermal units (BTUs) per cubic foot of gas.
Methane is colourless, odourless, and highly flammable. However, some of the associated gases
in natural gas, especially hydrogen sulfide, have a distinct and penetrating odour, and a few parts
per million are sufficient to impart a decided odour to natural gas.
 Upstream, Midstream and Downstream

Upstream works include the exploration and production of crude oil and natural gas, whilst
downstream refers to the processes applied after extraction through to it being delivered to the
customer in whatever format required.

Upstream
Exploration involves multiple activities, from acquiring land rights to conducting geological
surveys, and digging exploratory wells to look for reserves of oil and gas. It is a high-risk
activity for organisations, as it is very expensive and those costs are only truly recouped if the
exploration is successful.
Production covers the extraction of the natural resource from the ground. This covers drilling
wells (either onshore of offshore), or fracking. The next steps in the processes of refining oil and
natural gasses are referred to as midstream works.
Upstream works, unsurprisingly, rely heavily on technology and electronics. Modern exploration
relies on surveys conducted using sophisticated electronic equipment, which will likely inform
AI and computer-based models of the area, before exploration wells are dug. Production, too, has
become increasingly automated and computerised, as mechanical drilling and fracking
equipment has become more advanced, autonomous, and efficient. All of these electronics, of
course, mean that there is a heavy reliance on cabling to keep upstream works functioning.

ONSHORE PRODUCTION
Onshore oil production is the process of extracting crude oil from oil fields that are located on
land. It is the most common type of oil production, accounting for about 72% of global oil
production in 2025.
Onshore oil production typically begins with the exploration of a potential oil field. This
involves conducting seismic surveys to map the underground geology and identify areas where
oil is likely to be present. Once a potential oil field has been identified, exploratory wells are
drilled to confirm the presence of oil and to assess its quality and quantity.

If the oil field is deemed to be commercially viable, production wells are drilled to extract the
oil. Production wells are typically lined with steel casing to prevent the collapse of the borehole
and to protect the groundwater from contamination.

Once the production wells are in place, the oil is extracted using a variety of methods, including:
 Natural flow: If the oil reservoir is under enough pressure, the oil will naturally flow to
the surface. However, this is only the case for a small number of oil fields.
 Artificial lift: For most oil fields, some form of artificial lift is required to extract the oil.
Common artificial lift methods include:
  Gas lift: Gas is injected into the production well to reduce the density of the oil and help
it flow to the surface.
 Electric submersible pumps (ESPs): ESPs are submersible pumps that are placed in the
production well to lift the oil to the surface.
 Rod pumps: Rod pumps use a series of rods to drive a piston pump located at the bottom
of the production well. The piston pump lifts the oil to the surface.

The oil that is produced from the wells is then transported to a processing facility, where it is
separated from water and other impurities. The processed oil is then stored in tanks or
transported to a refinery, where it is converted into gasoline, diesel fuel, and other petroleum
products.

Onshore oil production can have a significant environmental impact. The drilling and operation
of oil wells can pollute the air and water, and the disposal of produced water can be a challenge.
However, there are a number of technologies and practices that can be used to minimize the
environmental impact of onshore oil production.

Benefits of onshore oil production

Onshore oil production is typically less expensive than offshore oil production.
Onshore oil fields are easier to access and maintain than offshore oil fields.
Onshore oil production can provide jobs and economic benefits to local communities.

Challenges of onshore oil production

Onshore oil production can have a significant environmental impact.
Onshore oil fields can be located in sensitive areas, such as national parks or wildlife refuges.
Onshore oil production can be disruptive to local communities.
Overall, onshore oil production is a complex and challenging process, but it is essential for
meeting the world's demand for energy.

OFFSHORE PRODUCTION
Offshore production of oil refers to the process of extracting oil from beneath the seabed or
underwater oil reservoirs. This is a common practice in many parts of the world, and it plays a
crucial role in meeting global energy demands. Here are some key points about offshore oil
production:

 Location: Offshore oil production can take place in various bodies of water, including
oceans, seas, and even large lakes. The location of offshore oil rigs and platforms
depends on the geological characteristics of the oil reservoirs.
 Exploration: Before offshore production begins, extensive geological and geophysical
surveys are conducted to identify potential oil reserves beneath the seabed. This involves
the use of seismic imaging and drilling test wells.

 Drilling: Once a promising oil reservoir is identified, drilling rigs are used to bore wells
into the seabed. These wells can extend thousands of feet below the seabed to reach the
oil-bearing rock formations.

 Production Platforms: Offshore oil production typically involves the installation of

production platforms. These platforms can be fixed structures (attached to the seabed),
floating structures (anchored to the seabed but capable of moving with waves), or subsea
systems. Production platforms house equipment for extracting, processing, and storing
oil.

 Extraction: Oil is extracted from the reservoir through the wells using a combination of
natural pressure, pumps, and sometimes enhanced oil recovery techniques like water
injection or gas injection.

 Processing: The extracted crude oil is processed on the production platform to remove
impurities and separate it into various products, including crude oil, natural gas, and
water. These products are then transported to onshore facilities or other locations for
further processing and distribution.

 Environmental Concerns: Offshore oil production can pose environmental risks,

including oil spills, habitat disruption, and impacts on marine life. Stringent regulations
and safety measures are in place to minimize these risks.

 Economic Importance: Offshore oil production is a significant contributor to the

economies of many countries. It provides jobs, generates revenue through taxes and
royalties, and supports related industries such as shipping and logistics.

 Challenges: Operating in offshore environments is challenging due to harsh weather

conditions, corrosion from saltwater, and the need for specialized equipment and
personnel. Maintenance and safety are critical considerations.

 Future Trends: There is growing interest in exploring and developing deeper offshore
reserves, as well as in renewable energy sources like offshore wind farms. The oil and
gas industry is also exploring more efficient and environmentally friendly extraction and
production technologies.
 Midstream
Midstream and downstream factors of oil production are those that affect the transportation,
storage, and refining of crude oil and the marketing and distribution of its refined products.

The midstream industry is the link between production of natural gas, natural gas liquids
(NGLs), and crude oil and the delivery of these hydrocarbon components to end-use markets.
Midstream operators create value at various stages along the midstream value chain by gathering
production from producers at the wellhead or production facility, separating the produced
hydrocarbons into various components, and delivering these components to end-use markets, and
where applicable, gathering and disposing of produced water.
These materials are then stored in preparation for transportation to refineries where the crude oil
and natural gas can be refined into a variety of products which are then sold to consumers. This
is a complex process, involving multiple supply chains and transportation methods including
pipelines, tankers, barges and trucks.

Pipeline infrastructure: Pipelines are the most common way to transport crude oil and natural
gas from production sites to refineries. The availability and quality of pipeline infrastructure can
have a significant impact on the cost and efficiency of oil production.
Gathering, Stabilization, and Compression
Gathering
Smaller diameter pipelines known as gathering systems directly connect to producers’ wellheads
or production facilities. These pipelines transport untreated oil or gas to a central location, where
it is treated and processed, if necessary. Produced water is also gathered and often accounts for
the largest byproduct stream associated with onshore oil and natural gas production.
Stabilization
The stabilization process for natural gas separates heavier hydrocarbons from the lighter
components by using a distillation process, adding heat, or by reducing the pressure and allowing
the more volatile components to flash from the liquid phase to the gas phase.
The stabilization process for crude oil ensures the crude oil meets downstream vapor pressure
specifications. Crude oil delivery points, like terminals, storage facilities, pipelines, and
refineries, often have specific requirements for vapor pressure and temperature, and for the
amount of sediment and water that can be contained in any crude oil delivered to them.
Compression
Natural gas is compressed to a desired higher pressure to enable it to be gathered more efficiently
and delivered into a higher pressure system, processing plant, or pipeline. Since wells produce at
progressively lower field pressures as they deplete, field compression is needed to maintain
throughput across the gathering system.
Storage capacity: Crude oil and refined products need to be stored in tanks before they can be
transported or processed. The availability of storage capacity can also affect the cost and
efficiency of oil production.
Transportation costs: The cost of transporting crude oil and refined products can vary
depending on the distance and mode of transportation. This can have a significant impact on the
profitability of oil production.

Downstream
These processes are the final step in the path that oil and gas take from being in the ground to
being in the hands of consumers. They are preceded by upstream and midstream works, which
cover the extraction and transportation of crude oil and natural gas to refineries.

The first step in downstream works, therefore, is refining. Crude oil is refined using fractional
distillation into a variety of products, including gasoline, naphtha, kerosene, and diesel oil.
Fractional distillation works because these different products all have different boiling points.
The crude oil is heated in the bottom of the distillation chamber until all the components turn
into gases, which rise up the chamber. As they rise up the chamber, they cool, and apparatus is
placed to capture the different products as they condense from a vapour into a liquid.

Processing natural gas is a much more complex process, involving multiple chemical reactions to
create various end products including ethane, propane, and butane. Once both products have
been refined and processed respectively, they are then packaged in various ways and delivered to
consumers. This may be petroleum being transported to petrol stations, where consumers then
fill their cars, or butane being bottled for use in camping stoves.
Refining capacity: The availability of refining capacity can affect the supply of refined products
and their prices.
Product demand: The demand for refined products, such as gasoline and diesel fuel, can vary
depending on the season, economic conditions, and other factors. This can also affect the
profitability of oil production.
Environmental regulations: Environmental regulations can affect the cost of oil production by
requiring companies to invest in pollution control measures.

In addition to these factors, there are a number of other midstream and downstream factors that
can affect oil production, such as government policies, technological advancements, and
geopolitical events.

Examples of how midstream and downstream factors can affect oil production

 If there is a shortage of pipeline infrastructure, it can be more expensive to transport

crude oil to refineries. This can lead to lower profits for oil producers.
 If there is a shortage of refining capacity, it can lead to higher prices for refined products.
This can also lead to lower profits for oil producers, as they will receive a lower price for
their crude oil.
 If environmental regulations become more stringent, it can increase the cost of oil
production. This can also lead to lower profits for oil producers.
 If there is a geopolitical event that disrupts the supply of oil, it can lead to higher oil
prices. This can benefit oil producers, but it can also hurt consumers and businesses.

Overall, midstream and downstream factors can have a significant impact on the cost, efficiency,
and profitability of oil production.
 Major players in Upstream, Mid-Stream and Downstream in India

Upstream
Crude oil and natural gas are found and produced by the upstream sector. This entails looking for
potential oil fields, digging test wells, and determining whether they have the capability of
producing a significant amount of oil. The businesses operating in this sector also bring surface-
recovered natural gas and crude oil. Exploration and Production (E&P) corporations are another
name for such organisations. Research and development (R&D) efforts are extremely important
to them. Geologists, scientists, engineers, and seismic specialists are among the employees of
E&P firms.
The basis for contemporary oil exploration is geological research carried out with the aid of
technology and artificial intelligence (AI). Over the past few years, mechanical drilling and
fracking equipment has progressed and become more effective.
1. Oil & Natural Gas Corporation (ONGC)
2. Oil India Limited (OIL)
3. Reliance Industries Limited (RIL)
4. BP PLC
Midstream
In oil and gas energy operations, the midstream phase is essential for easing the transfer of
unprocessed crude oil from oil sources and processing it into useful crude products for end
consumers. Processing, movement, storage, and logistics are all involved. Upstream activities are
the first step in the procedure, where miners move crude hydrocarbons from the well into a
central location. The hydrocarbons are processed, stored, and divided into their component parts.
The processed goods are subsequently transported downstream for storage and additional
processing via pipelines, roadways, or railcars. Integrated and independent midstream firms are
the two primary business categories in the midstream oil operations phase. While independent
firms provide services to businesses seeking access to midstream assets, integrated corporations
maximise every unit of oil and gas produced.
Crude Oil and its products:
1. Indian Oil Corporation Limited (IOCL)
2. Oil India Limited (OIL)
3. Oil & Natural Gas Corporation (ONGC)
4. Hindustan Petroleum Corporation Limited (HPCL)
5. Bharat Petroleum Corporation Limited (BPCL)
 Natural Gas Pipeline:
1. Gas Authority of India Limited (GAIL)
2. Gujarat State Petronet Ltd (GSPL) India Gasnet Limited (GIGL)
3. Gujarat State Petronet Ltd (GSPL)
4. Pipeline Infrastructure Limited (PIL)
5. Indian Oil Corporation Limited (IOCL)

Downstream
Downstream oil companies produce, manufacture, and sell petroleum products. This market
category consists of oil refineries, petrochemical factories, and gasoline merchants. They provide
a wide range of products, such as plastics, synthetic rubber, pesticides, petrol, diesel, natural gas,
jet fuel, and medicinal compounds. Therefore, downstream oil companies are in charge of
overseeing the essential last procedures of refining and transforming crude oil into finished items
that are subsequently made available for purchase by end customers.
1. Indian Oil Corporation Limited (IOCL)
2. Hindustan Petroleum Corporation Limited (HPCL)
3. Bharat Petroleum Corporation Limited (BPCL)
4. Reliance Industries Limited (RIL)
5. NPCC Engineering Private Limited (NEL)
6. Chennai Petroleum Corporation Limited (CPCL)
NORD STREAM
Nord Stream’s business model is to provide gas transportation capacity for the natural gas
coming from western Russia for distribution into the European gas grid. The gas transportation
system is comprised of its twin, 1,224-kilometre pipelines through the Baltic Sea. Each has the
capacity to transport 27.5 billion cubic metres of natural gas a year.
As operator, Nord Stream AG offers gas transportation capacities via its pipelines. This entails
the day-to-day technical operation and commercial handling of gas transport (dispatching), the
maintenance of all technical systems involved, continued liaison with permitting authorities in
the countries through whose waters Nord Stream runs, as well as adhering to environmental
management obligations and relevant technical standards (codes) of the respective permitting
countries.
A contractual framework is in place to ensure the transport of gas from the entry point of the
Nord Stream pipelines in Vyborg, Russia to the exit point in Lubmin, Germany. Nord Stream
AG does not own, buy or sell gas transported via its twin pipelines – the trade in natural gas is
solely between the shipper and its respective business partners in Europe. In Germany, the gas is
received by the connecting pipelines OPAL (Baltic Sea Pipeline Link) and NEL (North
European Gas Pipeline) for further transport into the European grid.
Gas transported through the Baltic Sea via the pipeline system is monitored 365 days a year,
around the clock by Nord Stream experts. From Zug, Switzerland, the operators of the pipelines
oversee all safety processes and parameters associated with gas transport from the Control
Centre. There, they are in constant contact with the supplier of gas and the receivers to assess the
flow of gas on a daily basis and to ensure that the pipelines are operating as planned.
Nord Stream also operates four pipeline facilities: landfalls in Russia and Germany where the
offshore pipeline ties in to the onshore connecting pipelines; the Control Centre; as well as a
fully independent Backup Control Centre.
Equipment needed for the operation of the pipelines is located at the landfalls, including isolation
and emergency shut-down valves to separate the offshore and onshore pipelines, as well as a
number of sensors to monitor parameters, such as pressure, temperature, gas quality and flow.

Nord Stream consists of two pipelines, which have two lines each.

Nord Stream 1 is a 1,224 km underwater gas pipeline running from Vyborg in northwest Russia
to Lubmin in northeastern Germany via the Baltic Sea. It was completed in 2011.

Nord Stream 2 which runs from Ust-Luga in Leningrad to Lubmin was completed in September
2021 and has the capacity to handle 55 billion cubic meters of gas per year once it becomes
operational.
 The twin pipelines together can transport a combined total of 110 billion cubic metres
(bcm) of gas a year to Europe for at least 50 years.
 The Nord Stream crosses the Exclusive Economic Zones (EEZs) of several countries
including Russia, Finland, Sweden, Denmark and Germany, and the territorial waters of
Russia, Denmark, and Germany.
 In Germany, the pipeline connects to the OPAL (Baltic Sea Pipeline) and NEL (North
European Pipeline) which further connects to the European grid.
How War Impacted Nord Stream Supply?
Russia had already decreased the supply of gas to Europe after the European Union imposed
sanctions on Moscow for invading Ukraine. Flows via Nord Stream 1 were reduced to 20% of its
capacity in July 2022.
In August 2022, Russia further plugged the supply and stopped Nord Stream 1 completely, citing
maintenance. Gazprom had reasoned that an oil leak in a turbine on the Nord Stream 1 pipeline
was behind the closure.
The Nord Stream 2, despite being completed, could not become operational after Germany
pulled out of the project after Russia invaded Ukraine.
The stream was supposed to double Russia's energy export to Europe to 110 billion cubic meters.
The short supply of the gas pipeline resulted in a sudden hike in energy prices in Europe. With
the shutting down of the Nord Stream pipeline, Europe faces a tough time ahead with winter
approaching.

What is its Significance of Nord Stream for Europe and Russia?

Europe:
Europe requires more than 100 billion cubic metres (bcm) of natural gas each year and around
40% of its gas comes from Russia.
Over the last few years, Europe has become more dependent on gas imports because of a
decrease in domestic gas production. Reducing dependence on Russian gas is difficult as there
are no easy replacements.
Many European businesses have large investments in Nord Stream 2 and there is pressure on
governments from these businesses. Finally, a reduction in gas from Russia would increase
already high gas prices and that would not be popular domestically.
Russia:
As for Russia, which has the largest natural gas reserves in the world, around 40% of its budget
comes from sales of gas and oil.
Nord Stream 2 is important because it eliminates the risks related with sending gas through
transit countries, cuts operating costs by doing away with transit fees and gives direct access to
its most important European customer, Germany.
It increases Europe’s dependence on Russia while giving it a reliable customer.
 Main fields of crude oil
Crude oil fields vary in size, production capacity, and geological characteristics, and they play a
critical role in meeting global energy demands.
1. Ghawar Field, Saudi Arabia
Ghawar is the largest and most productive oil field in the world. It is located in eastern Saudi
Arabia and has been a significant source of oil for decades. It produces high-quality Arabian
Light crude oil.
2. Burgan Field, Kuwait
Burgan is one of the largest oil fields in the Middle East and is located in Kuwait. It produces a
substantial amount of Kuwaiti crude oil, primarily of the Burgan and Magwa varieties.
3. Cantarell Field, Mexico
Cantarell was once one of the largest oil fields globally, located in the Gulf of Mexico. It has
been a vital source of Mexican crude oil, although its production has declined significantly in
recent years.
4. Daqing Field, China
Daqing is the largest oil field in China and is located in Heilongjiang Province. It has played a
crucial role in China's domestic oil production.
5.Prudhoe Bay, United States
Prudhoe Bay is the largest oil field in North America and is located in Alaska, USA. It produces
Alaskan North Slope crude oil and has been a significant contributor to U.S. oil production.
6.Rumaila Field, Iraq
Rumaila is one of the largest oil fields in Iraq and is located in the southern part of the country. It
has been a vital asset in Iraq's oil production.
7. Lula Field, Brazil
Lula, also known as Tupi, is a massive offshore oil field located in Brazil's Santos Basin. It has
contributed to Brazil's emergence as a major oil producer.
8.Sakhalin-1 Field, Russia
Sakhalin-1 is an oil and gas project located offshore in the Russian Far East. It has played a role
in Russia's oil production and exports.
9. Kashagan Field, Kazakhstan
Kashagan is a significant offshore oil field in the Caspian Sea, known for its complex
development and production challenges.
10. Orinoco Belt, Venezuela
The Orinoco Belt in Venezuela is a vast area with heavy crude oil reserves. It includes several
major fields, such as the Hamaca, Zuata, and Cerro Negro fields.
 Porter's Five Forces
Porter's Five Forces is a strategic framework developed by Michael Porter that helps analyze the
competitive forces within an industry. Here's how Porter's Five Forces can be used to assess the
competitive dynamics in the crude oil industry:

 Threat of New Entrants:

Barriers to Entry: The crude oil industry often has high barriers to entry due to substantial
capital requirements for exploration, drilling, and infrastructure development.
Additionally, established players benefit from economies of scale.
Access to Resources: Access to oil reserves is a significant barrier. Existing companies
have already secured rights to many of the world's known oil reserves.
Regulatory Hurdles: Governments often regulate oil exploration and production, which
can create challenges for new entrants.
 Bargaining Power of Suppliers:
Oil Producers: Large oil-producing countries, such as OPEC (Organization of the
Petroleum Exporting Countries), can exert significant influence over oil prices and supply
levels. This can limit the bargaining power of oil companies that rely on these suppliers.
Service Providers: Companies that provide drilling services, equipment, and technology
also hold some power, especially during periods of high demand.
 Bargaining Power of Buyers:
Oil Consumers: Major consumers of oil, such as industrial nations, have some bargaining
power in negotiating prices with oil suppliers. They may also seek alternative energy
sources.
Substitute Products: The availability and competitiveness of substitute energy sources,
like natural gas and renewable energy, can influence the bargaining power of buyers.
 Threat of Substitutes:
Alternative Energy Sources: The availability and affordability of alternative energy
sources, such as natural gas, solar, wind, and electric vehicles, can pose a threat to the
crude oil industry. Shifts in consumer preferences and government policies can impact
the demand for oil.
 Rivalry Among Existing Competitors:
Oil Companies: Rivalry among oil companies can be intense, with numerous global and
national players competing for market share. Price wars, technological advancements,
and exploration efforts are common competitive tactics.
OPEC and Market Dynamics: OPEC member countries often cooperate to manage oil
production and influence prices. However, internal disagreements and market forces can
lead to fluctuations in supply and pricing, affecting rivalry dynamics
 MANIFOLDS AND WELLHEADS AND SEPARATION
In the context of the oil and gas industry, "manifolds" and "wellheads" are essential components
used in the extraction and production of oil and natural gas from underground reservoirs. They
serve distinct purposes in the process. Here's an overview of both terms:

Wellhead:

Location: The wellhead is the equipment installed at the top of an oil or gas well, and it is the
point where the wellbore (the hole drilled into the ground) interfaces with the surface.
Primary Function: The primary function of the wellhead is to provide a secure and controlled
interface between the subsurface reservoir and the surface production facilities. It serves as a
barrier to prevent the uncontrolled release of oil or gas.
Components: A typical wellhead includes components such as casing and tubing hangers, a
casing head, a tubing head, a blowout preventer (BOP), and various valves and fittings.
Operations: Wellheads allow for the installation of production tubing and casing, control of
downhole pressure, and the capability to shut in or control the flow of hydrocarbons from the
well.

Manifold:

Location: Manifolds are typically located downstream from the wellhead, closer to the
production facilities. They can also be used in various locations throughout the production and
distribution system.
Primary Function: Manifolds serve as distribution and control points for the flow of oil or gas
from multiple wells. They collect production streams from multiple wells and direct them to the
production facilities or transportation pipelines.
Components: Manifolds consist of piping, valves, and sometimes instruments. They can be
designed with multiple branches to control and distribute fluid flow from different sources.
Operations: Manifolds allow operators to control the flow, pressure, and distribution of
hydrocarbons coming from multiple wells. They also enable the isolation of individual wells for
maintenance or in case of emergencies.

In summary, the wellhead is primarily responsible for securing the well and controlling the flow
at the point where the wellbore meets the surface, while the manifold is used to collect, control,
and distribute the flow of oil or gas from multiple wells to downstream production or
transportation systems. Both components are crucial in the oil and gas production process,
ensuring safe and efficient operations.
Separation

In the context of the oil and gas production process, separation refers to the process of separating
different components of the produced fluids, including oil, natural gas, and water. This
separation is typically carried out at production facilities and involves the use of separators and
other equipment. Here are some key points about separation:
Purpose: The separation process aims to separate hydrocarbons (e.g., oil and gas) from water
and other impurities. This is important for meeting product specifications and ensuring the
efficient production of valuable hydrocarbons.
Equipment: Separators are commonly used for this purpose. They use the difference in density
and phase behavior of the components to separate them. Other equipment, such as heaters,
treaters, and scrubbers, may also be used in the separation process.
Stages: Separation can occur in multiple stages. Primary separation separates the bulk of the
fluids, while secondary and tertiary separation stages further refine the products.
Safety and Environmental Considerations: Proper separation is essential for minimizing
environmental impact, ensuring the safety of operations, and meeting regulatory requirements.
These components and processes play a critical role in the oil and gas industry, ensuring the
efficient and safe extraction and processing of hydrocarbons from reservoirs.
 OIL SANDS
Oil sands, or tar sands, are sand and rock material that contain crude bitumen—a dense, viscous
form of crude oil. Bitumen is too thick to flow on its own, so extraction methods are necessary.
Bitumen is extracted and processed using two methods: mining and in-situ recovery.
Oil sands are found primarily in the Athabasca, Cold Lake, and Peace River regions of northern
Alberta and Saskatchewan, Canada, and in areas of Venezuela, Kazakhstan, and Russia. Oil
sands trade as part of crude oil commodities.
In surface mining oil sands, clearing large land areas of trees and brush is the first step. The
topsoil and clay are removed to expose the oil sand. This surface mining method uses large
trucks and shovels to remove the sand, which can have a volume of anywhere from 1% to 20%
of actual bitumen. After processing and upgrading, the results travel to refineries for refining into
gasoline, jet fuel, and other petroleum products.

The mining method is considered to be very damaging to the environment, as it involves leveling
hundreds of square miles of land, trees, and wildlife. Oil sands operators must develop a plan to
reclaim the land and have this approved by the government. Since oil sands operations began in
Canada in the 1960s, just 8% of total mining area has been reclaimed or is in the process of
reclamation.
Another method of mining oil sands is in-situ, also called in-situ recovery (ISR) or solution
mining. It is mainly used to extract bitumen in oil sand that is buried too deep below the earth's
surface for recovery with a truck and shovel.
In situ technology injects steam and chemicals deep beneath the ground to separate the viscous
bitumen from the sand and then pump it up to the surface. The bitumen then goes through the
same upgrading process as it would in the surface mining method.
Because mining for oil sands is extremely expensive, the price of oil is a critical factor in profit
generation for mining companies. If the price of oil drops too low then mining oil sands may not
be monetarily beneficial.
The in situ method is more costly than the surface mining method, but it is less damaging to the
environment, requiring only a few hundred meters of land and a nearby water source to operate.
After drilling holes, a mining solution is pumped into the soil. At times explosions or hydraulic
fracturing may be utilized to open pathways.
It is estimated by the Alberta government that 80% of oil in the oil sands is buried too deep for
open-pit mining; therefore, in situ methods will likely be the future of extracting oil from oil
sands. The most common form of in situ is called steam-assisted gravity drainage (SAGD).
 Suez Canal
The Suez Canal is a man-made waterway that travels from the Red Sea to the Indian Ocean. It
makes it possible for shipping to go more directly between Europe and Asia, giving access from
the North Atlantic to the Indian Ocean without having to go around the African continent. Since
it opened in 1869, the waterway has been at the epicentre of warfare since it is essential for
global trade.
Egypt's Port Said on the Mediterranean Sea and the city of Suez, which is situated on the
northern beaches of the Gulf of Suez, are connected by the 193-kilometer-long Suez Canal. The
Sinai Peninsula is divided from the majority of Egypt by the canal. On November 17, 1869, it
was formally opened after a ten-year construction period. The Suez Canal is owned and
administered by the Suez Canal Authority, and ships from all nations are welcome to utilize it for
either commercial or military purposes.

A Brief History
Since ancient times, there has been interest in a maritime route linking the Red Sea and the
Mediterranean Sea. A network of tiny canals connected the Red Sea to the Nile River as early as
2000 B.C., but a direct connection was thought impossible due to their different altitudes.
Overland routes were used, most notably by Great Britain, which conducted major trade with its
colonies in modern-day India and Pakistan. French explorer and engineer Linant de Bellefonds
led discussions in the 1830s about a sizable canal offering a direct path between the two bodies
of water. By the 1850s, Khedive Said Pasha permitted French diplomat Ferdinand de Lesseps to
establish a corporation to build a canal, which eventually became known as the Suez Canal
Company. Construction on the canal's northernmost Port Said end began in 1859, with an
estimated 1.5 million people working on the excavation effort over ten years. Despite protests
from British, French, and American canal investors, many workers were slaves, and tens of
thousands died from cholera and other causes while working on the canal.
The Suez Canal, a vital waterway in Egypt, was built and inaugurated on 17th November 1869
under British protection. Initially accessible only by steamships due to challenging winds, it had
a significant impact on global trade and European colonization of Africa. However, it saw less
traffic than anticipated. The canal was established as a neutral zone in 1888 under British
protection. The Anglo-Egyptian Treaty of 1936 reaffirmed Britain's control, but Axis ships were
prohibited from accessing it during World War II. After World War II, Egypt withdrew from the
Anglo-Egyptian Treaty in 1951. In 1956, the British withdrew their troops, handing control over
the canal to the Egyptian government under President Gamal Abdel Nasser. This led to the Suez
Crisis in 1956, where troops from Britain, France, and Israel threatened to invade Egypt. The
U.N. ratified Pearson's proposal in November 1956. The Suez Canal played a central role in
international conflict until the Six-Day War of 1967, when Israel took control of the east bank.
Suez Canal in Present Day
Averaging 50 ships per day now, more than 300 million tonnes of cargo are transported through
the canal annually.
The Suez was extended from 61 meters to 312 meters for a period of 21 miles as part of a $8
billion construction project that was overseen by the Egyptian government in 2014. The project
was finished in one year, and now ships may pass through the canal simultaneously in both
directions.
Despite the expanded path, a massive cargo ship, The Ever Given, owned by Japan and traveling
from China, got caught in the canal in March 2021, blocking more than 100 ships at each end of
the important commercial artery. Almost a week of international trade was hampered by the
incident. The blockage of the Ever-Given canal, which handles 10% of global maritime
commercial traffic, has caused significant delays and cost for ship owners. By March 29, 367
vessels were waiting to pass through the canal, with experts estimating it could take weeks to
clear. The traffic jam held up nearly $10 billion in trade daily. The owner of the Ever Given is
already facing millions in insurance claims and emergency salvage costs. The Egyptian
government, which received $5.61 billion in revenue from canal tolls in 2020, has a vital interest
in refloating the canal.

A vital Oil transit route

According to data analytics company Kpler, 1.74 million barrels per day (bpd) of the 39.2
million bpd of crude oil transported by seaborne methods in 2020 passed through the Suez Canal.
Fuels such as crude oil and refined fuels flow both ways.
According to the International Energy Administration, 3.6 million bpd of oil—1.5 million bpd of
it crude—moved through the canal between December and February. More crude is moving east.
During this time, 1.1 million bpd traveled east, making up around 4.5% of Asia's seaborne
imports. According to the IEA, about 400,000 bpd moved west, mostly to Europe.
Kpler estimates that 1.54 million bpd, or little under 9%, of the world's imported refined
products last year, passed through the Suez Canal. A significant fraction of the refined product
flows through the canal are made up of naphtha, the feedstock for plastics. According to the IEA,
the majority of volumes going east were fuel oil, naphtha, and liquefied petroleum gas, while the
majority of volumes going west were diesel and jet fuel.
80% of the oil supplied from the Middle East Gulf to Europe is transported by the 320 km (200
miles) Sumed pipeline that runs from the Gulf of Suez to the Mediterranean, according to the
Sumed website. Although the pipeline has a 2.8 million bpd capacity, use is frequently far lower
than that. According to the U.S. Energy Information Administration, the system saw a flow of
about 1.3 million bpd in 2018. The alternative is to cruise around Africa, which can lengthen a
trip by two weeks and incur additional fuel costs.
According to the IEA, the canal handled 6-8%, or 22 million tonnes, of the world's LNG traffic
in 2020. The waterway was used by about 25% of Middle Eastern LNG exports to distribute gas,
primarily to European consumers.
Suez Canal Crisis – 1956
In 1952, Egypt's king Faruk I was overthrown by Gamal Abdel Nasser, who later became its
leader and positioned Egypt as a leading nonaligned state. Nasser was not a true Marxist but
focused on Arab nationalism and decolonization. In 1956, he announced the nationalization of
the Suez Canal, violating a 1954 agreement that required Egyptian control of the canal by 1968.
Diplomats worked to prevent armed conflict in the Middle East, with the United States not
supporting war. An American proposal to give 18 maritime powers and Egypt equal stakes in the
canal was rejected. Britain and France secretly discussed a military invasion of Egypt with Israel,
as Israel considered Egypt a threat to its sovereignty.
In 1956, Israel invaded Egypt and defeated Egyptian forces, advancing towards the Suez Canal.
This conflict was not surprising, as Egypt had been involved in the Arab-Israeli War of 1948.
The United Nations' creation of a new Jewish territory in 1947 was seen as an encroachment on
Arab sovereignty. In May 1948, Israel declared its independence, leading to war with
neighboring Arab states. Israel won its war for independence, but intense hostility lingered.
Egypt prevented Israel from using the Suez Canal, motivating Israel to wrest it from Egyptian
control. Britain and France, having plotted with the Israelis, called for a cease-fire, but Nasser
rejected this, giving Britain and France an excuse to engage militarily.
After Egypt rejected a cease-fire, British and French bombing began on October 31. European
powers focused on neutralizing the Egyptian air force and establishing control of the skies. On
November 5, paratroopers and amphibious invasions occurred, with Royal Marines arriving
ashore with tanks and armor. The British took the Suez Canal with minimal opposition, but
Nasser limited Europeans' effectiveness by blocking it with sunken ships. Egyptian forces also
destroyed oil production in Iraq, which had been under British domination since World War II.
The blockage of the canal and Egyptian attempts to destroy oil bound for Europe worsened the
ongoing oil shortage. Overall, the combined Anglo-French invasion of Egypt was a swift
military success.
Despite their military victory, Britain and France faced a diplomatic firestorm when the US, led
by President Dwight D. Eisenhower, condemned the invasion of Iraq. The US believed the war
would push Arab states into alliances with the Soviet Union, and wanted to avoid appearing
hypocritical after condemning the Soviet Union for its intervention in Hungary. In a surprise
move, the US publicly criticized its World War II allies in the United Nations and promoted the
use of UN peacekeepers to secure the canal. These actions created tensions between the US and
its European allies, but likely bought goodwill from Arab states and prevented them from
pursuing close alliances with the Soviet Union. The Anglo-French invasion of Egypt was
criticized by the US, international community, and domestic protestors. Soviet diplomats
threatened to send volunteers if Britain, France, and Israel did not agree to a UN-backed cease-
fire. The biggest threat was financial, as the value of the British pound was falling due to oil
shortages and the Suez Crisis. The US threatened to sell its holding of British pounds, flooding
the foreign exchange market. Britain had no choice but to agree to the UN cease-fire, and Britain
pulled its troops from Egypt, followed by France and Israel.
 Refinery
An industrial facility known as an oil refinery, processes or refines crude oil into a variety of
petroleum products that can be used, including diesel, petrol and heating oils like kerosene.
Refinery services are regarded as a down-stream sector of the oil and gas industry since oil
refineries effectively act as the second step in the crude oil production process after the actual
extraction of crude oil up-stream. Distillation, the first step in the refining process, involves
heating crude oil to extremely high temperatures in order to separate the various hydrocarbons.
Crude oil components are sold to numerous businesses, and oil refineries are essential for
providing transportation and fuel. Several hundred thousand barrels of crude oil can be refined
every day in large refineries. While the production of crude oil in its unprocessed state is done in
the "upstream" sector, refining is done in the "downstream" sector. Oil is delivered down the
value chain of the product during the downstream stage, which also entails the sale of petroleum
products to organisations, governments, or private citizens.

Why the refining is necessary in Crude Oil

Hydrocarbons, which are made up of the elements, hydrogen and carbon, are abundant in crude
oils and are utilised to make a variety of goods like paraffin wax, petrol and diesel. These
hydrocarbons can be converted into other forms, such fuels and aromatics, which are utilised in a
variety of products, including plastic, pharmaceuticals, and fuel. To comprehend the kinds of
products that can be derived from crude oil, refinery is required. Methane, ethane, propane, and
butane are other names for petroleum gas, which is used to heat, cook, and create plastic.
Naphtha or Ligroin can be further processed to make gasoline.

 Gasoline
 Kerosene
 Diesel distillate or Gas oil
 Lubricating oil
 Heavy gas or Fuel oil
 Residuals

Working of Oil Refineries

Crude oil, a raw unprocessed fossil fuel, is composed of 84% carbon, 14% hydrogen, 1 to 3%
sulphur, and less than 1% nitrogen, oxygen, metals, and salts. It is unusable due to the mixed
hydrocarbons in the sludge. The process of fractional distillation column is used to separate the
components of crude oil, which are separated by their boiling points and vaporization
temperatures. The quality of hydrocarbons depends on the type of chains formed in the
molecules. Longer chains have higher boiling temperatures and are used differently.
A newer process, Cracking, breaks complex hydrocarbons into simpler ones, maximizing yield
per barrel. This process breaks down long and complex chains into smaller and lighter ones, such
as LPG, gasoline, and diesel. Reforming, on the other hand, changes the nature of hydrocarbons
to achieve desired physical properties.
Cracking can be achieved by different processes, namely:

 Thermal Cracking: The heaviest hydrocarbon molecules that have been produced
during the distillation process are cracked open using tremendous heat in this step. The
molecules are "cracked" into smaller hydrocarbons by the extreme heat, producing coke,
a by-product that is virtually entirely carbon. Fuel oil, diesel, petrol and naphtha are all
extracted using this method from residual oil.

 Hydrocracking: Here, hydrogen is used to heat fractions like petrol oil, kerosene, and
naphtha to 300–400°C under high pressure while a catalyst is present. This procedure can
eliminate trace contaminants like metals, nitrogen, and sulphur.

 Catalytic Cracking: Here, under extreme heat and pressure, residual oils or petrol oil are
broken down in the presence of a catalyst. In some cases, hydrogen is also added to
enhance the hydrocarbons' purity. Higher grades of hydrocarbons are produced at the
conclusion of the process, but the expense is much higher. When hydrocarbons with
shorter chains are joined to create ones with longer chains, this process is known as
reforming. Low weight naphtha is transformed by a process known as "catalytic
reforming" into aromatics, which are used to create chemicals and blended petrol.

 Steam Cracking: Facilities called steam cracker units use steam to thermally crack
feedstocks such naphtha, LPG, butane, ethane, and propane in a bank of pyrolysis
furnaces. Steam is cracked without the presence of oxygen. The lighter alkenes, such as
ethene and propene, are produced using this technique as their primary industrial method.
The greatest scale chemical processes, ethylene and propylene, are supported by steam
cracking as the main technology.

19 to 20 gallons of petrol and 11 to 12 gallons of diesel fuel can be made from one barrel of oil
(42 gallons).
The price discrepancies between a barrel of unrefined crude oil and the refined goods (like
petrol) that are made from it are known as the crack spread in the commodities trading industry.
Investors monitor fluctuations in the crack spread as a market indicator for changes in the price
of crude oil and refined goods.

Oil Refinery Safety

Working in an oil refinery can occasionally be risky. For instance, the Texas City oil refinery of
BP experienced an accident in 2005. The restarting of a hydrocarbon isomerization unit
reportedly resulted in a sequence of explosions, according to the US Chemical Safety Board.
There were 15 fatal workplace accidents and 180 injuries. The explosions happened when a
distillation tower over pressurized due to hydrocarbon flooding, which led to a geyser-like
emission from the vent stack.

Oil refining is a downstream function that involves extracting oil and selling it as a final product.
Companies invest heavily in both upstream and midstream functions to maximize profit margins.
The refining industry is price sensitive and requires heavy investment, occupying large land
tracts and employing heavy machinery. The fluctuating crude oil prices can impact the industry,
leading many companies to opt for end-to-end service.

The refining industry is also a dangerous place to work, with accidents causing human deaths
and health hazards like asthma, cancer, birth defects, neurological damage, and blood disorders.
To mitigate these hazards, oil refineries collaborate with local emergency response teams, invest
in safety drills, ensure proper communication of work and responsibilities, maintain constant
housekeeping, apply labelling techniques, and conduct regular inspections and maintenance of
machinery.

The oil refining industry has evolved from producing a single product to multiple products,
becoming the world's most stringently regulated manufacturing industry. With over 77 million
barrels of crude oil produced per day in 2021, the need for oil is expected to remain to sustain
economies and daily lives.

Types of Refineries
Numerous distinct processing units make up refineries. An oil refinery's configuration refers to
the arrangement of these processing units. A refinery's capacity to process heavier crude grades
and to produce a large percentage of higher-value petroleum products, such diesel and petrol, is
directly correlated to the number of units it has. The more units it has, the more complicated the
refinery is.
The choice of a refinery configuration for petroleum oil depends on a number of variables, but
each of the variables must be economically balanced in order to choose a refinery configuration
with the best possible profit margin and the right flexibility for crude oil.
Based on their ability to convert fuel, oil refineries are often divided into four groups. The
potential product value from a refinery rises when the conversion capability is enhanced from
zero to full conversion, and the crude flexibility grows.
1. Topping Refinery with no conversion
2. Hydroskimming with product treatment
3. Cracking oil refinery, heavier oil conversion
4. Full conversion or deep conversion, maximum conversion

1. Topping Oil Refinery

A crude oil distillation unit called a topping refinery is created for the production of industrial
fuel or petrochemicals. It produces a lot of unfinished oils and is very reliant on regional
markets. Tankages, distillation units, gases, light hydrocarbon recovery units, and utility systems
including steam, power, and water treatment plants are all included in the crude topping unit.
Condensates or light sweet crudes are often the only types of oil that topping oil refineries
process, unless there are markets for heavier fuel oil. The refineries that produce asphalt or
bitumen also accept heavy crude oil as feedstock. As the demand for low sulphur and high
sulphur fuel oil rises, these units may produce up to half of their output as residual fuel oil, thus
losing market share. Due to a lack of downstream processing facilities for high-quality low-
sulfur fuels, the products are inadequately refined. These facilities are often found in oil field
processing facilities or environmental requirements that are flexible.
The crude topping unit is advantageous due to its simplicity and low cost, making it easier to
operate than more complex refineries. However, it has limitations such as limited crude slate,
products that don't meet environmental specifications, and the production of low-value products
like fuel oil, making it not economically viable in low-margin periods.

2. Hydroskimming Oil Refinery

The hydroskimming refinery is a more complex refinery than the topping refinery, consisting of
an atmospheric distillation unit, naphtha reforming, and treating units. It produces hydrogen from
hydrocarbon and high-octane gasoline, which is crucial for upgrading refinery products through
hydrotreating. The addition of hydrotreating and reforming units results in a more flexible
petroleum refinery capable of producing desulfurized distillate fuels and high-octane gasoline.
The main drawback of a hydroskimming oil refinery is that it can only process lighter crude
feeds and produces a large volume of residual oil. Hydroskimming refineries are in danger as a
result of the sharp decline in demand for furnace oil. Light ends (C1-C4), finished petrol,
finished jet fuel and ultralow sulphur diesel are possible outputs from a hydroskimming refinery.
It is also possible to upgrade the light ends to increase their value (for example, by isomerizing
butanes).

3. Conversion or Cracking Oil Refinery

A conversion refinery combines fundamental components from hydroskimming and topping
refineries with olefin conversion facilities like alkylation or polymerization as well as residual oil
conversion plants like catalytic cracking and hydrocracking. Using catalysts, high temperatures,
and high pressure, it transforms crude, vacuum residue, or residual oil into lucrative petrol and
distillate components. Vacuum distillation, fluid catalytic cracking, alkylation, or hydrocracker
units are added in addition to hydroskimming to convert vacuum gas oil. Strict standards call for
additional feed or product treatment.
Fluid catalytic cracking (FCC) or residue fluid catalytic cracking (RFCC) approaches are used by
cracking refineries with large petrol markets due to their greater crude oil flexibility and high
product value per barrel. Hydrocracking is preferred by cracking refineries over FCC in diesel
markets. Conversion or cracking refineries, on the other hand, demand higher capital and
operating expenditures to obtain operational flexibility. In comparison to topping or
hydroskimming, this facility can create more fluctuation in margins.

4. Deep Conversion, Coking or Full conversion, or Complex Oil Refineries

The final stage of refining is called a deep conversion refinery, which combines all of a
conversion refinery's elements with an additional unit called a coking unit. The cooking unit
enables the treatment and production of lighter products from highly heavy crude oil fractions.
Additionally, the gases or any other hydrocarbon feedstock are converted into petrochemicals in
a deep conversion refinery.
Installing more conversion capacity results in a higher production of clean products and a lower
yield of heavy fuel oil. Increased conversion capacity would, however, often need more energy,
which would raise operational expenses. The lower cost of the heavier crude oil and the earnings
from the sale of goods must be considered in relation to these greater operating and capital costs.
Deep conversion refineries offer refiners flexibility in processing cheaper, heavier crude, and
lower quality synthetic crude, allowing them to make more informed crude buying decisions.
Modern catalytic cracking and coking refineries produce high gasoline outputs, with a balance
between liquefied petroleum gas, jet fuel, diesel fuel, and coke. They often use solvent extraction
processes for manufacturing lubricants and petrochemicals, recovering propylene, benzene,
toluene, and xylenes for further processing into polymers. Potential margins increase
significantly with conversion, but operating costs and transportation reduce realized margins.
 Coalbed methane
Coalbed methane, coalbed gas, or coal seam gas is a form of natural gas extracted from coal
beds. CBM is formed during the geological process of coalification, which converts plant
material into coal. As coal forms, methane is trapped within the coal matrix.
The term refers to methane absorbed into the solid matrix of the coal. It is called 'sweet gas'
because of its lack of hydrogen sulfide. The presence of this gas is well known from its
occurrence in underground coal mining, where it presents a serious safety risk. Coalbed methane
is distinct from a typical sandstone or other conventional gas reservoir, as the methane is stored
within the coal by a process called adsorption. The methane is in a near-liquid state, lining the
inside of pores within the coal (called the matrix). The open fractures in the coal (called the
cleats) can also contain free gas or can be saturated with water.
Composition
CBM primarily consists of methane (CH4), which is the main component of natural gas.
Methane content in CBM can be as high as 90-95%.
Unlike much natural gas from conventional reservoirs, coalbed methane contains very little
heavier hydrocarbons such as propane or butane, and no natural-gas condensate. It often contains
up to a few percent carbon dioxide. Coalbed methane is generally formed due to thermal
maturation of kerogen and organic matter. However, coal seams with regular groundwater
recharge see methane generated by microbial communities living in situ.

Properties
 Low Impurities:CBM typically has fewer impurities compared to conventional natural
gas. It contains low levels of nitrogen, carbon dioxide, and other contaminants, making it
easier to process and use.

 Permeability Variability:The permeability of coal seams can vary widely, and it often
depends on factors like coal type, depth, and geological conditions. Low permeability can
make gas extraction more challenging.

 Energy Resource:CBM is considered an unconventional source of natural gas and is often

used as an energy resource for electricity generation, heating, and industrial processes.

 Renewable Energy:In some cases, CBM is considered a "green" or renewable energy

source when it is produced from abandoned coal mines or used as a substitute for more
carbon-intensive fossil fuels.

 Energy Transition:CBM can play a role in the transition from coal to cleaner energy
sources by utilizing the methane trapped in coal seams while reducing the environmental
impact of coal mining.

Extraction
To extract the methane, CBM operators drill wells into coal seams and pump out ground water
(produced water or CBM wastewater). Removing the ground water from the formation is
necessary to produce CBM, as the water removal reduces the pressure and allows the methane to
release from the coal to produce flowing natural gas.Unlike conventional natural gas reserves,
CBM is stored within the pore spaces and fractures of coal seams. This requires specialized
extraction techniques.
1. Directional Drilling:
Directional drilling is a method where a well is drilled at an angle, allowing it to reach greater
distances horizontally or tap into specific areas of interest underground. In the context of CBM
extraction. By drilling horizontally through the coal seam, a larger portion of the seam can be
accessed, enhancing methane recovery.

2. Hydraulic Fracturing (Fracking):

Hydraulic fracturing involves injecting a fluid mixture at high pressure into the coal seam,
creating fractures in the coal. These fractures allow methane to flow more freely, increasing the
productivity of the well.
 The Green River Formation
One of the most important fossil sites for understanding the Eocene is found at Green River,
located in western Colorado, eastern Utah and southwestern Wyoming in the United States. The
Green River Formation primarily consists of sedimentary rocks that were deposited in ancient
lake environments during the Eocene epoch, approximately 50 to 70 million years ago. These
lakes were typically long-lived and covered large areas. The formation of the Green River lakes
was influenced by tectonic activity in the region. As tectonic plates shifted and crustal
movements occurred, basins and depressions formed where these ancient lakes would eventually
develop.Climate conditions in the Eocene period played a significant role in the formation of the
Green River lakes. The region experienced a relatively warm and humid climate, which allowed
for the persistence of large, stable lakes.

Over millions of years, sediment was continuously deposited into these ancient lakes. This
sediment was derived from various sources, including rivers, streams, volcanic ash, and organic
matter. Accumulation of organic matter, including plant material, algae, and microorganisms.
These organic deposits contributed to the formation of oil shale within the formation.

The sediments in the Green River lakes were deposited in distinct layers and laminations. The
stable lake environments and sedimentary conditions of the Green River Formation were ideal
for the preservation of fossils. As a result, the formation contains well-preserved fossils of
various organisms, including fish, insects, plants, and even mammals.
 Oil Marketing Companies
Major stakeholders in India's oil and gas sector include Oil Marketing Companies (OMCs). The
exploration, production, refining, distribution, and marketing of petroleum products are just a
few of the activities that these businesses are involved in along the entire petroleum value chain.
The OMCs are crucial in ensuring that consumers in India have access to petroleum products like
petrol, diesel, LPG (liquefied petroleum gas), and aviation fuel.

Major Oil Marketing Companies in India are:

1. Indian Oil Corporation Limited (IOCL): Indian Oil is the largest OMC in India and
operates a vast network of refineries, pipelines, and retail outlets. It is a government-owned
company and plays a crucial role in meeting the energy needs of the nation.
2. Bharat Petroleum Corporation Limited (BPCL): BPCL is another significant OMC in
India with a strong presence in the refining and marketing of petroleum products. It also has a
substantial network of retail outlets.
3. Hindustan Petroleum Corporation Limited (HPCL): HPCL is another prominent
OMC, involved in refining and marketing of petroleum products. It operates a substantial
number of retail outlets and LPG distributorships.
4. Reliance Industries Limited (RIL): RIL is a private company with interests in oil and
gas. It operates the Jamnagar Refinery, one of the world's largest and most advanced refineries.
RIL is involved in various aspects of the petroleum industry, from exploration and production to
refining and marketing.

Price Parity
The idea of ensuring that the pricing of petroleum products, such as petrol, diesel and LPG
(liquefied petroleum gas), are in line with the worldwide or global prices of crude oil is known as
"price parity" of petroleum products in India. It tries to keep crude oil costs, which serve as the
major raw material for repurposing petroleum products, in harmony with domestic prices for
these products.

Concepts like Import Price Parity (IPP), Trade Price Parity (TPP), and Export Price Parity (EPP)
are utilised when discussing how much petroleum goods should cost, particularly for the
domestic market. These phrases aid in illuminating the process by which the prices of petroleum
products are established, taking into account a number of variables such as trade dynamics and
prices on global markets.

 Import Price Parity (IPP): IPP is a pricing concept that describes the cost at which a
nation would have to import petroleum products to satisfy its domestic demand, taking
into account the price on the global market. It accounts for the price of importing the
good, which includes shipping costs, taxes, customs, and other related costs. The
appropriate domestic price for a commodity, if it were imported, is established using IPP
in the context of petroleum pricing, ensuring that domestic prices are competitive with
 those on the global market. It serves as a pricing standard and reduces unfair price
differences between domestic and foreign markets.
IPP represents the price that importers would pay in case of actual import of product at
the respective Indian ports and includes the elements of Free on Board (FOB) price +
Ocean Freight + Insurance + Custom Duties + Port Dues, etc.

 Export Price Parity (EPP): The EPP is the price at which a domestic petroleum product
ought to be offered in order to compete on world markets. It accounts for the price on the
global market as well as additional export-related expenditures including shipping, export
taxes, and other connected costs. In order for a nation to properly participate in
international trade, EPP is employed to make sure that domestic products maintain their
competitiveness when offered in foreign markets.
EPP represents the price which oil companies would realize on export of petroleum
products. This includes FOB price + Advance License benefit or ALB for duty free
import of crude oil pursuant to export of refined products. Consequent to abolition of
Customs Duty of Crude oil effective 25.06.2011, the ALB is currently zero.

 Trade Price Parity (TPP): TPP stands for the cost for international trading in petroleum
products. It takes into account both the price on the global market and the expenses
incurred during cross-border trade, such as shipping, customs duties, taxes, and handling
fees. TPP aids in establishing a benchmark price for the exchange of petroleum products
among various countries, providing reasonable and competitive pricing for global trade.
TPP consists of 80% of Import Parity Price and 20% of Export Parity Price.

Refinery Transfer Price (RTP)

RTP – Refinery Transfer Price or RGP (Refinery Gate Price) is the price paid by the oil
companies to domestic refineries for purchase of finished petroleum products at refinery gate.
The Crude Oil is transported and refined to extract Petrol. The cost & freight charges, refinery
charges are added to the price of Crude oil. This is called the Refinery Transfer Price (RTP). In
other words, this is the price paid by OMCs (Oil Marketing Companies) like IOCL, BPCL &
HPCL to the refineries. OMCs retain some margin and sell it to the Dealer (the owner of the
Petrol Pump).

The upstream, downstream, marketing, and distribution components of the petroleum value chain
are only a few of the divisions that integrated oil businesses have. Refinery transfer pricing
assists in ensuring equitable remuneration for each segment by seeing these divisions as profit
centres within the business. Establishing internal prices for the products of the refining segment
through refinery transfer pricing enables cost allocation and performance evaluation. As tax
authorities may require businesses to utilise arm's length pricing, which sets transfer prices as if
the segments were separate firms dealing with each other at market prices, proper transfer
pricing is crucial for tax and regulatory compliance. Fairness and accountability are ensured by
transparent and well-documented transfer pricing policies, which also promote effective
operations by guaranteeing that various segments receive just compensation for their
contributions.

The Retail Selling Price of Petrol and Diesel is based on the international prices of Petrol and
Diesel, Trade Parity Pricing methodology is applied to compute the Retail Selling Prices. The
Refinery Transfer Price (RTP) of Petrol and Diesel constitute around 46% and 55% of the Retail
Selling Price respectively. Many of the remaining cost elements viz. Excise Duty, BS IV
premium, marketing cost and margins etc. are specific costs which do not increase/decrease with
the volatility in international prices of Petrol and Diesel.

Benchmark (Crude Oil Price)

Benchmark crude is a reference price for buyers and sellers of crude oil, consisting of three main
benchmarks: West Texas Intermediate (WTI), Brent Blend, and Dubai Crude. Other well-
known blends include OPEC Reference Basket, Tapis Crude, Western Canadian Select, Bonny
Light, Urals oil, and Mexico's Isthmus. Energy Intelligence Group's 2011 handbook identified
195 major crude streams or blends. Benchmarks are used to reference different types of oil and
make it easier for sellers and buyers. There is always a spread between WTI, Brent, and other
blends due to volatility, sweetness/sourness, and transportation costs, which controls the world
oil market price.

Brent Crude
Brent Crude is used as a reference in about two-thirds of all crude contracts worldwide, making
it the most commonly used benchmark. Today, the term "Brent" is actually used to describe oil
from four different North Sea fields: Brent, Forties, Oseberg, and Ekofisk. This region produces
light, sweet crude that is perfect for refining into petrol, diesel fuel, and other high-demand
products. Additionally, because the supply is waterborne, it is simple to transport to far-off
places.

West Texas Intermediate (WTI)

WTI is the name given to oil that is drawn from U.S. wells and transported to Cushing,
Oklahoma, via pipeline. One of the disadvantages of West Texas crude is that supplies are
landlocked; it is relatively expensive to ship to some regions of the world. The product's
lightness and sweetness make it particularly suitable for petrol refining. The primary benchmark
for oil used in the US continues to be WTI.

Dubai/Oman
This Middle Eastern crude serves as a helpful benchmark for crude with a marginally lower quality than
WTI or Brent. It is a "basket" product made up of crude from Dubai, Oman, or Abu Dhabi, but it falls
under the "sour" classification because it is heavier and contains more sulphur. The primary reference for
Persian Gulf oil shipped to the Asian market is Dubai/Oman.

Supply and Demand Shocks

Oil shock' is a sudden rise in the price of oil that is often accompanied by decreased supply.
Supply Shocks
The supply of goods and services are often the ones who face shocks, though they can affect
producers and consumers alike.
Negative Supply Shock
 Causes a sudden decrease in the amount supplied and an abrupt rise in the price until a
new equilibrium is attained.
 Any natural disaster or other unforeseen occurrence that affects the supply chain and/or
production process would be a suitable illustration of this. An illustration of this would be
the harm that Hurricane Katrina caused to the oil and petrol sector: oil rigs, refineries,
and pipelines were either shut down or removed off the grid.
 The cost of the input would increase, for instance, if a crucial resource input of a
company's manufacturing process was discovered to have a considerably more valuable
application in another use. For instance, the price of a metal would rise if it was utilized
in the manufacturing process of a pipe-fitting company rather than a new application in
the semiconductor sector. As a result, the supply of pipes would decline and their price
would rise.
Positive Supply Shock
 These typically take the form of technological breakthroughs that occur overnight and
immediately increase both the return on capital and the productivity of labour. The
amount delivered rises as a result of these advancements, and the cost decreases. For
instance, the advent of computers and robots has resulted in an unparalleled rise in
productivity, enabling the mass production of items at a scale that is both enormous and
reasonably priced.
 It might also happen if a brand-new, less expensive production input is discovered.
Consider the finding of a seam of low-sulfur coal in Wyoming's Powder Basin.

Demand Shock
Shocks can also have an impact on demand, despite frequently being thought of as a supply-side
issue only. Demand shocks are frequently thought to result from shifting consumer preferences,
but they can also be attributed to alterations in other demand-related parameters, such as the cost
of alternatives and complements.
Negative Demand Shock
 Due to these, fewer commodities are consumed, which results in lower prices for the
goods for those customers who remain in the market. An illustration of this would be if a
medical journal revealed that taking a frequently prescribed prescription medicine
significantly raises your risk of developing cancer. Afterward, demand would abruptly
change, resulting in less goods being consumed at a cheaper price.

Positive Demand Shock

 On the other hand, this kind of shock may lead to increased prices for more things being
consumed. Take into account the combined effects of two concurrent events on the
demand for two complementary foods, fish and tartar sauce: a new nutritional study
unequivocally affirms the numerous health benefits of eating fish, and there have been
improvements in commercial fishing efficiency that have made fish more affordable.
Because there will be a greater demand for fish, even though tartar sauce is now more
expensive, there will be a greater demand for it.

Notable trends in the Oil and Gas Sector

1. Coal Bed Methane (CBM)

Coalbed methane (CBM) is a natural gas extracted from coal beds, becoming a significant
energy source in countries like the United States, Canada, and Australia. It is a 'sweet gas' due to
its lack of hydrogen sulphide and is known for its presence in underground coal mining, where it
poses a safety risk. Coalbed methane is distinct from conventional gas reservoirs as it is stored
within the coal through adsorption. It is in a near-liquid state, lining the inside of pores within the
coal matrix. Unlike conventional gas, coalbed methane contains very little heavier hydrocarbons
and no natural-gas condensate. It often contains up to a few percent carbon dioxide. Coalbed
methane is formed due to thermal maturation of kerogen and organic matter, but coal seams with
regular groundwater recharge may also see methane generated by microbial communities.
Coal bed methane (CBM) is an unconventional form of natural gas that is found in coal deposits
or coal seams. It is formed during the process of coalification, which is the transformation of
plant material into coal. CBM is composed of:
· Methane (CH4): The main component of CBM (90-95%)
· Ethane (C2H6): Trace amounts
· Carbon dioxide (CO2): Trace amounts
· Water (H2O): Trace amounts
CBM can also contain minor amounts of heavier hydrocarbons (mostly C2H6 and C3H8), and
nonhydrocarbon gases (i.e., N2 and CO2).

The CBM policy was created to be open-minded and beneficial to investors. In July, CBM’s first
commercial production cycle began.
72,000 cubic metres per day on average in 2007. The amount produced in July 2022 was 58.78
MMSCM.

2. Underground Coal Gasification (UCG)

Underground coal gasification (UCG) is an industrial process that converts coal into product gas,
such as methane, hydrogen, carbon monoxide, and carbon dioxide. This process is carried out in
non-mined coal seams using oxidants and steam injection. The gas output can be used for
electricity production, synthetic natural gas production, or as a chemical feedstock for fuels,
fertilizer, explosives, and other products. UCG offers an alternative to conventional coal mining
methods for some resources that are unprofitable or technically complicated to extract by
traditional methods. However, it has been linked to environmental campaigner concerns.
The early 1900s saw the technology’s first widespread application in India (Kolkata and
Mumbai) and the US (about 1800).
The only practical method for economically and environmentally-friendly energy extraction from
deep, unmineable coal seams is UCG at the moment. Compared to surface gasification, it lowers
capital expenditure, operational costs, and output gas expenses by 25–50%.

3. Gas Hydrates and Bio Fuels

Gas hydrates, also known as methane hydrates or clathrates, are ice-like structures made of
water molecules encased in gas molecules, typically methane. They form under low temperature
and high-pressure conditions in deep-sea sediments and permafrost regions. These hydrates are a
significant source of natural gas, found in ocean sediments on continental shelves. They are
particularly valuable for their energy potential, as they contain a large amount of methane, a
clean-burning hydrocarbon. However, extracting methane from gas hydrates is challenging and
poses environmental and safety risks.

As opposed to fossil fuels like coal, oil, and natural gas, biofuels are fuels made from biological
elements like plants and microbes. Because they may lessen greenhouse gas emissions and
reliance on non-renewable resources, these renewable energy sources are viewed as being more
environmentally friendly.
In order to map gas hydrates for use as a backup energy source, the government established the
National Gas Hydrate Programme (NGHP), a collaboration of national E & P businesses and
research institutes.
Alternative energy sources made from domestic renewable resources include biofuels like
bioethanol and biodiesel. These emit fewer pollutants than petrol or diesel.

4. Open Acreage Licensing Policy

The Government of India implemented the Open Acreage Licencing Policy (OALP) as a legal
framework to entice foreign investment in the exploration and production of hydrocarbons, such
as oil and natural gas. It was put into place to encourage domestic energy production, lessen the
nation’s reliance on foreign oil and gas, and boost economic development in the energy industry.
The Hydrocarbon Exploration and Licencing Policy (HELP), which was introduced in 2016 to
replace the previous New Exploration Licencing Policy (NELP), includes OALP as part of its
bigger programme.
The Open Acreage Licensing Policy (OALP) in India allows energy companies to select specific
exploration blocks or acreages for hydrocarbon exploration. The policy uses a revenue-sharing
model, where companies share a portion of their revenues with the government. This simplifies
the process for obtaining exploration and production rights, providing clear guidelines and a
transparent mechanism for interested companies. OALP covers both conventional and
unconventional hydrocarbon resources, encouraging exploration and production activities in
various geological formations. It also allows companies the flexibility to market and price their
hydrocarbon products, subject to relevant regulations. The policy aims to boost domestic energy
production and reduce energy imports, aligning with India’s energy security and self-reliance
goals.

Global E & P firms like Shell, BP, Conoco Phillips, and others have started the Open Acreage
Licencing Policy (OALP), which enables an explorer to review the data available and bid for
blocks of his choice.
The Ministry of Petroleum and Natural Gas began the ninth OALP bid process in 2022.
Investors have been given a choice of about 223,031.4 square kilometres under this round.

5. Oil and Gas Pricing

Jio-bp, the retail fuel joint venture between Reliance and bp, will sell diesel blended with
detergents and dispersants at a price per litre that is Rs. 1 less than gasoil sold by state-run
businesses like IOCL, BPCL, and HPCL, as was revealed in May 2023.
As of 2020, OPEC supplies 78% of India's crude oil needs, 59% of its LPG requirements, and
38% of its LNG requirements.
In a deliberate effort to lower global crude oil prices, India declared in November 2021 that it
will release 5 million barrels of crude oil from its strategic petroleum reserves. This closely
corresponds to the nation's daily consumption.
On May 21, 2022, the government announced a decrease in excise duty for petrol and diesel of
Rs. 8 (US$ 0.10) and Rs. 6 (US$ 0.077), respectively.
 Shale Oil
Shale formations are a subset of low permeability tight formations, including sandstones,
carbonates, and shales, that are sources of tight oil production in the United States. The oil and
natural gas industry typically refer to tight oil production as a more accurate term. The Energy
Information Administration (EIA) has adopted this convention and develops estimates of tight oil
production and resources in the US, including shale formations. Shale oil and gas are produced
from oil shale rock fragments through pyrolysis, hydrogenation, or thermal dissolution. These
processes convert organic matter into synthetic oil and gas, which can be used as fuel or
upgraded to meet refinery feedstock specifications.

Conventional natural gas reservoirs are formed when gas travels from organic rich rock and
becomes trapped by impermeable rock. Producers access gas by drilling vertical wells into the
area, allowing it to flow to the surface. However, shale gas resources are contained within
impermeable source rock, allowing gas and oil to flow to the surface using vertical and
horizontal drilling techniques and hydraulic fracturing. This rapid process allows producers to
ramp up production quickly, allowing them to be more responsive to oil and gas prices.
However, production requires capital to maintain output, especially in the case of shale oil and
gas due to high decline rates, creating a competition for cash flows between servicing debt and
maintaining production.

The main production stages in shale oil and gas production are as follows:

 Initial construction includes development of access roads and a well pad, and takes
about four weeks.

 Vertical drilling can take up to two weeks per vertical well; there may be several vertical
wells on each well pad.

 Horizontal drilling involves the transport and assembly of a larger, horizontal drilling
rig on site; this is followed by drilling, and the insertion of cement casing around the
well, which can take up to six weeks per well.

 Hydraulic fracturing will include the removal of the drilling rig and transport of
fracking fluids and sand to the site, followed by hydraulic fracturing, which involves
pumping sand and fluids into the well. This can take up to nine weeks per well.

 Flow-back treatment involves transfer of flow-back fluids to pits or tanks, and their
ultimate removal by truck or pipeline to disposal facilities, and can take up to 14 weeks
per well.
 Well clean-up and testing will involve well flaring and monitoring, preparatory to
production, and takes up to four weeks per well.

 Well production requires the installation of pipelines to a centralized compression

facility serving several well pads. Production typically declines rapidly in the first few
months, while continuing at lower levels for up to several years.

 Well abandonment, at the end of operation, is where the well is taken out of service and
capped with a surface plug.
 City Gas Distribution
In India, the term "City Gas Distribution" (CGD) refers to the natural gas distribution to
residential, commercial, and industrial consumers in various cities and towns. An essential
component of India's efforts to diversify its energy supply and promote sustainability has been
the construction and growth of CGD networks.
The Petroleum and Natural Gas Regulatory Board (PNGRB) oversees the city gas distribution
network in India, which is run by City Gas Distribution Companies (CGD) like Indraprastha Gas
Limited, Mahanagar Gas Limited, and Gujarat Gas Limited. The primary gas used in CGD
networks is natural gas, sourced from domestic production and imported LNG. The network
serves various consumer segments, including residential, commercial, and industrial users, and
promotes the use of compressed natural gas (CNG) as a cleaner and more sustainable fuel. The
expansion of CGD networks in India has several benefits, including reduced air pollution, lower
greenhouse gas emissions, energy security, and improved energy access in urban and semi-urban
areas. The government has taken initiatives to promote CGD network expansion, such as the
"Pradhan Mantri Urja Ganga" project, to connect eastern and northeastern states to the natural
gas grid. However, challenges such as infrastructure development, regulatory hurdles, and price
fluctuations continue to impact the growth of CGD in India.
It has been prioritised to cover 407 districts nationwide through the extension of city gas
distribution (CGD) networks, which has the potential to make gas accessible to more than 70%
of the population. The distribution networks would make it possible to supply automobiles and
families with cleaner transportation fuel, such as compressed natural gas (CNG), as well as
cleaner cooking fuel, such as PNG. Over the following ten years, an investment of Rs 120,000
crore is anticipated.
 Oilfield Services
Oilfield services, often known as oilfield service companies, are businesses that offer the oil and
gas sector a variety of specialised services and tools. The exploration, drilling, production, and
well maintenance of oil and gas are all supported by these services. The efficient and secure
extraction of oil and natural gas from the earth depends on oilfield services.
Oilfield service companies offer various services to enhance the efficiency of oil and gas
production. These services include exploration and geophysical services, drilling services, well
completion services, production services, reservoir evaluation services, well logging and
measurement, wireline services, well testing services, cementing services, hydraulic fracturing
services, drilling fluid services, wellhead and Christmas tree services, and environmental and
waste management services.
Exploration and geophysical services use seismic and electromagnetic surveys to assess
subsurface geology and identify potential oil and gas reserves. Drilling services include
constructing drilling rigs, directional drilling, and wellbore management, as well as providing
drilling fluids and equipment. Well completion services involve preparing a well for production,
including installing casings, tubing, and wellheads. Production services focus on enhancing the
efficiency of oil and gas production, involving artificial lift systems, well optimization, and
maintenance services. Well logging and measurement services provide data on subsurface
conditions for reservoir characterization. Wireline services involve well intervention, perforation,
and logging using specialized tools and equipment. Well testing services measure and analyze
reservoir and well performance, while cementing services seal the annulus between casing and
wellbore for zonal isolation.
Major market players in the India Oilfield Services Market are:
· Schlumberger India Technology Centre
· Private Limited
· Asian Energy Services Limited
· HSL Asia Limited
· Alphageo (India) Limited
· Halliburton
· India Operations Pvt. Ltd.
· OGD Services Limited
· Petrofac Engineering Services India Private Limited
· Baker Hughes Oilfield Services India Private Limited
· Oil States Industries (India) Private Limited
· Fluor
· Daniel India Private Limited
 1940s Oil Campaign of WW-II
The "oil campaign" of World War II was a series of strategic bombing missions by the Allied
forces, primarily the United States Army Air Forces and the Royal Air Force, against Axis oil
refineries and facilities in Europe and the Pacific. The primary objectives of the campaign were
to disrupt Axis oil production, reduce mobility and effectiveness of Axis forces, and force them
to divert resources and manpower to repair and defend their facilities. This would take resources
away from other military priorities and stretch the Axis's already strained logistical capabilities.
The campaign took place in several theaters of the war, including Europe and the Pacific, and
had a significant impact on the conflict's course.
The oil campaign during World War II involved bombing raids on various facilities, including
oil refineries, synthetic fuel plants, storage depots, and transportation infrastructure. Notable
operations included Operation Tidal Wave (1943), a massive American raid on oil refineries in
Ploiești, Romania, causing significant damage but high aircraft and crew losses. The Allies also
conducted the bombing of the Ruhr Valley in the 1940s, targeting German oil production and
transportation. The Ploiești oil fields in Romania were targeted by multiple Allied bombing
raids. The oil campaign, along with other strategic bombing efforts, played a crucial role in
weakening the Axis Powers' war machine by disrupting their oil production and supply lines,
hindering their ability to wage war effectively. Although it did not lead to immediate collapse, it
contributed to their overall defeat.
Before the war, Britain recognized Germany's dependence on oil and oil products as a war
machine. Strategic bombing began with RAF attacks on Germany in 1940. After the US entered
the war, they carried out daytime "precision bombing" attacks, such as Operation Tidal Wave
against Romania in 1943. The last major raid targeted a refinery in Norway in April 1945.
During the war, efforts against POL targets varied, with priority given to other objectives.
The strategic importance of oil resources in World War II also showed in campaigns such as:
 To gain access to Persian oil, the Anglo-Soviet invasion of Iran took place between
August and September 1941.
 To regain access to resources subject to a trade embargo, Japan launched a strategic
offensive against the Dutch East Indies in 1941–1942.
 The Wehrmacht's (Case Blue and Operation Edelweiss) invasion of Baku and the
Caucasus oilfields in the summer of 1942
 The Soviet invasion of Romania in August 1944, which cost the Axis the valuable Ploesti
oil fields

The Combined Bomber Offensive failed to significantly damage the German economy or disrupt
production of a vital item by spring 1944. The oil campaign was the first to achieve these goals,
but the US strategic bombing survey (USSBS) identified "catastrophic" damage. German
industry was not significantly affected by oil targets as coal was its primary source of energy.
The breakdown of transportation resulting from attacks against transportation targets was
considered "probably greater than any other single factor" in the final collapse of the German
economy. However, several prominent Germans, including Adolf Galland, Hermann Göring,
Albert Speer, and Luftwaffe Field Marshal Erhard Milch, viewed the oil campaign as critical to
the defeat of Nazi Germany. The campaign was effective immediately and decisive within less
than a year, and the British left Germany with deep and bleeding wounds, while the Americans
stabbed them in the heart.

It was discovered that Allied bombing campaigns during World War II, particularly those that
targeted Axis oil facilities, lacked effectiveness. Only a small percentage of bombs actually
found their intended targets inside factory perimeters, with an average miss rate of about 87%. In
favourable conditions, the USAAF's accuracy ranged from 26% to just 5%, while under
instrument-only guidance. Bomber Command used fewer bombs but was more effective in some
ways. Unexploded bombs were a problem for both the RAF and the USAAF, with 12% and
19%, respectively. This demonstrates the difficulties in accurately bombing important industrial
targets during the conflict.
 Rise of Synthetic Oil
Synthetic fuel, also known as synfuel, is a liquid fuel that can also occasionally be gaseous.
Syngas is a mixture of carbon monoxide and hydrogen that is produced by gasifying solid
feedstocks like coal or biomass or by reforming natural gas.
The Fischer-Tropsch conversion, methanol to petrol conversion, and direct coal liquefaction are
common processes for refining synthetic fuels.
During and after World War II, Germany played a significant role in the development of
synthetic fuel production. Two major processes were developed in Germany: the Bergius
process, pioneered by Friedrich Bergius, and the Fischer-Tropsch process by Franz Fischer and
Hans Tropsch. These processes allowed for the conversion of coal into synthetic fuels. During
World War II, Nazi Germany heavily relied on these processes to produce aviation gasoline,
synthetic oil, rubber, methanol, ammonia, and nitric acid. The Bergius process plants were
instrumental in this effort, with the largest ones located in Pölitz and Leuna.
Germany's synthetic fuel production was vital, particularly after the Soviet Red Army occupied
the Ploiești oilfields in Romania in 1944, cutting off Germany's access to natural oil sources.
After the war, Fischer-Tropsch technologies were brought to the United States, and a commercial
plant was constructed in Texas. In the post-war years, the United States and other countries also
developed their own coal conversion plants. South Africa, in later decades, established a state oil
company with a significant synthetic fuel industry.
Overall, this history highlights the role of synthetic fuel production, especially during wartime,
and its subsequent development and utilization in various countries.
Synthetic motor oils offer several advantages, including improved viscosity performance, higher
Viscosity Index, and chemical and shear stability. They also help reduce evaporation loss, are
resistant to oxidation, thermal breakdown, and oil sludge problems, and provide extended drain
intervals. They also offer better lubrication in extreme cold conditions and promise longer engine
life. Synthetic oils also protect against deposits in engine hot spots, reducing oil burn-off and
clogging. They improve engine performance by increasing horsepower and torque due to less
internal drag. However, synthetic motor oils are more expensive per volume than mineral oils
and may cause decomposition problems in certain chemical environments, particularly in
industrial use.
 Oil crisis
It was early October 1973 when Egypt and Syria launched an attack against Israel. They
managed to make some victories on the Golan Height and Suez Canal but they were quickly
turned back by the Israeli forces. Israel’s army managed to reach Egyptian and Syrian territories
which resulted in Arab nations of OPEC (Organization of the Petroleum Exporting Countries)
ordering substantial oil production cutbacks. Additionally, they blocked the sale of oil to the
United States and the Netherlands in an effort to compel Western countries to force Israel to
withdraw from occupied territory.
Dislikes against the United States had grown among OPEC members well before the embargo
because of Nixon's efforts to stimulate the American economy. Shortly after the Second World
War had ended, President Nixon ordered the abolishment of the system where the dollar was tied
to the gold standard. This caused a devaluation of the dollar. Due to the devaluation of the dollar,
oil-producing countries suffered financial losses as a big portion of their revenues came from the
US.
This was a time that coincided with a doubled oil consumption in Western countries, which only
deepened the crisis after the embargo. The reason was that Western individuals had gotten used
to cheap gasoline and steady prices.The oil prices doubled when the embargo was imposed in
1974. This caused a fuel scarcity and a major spike in gasoline prices in the United States, which
prompted the government to implement a number of policies aimed to address the issue. Fuel
rationing was one of the measures. After many negotiations in Washington, D. C., the embargo
was lifted in March 1974.
The 1973 and 1979 oil crises
There are two major oil crises that took place after the Second World War:
 The oil crisis of 1973
 The oil crisis of 1979
As previously mentioned, the oil crisis of 1973 occurred after Arab members of OPEC decided
to quadruple the price of oil. They also prohibited oil exports to the United States and Western
Europe, which caused the oil prices to increase to around $12 per barrel. There were many
political and economic factors that lead the OPEC countries to make that decision. The main
reason was because of a fall in export revenues. The devaluation of the US dollar undermined the
export revenues of OPEC countries. Cutting oil production helped stabilize OPEC’s revenues.
The oil crisis of 1979 occurred 6 years after the first oil crisis. The Iranian Revolution of 1978–
79 triggered a serious energy crisis in 1979. The Iranian oil sector was badly harmed by the
country's high levels of civil unrest, which resulted in significant production losses and an
increase in pricing. The war between Iran and Iraq increased to the degree of instability. The
economic effects of this oil crisis were not as big. By 1983, most developed economies had
embraced more efficient production models.
The effects of the 1973 oil crisis on the economy
The United States was the world’s leading oil producer before and during the Second World
War. Oil resources in Texas, Oklahoma, and other states could maintain cheap fuel throughout
the 1950s and 1960s.
In 1973, the United States used a third of the world’s total oil production. The United States’
economy was dependent on oil imports to keep pace with the country's rapid industrial
development and the construction of new roads and factories for the automotive industry. Due to
environmental concerns and government regulations, domestic oil production and exploration
had been limited by the early 1970s, when imports accounted for around 30% of US oil
consumption.
Many Americans saw the OPEC embargo as evidence of their country’s downfall in the 1970s.
The embargo also pointed out a significant increase in the OPEC cartel's influence in the global
economy. As we mentioned at the beginning, oil prices rose from $3 to almost $12 per barrel
when the embargo went into effect. Fuel costs rose by 40% in November 1973 alone, putting an
enormous strain on the budgets of American consumers. Gas outlets hiked their rates multiple
times daily while Americans waited in line out of fear of a gasoline scarcity. The long queues at
the pump revealed the panic that arose as a result of the embargo. Many feared that they
wouldn’t be able to afford petrol if they didn’t fill up immediately.
 1973 Energy Crisis
The War
The Yom Kippur War, also known as the Ramadan War, October War, 1973 Arab–Israeli War,
or Fourth Arab–Israeli War, was an armed conflict between Israel and a coalition of Arab states
led by Egypt and Syria from 6 to 25 October 1973. The majority of combat took place in the
Sinai Peninsula and the Golan Heights, both of which had been occupied by Israel in 1967.
Egypt's initial objective in the war was to seize a foothold on the eastern bank of the Suez Canal
and leverage these gains to negotiate the return of the rest of the Israeli-occupied Sinai Peninsula.

The war began on 6 October 1973, when the Arab coalition jointly launched a surprise attack
against Israel on the Jewish holy day of Yom Kippur, which had occurred during the 10th day of
the Islamic holy month of Ramadan in that year. Following the outbreak of hostilities, both the
United States and the Soviet Union initiated massive resupply efforts to their allies, leading to a
confrontation between the two nuclear-armed superpowers.

Fighting commenced when Egyptian and Syrian forces crossed their corresponding ceasefire
lines with Israel and entered the Sinai Peninsula and the Golan Heights. After three days of
heavy fighting, Israel halted the Egyptian offensive, resulting in a military stalemate on that
front, and pushed the Syrians back to the pre-war ceasefire lines. The Israeli military then
launched a four-day-long counter-offensive deep into Syria, shelling the outskirts of the Syrian
capital of Damascus.

The Yom Kippur War had far-reaching implications, as the Arab world had experienced
humiliation in the lopsided rout of the Egyptian–Syrian–Jordanian alliance in 1967 but felt
psychologically vindicated by early successes in the 1973 conflict. The Israelis recognized that
there was no guarantee they would always dominate the Arab states militarily, leading to the
Israeli–Palestinian peace process.

What Was the 1973 Energy Crisis?

The 1973 energy crisis, also known as the Oil Shock of 1973–74, was a period of skyrocketing
energy prices and fuel shortages resulting from an embargo by Arab oil-producing nations in
response to U.S. support for Israel during the Yom Kippur War. During this period, the price of a
barrel of oil nearly quadrupled in less than a year.
The embargo was lifted in early 1974, but the economic shock it caused is regarded as a
precursor to the rapid inflationary pressures and stagflation experienced later in the 1970s. The
oil embargo of 1973 was just one of many complicating factors that led to a decade of high
inflation and stagflation in the United States during the ’70s.

Understanding the 1973 Energy Crisis

On Oct. 19, 1973, following then-President Richard Nixon’s decision to provide Israel with $2.2
billion in emergency aid in support of the Yom Kippur War, the Organization of the Petroleum
Exporting Countries (OPEC) approved an oil embargo on the U.S. This effectively shut off the
exports of Arab crude oil to the U.S., followed by a series of steep production cuts in output.
Before the embargo, a barrel of oil traded for around $2.90, quadrupling to $11.65 per barrel by
January 1974. This led to an increase in the price of regular gasoline in the U.S. from an average
of 39 cents per gallon before the crisis to 53 cents in 1974, an increase of around 36% in less
than a year.
In addition to rising prices, there were shortages, leading to rationing at gas stations and long
queues of cars waiting to fill up. Some consumers tried to hoard gasoline and related products,
making the situation even worse.
To replace Arab oil, the U.S. had little excess capacity to boost production. Even with rising oil
prices, the time and capital needed to discover new deposits and bring new wells online can take
years.
Ultimately, OPEC lifted its embargo in March 1974; however, higher oil prices persisted, leading
to higher inflation overall.

While OPEC’s embargo was, in part, a use of oil as a weapon in the 1973 Arab-Israeli conflict, it
was also the outcome of a long-standing duel between the oil-exporting countries and the
American oil companies, whose ultimate goal was control of the international oil market

Special Considerations
As with most economic events, the 1973 energy crisis and inflation that followed were caused by
several factors, not just U.S. support for Israel.
There had been a decades-long struggle between the governments of oil-producing nations and
the large U.S. oil conglomerates for control over the global oil market. Until the 1970s, OPEC,
formed in 1960, had kept a relatively low profile, mainly negotiating with international oil
companies for better terms for its member countries. OPEC saw the Yom Kippur War as a way
to make its geopolitical power known and to strike a blow at the U.S. oil giants.
Inflation, too, was not caused only by high energy prices. The U.S. saw commodity prices rise at
a rate of around 10% per year starting in 1970, and inflation was on the Federal Reserve’s radar
of things to keep a close eye on even before 1973. The oil embargo only made things worse and
sped up inflation.
The Fed chairman at the time, Arthur Burns, argued in 1979 that this period of high inflation was
the result of a confluence of several external forces in addition to the embargo, including “the
loose financing of the war in Vietnam...the devaluations of the dollar in 1971 and 1973, the
worldwide economic boom of 1972–73, the crop failures and resulting surge in world food prices
in 1973–74, [and] the extraordinary increases in oil prices... [as well as] the sharp deceleration of
productivity.”

1970s Stagflation
In addition to inflation caused by the 1973 energy crisis, the U.S. economy stagnated. This led to
an unusual condition of rising prices and an economic recession, known as stagflation.
Economists previously had predicted that when the economy turns sour, high unemployment
should be met with lower prices, not rising ones (i.e., as modelled by the Phillips’s curve). The
1970s proved this theory and the Phillips curve wrong.
In the aftermath of the energy crisis, some began to argue that high oil prices led to higher
transportation and manufacturing costs, even as people were being laid off in high numbers.
Critics of this hypothesis point out that other periods of inflation or recession have not been
accompanied by an oil shock. This may yet occur, given the Russian invasion of Ukraine in
2022.

Why Did the Arab Nations Prohibit Oil Exports to the U.S. in 1973?
The oil-producing Arab countries viewed American political and economic support of Israel
during the 1973 Yom Kippur War as siding with their enemy, and they wanted to punish the U.S.
Their dominance over oil exports gave them the weapon they needed.
The Organization of the Petroleum Exporting Companies (OPEC) also saw this as a way to gain
greater power in their relationship with Western oil companies.

What Were Some Long-Term Consequences of the 1973 Energy Crisis?

The embargo lasted only a few months but high oil and energy prices persisted throughout the
1970s.
One knock-on effect of this was the reduction of the national speed limit to 55 mph, then thought
to be the most fuel-efficient speed for automobiles, in order to reduce oil consumption.
Another unusual consequence was the extension of daylight saving time in the U.S. from 1974 to
1975, which the Nixon administration claimed saved 150,000 barrels of oil in heating costs
during the winter months.
There were more substantive effects. Higher energy prices contributed to the high inflation and
subsequent stagflation of the 1970s, but they also helped move U.S. energy reliance away from
OPEC.
In fact, several laws were passed in the mid-1970s to bolster domestic oil production and to
establish the strategic petroleum reserves to stockpile emergency supplies.
The crisis also sparked an early interest in environmental issues.

Summary
 The 1973 energy crisis was an oil shock that caused energy prices to skyrocket, resulting
in fuel shortages in the United States.
 The crisis was caused by the refusal of the Organization of the Petroleum Exporting
Countries (OPEC) to sell crude to the U.S.
 Arab oil-producing countries launched the embargo in response to U.S. support of Israel
during the 1973 Yom Kippur War.
 OPEC lifted its embargo in March 1974, but it left economic damage throughout the U.S.
and globally.
 Economists now agree that the embargo was one of several factors that led to high
inflation and stagnation during the 1970s in the U.S. and abroad.

The 1979 Energy Crisis

The War
The Iranian Revolution, also known as the Islamic Revolution, was a series of events that led to
the overthrow of the Pahlavi dynasty in 1979. The revolution replaced the Imperial State of Iran
by the present-day Islamic Republic of Iran, with the monarchical government of Mohammad
Reza Pahlavi being replaced by the theocratic government of Ayatollah Ruhollah Khomeini.
This marked the end of Iran's historical monarchy.

After the 1953 Iranian coup d'état, Pahlavi aligned Iran with the Western Bloc and maintained a
close relationship with the United States to consolidate his power. He remained the Shah of Iran
for 26 years after the coup, relying heavily on American support during the Cold War. In 1963,
Pahlavi implemented reforms aimed at modernizing Iranian society, known as the White
Revolution.

Khomeini was exiled from Iran in 1964 due to his continued opposition to the modernization
campaign. However, as ideological tensions persisted between Pahlavi and Khomeini, anti-
government demonstrations began in October 1977, eventually developing into a campaign of
civil resistance that included elements of secularism and Islamism. The Cinema Rex fire in
August 1978 served as a catalyst for a popular revolutionary movement across Iran, leading to
large-scale strikes and demonstrations paralyzing the entire country.

On 16 January 1979, Pahlavi left the country and went into exile as the last Iranian monarch. On
1 February 1979, Khomeini returned to Iran, and by 11 February 1979, the monarchy was
officially brought down. The new government began efforts to draft the present-day Constitution
of the Islamic Republic of Iran, and Ayatollah Khomeini emerged as the Supreme Leader of Iran
in December 1979.

The Iranian Revolution was met with surprise worldwide and was considered unusual in nature
due to its lack of customary causes of revolutionary sentiment, its massive popularity, and its
attempt to spread Shia Islam across the Middle East through Khomeininism.

Iran started supporting Shia militancy across the area as Khomeinist forces consolidated in an
effort to counter Sunni influence and create Iranian control within the Arab world, ultimately
intending to build an Iranian-led Shia political regime.

What Was the 1979 Energy Crisis?

The 1979 energy crisis, the second of two oil price shocks in the '70s, resulted in a widespread
panic about potential gasoline shortages, and far higher prices for both crude oil and refined
products. Oil output declined by only 7% or less, but the short-term supply disruption led to a
spike in prices, panic buying, and long lines at gas stations.
Understanding the 1979 Energy Crisis
The 1979 energy crisis occurred in the aftermath of the Iranian Revolution, which started in early
1978 and ended in early 1979 with the fall of Shah Mohammad Reza Pahlavi, the state’s
monarch. Turmoil in Iran, a major petroleum exporting country, caused the global supply of
crude oil to decline significantly, triggering noteworthy shortages, and a surge in panic buying—
within 12 months, the price per barrel of this widely used resource almost doubled to $39.50.
Short-run disruptions in the global supply of gasoline and diesel fuel were particularly acute in
the spring and early summer of 1979. Several states responded by rationing gasoline, including
California, New York, Pennsylvania, Texas, and New Jersey. In these populous states,
consumers could only purchase gas every other day, based on whether the last digit of their
license plate numbers was even or odd.
The gasoline shortage also led to fears that heating oil might be in short supply through the 1979-
1980 winter. This prospect was especially concerning for New England states, where demand for
home heating oil was the highest.

Special Considerations
It would be erroneous to blame the crisis solely on the fall of the Shah. Notably, the U.S. faced
more-acute pain from the crisis than other developed countries in Europe, which also depended
on oil from Iran and other Middle East countries. Part of the reason behind the crisis had to do
with fiscal policy decisions in the U.S.
U.S. Fiscal Policy Also put to Blame
In early 1979, the U.S. government regulated oil prices. Regulators ordered refiners to restrict the
supply of gasoline in the early days of the crisis to build inventories, directly contributing to
higher prices at the pump.
Another factor was unintended supply restriction after the Department of Energy (DOE) decided
to make a handful of large U.S. refiners sell crude to smaller refiners who could not find a ready
supply of oil. Because smaller refiners had limited production capabilities, the decision further
delayed gasoline supply.
Monetary policy leading up to the crisis also seemingly played a role to a degree. The Federal
Open Market Committee (FOMC) was reluctant to raise target interest rates too quickly and this
hesitation contributed to rising inflation late in the decade. The jump in inflation was
accompanied by higher prices for energy and a range of other consumer products and services.
Benefits of the 1979 Energy Crisis
Amid the crisis, politicians actively encouraged consumers to conserve energy and limit
unnecessary travel. In subsequent years, the 1979 crisis led to the sale of more compact and
subcompact vehicles in the U.S. These smaller vehicles had smaller engines and provided better
fuel economy.
In addition, the crisis prompted utility companies worldwide to seek out alternatives to crude oil
generators, including nuclear power plants, and governments to spend billions on the research
and development (R&D) of other fuel sources.
Combined, these efforts resulted in daily worldwide oil consumption declining in the six years
following the crisis. Meanwhile, the Organization of Petroleum Exporting Countries (OPEC)
global market share fell to 29% in 1985, down from 50% in 1979.
Rise of non-OPEC oil production
Some of the most important lingering effects of the Iranian revolution occurred afterward, as the
market recovered from the price and supply shock. Oil producers around the world responded to
the two crises of the 1970s by investing in exploration and production. Additionally, several
large fields that had been discovered in the previous decade began substantial production.
The North Sea, Alaska, and Mexico were very large new sources of oil at this time. Oil was first
discovered in the British North Sea in 1965 and in Norway in 1967. Norway began production in
the giant Ekofisk field in 1971 and the British Forties field began production in 1975. In the
United States, the Prudhoe Bay field in Alaska was discovered in 1968 and oil began flowing
thorough the Trans-Alaska Pipeline in 1977. Approval and construction of the pipeline was
rushed after the first oil crisis in 1973. In 1976, Mexico discovered the super-giant Cantarell
field, named after the fisherman who noticed an oil seep in the Gulf of Mexico. At the same
time, Mexico was pouring money into its oil industry, and production increased from 1.3 million
barrels per day in 1978 to 2.8 million barrels per day in 1984.
In total, non-OPEC producers added 5.6 million barrels per day of crude oil production from
1979-85. In response, OPEC drastically cut production, setting a limit of 18 million barrels per
day in March 1982, compared to the 31 million barrels per day it had been producing at the time
of the Iranian revolution.
At the same time, the high oil prices of the previous years and a global recession in the early
1980s brought about declining oil demand. World oil demand fell by about 10 percent from 1979
to 1983. Because of growing supply and shrinking demand, oil prices crashed in the 1980s,
declining 40 percent between 1981 and 1985 before collapsing another 50 percent in 1986, down
to $12 per barrel.

Summary
 The energy crisis of 1979 was one of two oil price shocks during the 1970s—the other
was in 1973.
 Higher prices and concerns about supplies led to panic buying in the gasoline market.
 Crude oil prices nearly doubled to almost $40 per barrel in twelve months.
 The energy crisis of 1979 led to the development of smaller, more fuel-efficient vehicles.
 OPEC's market share fell sharply and utility companies moved toward alternative energy
sources.
1990 Oil Price Shock
The Iraqi invasion of Kuwait on August 2, 1990—Saddam Hussein's second invasion of an
OPEC member—caused the oil price shock of 1990. The price spike, which lasted only nine
months, was less severe and shorter-lived than the previous oil crises of 1973–1974 and 1979–
1980, but it nonetheless played a role in the early 1990s U.S. recession. From $17 per barrel in
July to $36 per barrel in October, the average monthly price of oil increased. As the U.S.-led
coalition defeated the forces of Iraq, worries about long-term supply shortages subsided, and
prices started to drop.
Iraq invaded Kuwait on August 2, 1990, leading to a seven-month occupation and eventual U.S.-
led military intervention. Iraq claimed Kuwait was stealing its oil via slant drilling, but the true
motives were more complicated. Iraq owed Kuwait $14 billion of outstanding debt from the
1980-1988 Iran-Iraq War and felt Kuwait was overproducing oil, lowering prices and hurting
Iraqi oil profits. The combined production of Iraq and Kuwait was 4.3 million barrels per day,
and the potential loss of supplies and threats to Saudi Arabian oil production led to a rise in
prices from $21 per barrel to $28 per barrel on August 6. The U.S.'s intervention and military
success mitigated the risk to future oil supplies, calming the market and restoring confidence.
However, the Kuwaiti oil fires set by retreating Iraqi forces were not completely extinguished
until November 1991, and it took years for the combined production to regain its former level.
In 1988, the U.S. Federal Reserve tightened monetary policy to counter the 1980s' rapid inflation
by raising interest rates and lowering growth expectations. The August 6 invasion was seen as a
direct threat to price stability, with a consensus estimate suggesting a one-year, 50% increase in
oil prices could temporarily raise the economy's price level and potentially lower real output.
Despite the potential for inflation, the Fed and central banks decided not to raise interest rates to
counteract the rise in oil prices. This decision was based on confidence in the success of Desert
Storm and the long-term credibility of economy policy built up during the 1980s.
To avoid accusations of inaction, the U.S. revised the Gramm–Rudman–Hollings Balanced
Budget Act, which initially prohibited the U.S. from changing budget deficit targets even in the
event of a negative shock to the economy. When oil prices rose, the act allowed the U.S.
government to adjust its budget for changes in the economy, mitigating the risk of rising prices.

2020 Russia – Saudi Arabia oil price war

In March 2020, Saudi Arabia and Russia entered a price war on oil, leading to a 65% quarterly
drop in oil prices. This was triggered by a breakdown in dialogue between OPEC and Russia
over oil production cuts during the COVID-19 pandemic. Russia walked out of the agreement,
resulting in the fall of the OPEC+ alliance. Oil prices had already fallen 30% since the start of
2020 due to a drop in demand. In April and June 2020, Saudi Arabia and Russia agreed to oil
production cuts, causing the price of oil to become negative on 20 April. Oil futures holders were
willing to pay to offload contracts for oil they expected to be unable to store, resulting in
enormous profit.
In 2014, US shale oil production increased, leading to a drop in oil prices from $114 per barrel in
2014 to $27 in 2016. In 2016, Saudi Arabia and Russia formed an informal alliance called
"OPEC+" to manage oil prices. By January 2020, OPEC+ had cut oil production by 2.1 million
barrels per day, with Saudi Arabia making the largest reductions. The COVID-19 pandemic
caused a decrease in factory output and transportation demand, causing oil prices to fall. The
International Energy Agency forecasted that demand growth would fall to the lowest rate since
2011, with full-year growth falling by 325,000 barrels per day to 825,000 barrels per day and a
first quarter contraction in consumption by 435,000 barrels per day. An OPEC summit in Vienna
agreed to cut oil production by an additional 1.5 million barrels per day through the second
quarter of the year. Russia rejected the demand, marking the end of the unofficial partnership and
causing oil prices to fall 10% after the announcement. The Trump administration's sanctions on
Russia's largest oil company Rosneft in February 2020 may have been seen as a retaliation
against US sanctions.
Oil revenue is a significant government income for several oil producing countries. Low oil price
put pressure on state financials.

On Saudi Arabia

The expected $35–40 billion Indian economy is impacted by Saudi Aramco, a crude oil
company, to $25–30 billion. Due to the effects of the epidemic and rising oil costs, the
government also raised the debt ceiling from 30 to 50 percent of GDP. It also announced plans to
reduce spending by 5 percent while projecting an increase in the budget deficit from 6 to 9
percent.

On Russia

Prior to the onset of the price war, the Russian government had predicted that it would have a
930 billion rouble ($11.4 billion) surplus in 2020. However, after the price war broke out, it
changed its prediction to a deficit. The ruble has depreciated, falling more than thirty percent
between the beginning of 2020 and March 18, 2020.

On Stock Market
Due to worries about the coronavirus and the conflict over oil prices between Saudi Arabia and
Russia, the Dow Jones Industrial Average futures market plummeted more than 1,300 points on
March 9, 2020, and trading was halted. The Dow Jones experienced its biggest point collapse in
history, plunging more than 2,000 points, or 7.8%, below the futures market's forecast. There
were also large losses on other major markets, like the NASDAQ Composite and S&P 500. The
biggest percentage decline was seen in Italy's FTSE MIB, where the index dropped 11%. There
were 15-minute trade pauses in the US as a result of the declines setting off circuit breakers
designed to avoid stock market crashes.

On Other Producers

The oil price drop has led to a significant reduction in oil production in North America, with only
16 shale producers able to operate new wells profitably at $35 per barrel. This is expected to
nullify the expected growth in US oil production. With Brent at $25/barrel, 10% of oil
production globally would not be able to cover its base operating cost, particularly heavy crude
oil producers like Venezuela, Mexico, and oil sands in Canada. The U.S. Energy Information
Administration forecasts show that US crude oil production will fall from 13.2 million bpd in
May 2020 to 12.8 million bpd in December 2020, and then to 12.7 million bpd in 2021.
Whiting Petroleum Corporation and Diamond Offshore Drilling, an offshore drilling contractor,
filed for bankruptcy due to the price war and drop in oil demand due to the coronavirus
pandemic. Iraqi and Kuwaiti oil producers also announced price discounts to their buyers, while
the United Arab Emirates increased production to 4 million barrels per day. Qatar's minister of
state for energy affairs, Saad al-Kaabi, described the price war as a "very big mistake." Norway,
Europe's largest oil exporter, saw its currency drop to historic lows against the Euro, while
Nigeria's Central Bank devalued its naira against the dollar.

2022-2023 Russia – EU Gas Dispute

The Russia-EU gas dispute began in March 2022 following Ukraine's invasion. Russia and EU
countries clashed over payment for gas exported to Europe by Gazprom. Russia cut gas flow to
Germany by over half in June and stopped it in September. The Nord Stream 1 and 2 gas
pipelines ruptured in September 2022, indicating sabotage. As of August 2023, Russian gas
exports continued via Ukraine to Slovakia, Austria, Italy, Moldova, Greece, Hungary, Croatia,
and other non-EU countries. Europe imported record volumes of liquefied natural gas from
Russia in 2022, with Spain being a key importer.
In 2020, Europe consumed 512 billion cubic meters of natural gas, with 36% coming from
Russia. In early 2022, Russia supplied 45% of the EU's natural gas imports, earning $900 million
a day. However, by October 2022, it had decreased to 7.5%. Following Russia's invasion of
Ukraine in February 2022, the US, EU, and other countries introduced or expanded sanctions to
cut off "selected Russian banks" from SWIFT. Assets of the Central Bank of Russia held in
Western nations were frozen, and accounts in Western banks owned by Gazprom were frozen.
The Biden administration initially allowed Russia to repurpose funds in US financial institutions
to make payments on its sovereign debt. However, on April 4, 2022, the US Department of the
Treasury banned Russia from withdrawing funds to pay off its debt obligations.
Russia, with $630 billion in foreign-exchange reserves in early 2022, was unable to make
payments on its debt in US dollars or Euros as required. Two dollar-denominated bonds matured
on April 4, 2022, and on April 5, Russia attempted to pay bond holders with $600 million of
reserves held in U.S. banks, but these were blocked by the U.S. government as part of
international sanctions during the Russo-Ukrainian War. In April 2022, Russia defaulted on its
foreign debt by failing to pay its obligations in U.S. dollars. The European Commission and
International Energy Agency presented joint plans to reduce reliance on Russian energy, reduce
Russian gas imports by two-thirds within a year, and completely by 2030. In May 2022, the
European Union published plans to end its reliance on Russian oil, natural gas, and coal by 2027.
In March 2022, Russian President Vladimir Putin announced that payments for Russian pipeline
gas would be switched from US dollar and euro to roubles for "unfriendly countries", including
all European Union states. He ordered the Central Bank of Russia, government, and Gazprom to
present proposals for gas payments in rubles by 31 March. This move was aimed at forcing
European companies to directly support the Russian currency and bringing Russia's Central Bank
back into the global financial system. ING bank's chief economist, Carsten Brzeski, considered
the gas-for-ruble demand a smart move. Russian Foreign Minister Sergey Lavrov stated that the
$300 billion of Gazprom's funds that had been "stolen" by Western countries were actually funds
they had paid for Russia's gas, preventing "the continuation of the brazen thievery those
countries were involved in." Germany's Economy Minister Robert Habeck announced that the
Group of Seven countries had rejected Putin's demand for gas payments in rubles, while Russian
President Dmitry Peskov stated that Russia would not supply gas for free.
On 29 March, physical gas flows through the Yamal-Europe pipeline at Germany's Mallnow
point reached zero. Germany's Economy and Climate Minister Robert Habeck triggered an "early
warning" level for gas supplies, urging Germans to cut their energy consumption to end their
dependence on Russia. Austrian government also took similar steps. Gazprom continued to
supply gas to Europe via Ukraine and Poland, while Russia's gas began flowing westward
through the pipeline via Poland. Russia's President Putin informed Germany's Chancellor Olaf
Scholz about the decision to switch to payments in rubles for gas, but European companies could
continue paying in euros or dollars.

Decree 172

President Vladimir Putin signed decree 172 on 31 March, requiring Russian pipeline gas
purchasers from countries on Russia's Unfriendly Countries List to make payments through
Gazprombank, a subsidiary of Gazprom. To pay, companies from "unfriendly countries" must
open two accounts at Gazprombank and transfer foreign currency into one. Gazprombank will
then sell the foreign currency on the Moscow stock exchange for rubles, which are deposited into
the foreign-purchaser-owned account. Gazprombank then transfers the payment to Gazprom
PJSC, a company that operates gas pipeline systems and transports high pressure gas in the
Russian Federation and European countries. Gas purchasers can still make payments using
foreign currencies, including US dollars and Euros. However, the new payment mechanism has
been referred to as a "demand to pay in rubles" by many media outlets.
The natural gas contracts stipulated the currency for payments to Gazprom, 97% in US dollars or
euros, and the accounts for deposits. These accounts were frozen by Western sanctions, but
payments deposited into Gazprombank accounts in Russia would be accessible to Gazprom. The
first payments were due in April and May. Putin warned that countries refusing to use the new
payment mechanism would violate their contracts and face repercussions. Failure to pay would
be considered a default, and the existing contract would be terminated. However, exceptions
were allowed for buyers to pay as before.
Germany's Economy Ministry clarified on April 29, 2022, through email that "According to
these guidelines, account K, to which payment is made in euros/dollars, is in line with the
sanctions if companies declare that contracts have been fulfilled with payment in euros or
dollars." This means that European energy companies that comply with decree 172 won't be in
violation of the sanctions.

Gas Delivery Disruption

In April 2022, Gazprom announced the suspension of natural gas deliveries to Poland and
Bulgaria due to their failure to make payments in rubles. Poland was well-prepared to handle the
disruption with full storage and new pipeline connections. Bulgaria, heavily reliant on Russian
gas, faced a more challenging situation.
This suspension led to a surge in natural gas prices and a stronger Russian ruble. In May,
Ukraine's gas transit was disrupted for the first time since Russia's invasion, further complicating
the gas supply situation. Russia imposed sanctions on Gazprom's European subsidiaries,
nationalized by European countries.
In May, Finland faced halted gas deliveries for refusing to pay in rubles. In June, Gazprom
reduced gas flow through the Nord Stream 1 pipeline, citing issues with compressor units sent
for repair. This move led to increased natural gas prices in Europe.
Nord Stream 1 was turned off for maintenance but remained offline due to sanctions preventing
the return of a repaired turbine from Canada to Russia. In September, both Nord Stream 1 and 2
pipelines ruptured in the Baltic Sea, with Swedish investigators suspecting sabotage. These
events disrupted the natural gas supply between Russia and Europe, causing significant
implications for energy markets.