Overview of oil and gas operations and industry

1. to 400 level students of
DEPARTMENT OF ACCOUNTING, COVENANT UNIVESITY, OTA
to 400 level students of
Being paper presented by:
NOVEMBER 14, 2023
Mr. Kayode Adebiyi
Managing Director
HONEYROCK MULTICONSULT LTD
18B, Bayo Ajayi Street, Off Hakeem Balogun Street,
Marwa Brooks Estate,
Alausa, Ikeja,
Lagos.
08033181225,07064078211
Email: hmlconsultancy@outlook.com
OIL & GAS OPERATIONS, INDUSTRY AND BUSINESS PROCESSES: AN
OVERVIEW
Mr. Kayode Adebiyi MBA, FCA, ACTI MIoD

2. Introduction to Oil and Gas

3. Crude Oil Characterization
Hidden
underground
High risk and
uncertainty
Highly
regulated
Strict regulation at all
stages.
Capital and
Technology
intensive
Ready finance and
cutting-edge
technology
Crude Oil
Characterization
Main characteristics of
crude oil and gas.

4. Company Structure
Most oil and gas companies are segmented and organized
according to business segment, assets, or function.

5. Generally, this consists of:
UPSTREAM MIDSTREAM
DOWNSTREAM

6. Integrated/Supermajors (upstream and
downstream):
Getting Refined
Products to
the Consumers
Getting Raw
Oil & Gas to
the Refinery
Refinery
http://www.npl.co.uk/upload/img_400/oilri
g.gif
A Fully-Integrated Oil
Company
(Example: ExxonMobil) 6

7. Exploration
Production
Refining
Marketing
 This unit is on the Focus of Industry
 Industry’s scope runs from finding oil and gas reservoirs to getting refined products to our
customers
7

8. MAIN ASPECT OF ENERGY BUSINESS VALUE CHAIN
UPSTREAM
MID
STREA
M
DOW
N
STRE
AM
POW
ER
STRE
AM
• Exploration
• Production
• Pipeline
• Trucking
• Shipping
• LNG
terminals
• Refining
• LNG
• Retail
sales
• Industry
• Domestic
• Each business owns a value chain
• To operate in each of them gives an important position to a
company compared to her competitors

9. The American Petroleum Institute divides the petroleum industry into five sectors:
1) Upstream sector(exploration, development and production of crude oil or
natural gas);
2) Midstream sector
3) Downstream (oil tankers, refiners, retailers and consumers);
4) Pipeline sector; and
5) Service and supply sector
THE AMERICAN PETROLEUM INSTITUTE CLASSIFICATION
OF THE
PETROLEUM INDUSTRY
9

10. Figure : Production
adding value

11. Upstream = E&P
The upstream segment of the business is also known as
the exploration and production (E&P) sector.

12. E&P encompasses activities related to searching for,
recovering and producing crude oil and natural gas.

13. E&P cycle
ATA
Appraisal drilling
Field
Development
Plan
Abandonment
Acreage acquisition
Basin analysis
Prospect
generation
Economic analysis
Wildcat Drilling Field
developmen
t
Facilities design
Facilities construction
Facilities installation
Operations
Reservoir Mgt
NIGERIA
QI
T
CAMEROU
N
Exploration
and
Production
Life
Cycle
Economic
analysis
QI
L
LAG
O S
6

14. Exploration Appraisal Development Production Abandonment
Exploration :
Find a new oil & gas reservoir
Appraisal :
Ensure new finding is commercially feasible
Development :
Develop surface facilities to extract & process oil & gas
from the reservoir
Production :
Produce oil & gas and maintain the facilities until end of
field life / contract period
Abandonment :
Close the production and return the field into original
condition

15. It’s all about the
WELLS.
EKTINTERACTIVE.COM

16. Where to locate them,
How deep and how far to drill them,
How to design, construct, operate and manage
them...

17. ...to deliver the greatest possible return on
investment with the lightest, safest and smallest
operational footprint.

18. Exploration
The exploration sector involves obtaining a lease
and permission to drill.

19. Drilling
Drilling is physically creating the “borehole” in the ground
that will eventually become an oil or gas well.
This work is done by rig contractors and service
companies in the Oilfield Services business sector.

20. Simple or Complex
Wells can be drilled on land or in miles of water. They can
be less than 100 feet (30 meters) deep and totally vertical,
or 20,000 feet (6,000 meters) deep and horizontal.

21. Drilling
There are even highly complex “J” and “S” configurations
with numerous branches, or laterals, emanating from the
original, or “mother”, hole.

22. Production
The production sector of the upstream segment maximizes
recovery of petroleum from subsurface reservoirs.
Production brings the oil to the surface.

23. Production - Decline Curve
The inevitable fact of every oil or gas field is that
production will eventually decline.
The question is how fast?

24. Deepwater Drilling
Some of the largest oil and gas discoveries of the last
decade have been found in deep water off the coasts of
Africa and South America as well as the Gulf of Mexico.

25. Upstream Business Characteristics

26. Unbelievably Complex
The upstream industry is arguably the most complex of all
the oil and gas business sectors.

27. Who are the Players?
Independents, Majors, NOCs,
Oilfield Services

28. Independents
The companies that focus solely on Exploration and
Production are called Independents.

29. Independents are known for their ability to make decisions
and move quicker than other industry participants.
They are also considered early adopters of the more
innovative drilling and production technologies.

30. Majors
Major Oil Companies (also called Integrated Oil Companies
- IOCs) also have assets in the downstream - the refineries
and service stations that bring the products to the end-user
customers.

31. These companies have the prominent and advertised
brands that you are familiar with:

32. NOCs
National Oil Companies (NOCs) are those industry
participants that are owned and managed by governments
around the world.

33. Oilfield Service
The Oilfield Services sector of the Upstream segment
consists of companies that build the infrastructure and
provide the specialized equipment.

34. The Oilfield Services industry provides the following support:
Exploration services
Drilling services
Well completion
Production services
Offshore

35. Oilfield Services
Oilfield services and supply companies do not typically
produce oil and gas or own the assets that contain them.

36. Oilfield Services
At a typical drilling well site, there could be 25-30 different
oilfield service companies handling the mechanical,
technical and analytic operations needed to successfully
complete a well.

37. Oil Reserves
EKTINTERACTIVE.COM
Reserves, Reservoirs, Types of Crude Oil

38. Oil Reserves
The vast amounts of crude oil and natural gas trapped
underground are referred to as reserves.

39. Oil Reserves
Proven reserves are the estimated quantities which
geological and engineering data demonstrate can be
recovered in future years from known reservoirs, assuming
existing economic, technical and operating conditions.

40. Oil & Gas Reservoir Characteristics
Oil and gas are not found in easy-to-access underground
pools or puddles but, instead, are trapped in various rock
formations and geological structures.

41. Oil & Gas Reservoir Characteristics
There are four key types of geological formations needed
to have oil and gas reserves in place

42. Source rock – where the oil or gas was formed

43. Reservoir – where oil or gas reside, having migrated
through microscopic structures in the surrounding rock

44. Seal – which is impermeable and stops the migration of the
oil and gas

45. Trap – which is the combination of the reservoirs and seals

47. Types of Crude Oil:
EKTINTERACTIVE.COM
Heavy, Light, Sweet, Sour

48. Types of Crude Oil
There are hundreds of different grades of crude oil that
come out of the ground.
Most commonly, the crude will be described as light or
heavy and sweet or sour.

49. Types of Crude Oil

50. E&P Projects Life Cycle
The life-cycle of an E&P project could be shown simply in figure below
and need decision for each stage:

52. Main E&P Project Risks
➢ Exploration
➢ Existence of Hydrocarbons
➢ Magnitude of Discovery
➢ Type of Hydrocarbon
➢ Development
➢ Technical Risk
➢ Reservoir Development
➢ Fiscal
➢ Changes in fiscal terms
➢ Economic Risks
➢ Exploration and development
costs
➢ Hydrocarbon prices
➢ Political risk
➢ Nationalization
➢ Policy and Rule Changes

53. Petroleum Refining
Process
Content of a Typical Barrel of Crude Oil
From Distillation Only From Modern Refining Process
Gasoline 25%
Kerosine 12%
Distillate
Fuels 25%
Residual Oil
39%
Gasoline 58%
Kerosine 8%
Distillate Fuels
24%
Residual Oil 10%