From the Environmental Manual 2009 

THE OIL AND GAS VALUE CHAIN

This text gives a brief overview of the main activities that are carried out from start to finish
of the oil and gas value chain. Environmental impacts have an origin in the activities that are
carried out. Hence, this section serves as background information to chapter 3 Environmental
aspects and potential impacts.
For the purpose of this Manual, the oil and gas value chain is divided into seven different
phases as shown in Figure 0-1. An overview of main activities along the oil and gas value
chain is given in Table 0-1.

GEOLOGICAL,
RESOURCE, FIELD/
OPENING OF NEW EXPLORATION TRANSPORTATION DECOMMISS-
ENVIRONMENTAL FACILITY OPERATION IONING
REGIONS/FIELDS REFINING
MAPPING DEVELOPMENT

Figure 0-1 The Oil and gas value chain

Table 0-1 Overview of main activities along the oil and gas value chain
Value chain Description of main activities
Geological, Geological mapping, including desk study and seismic surveys, identify areas with
resource, favourable geological conditions for oil and gas extraction.
environmental Seismic surveys offshore are conducted by sending sound waves into the seabed, using
mapping large, specially designed ships with air guns and cables with receivers. The air guns fire
strong, compressed air-based sound pulses (sound waves) at regular intervals, typically each
25 metres the vessel moves.
Seismic surveys onshore are conducted either by shot-hole method (using dynamite) or
vibroseis (using a generator that hydraulically transmits vibrations into the earth).
Mapping of resources and environment is performed to establish a knowledge base for
environmental protection.

Opening of new The government 1) opens new regions (areas) for exploration drilling, 2) issue production
regions/fields licenses in opened areas, and 3) approve field developments for discoveries in granted
licences.

Exploration Exploratory drilling explores the presence or absence of a hydrocarbon reservoir while
appraisal drilling may improve quantification of the reserves. Mobile rigs commonly used
offshore include jack-ups and semi-submersibles, whilst in shallow protected waters barges
may be used. For land-based operations a pad is constructed at the chosen site to
accommodate drilling equipment and support services. A self-contained support camp is
also constructed, which may include helipad for remote sites. The time to drill a bore hole is
commonly in the order of one or two months. Where a hydrocarbon formation is found,
initial well tests- possibly lasting another month, are carried out, often generating oil, gas
and formation water that need to be disposed of, followed by the drilling of more wells to
determine the size and extent of the field (appraisal wells).

Field and facility Field and facility development involves drilling of production wells and constructing
development platforms/FPSO/subsea systems, production facilities, pipelines and infrastructure for

1
 transportation of oil and gas.

Operation Oil and gas is produced from the reservoir through formation pressure, artificial lift (water
or gas), and possibly advanced recovery techniques, until economically feasible reserves are
depleted. Injection wells are drilled in order to inject gas/water/steam to maintain reservoir
pressures and increase recovery rates (other methods of recovery can also be used).
Production facilities process the hydrocarbon fluids and separate oil, gas and water.
Produced water is treated and discharged or re-injected.

Transportation Oil and gas is transported to refinery where crude oil is separated and converted into end
and refining products such as high-octane motor fuel (gasoline/petrol), diesel oil, liquefied petroleum
gases (LPG), jet aircraft fuel, kerosene, heating fuel oils, lubricating oils, bitumen, and
petroleum coke. Refined products are transported from refinery to end-users by pipelines,
ship or road.

Decommissioning Petroleum installations are either re-used or demolished for recycling or disposal. Clean up
is also included as part of decommissioning. Decommissioning generally involves permanently
plugging and abandoning all wells, and may include removal of buildings and equipment, transfer
of buildings and roads to local communities or host government entities, implementation of
measures to encourage site re-vegetation and site monitoring.

Sources: OGP, 2008 and E&P Forum/UNEP, 1997