The Global Oil Industry

BADM 381: September 30, 2008

Kelley Sheehan Kailyin Young Caleb Ganzer Caroline Bobrecki

Proven World Oil Reserves

Rank Country World 1 Saudi Arabia

Oil - proved reserves (bbl)

1,331,000,000,000 264,300,000,000

Date of Information 1 January 2006 est. 2007 est.

2
3 4 5 6

Canada
Iran Iraq Kuwait United Arab Emirates

178,800,000,000
138,400,000,000 115,000,000,000 101,500,000,000 97,800,000,000

1 January 2006 est.

2007 est. 1 January 2007 est. 2007 est. 2007 est.

7
8 9 10 12

Venezuela
Russia Libya Nigeria United States

79,140,000,000
60,000,000,000 45,000,000,000 37,250,000,000 21,760,000,000

2007 est.
1 January 2006 est. 2007 est. 2007 est. 1 January 2006 est.

https://www.cia.gov/library/publications/the-world-factbook/rankorder/2178rank.html

Petroleum Intelligence Weekly's Ranking of Top Oil Companies

Rank 2006 1 2 3 4 5 Rank 2005 1 3 2 5 4

Company
Saudi Aramco NIOC Exxon Mobil BP PDV

Country
Saudi Arabia Iran US UK Venezuela

State Ownership % 100 100

100

6
7 8 9 10

6
7 11 8 8

Royal Dutch Shell

CNPC ConocoPhillips Chevron Total

UK/Netherlands
China US US France Published December of 2007 100

https://www.cia.gov/library/publications/the-world-factbook/rankorder/2178rank.html

Saudi Aramco
Operations in:
Exploration, production, refining, marketing, and international shipping.

The company has approximately one fourth of world oil reserves The company is headquartered in Dhahran, Saudi Arabia and employs about 52,100 people. State Owned

National Iranian Oil Company (NIOC)

State owned Involved in:
exploration, refining, and transportation of oil, gas, and petroleum products. The company primarily operates in Iran where it is headquartered in Tehran, Iran

NIOC produces more than 3.9 million barrels of crude oil per day from its 138.4 billion barrels of reserves.

Exxon Mobil
Engaged in
exploration and production, refining, and marketing of oil and natural gas. The company is also engaged in the production of chemicals, commodity petrochemicals, and electricity generation.

Exxon also set an annual profit record by earning $40.61 billion last year
nearly $1,300 per second in 2007.

Organization of Petroleum Exporting Countries (OPEC)

Created in 1960 Original Member Countries
Iran Iraq Kuwait Saudi Arabia Venezuela

Objective statement

OPEC 149th Conference

Conference of OPEC members met on the 9th and 10th of September Non-OPEC members attended Minister of Petroleum of Egypt, the Deputy Prime Minister of the Russian Federation and the Minister of Energy & Mining of the Republic of Sudan, Discussed energy market stability and security, enhancing socio-economic development, alleviating poverty and protecting the environment, recognizing that energy is central to the achievement of the Millennium Development Goals

US Oil Imports
Crude Oil Imports (Top 5 Countries) (Thousand Barrels per Day)
Country CANADA SAUDI ARABIA MEXICO VENEZUELA Jul-08 1,960 1,661 1,200 1,187 Jun-08 1,883 1,479 1,124 1,085 YTD 2008 1,899 1,543 1,194 1,038 Jul-07 1,818 1,434 1,469 1,167 YTD 2007 1,872 1,411 1,457 1,117

NIGERIA

741

946

993

890

1,003

Total Imports of Petroleum (Top 5 Countries) (Thousand Barrels per Day)

Country CANADA SAUDI ARABIA VENEZUELA MEXICO NIGERIA Jul-08 2,383 1,673 1,340 1,290 822 Jun-08 2,359 1,493 1,215 1,254 1,020 YTD 2008 2,459 1,558 1,196 1,302 1,052 Jul-07 2,386 1,436 1,399 1,611 906 YTD 2007 2,458 1,435 1,363 1,593 1,054

China Oil Imports

Half of its imports is from the Middle East In 2006, one-third of its oil imports from Africa, Angola, the Republic of Congo, Equatorial Guinea, and Sudan It has also sought supplies from Chad, Nigeria, Algeria, and Gabon. The International Energy Agency projects China's net oil imports will jump to 13.1 million barrels per day by 2030 from 3.5 million barrels per day in 2006.

Oil Consumption and Consumer Responses to Oil prices

Did you know?

The United States alone consumes about 20,687 barrels of petroleum products each day almost half in the form of gasoline? Next in line is China with about 7,201 Although the United States is the worlds third largest crude oil producer, less than 35 percent of the crude oil used by U.S. refineries was produced in the United States.
We are the 3rd largest crude oil producer, but most of the petroleum we use is imported.

Did You Know?

The United States produces about 10% of the worlds petroleum and consumes 24%.
o

About 20.7 millions barrels per day, making us the worlds largest petroleum consumer. (2007)

How dependent are we on foreign oil?

The United States imported about 58% of the petroleum, that we consumed during 2007. About half of these imports came from the Western Hemisphere.

Gasoline (Cents per Gallon) 09/22/08 Price U.S. East Coast New England Central Atlantic Lower Atlantic 3.718 3.721 3.601 3.634 3.821 Change from Week Ago -.117 -.88 -.54 -.38 -.136 Year Ago .906

Gas Prices now In the U.S.

.952

.862

.878 1.034

Midwest
Gulf Coast Rocky Mountain West Coast California

3.754
3.678 3.651 3.693 3.725

-.192
-.79 -.103 -.77 -.79

.893
.973

.834

.784

Average: $3.73

.764

A look around the World

Nation Price in USD Regular/Gallon *****$26.50**** $11.18 $9.97 Nation Price in USD Regular/Gall on $1.95 $1.44 $1.40 $1.24 Gaza Strip Turkey Netherlands Bolivia Iraq Ecuador Egypt

Norway
Zambia Denmark Findland Italy Belgium Portugal Sweden Iceland

$9.95
$9.88 $9.29 $9.27 $9.09 9.03 $8.85 $8.69 $8.68

Oman
Yemen Qatar Liby

$1.18
$1.14 $0.73 $0.50

Saudi Arabia
Iran

$0.47
$0.41

http://www.portfolio.com/interactive-features/2008/08/Gas-Prices-Around-the-World

The winner goes to. Venezuela: $0.12 per gallon

Venezuela has the world's cheapest gas. Motorists love it. They're buying cars at a record pace. BUT The nation's capital, Caracas, is having a problem with clogged streets and air pollution.

Why Such a big difference?

The main factor in price disparities between countries is government policy, Many European nations tax gasoline heavily, with taxes making up as much as 75 percent of the cost of a gallon of gasoline. Many of the low prices such as in Venezuela are the result of a big government subsidy. In a few Latin America and Middle-East nations, such as Venezuela and Saudi Arabia, oil is produced by a government-owned company and local gasoline prices are kept low as a benefit to the nation's citizens.

What now?
Since many consumers around the world are paying outrageous prices for gas, they are urging for
o o

Changes in policies Finding and investing in alternative sources for fuel

Besides the economic need there is also needs because of environmental, geopolitical and sustainability concerns .
o

Environmental groups have for years been arguing that we shall all have to live radically different lives when the oil reserves are finally exhausted.
The benefit of the present oil price hikes could be to focus attention on the possibility of a world less dependent on oil. The truth is that they probably never will be. Oil will simply become too expensive to compete with other fuels.

Renewable Resources
Renewable energy is energy generated from natural resources which are renewable (naturally replenished) Success Stories Germany Hydropower Solar Power

Wind Biomass

Requiring utilities to buy renewable power A good idea 80% A bad idea 20%

Ethanol
Ethanol is a renewable fuel made from various plant materials, which are called "biomass. o Examples: Switchgrass, hemp, corn, willow, sugarcane o biofuels emit far fewer greenhouse gasses United States o corn grain Brazil o sugar cane
o

Food versus fuel debate

Using more biofuels A good idea 45% A bad idea 55% Total responses to this question: 41876

Hybrids
A hybrid vehicle is a vehicle that uses two or more distinct power sources to propel the vehicle. Power sources include: o On-board or out-board rechargeable energy storage system (RESS) o Gasoline o Hydrogen The term most commonly refers to Hybrid-electric vehicle (HEV) which includes internal combustion engines and electric motors

Nuclear Power
Some people still put their hopes in nuclear power, which makes far less of a contribution to global warming Today, more than 15% of the world's electricity comes from nuclear power The long-term radioactive waste storage problems of nuclear power have not been solved. o Concerns about health risks The world's nuclear industry has had serious accidents. Many people therefore reject new nuclear plants in the belief that more accidents are inevitable. Building more nuclear plants
A good idea 79% A bad idea 21% Total responses to this question: 43308

Conservation
Some people suggest that greater concentration on conservation is key o Most of us all over the world still waste fuel on a excessive scale, and the savings we could make by greater efficiency, and by just switching off, are immense.

QuickTime an d a TIFF (Uncompressed) decompressor are need ed to see this p icture.

The Heated Debate on Drilling

The heated debate on drilling:

The debate on drilling has been going on since 2004. When Americans began weighing the pros and cons to offshore and Alaskan drilling. A few pro's:
Lower fuel prices Less dependency on foreign oil

Con's:
Continue to destroy the environment

Natural disasters here has spurred even more talk on this debate. Generally because hurricanes in the paths of oil production rigs because they create imbalances to supply and demand which affect the price of gas.

Political Standpoints on Drilling:

Republicans: promote supply-side solutions like drilling offshore and in an Alaska wildlife refuge. At the Republican National Conference Presidential Nominee John McCain calls for "Drill Baby Drill" and "Drill Now".

Democrats: mostly push demand-side ideas such as renewable energy sources. opposition comes from the idea that drilling will affect natural habitats and have a small impact on gas prices.
Democratic Presidential Nominee Barack Obama encouraged inflating tires to the proper level instead of drilling. But in August shifted his opposition to drilling saying he could support the new drilling proposal drafted by Congress (Saine).

The Oil and Natural Gas Value Chain

1)Exploration- Seismic exploration locates hydrocarbons on land or under the sea 2) Preparing the Drill 3) Drill to receive the resources 4) Extracting the oil 5) Production and Transport:The oil and gas are then transported, either by ship or pipeline, to processing facilities. Facilities remove impurities and convert oil and gas to refined products and petrochemicals we use daily. 6) Market- at the gas pump

1) Seismic Exploration Seismic waves reflect off rock formations and travel back to hydrophone receivers. Geologists then estimate the structure and types of formations under land by measuring travel times of the returned energy. This tells them where to drill.

2) Preparing to drill requires: Clearing the land and building access roads. Have a source of water nearby, or drill a water well. Digging a reserve pit for rock and mud that comes up in the drilling process.

Examples of drill ships The Discoverer Deep Seas drill ship sits off the coast of Louisiana as Chevron drills for oil in the Gulf of Mexico.

Drilling off the coast of Cuba.

continued value chain

3) Drilling: Drill the surface hole, and after reaching the preset depth, cement the casing so it does not collapse. Drilling continues in stages: They drill, then run and cement new casings, then drill again. Run tests to make sure they are at the right depth. 4) Extracting the Oil: Remove the drill, and place a pump on the well head.The pump system forces the pump up and down, creating a suction that draws oil up through the well. If the oil is too heavy a second hole is drilled where steam pressure is injected. Heat from the steam thins the oil, and the pressure pushes it up the well.
.

5) Production Gas and oil are gathered and transported, through pipelines or ships, to processing facilities. Gasoline and natural gas are used as fuel in the transportation sector. Oil can be stored in specially built tanks before being processed into products or exported. Oil and gas can be used as fuel in the generation of electrical power. Oil and gas are exported either as refined products or crude oil in specialized tankers. 6) Social and Economic Benefit The activities of the oil value chain create wealth in the form of taxes, and dividends for countries and help provide more employment opportunities.

Oil Barrel Politics: Running on Volatility

The Oil Curse

1970s
o o

Oil Boom Fast Growth among OPEC nations After decades of sluggish growth, if not recession, over 50% of countries poorer

2005
o

Dutch Disease
1960s

Oils Political Effects

1) Economic and Political Instability
Volatile prices = volatile job market When people are out of work they are more susceptible to violence

Oils Political Effects

2) Supports Insurgents
Steal & Sell Extortion Political Alliances

Oils Political Effects

3) Increases Separatism
Massive revenues, little disbursement of wealth Underrepresented locals bear brunt of costs

The Oil Producing Countries is relatively fixed, right?

Wrong! :(

Countries contending for Arctic Ocean Drilling & Shipping Rights

Canada Denmark Russia Finland USA

Russia staking its claim

Russia petitioned UN to extend continental shelf - seeking exclusive exploration rights 2007, Russia planted a flag on the extreme edge of its continental shelf, under the North Pole

Works Cited
Freundenrich Ph.D., Craig. "How Oil Drilling Works". 2008 http://science.howstuffworks.com/oil-drilling3.htm National Gas Company of Trinidad and Tobago. "Natural Gas Value Chain". 2007 http://www.ngc.co.tt/knowledge/knowledge_value_chain.htm Reuters, Thomas. "Five Questions about U.S. offshore Drilling" 14 July 2008. http://www.reuters.com/article/newsOne/idUSN1443189420080715?s p=true Saine, Cindy. "Obama Softens His Stance on Offshore Oil Drilling" 02 August 2008 http://www.voanews.com/english/archive/2008-08/2008-08-02voa7.cfm?CFID=42787907 &CFTOKEN=5617557 UTC Energy Investment Series. "The Energy Value Chain" http://www.ttutc.com/news/article/energy/value_chain.pdf http://money.cnn.com/2008/02/01/news/companies/exxon_earnings/ http://www.energyintel.com/documentdetail.asp?document_id=218175 https://www.cia.gov/library/publications/the-worldfactbook/rankorder/2178rank.html http://www.washingtonpost.com/wpdyn/content/article/2008/06/09/AR2008060900714.html http://www.saudiaramco.com/irj/portal/anonymous http://library.marketlineinfo.com.proxy2.library.uiuc.edu/library/ http://www.opec.org/aboutus/history/history.htm http://www.businessspectator.com.au/bs.nsf/Article/Statement-from-149thMeeting-of-the-OPEC-Conferenc-JC58W?OpenDocument

Sources
Borgerson, Scott. Arctic Meltdown. Foreign Affairs, March/April 2008 Carbon-cutters.com (Oily World Image) Ebrahim-zadeh, Christine . Finance & Development. IMF. V40, 1. March 2003. media.washingtontimes.com (background image) Nasa.gov (North Sea Image) Ross, Michael. Blood Barrels. Foreign Affairs, May/June 2008 Russia-ic.com Wikimedia.org (OPEC image) worldproutassembly.org (arctic sea image)

Sources
http://72.3.136.90/NACS/Resource/PRToolkit/Ca mpaigns/prtk_gp2008_Resources.htm http://www.npr.org/templates/story/story.php?sto ryId=6542617 http://money.cnn.com/galleries/2008/news/0807/ gallery.energy_solutions/13.html http://www.eia.doe.gov/oil_gas/petroleum/info_g lance/Petroleum.html http://www.portfolio.com/interactivefeatures/2008/08/Gas-Prices-Around-theWorld http://www.nytimes.com/2006/04/10/world/ameri cas/10brazil.html