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What Oil Is and Where It Comes From

According to the most widely accepted theory, oil is composed of compressed hydrocarbons, and was formed millions of years ago in a process that began when aquatic plant and animal remains were covered by layers of sediment -- particles of rock and mineral. Over millions of years of extreme pressure and high temperatures, these particles became the mix of liquid hydrocarbons that we know as oil. Different mixes of plant and animal remains, as well as pressure, heat, and time, have caused hydrocarbons to appear today in a variety of forms: crude oil, a liquid; natural gas, a gas; and coal, a solid. Even diamonds are a form of hydrocarbons.

The word "petroleum" comes from the Latin words petra, or rock, and oleum, oil. Oil is found in reservoirs in sedimentary rock. Tiny pores in the rock allowed the petroleum to seep in. These "reservoir rocks" hold the oil like a sponge, confined by other, non-porous layers that form a "trap." (See illustration.)

Trap.gif (36969 bytes)

The world consists of many regions with different geological features formed as the Earth's crust shifted. Some of these regions have more and larger petroleum traps. In some reservoir rock, the oil is more concentrated in pools, making it easier to extract, while in other reservoirs it is diffused throughout the rock.

The Middle East is a region that exhibits both favorable characteristics -- the petroleum traps are large and numerous, and the reservoir rock holds the oil in substantial pools. This region’s dominance in world oil supply is the clear result (see graph below). Other regions, however, also have large oil deposits, even if the oil is more difficult to identify and more expensive to produce. The United States, with its rich oil history, is such a region.

What is crude oil?

Crude oil is a naturally-occurring substance found trapped in certain rocks below the earth's crust. It is a dark, sticky liquid which, scientifically speaking, is classed as a hydrocarbon. This means, it is a compound containing only hydrogen and carbon. Crude oil is highly flammable and can be burned to create energy. Along with its sister hydrocarbon, natural gas, crude oil makes an excellent fuel.

Measurement

Crude oil is measured in barrels. When crude oil first came into large-scale commercial use in the United States in the 19th century, it was stored in wooden barrels. One barrel equals 42 US gallons, or 159 litres.

Uses of crude oil

Burning crude oil itself, however, is of limited use. To extract the maximum value from crude, it first needs to be refined into other products. The best-known of these is gasoline, or petrol. However, there are many other products that can be obtained when a barrel of crude oil is refined. These include liquefied petroleum gas (LPG), naphtha, kerosene, gasoil and fuel oil. All of these are fuels. Other useful products which are not fuels can also be manufactured by refining crude oil, such as lubricants and asphalt (used in paving roads). A range of sub-items like perfumes and insecticides are also ultimately derived from crude oil.

Furthermore, several of the products listed above which are derived from crude oil, such as naphtha, gasoil, LPG and ethane, can themselves be used as inputs or feedstocks in the production of petrochemicals. There are more than 4,000 different petrochemical products, but those which are considered as basic products include ethylene, propylene, butadiene, benzene, ammonia and methanol. The main groups of petrochemical end-products are plastics, synthetic fibres, synthetic rubbers, detergents and chemical fertilisers.

Considering the vast number of products that are derived from it, crude oil is a very versatile substance. Life as we know it today would be extremely difficult without crude oil and its by-products

Crude Oil Characteristics

The best way to describe it is to start by saying, what it is not and what doesn't it do. It is not a chemical compound; it is a mixture of chemical compounds. The most important of its behavioral characteristics emerge when it is heated up. When it is warmed to its boiling temperature and held there, it will not all evaporate.

Contrast that with water to make a point. Take a pot of water and heat it to 212 degrees Fahrenheit ( 100 degrees Celsius ) and keep the heat on. What happens ? The water starts to boil ( to flash or vaporize ). Eventually, if the heat is kept on, all water will boil off, and disappear.

If you had a thermometer in the pot, you would notice that the temperature of the water just before the last bit boiled off would still be 100 degrees Celsius. That's because the chemical compound H2O boils at 100 degrees Celsius. At atmospheric pressure it boils at no more or less.

Crude Oil Composition

Now back to crude oil. Unlike water, crude oil is not a chemical compound, but a mixture of thousands of different compounds. Some are as simple as CH4 ( Methane ); some are as complex as C85H60. CH4 and C85H60 are the chemist's shorthand for certain chemical compounds. They are all generally combinations of hydrogen & carbon atoms, called Hydrocarbons. The important characteristic is that each of these compounds has its very own boiling temperature, and therein lies the most useful and used physical phenomenon in the petroleum industry.

Sulfur content of Crude Oil

One of the annoying aspects Mother Nature endowed crude oils with is varying amounts of sulfur content in various types of crude oil. To complicate the endowment, the sulfur is not in the form of elemental sulfur but is usually a sulfur compound. That is, it is chemically bonded to some of the more complicated hydrocarbon molecules so that it is not easily separated from the pure hydrogen/carbon compounds.

The parlance in discussing crude oils of varying content is to categorize them into sweet and sour crudes. This seemingly quaint, faintly oriental designation of sweet and sour has more to do with taste than you might think of. In the early days of Pennsylvania crude oil production, petroleum was primarily a substitute for whale oil used as lamp oil for it would have an unacceptable smell when burned. The method originally used in the Pennsylvania oil fields to determine if the kerosene was suitable for shipping to the New York and Philadelphia markets was to taste it. If the taster thought it sweet, it passed; sour, it was rejected for having to much sulfur content.

Today however, sweet crudes typically have 0.5% sulfur or less, sour 2.5% sulfur or more. The area in between is sometimes called intermediate sweet or intermediate sour, but the distinction is not clear. What may be sweet to some could be sour to others; especially now that we have no more crude oil tasters.

Simple Distillation

The core refining process is simple distillation, illustrated in a stylized fashion at the right. Because crude oil is made up of a mixture of hydrocarbons, this first and basic refining process is aimed at separating the crude oil into its "fractions," the broad categories of its component hydrocarbons. Crude oil is heated and put into a still -- a distillation column -- and different products boil off and can be recovered at different temperatures. The lighter products -- liquid petroleum gases (LPG), naphtha, and so-called "straight run" gasoline -- are recovered at the lowest temperatures. Middle distillates -- jet fuel, kerosene, distillates (such as home heating oil and diesel fuel) -- come next. Finally, the heaviest products (residuum or residual fuel oil) are recovered, sometimes at temperatures over 1000 degrees F. The simplest refineries stop at this point. Most in the United States, however, reprocess the heavier fractions into lighter products to maximize the output of the most desirable products, as shown schematically in the illustration, and as discussed below.

Downstream Processing

Additional processing follows crude distillation, "downstream" (or closer to the refinery gate and the consumer) of the distillation process. Downstream processing is grouped together in this discussion, but encompasses a variety of highly complex units designed for very different upgrading processes. Some change the molecular structure of the input with chemical reactions, some in the presence of a catalyst, some with thermal reactions.

In general, these processes are designed to take heavy, low-valued feedstock -- often itself the output from an earlier process -- and change it into lighter, higher-valued output. A catalytic cracker, for instance, uses the gasoil (heavy distillate) output from crude distillation as its feedstock and produces additional finished distillates (heating oil and diesel) and gasoline. Sulfur removal is accomplished in a hydrotreater. A reforming unit produces higher octane components for gasoline from lower octane feedstock that was recovered in the distillation process. A coker uses the heaviest output of distillation, the residue or residuum, to produce a lighter feedstock for further processing, as well as petroleum coke.

Crude Oil Quality

The physical characteristics of crude oils differ. Crude oil with a similar mix of physical and chemical characteristics, usually produced from a given reservoir, field or sometimes even a region, constitutes a crude oil "stream." Most simply, crude oils are classified by their density and sulfur content. Less dense (or "lighter") crudes generally have a higher share of light hydrocarbons -- higher value products -- that can be recovered with simple distillation. The denser ("heavier") crude oils produce a greater share of lower-valued products with simple distillation and require additional processing to produce the desired range of products. Some crude oils also have a higher sulfur content, an undesirable characteristic with respect to both processing and product quality. For pricing purposes, crude oils of similar quality are often compared to a single representative crude oil, a "benchmark," of the quality class.

In addition to gravity and sulfur content, the type of hydrocarbon molecules and other natural characteristics may affect the cost of processing or restrict a crude oil's suitability for specific uses. The presence of heavy metals, contaminants for the processing and for the finished product, is one example. The molecular structure of a crude oil also dictates whether a crude stream can be used for the manufacture of specialty products, such as lubricating oils or of petrochemical feedstocks.

Refiners therefore strive to run the optimal mix (or "slate") of crudes through their refineries, depending on the refinery's equipment, the desired output mix, and the relative price of available crudes. In recent years, refiners have confronted two opposite forces -- consumers' and government mandates that increasingly required light products of higher quality (the most difficult to produce) and crude oil supply that was increasingly heavier, with higher sulfur content (the most difficult to refine).

Other Refinery Inputs

In addition to crude oil that runs through a simple distillation, a variety of other specialized inputs, usually to downstream units, enhance the refiner's capability to make the desired mix of products. Among these products might be unfinished (partly refined) oil, or imported residual fuel oil used as input to a vacuum distillation unit. The supply pattern for "reformulated gasoline" or RFG, the mandated low-pollution product first required in 1995, includes an important share of blending components that are classified as refinery inputs. These blending components include oxygenates but consist mainly of products that could be classified as finished gasoline in other jurisdictions or products that require little additional blending to be classified as finished gasoline. While they are counted as "refinery inputs," they are brought to saleable specifications in terminals and blending facilities, not in conventional refineries.

Petroleum Refining converts crude oil into usable products. Major products include fuels (LPG, naphtha, kerosene, diesel, gas oils, residue), lubricants, bitumen, and petrochemical products (benzene, toluene, xylene). Many of the major product names that you buy are special types of the general products. For example:

Propane gas, butane gases are types of LPG
Gasoline or petrol are Naphthas
Jet fuel is a kerosene
Heating oil is usually diesel
Marine diesel and some heating oils are gas oils
Fuel oil, tar, and asphalt are made from residue

Petroleum refining is done in a refinery. The major parts of a refinery correspond to the major steps in turning crude oil into products. Crude oil is a complex mixture of hydrocarbons, water, salts, sulfur, metals, dirt and other impurities. First, it must be cleaned and separated. Second, often it must be changed from one type of molecule into another to improve its properties. Third, different products must be blended together to meet specific requirements. This blended mixture goes to customers as gasoline, diesel, jet fuel or lubricants.

The major steps include:

Desalting - removing salt, water, dirt and other impurities
Crude and vacuum distillation - start separating the crude oil into separate products
Conversion - modifying the composition of the products
Blending - putting together measure amounts of products to make something that does a specific job

These steps are called the process units because they process the crude oil directly. A refinery has more than process units. The refinery adds all the process units with extra stuff, called utilities, to make up an entire plant. Utilities can include:

Water treating
Sulfur removal
Environmental control
Steam generation
Power generation
Safety systems

No two oil refineries are the same. This may seem odd. Why?

Lots of different companies offer different ways to do the same thing. After all, you can buy a Ford, a Chevy, a Dodge, a Toyota, or other pickup. They all do a similar job, but they everyone can tell them apart. The same with process units. You can buy an IFP, a UOP, a Kellog, an Exxon....
Lots of things get added latter. You've heard the song about the Cadillac with the '67 transmission, '68 brakes, '69 engine, '70.... (will someone who really knows the song email and tell me what really should be here?)
Changes and repairs get done differently in different plants.
What you want to do depends on what type of crude oil you have. Every place you make oil from has a slightly different crude oil.

Put this all together, and you see why every refinery differs.

Section still under construction, return in the future for more updates.

What is Gasoline? In everyday life we deal with both pure (or nearly pure) materials, like water, and mixtures of things, like coffee. A pure material is one made up of a large quantity of one molecule. A mixture is made up of many different things put together. A mixture may be simple, such as sugar water made up of sucrose (sugar) and water. A mixture may be complex, such as most foods we eat which are made up of thousands of different compounds. Gasoline is a complex mixture. Its main components are a blend of different hydrocarbons along with additives to help it meet specific properties. Recently, in the US and some other countries, significant amounts of compounds that contain oxygen are added to the gasoline to help it burn cleaner.

World Oil Reserves by Region, December 31, 2000
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Drilling for Oil

To identify a prospective site for oil production, companies use a variety of techniques, including core sampling -- physically removing and testing a cross section of the rock -- and seismic testing, where the return vibrations from a man-made shockwave are measured and calibrated. Advances in technology have made huge improvements in seismic testing.

After these exploratory tests, companies must then drill to confirm the presence of oil or gas. A "dry hole" is an unsuccessful well, one where the drilling did not find oil or gas, or not enough to be economically worth producing. A successful well may contain either oil or gas, and often both, because the gas is dissolved in the oil. When gas is present in oil, it is extracted from the liquid at the surface in a process separate from oil production.

Historically, drilling a "wildcat" well -- searching for oil in a field where it had not yet been discovered -- had a low chance of success. Only one out of five wildcat wells found oil or gas. The rest were dry holes. Better information, especially from seismic technology, has improved the success rate to one out of three and, according to some, one in two. Reducing the money wasted on dry holes is one of the aspects of upstream activity that has allowed the industry to find and produce oil at the prices prevailing over much of the 1990's.

After a successful well identifies the presence of oil and/or gas, additional wells are drilled to test the production conditions and determine the boundaries of the reservoir. Finally, production, or "development," wells are put in place, along with tanks, pipelines and gas processing plants, so the oil can be produced, moved to markets and sold. Once extracted, the crude oil must be refined into usable products, as discussed in the chapter on oil refining.

How Oil Is Produced

The naturally occurring pressure in the underground reservoir is an important determinant of whether the reservoir is economically viable or not. The pressure varies with the characteristics of the trap, the reservoir rock and the production history. Most oil, initially, is produced by "natural lift" production methods: the pressure underground is high enough to force the oil to the surface. Reservoirs in the Middle East tend to be long-lived on "natural lift," that is, the reservoir pressure continues over time to be great enough to force the oil out. The underground pressure in older reservoirs, however, eventually dissipates, and oil no longer flows to the surface naturally. It must be pumped out by means of an "artificial lift" -- a pump powered by gas or electricity. The majority of the oil reservoirs in the United States are produced using some kind of artificial lift.

Over time, these "primary" production methods become ineffective, and continued production requires the use of additional "secondary" production methods. One common method uses water to displace oil, using a method called “waterflood,” which forces the oil to the drilled shaft or "wellbore."

Finally, producers may need to turn to "tertiary" or "enhanced" oil recovery methods. These techniques are often centered on increasing the oil's flow characteristics through the use of steam, carbon dioxide and other gases or chemicals. In the United States, primary production methods account for less than 40 percent of the oil produced on a daily basis, secondary methods account for about half, and tertiary recovery the remaining 10 percent.

Both the varying reservoir characteristics and the physical characteristics of the crude oil are important components of the cost of producing oil. These costs can range from as little as $2 per barrel in the Middle East to more than $15 per barrel in some fields in the United States, including capital recovery. It is interesting to note that technological advances in finding and producing oil have made it possible to bring once-expensive deepwater Gulf of Mexico oil into production for less than $10 per barrel.

Upstream Technology

Technology's contribution to finding oil is huge. It cannot change geology, but by revolutionizing the information available on the features of a geologic structure, it has enhanced the likelihood of success. A primary benefit is the ability to eliminate poor prospects, thus wasted expenditure on dry holes. In addition, drilling and production technologies have made it possible to exploit reservoirs that would have formerly been too costly to put into production and, as described above, to increase the recovery from existing reservoirs.

The new power of oil exploration technology comes first from the revolution in computing power. The enhanced capability to process data has, for instance, allowed seismic testing to move from 2-dimensional to 3-dimensional. While seismic testing has been important for decades, even 2-D seismic was economically feasible only for large companies for a long time. New computing power has both enhanced the results of seismic testing and made it accessible to the full spectrum of companies.

Seismic exploration, broadly speaking, creates a picture of the subsurface by recording vibrations as they bounce back from geologic formations. Offshore, the vibrations come from vessels towing a sonar array that "shoots" with compressed air. Onshore, the vibrations come from specially designed trucks that "thump" the ground (and formerly, from a dynamite explosion). The difference between 2-D and 3-D seismic lies in the number of vibrations from which meaningful information can be calibrated. With 2-D, geophones along a line of vibrations provided a picture that was a cross-section -- a slice -- of the rock formation. With 3-D, the geophones cover a grid, not just a line. With thousands of times more data points, scientists can map a cube, creating a 3-dimensional computer image of the formation. While 3-D seismic is many times more expensive than 2-D, it allows companies to avoid unlikely prospects, and hence wasting money on unsuccessful wells.

Technology has also contributed a variety of tools to identify and exploit reservoirs or portions of reservoirs that are less accessible, small and/or compartmentalized, incompletely drained, or porous. Advanced imaging, used widely in medicine, also helps find and produce oil more efficiently, and has advanced the recovery of subsalt reservoirs (those lying beneath a "sheet" of salt, commonly offshore). Multiple zone completions, where oil flows into the wellbore at points along the pipe, instead of just at the bottom, helps drain reservoirs more economically. Horizontal drilling both enhances the accessibility and allows more efficient extraction from some reservoirs. New drillbits can penetrate harder rock. In the offshore, as discussed more fully below, subsea platforms allow safer and more economic development of remote fields.

Technology has also contributed in making oil exploration and production safer for the industry and for the environment. Offshore production can be operated from onshore, with automatic shutoff systems to minimize the pollution risk. Infrared photography can pinpoint a trajectory of spilled oil, allowing equipment and personnel to be deployed effectively to minimize damage.

Technology also has contributed to making oil exploration and production safer for the industry and for the environment. Offshore production can be operated from onshore, with automatic shutoff systems to minimize the pollution risk. Infrared photography can pinpoint a trajectory of spilled oil, allowing equipment and personnel to be deployed quickly and effectively, thus minimizing damage.

In addition, technology has been responsible for the rejuvenation of offshore exploration that has taken place beyond the Outer Continental Shelf.

The Impact of Upstream Technology

Technology's contribution to finding oil is huge. Technology cannot change geology but, by revolutionizing the information available about the features of a geologic structure, it has enhanced the likelihood of finding oil. A primary benefit is the ability to eliminate poor prospects, thus considerably reducing wasted expenditures on dry holes. In addition, drilling and production technologies have made it possible to exploit reservoirs that would formerly have been too costly to put into production and to increase the recovery from existing reservoirs.

Global Oil Supply by Region

The Mideast remains the largest oil-producing region, as shown in the accompanying graphs. Mideast dominance in oil reserves -- the estimated amount of oil that can be produced from known reservoirs -- is even more pronounced: the region holds about two-thirds of the one trillion barrels of global proved oil reserves (graph), so the region's critical role in world oil supply will continue and will grow. (The United States, by contrast, holds only 4 percent of global proved reserves.) Several core developments have shaped the pattern of regional oil production: