Lecture # 4 PETROLEUM INDUSTRY STRUCTURE

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1) INTRODUCTION. 1.1) The Oil and Natural Gas Value Chain. 2) PETROLEUM INDUSTRY STRUCTURE. 3) THE AMERICAN PETROLEUM INSTITUTE ...
PETROLEUM INDUSTRY STRUCTURE

Hassan Z. Harraz [email protected] 2015- 2016

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Prof. Dr. H.Z. Harraz Presentation

Lectures # 2 & 3 PETROLEUM INDUSTRY STRUCTURE

© Hassan Harraz 2016

Outline of Lecture 1) INTRODUCTION 1.1) The Oil and Natural Gas Value Chain 2) PETROLEUM INDUSTRY STRUCTURE 3) THE AMERICAN PETROLEUM INSTITUTE CLASSIFICATION OF THE PETROLEUM INDUSTRY 3.1) UPSTREAM OIL AND GAS SECTOR 3.1.1) Business Cycle of Upstream 3.1.2) Components of the Upstream Sector 3.1.3) Upstream Oil Company Targets 3.2) MIDSTREAM SECTOR 3.3) DOWNSTREAM PROCESS AND SECTOR 3.3.1) Distribution of Refined Products  PETROLEUM REFINING: Distillation of Crude Oil. 4) PETROLEUM COMPANIES TYPES 4.1) International Oil Companies (IOCs) 4.2) Nation Oil Companies (NOCs) 4.3) Operator Companies (or Exploration and Production (E &P) Companies) 4.3.1) Types of exploration and production companies: 4.4) Service Petroleum Companies 4.4.1) Types of service companies: 5) MAIN PETROLEUM COMPANIES PARTICIPANTS IN THE INTERNATIONAL OIL MARKET 6) SEVEN SISTERS (or ANGLO-SAXON) 6.1) Composition and history 6.2) "New Seven Sisters"

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Exploration

Refining

Production

Marketing

 This unit is on the Focus of Industry  How many – by show of hands - have had some interaction with an oil company – internship, research funded by, etc.  Industry’s scope runs from finding oil and gas reservoirs to getting refined products to our customers © Hassan Harraz 2016

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1) INTRODUCTION  The petroleum industry is quite complicated.  Part of what makes it so complicated is the fact that most of the world’s oil supplies are control by state agencies and not by private corporations.  In fact, well over half of total world oil reserves are controlled by state agencies in the Middle East.  The somewhat complicated and intertwined operations of these major industry players can make it difficult to understand why the industry works as it does.

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1.1) The Oil and Natural Gas Value Chain 1) Exploration  Seismic Exploration  Seismic exploration locates hydrocarbons on land or under the sea  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 the Drill  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.

3) Drilling:  Drill to receive the resources  Drill the surface hole, and after reaching the pre-set 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) 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.

7) Market- at the gas pump

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2) PETROLEUM INDUSTRY STRUCTURE The petroleum industry can be divided by five ways, as following: I) Broad Oil Segments

IV) main categories of participants in the international oil market

1) Crude oil exploration and production segments;

1) National Oil Companies (NOCs);

2) Refining segments, and 3) Product distribution and sales segments.

II) The American Petroleum Institute divides the petroleum industry into five sectors: 1) Upstream sectors (exploration, development and production of crude oil or natural gas); 2) Midstream sectors; 3) Downstream sectors (oil tankers, refiners, retailers and consumers); 4) Pipeline sectors; and

2) International Oil Majors Companies (IOCs) and Their Trading Arms; 3) Independent Oil Trading Companies; 4) Financial houses and non industry speculators V) Oil companies used to be classified by sales as: 1) Supermajors Companies (BP, Chevron, ExxonMobil, ConocoPhillips, Shell, Eni and Total S.A.), 2) Majors Companies, and 3) Independents (or Jobbers) Companies

5) Service and supply sectors

III) The oil industry can be subdivided into four major company types: 1) National Oil Companies (NOCs) and 2) International Oil Companies (IOCs). 3) Operator Companies (or Exploration and Production (E &P) Companies); and 4) Service Companies © Hassan Harraz 2016

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1) Crude oil exploration and production segment; 2) Refining segments; 3) Product distribution and sales segments

1) Supermajors Oil

1) Upstream sector; 2) Midstream sector; 3) Downstream sector; 4) Pipeline sector; 5) Service and supply sector

PETROLEUM INDUSTRY STRUCTURE

1) National Oil Companies (NOCs); 2) International Oil Companies (IOCs); 3) Operator (E & P) Companies; 4) Service Companies

© Hassan Harraz 2016

Companies ; 2) Majors Oil Companies; 3) Independents (or Jobbers) Oil Companies

1) National Oil Companies (NOCs); 2) International Oil Majors Companies (IOCs) and Their Trading Arms; 3) Independent Oil Trading Companies; 4) Financial houses and non industry speculators

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3) THE AMERICAN PETROLEUM INSTITUTE CLASSIFICATION OF THE PETROLEUM INDUSTRY The American Petroleum Institute divides the petroleum industry into five sectors: 3.1) Upstream sector(exploration, development and production of crude oil or natural gas); 3.2) Midstream sector 3.3) Downstream (oil tankers, refiners, retailers and consumers); 3.4) Pipeline sector; and 3.5) Service and supply sector

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 Crude oil exploration and production is commonly referred to as the “Upstream”.  Refining and product sales are generally referred to as the “Downstream”.  As the industry is globalizing new major companies are being formed, particularly in Russia, China, India and Brazil.  These companies are exhibiting global ambition both in the upstream and downstream.

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3.1) UPSTREAM OIL AND GAS SECTOR  The upstream oil sector is also known as the exploration and production (E&P) sector.  E&P sector: collecting data and drilling wells  Refers to the searching for and the recovery and production of crude oil and natural gas.  Upstream covers everything to getting raw material to a refinery.  The upstream sector includes the searching for potential underground or underwater oil and gas fields, drilling of exploratory wells, and subsequently operating the wells that recover and bring the crude oil and/or raw natural gas to the surface.  The upstream can be further subdivided into 3 main parts: EXPLORATION, DEVELOPMENT and PRODUCTION.

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 Most upstream work in the oil field or on an oil well is contracted out to drilling contractors and oil field service companies.  In recent years however, National Oil Companies (NOC), as opposed to International Oil Companies (IOC) have come to control the rights over the largest oil reserves; by this measure the top ten companies all are NOC.  Aside from the NOCs which dominate the upstream sector, there are many IOC that have a market share.  For example:  BG Group  BHP Billiton  ConocoPhillips  Chevron  Eni  ExxonMobil  Hess Ltd  Marathon Oil  Total  Tullow Oil

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3.1.1) Business Cycle of Upstream Upstream Licensing  Negotiation with Governments / Individuals (US)

Prospect

Exploration Drilling

 Geological characteristics

 Infrastructure set-up .

 Seismic evaluation

 Uncertainty

 Different types of contracts: royalties,  Geological PSA, service Model …(+See contract, …etc Prospect evaluation section in Lecture #1)

 Analysis of formations and hydrocarbon characteristics

Production Drilling

Downstream

 Full scale project

Field optimization Definition of drilling program and well profiles

Onshore / Offshore

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3.1.2) Components of the Upstream Sector  The upstream can be further subdivided into 3 main parts a) EXPLORATION: One part is focused on finding oil & gas ‘pools’.  which regions and basins?  which blocks?  where on the block? b) DEVELOPMENT: The second part is focused on how to get oil & gas out of what has been discovered. How to Get It Out  where, in detail, are the reserves?  what to build (facilities)?  will it be profitable? c) PRODUCTION: The mission of the third part is to get the most out of the ground and to the refinery From the Ground, to the Refinery  how to manage the field?  how to deliver the ‘crude’? © Hassan Harraz 2016

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3. 1.3) Upstream Oil Company Targets  Oil companies, and each of their departments, establish certain targets  For example, these might be some targets within an exploration group/company:  To replace production with new reserves on a yearly basis – like a bank account where to be financially healthy you want deposits > withdrawals  To keep the finding costs below a target, such as $1/barrel – sum of all exploration costs divided by total number of discovered barrels on a yearly basis  Development and Production departments would have similar targets.

 To maintain a healthy petroleum company, one would want to:  Replace production (what you take out of the ground) with new reserves: Exploration Finds  Volumes Produced  Keep finding costs below $1 per barrel  Exploration Costs  New Barrels

< $1/barrel

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3.1.4) We Need to Drill Wisely  We always need to drill wisely.  Wells can be very expensive, some > $200 million, a lot even for a major oil company. Such as ExxonMobil or Shell.  Well placement and well path can be critical to success.  We want to place each well in the best possible location - we can’t afford to trust in ‘dumb luck’.  Many times the oil & gas occur at several depth levels. We are not limited to drilling straight holes.  So we also need to carefully design the well path so that we can tap into several ‘pools’ in the best possible locations.  Much of the technical work done in the upstream is directed towards determining where to drill and predicting what we will find BEFORE we start drilling. How can we determine where to drill and predict what we will find BEFORE we start drilling? This leads to the need for geologists, geophysicists, and other specialists focused on imaging and interpreting the subsurface  This leads to the need for all types of scientists and engineers working in the Upstream.  Their goal is to image and interpret the subsurface so we can maximize oil & gas production while minimizing costs. © Hassan Harraz 2016

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3.2) MIDSTREAM SECTOR  Midstream operations are sometimes classified within the downstream sector, but these operations compose a separate and discrete sector of the petroleum industry.  Midstream operations and processes include the following: a) Gathering: The gathering process employs narrow, low-pressure pipelines to connect oil- and gas-producing wells to larger, long-haul pipelines or processing facilities. b) Transportation: Oil and gas are transported to processing facilities, and from there to end users, by pipeline, tanker/barge, truck, and rail. Pipelines are the most economical transportation method and are most suited to movement across longer distances, for example, across continents. Tankers and barges are also employed for long-distance, often international transport. Rail and truck can also be used for longer distances but are most cost-effective for shorter routes. c) Storage: Midstream service providers provide storage facilities at terminals throughout the oil and gas distribution systems. These facilities are most often located near refining and processing facilities and are connected to pipeline systems to facilitate shipment when product demand must be met. While petroleum products are held in storage tanks, natural gas tends to be stored in underground facilities, such as salt dome caverns and depleted reservoirs. © Hassan Harraz 2016

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3.2) MIDSTREAM SECTOR (cont.) d) Technological applications: Midstream service providers apply technological solutions to improve efficiency during midstream processes. Technology can be used during compression of fuels to ease flow through pipelines; to better detect leaks in pipelines; and to automate communications for better pipeline and equipment monitoring.  While some upstream companies carry out certain midstream operations, the midstream sector is dominated by a number of companies that specialize in these services.

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Midstream companies include:  Aux Sable  Bridger Group  DCP Midstream  Enbridge Energy Partners  Enterprise Products Partners  Genesis Energy  Gibson Energy  Inergy Midstream  Kinder Morgan Energy Partners  Oneok Partners  Plains All American  Sunoco Logistics  Targa Midstream Services  TransCanada  Williams Companies

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3.3) DOWNSTREAM PROCESS AND SECTOR   





Downstream is everything from refining to sales. The refining, processing, marketing, and distribution of refined petroleum products. Processing / refining: Processing and refining operations turn crude oil and gas into marketable products. In the case of crude oil, these products include heating oil, gasoline for use in vehicles, jet fuel, and diesel oil. Oil refining processes include distillation, vacuum distillation, catalytic reforming, catalytic cracking, alkylation, isomerization and hydrotreating. Natural gas processing includes compression; glycol dehydration; amine treating; separating the product into pipeline-quality natural gas and a stream of mixed natural gas liquids; and fractionation, which separates the stream of mixed natural gas liquids into its components. The fractionation process yields ethane, propane, butane, isobutane, and natural gasoline. It is a term commonly used to refer to the refining of crude oil, and the selling and distribution of natural gas and products derived from crude oil. Such products include liquified petroleum gas (LPG), gasoline or petrol, jet fuel, diesel oil, etc. The downstream sector includes oil refineries, petrochemical plants, petroleum product distribution, retail outlets and natural gas distribution companies. © Hassan Harraz 2016

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Table 3: Characteristics of Downstream Process and Sector Downstream Characteristics Source

Key Drivers

Financial Resource Government Taxation

Upstream Resource Extraction Revenue depends on absolute price Access to resources Technical skills Highly capital intensive

Often highly taxed

Refining

Distribution & Sales

Manufacturing

Marketing

Revenue depends on margin Location Configuration Technical skills

Revenue depends on margin Location Marketing skills Economy of scale

Highly capital intensive

Low capital relative to other segments

Subject to corporate Subject to corporate taxes. Products highly taxed in taxes Europe

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Major Companies Involved in Downstream 

TAMOIL



PREEM



NESTEOIL



ERG



Q8

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3.3.1) Distribution of Refined Products  Refined products are traded in reference to prices at a few key locations in the world.  Their prices are set in relation to supply/demand pressures that are specific to the products markets.  Market prices can be used to set transfer prices between a refinery and a distribution affiliate, so as to understand how much margin is made in both segments.  There are three main channels of sale for products from a refinery to the consumer : i) Retail (or Own Brand), ii) Wholesale (or distributor), and iii) Bulk sales.  The wholesale (or distributor) sector supplies to customers in small loads either directly from a refinery by truck or from a distribution terminal that is fed from a refinery or imports.  Bulk sales are large volume sales that are generally made directly by the refiner or by a large trading company (e.g., Cargo Sales and Large Consumers). Typical customers would be a petrochemicals plant or nearby power station.

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Figure : Production adding value

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PETROLEUM REFINING  Crude oil must be refined before it can be optimally used.  Crude oil from the field is a mix of hydrocarbons of different molecular length (all hydrocarbons contain carbon and hydrogen, but in different compositions).  Refining is the process through which the various components of crude oil are separated.  Crude oil must undergo several separation processes so that its components can be obtained and used as fuels or converted to more valuable products.  The process of transforming crude oil into finished petroleum products (that the market demands) is called crude oil refining.

What is a refinery?  A refinery is a plant where crude oil is boiled and distilled to separate the individual components.  Atmospheric distillation is the essential process from which refining starts. It is normally followed by further stages: Vacuum distillation, Cracking: thermal or catalytical, etc.  The objective is to increase the output of light products, which are more valuable and reduce residuals, which constitute a problem

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What is Oil Refining ? Is an industry which refine crude oil into more useful petroleum products, such as

gasoline, diesel fuel, asphalt base, heating oil, kerosene, and liquefied petroleum gas by fractional distillation.

Distillation of Crude Oil  We can separate the components of crude oil by taking advantage of the differences in their boiling points. This is done by simply heating up crude oil, allowing it to vaporize, and then letting the vapor to condense at different levels of the distillation tower (depending on their boiling points). This process is called fractional distillation and the products of the fractional distillation of crude oil is called fractions  A fraction from crude oil can be categorized into two categories:

 Refined Product: A crude oil fraction which contains a lot of individual hydrocarbons (e.g. gasoline, asphalt, waxes, and lubricants)  Petrochemical Product: A crude oil fraction which contain one or two specific hydrocarbons of high purity (e.g. benzene, toluene, and ethylene). © Hassan Harraz 2016

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Typical Fuels Refinery

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Petroleum Refining Process Content of a Typical Barrel of Crude Oil From Distillation Only

From Modern Refining Process

Gasoline 25% Kerosine 12%

Gasoline 58%

Distillate Fuels 25%

Kerosine 8%

Residual Oil 39%

Distillate Fuels 24% Residual Oil 10%

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What is in a Barrel of Crude Oil?

Refineries upgrade crude oil to higher value products

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4) PETROLEUM COMPANIES TYPES WHAT ARE OIL COMPANIES?  Companies are the main protagonists in the International oil and gas Industry.  Companies are living organisms that take time to develop and grow, acquire a specific know-how and develop their own culture. The Petroleum industry can be subdivided into four major categories: i) National Oil Companies (NOCs) and ii) International Oil Companies (IOCs). iii) Operator Companies (Exploration and Production Companies) iv) Service Companies

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i) International Oil Companies (IOCs)  International Oil Companies (IOCs) include familiar names like ExxonMobil and Royal Dutch Shell.  These are publicly traded corporations that function like any other corporation except that the product the deal in is petroleum.  IOCs all have long histories that generally date back to the late 19 th century when they were formed.  Most IOCs in the United States arose from the break-up of Standard Oil, which was the dominant oil corporation until 1911.  Several terms are often associated with IOCs. “Supermajor” is the most often used and it refers to the 6 largest publicly traded oil companies in the world.  Supermajors have gone through many changes since the 1990s as a result of mergers and acquisitions secondary to market forces, the introduction of NOCs, and depression in oil prices in the early 1990s.  As a group, supermajors control 6% of the world’s oil. Comparatively NOCs control 88% of the world’s oil.  The six supermajors are as follows. Name

Location

ExxonMobil Royal Dutch Shell BP/Amoco Total SA Chevron ConocoPhillips

Texas – United States The Hague – Netherlands London – United Kingdom Paris – France California – United States Texas – United States

Revenue (Billions of Dollars) 383 368 308 229 204 198

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Reserve Size in Billions of Barrels 72 20 18 10.5 10.5 8.3

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4.1) International Oil Companies (IOCs)  Reserve size is not the only way to divide the industry. It seems that reserve size is most often used in reference to NOCs while reserve size and industry segment are both used to describe IOCs. The American Petroleum Institute divides the industry into five categories based on function. These divisions help to explain why having large petroleum reserves does not automatically translate into large revenues and why the supermajors, despite their relatively small reserve sizes in comparison to NOCs, dominate the market. The industry segments are: Category Upstream Downstream Pipeline Marine Service and Supply (General)

Function Exploration and development of crude Tankers, refineries, and consumers Any hazardous pipeline, including petroleum, liquid CO2, etc. For transport by water of petroleum Equipment manufacturers, consulting firms, etc.

Most supermajors are referred to as “Vertically Integrated” This means that divisions of the company specialize in various segments of the industry like upstream, downstream, and marine. While all supermajors participate in upstream and downstream operations, some do not get involved in pipeline or marine segments. Most have some involvement in service and supply. The upstream segments of most supermajors are their primary income divisions. For instance, Royal Dutch Shell make 2/3 of its profits from exploration and development of crude. Because supermajors have been in the petroleum business the longest, they have developed the necessary expertise to find and develop crude. This makes them indispensible to the industry, even to NOCs. As a result of market dominance in this segment, the supermajors do the majority of the upstream work in the industry and thus derive most of their income from providing these services both for their own oil reserves and to others. © Hassan Harraz 2016

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4.2) Nation Oil Companies (NOCs) 







State agencies are called National Oil Companies (NOC) and are set up much like any International Oil Company (IOC). The major difference is that IOCs release earnings reports and have stock holders. In the early history of oil, IOCs were the major producers. In recent decades, NOCs have been organized in most countries with large oil reserves. This trend has occurred for two reasons. The first reason for the rise of NOCs is political change. Countries in which large oil reserves can be found have slowly wrested away the rights of IOCs that initially controlled the oil. Many military dictators in the Middle East have come to power in part because of their support for NOCs, which promised to return oil income to the people rather than seeing it go to IOCs. Of course, in many instances, these promises were not followed through on. The other reason for the rise of NOCs is the industrial progress. Many of the oil-rich nations have leveraged their tremendous natural resources to negotiate profitable contracts with IOCs for extraction and development. The creation of OPEC was a direct response to the bargaining power of the IOCs. Like a giant union, OPEC has allowed oil rich countries to put more pressure on IOCs to offer price concessions. The development of their own means for extracting and refining oil has also allowed NOCs to reduce their reliance on IOCs. The top ten largest NOCs in the world, in terms of reserve size, are in the following table. It is important to note that the numbers in the table below are for liquid petroleum and do not include such things as extra heavy petroleum, oil shale, etc. Most of these countries do not reveal earnings, so judging them based on income is relatively difficult. However, comparing the size of their reserves to those of IOCs should offer a rough estimate of their potential revenues.

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Table shows top 10 LARGEST WORLD OIL COMPANIES by RESERVES AND PRODUCTION Rank

1 2

Name of Company

Saudi Arabian Oil Company (Saudi Aramco) National Iranian Oil Company (NIOC)

Worldwide Liquids Reserves (109Bbl)

Worldwide Natural Gas Reserves (1012ft3)

Total Reserves in Oil Equivalent Barrels (109Bbl)

Company (Production)

Output (Millions Bbl/day)

260

254

303

Saudi Aramco

12.5

138

948

300

NIOC

6.4

3

Qatar Petroleum (QP)

15

905

170

ExxonMobil

5.3

4

Iraq National Oil Company (INOC)

116

120

134

PetroChina Company Limited (PTR)

4.4

5

Petróleos de Venezuela, S.A. (PDVSA)

99

171

129

British Petroleum (BP)

4.1

6

Abu Dhabi National Oil Company (ADNOC)

92

199

126

Royal Dutch Shell plc (RDS.A)

3.9

7

Kuwait Petroleum Corporation

56

102

111

Pemex

8

Nigerian National Petroleum Corporation (NNPC)

36

184

68

Chevron

3.5

9

National Oil Corporation Of Libya (NOC)

41

50

50

Kuwait Petroleum Corporation

3.2

10

Société Nationale pour la Recherche, la Production, le Transport, la Transformation, et la Commercialisation des Hydrocarbures s.p.a.- Algeria (Sonatrach)

12

159

39

Abu Dhabi National Oil Company (ADNOC)

2.9

3.6

Total energy output, including natural gas (converted to Bbl of oil) for companies producing both. © Hassan Harraz 2016

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Company

Country Market value ($m) Russia

91,289.40

Exxon Mobil Corp. (XOM)

US

422,098.30

BP plc (BP)

UK

147,771.10

Chevron Corp. (CVX)

US

227,014.70

China

220,893.70

UK

238,993.50

Total S.A. (TOT)

France

155,984.80

China Petroleum & Chemical Corporation, or Sinopec Limited (SHI)

China

96,667.80

Petróleo Brasileiro S.A. or Petrobras (PBR)

Brazil

88,517.80

US

86,358.30

Gazprom (OGZPY)

PetroChina Company Limited (PTR) Royal Dutch Shell plc (RDS.A)

ConocoPhillips Co. (COP)

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4.3) Operator Companies (or Exploration and Production (E &P) Companies)

 Companies that decide where and how to drill for hydrocarbons, and own the rights once produced.  Examples: BP, Chevron, ExxonMobil, Shell, ConocoPhillips, Anadarko, Apache, Devon, Hess, Occidental Petroleum, Noble Energy, Marathon, Southwestern, EOG, …etc. Types of exploration and production companies: Integrated/Supermajors (upstream and downstream):

 It is one that does everything - from finding oil & gas reserves to sales to customers.  Examples of a fully-integrated companies are: BP, Chevron, ExxonMobil, Shell, and Total.  It break up the entire process into two main stages:  Upstream covers everything to getting raw material to a refinery  Downstream is everything from refining to sales  Easy question: Where (which stage) do we employ geoscientists? Obviously in the Upstream Exploration and Production/Independents (just upstream): ConocoPhillips, Anadarko, Apache, Noble Energy, EOG Resources, Marathon Oil, Hess Corporation, etc.. National Oil Companies (NOC): Ecopetrol, Gazprom, PEMEX, Petrobras, Petronas, PDVSA, Rosneft, Sinopec, Sonangol

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Integrated/Supermajors (upstream and downstream):

Refinery http://www.npl.co.uk/upload/img_400/oilrig.gif

Getting Raw Oil & Gas to the Refinery

Getting Refined Products to the Consumers

A Fully-Integrated Oil Company (Example: ExxonMobil) © Hassan Harraz 2016

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Example: Shell Gas Integrated Value Chain

Shell Gas Integrated Value Chain © Hassan Harraz 2016

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4.4) Service Petroleum Companies  Companies which provide technical services to operating companies, but do not own the hydrocarbons that are produced  Examples: Baker Hughes, Cameron, CGG, Core Lab, Fugro, Halliburton, ION Geophysical, National Oilwell Varco, PGS, Schlumberger, Spectrum, Technip, Transocean, Weatherford, etc.

Types of service petroleum companies:  Diversified: Schlumberger, Halliburton, Weatherford, Baker Hughes.  Equipment: National Oilwell Varco, Cameron.  Seismic acquisition: ION, CGG, Spectrum, TGS, PGS.  Drilling rigs: Transocean, Noble Corporation, Hercules Offshore, Nabors Industries. © Hassan Harraz 2016

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WalMarts sells An impossibly large multinational corporation corporation intent on world domination. This company that only cover certain components e.g., WalMarts sells, but does not explore or refine

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5) MAIN PETROLEUM COMPANIES PARTICIPANTS IN THE INTERNATIONAL OIL MARKET According to the main petroleum companies types that participants in the international oil market; Petroleum industry divides into four types, as following: i) National Oil Companies (NOCs); ii) International Oil Majors Companies (IOCs) and Their Trading Arms; iii) Independent Oil Trading Companies; and iv) Financial houses and non-industry speculators

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Table 5: shows main categories of participants in the international oil market.

Examples National Oil Companies (NOCs)

International Oil Majors and Their Trading Arms

Independent Oil Trading Companies

Participation in the market

 NOCs mostly sell under term contracts (NOCs account for 70% of world production and for most of the OPEC production).  Limited number of term contracts prevent re-selling to third parties.  Privately owned international majors are large vertically integrated companies that are present in all the activities along the supply chain (upstream exploration and production, refining, ExxonMobil, trading, downstream distribution and marketing through fuel Total, Chevron, distribution networks). ConocoPhillips,  Majors do not trade all of their production, because an important BP, Shell, LUKOIL , part of it is devoted to the needs of their own supply chain system etc  Majors have a risk aversion corporate profile that discourages high levels of exposure to price risks and the resulting “speculation”. Vitol, Glencore,  Trade energy and other commodities while holding few or no production assets. Sempra,  Actively trade in spot physical and derivatives markets.

Saudi Aramco, INOC, PDVSA, KPC, etc

Trafigura, etc

 Trade a wide spectrum of commodities while offering other Financial houses and Morgan Stanley, J. financial products and services. non industry Aron, hedge  Have a controlled speculative exposure in oil derivatives markets, speculators funds, etc similar to other financial markets. © Hassan Harraz 2016

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© Hassan Harraz 2016

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6) SEVEN SISTERS (or ANGLO-SAXON)  The Seven Sisters is a term to describe the shadowy oil cartel, which tried to eliminate competitors and control the world’s oil resource.  The "Seven Sisters" was a term coined in the 1950s by businessman Enrico Mattei, then-head of the Italian state oil company Eni, to describe the seven oil companies which formed the "Consortium for Iran" cartel and dominated the global petroleum industry from the mid-1940s to the 1970s.  The group comprised: a) Anglo-Persian (or Anglo-Iranian) Oil Company (now BP); b) Gulf Oil, c) Standard Oil of California (SoCal), d) Texaco (now Chevron); e) Royal Dutch Shell; f) Standard Oil of New Jersey (Esso) g) Standard Oil Company of New York (Socony) (now ExxonMobil)  Prior to the oil crisis of 1973, the members of the Seven Sisters controlled around 85 % of the world's petroleum reserves, but in recent decades the dominance of the companies and their successors has declined as a result of the increasing influence of the OPEC cartel and stateowned oil companies in emerging-market economies.

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Refining

The Eight Majors’ Market Share, 1970

Gulf

Mobil 4,6%

Exxon 12,4%

B P 5,4% CFP 1,9%

altri

Production

Socal 4,8%

Texaco 8,3%

Mobil 5,4%

6,6%

Mobil 5,4%

15,7%

Exxon Shell 13,0%

49,3%

Products Sales

Gulf 8,3%

Texaco 6,4%

Shell 11,9%

(in percent)

Socal

4,1% Socal 4,1%

Shell 13,1%

Gulf 4,2%

Texaco 7,3% Exxon 14,2%

BP 5,4% CFP 2,0% 29,1%

BP 10,4% CFP 3,2%

altri altri 43,7%

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6.1) "New Seven Sisters"  Now we used the label the "New Seven Sisters" to describe a group of what it argues are the most influential national oil and gas companies based in countries outside of the Organization for Economic Cooperation and Development (OECD.  This group comprises: 1) 2) 3) 4) 5) 6) 7)

Saudi Aramco (Saudi Arabia) China National Petroleum Corporation Gazprom ((OGZPY) Russia) National Iranian Oil Company (NIOC) PDVSA (Venezuela) Petrobras (Brazil) Petronas (Malaysia)

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“Big Oil"

 Chart of the major energy companies dubbed "Big Oil" sorted by latest published revenue.  The sheer size of the extractive industry economy often out shadows the size of the economy of © Hassan Harraz 2016 sovereign countries

49 Source: from the wikipedia:

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.

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GasAssure is the only fully compositional 'reservoir to market' integrated asset modelling tool available. This timeline shows the history of GasAssure and our path to setting the standard for IAM.

© Hassan Harraz 2016

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© Hassan Harraz 2016

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Saudi Aramco  One of the largest integrated oil companies in the world.  State Owned:  The company, as a state-owned entity, does not publish its financial statements.  Operations in:  Exploration, production, refining, marketing, and international shipping.  The company has approximately one fourth of world oil reserves  The company is head quartered in Dhahran, Saudi Arabia and employs about 52,100 people.

© Hassan Harraz 2016

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© Hassan Harraz 2016

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National Iranian Oil Company (NIOC)  State Owned:  The company, as a state-owned entity, does not publish its financial statements.  Operations in:  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.

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Egyptian Petroleum Sector

Ministry of Petroleum

Egyptian General Petroleum Corporation (EGPC)

Egyptian Natural Gas Holding Company (EGAS)

Egyptian Petrochemical Holding Company (ECHEM)

Ganob El-Wadi Petroleum Holding Company (GanoPe)

The Restructuring Process  The restructuring included establishing 3 new Holding Companies in addition to the Egyptian General Petroleum Corporation (EGPC), namely:  The Egyptian Natural Gas Holding Company (EGAS),  The Egyptian Petrochemicals Holding Company (ECHEM), and  Ganoub El Wadi Petroleum Holding Company (GANOPE).

 EGPC: Exploration, production, transportation, refining, distribution and marketing of crude oil and petroleum products.  EGAS: Exploration, production, transportation, treatment, processing, distribution and marketing of natural gas.  ECHEM: All petrochemical activities in Egypt.  GANOPE: All oil and gas activities in Upper Egypt.

Oil & Gas Industry in Egypt Egypt Concession Agreements & Commitments • 171 signed concession agreements with 50 international petroleum companies represent 29 nationalities with financial commitments 11 billion dollars & to drill 494 wells.

  

Upstream Investments Egyptian Ministry of Petroleum has been successful in attracting more international oil and gas companies. Upstream Investments has more than doubled during the past decade compared to the eighties and nineties. Oil and gas investments account for 76% of total foreign investments in Egypt.

Exploration 427 New Discoveries Were achieved During the Period from 1999 to 2009 271 Oil discoveries & 156 Gas discoveries

Egypt’s Petroleum Wealth Map

Reserves Hydrocarbon Reserves have increased steadily in the past few years Proven Gas Reserves have more than doubled from 36 tcf in 1999 to 78 tcf in April 2010. Oil & Condensates’ Reserves have raised from 3.8 billion barrels in 1999 to 4.4 billion barrels in 2009.

Production  Total Production of

Hydrocarbon grew from 1.1 million barrels equivalent in 1999 to 1.8 million barrels equivalent in 2009.  Gas Production has risen three‐fold from around 18 bcm in 1999 to 61 bcm in 2009.  In 08/09, Production of Crude Oil & Condensate increased by 6% more than 07/08 after declining all the way from 94/95 till 05/06.  Egypt Among the First Twenty Countries in the World In Natural Gas Production.

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