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Understanding the Oil & Gas Sector

   Dharminder Dargan – Principal Cyber Security Architect
                      Houston, Texas
Oil Production Capacity

                120
                                     World Production
                                     Capacity
                100       Excess
                          Capacity
Oil Rate MMbd




                 80

                 60

                 40
                           World
                 20        Demand

                  0
                   1970    1975      1980      1985      1990       1995       2000       2005       2010


                                     Source: BP Statistical Review, IEA WEIO, Salomon Smith Barney
Oil Demand vs Production Capacity

                  120                                                                                     Projected Demand growth         240
                                                                                                          at 1.6% per year
                  110       World                                                                                                         220
                                                      Excess
                  100       Capacity
                                                      Capacity                                                                            200
                   90                                                                                                                     180
Oil Rate MMbd




                                                                                                                                                E&P Expenditures $ Billion
Oil Price $/bbl




                   80                                                                                                                     160
                   70                                                                                                                     140
                   60                                                                                                E&P Expenditure      120
                   50                                                                                                                     100
                   40       World                                                                                                         80
                            Demand
                   30                                                                                                                     60
                   20                                                                                                   Oil Price $/B     40
                   10                                                                                                                     20
                    0                                                                                                                     0
                     1970       1975             1980            1985             1990            1995             2000      2005     2010

Source: BP Statistical Review, IEA Oil Market Annual Summary, OPEC Secretariat, Salomon Smith Barney. Data Revised January 2006.


                                                            Source: BP Statistical Review, IEA WEIO, Salomon Smith Barney
Terminology Check…
• SCADA = Supervisory Control and Data Acquisition
  Systems
  (these open and close valves, read flow, and give input into
  companies’ accounting systems)


• BTU = British Thermal Unit = Caloric Value = how
  natural gas is measured
Economides & Oligney: World Energy Consumption


                     700
                                                                                     %
                                    Hydro, Geothermal, Solar                        Share
                     600                                                            8.1

                                                            Nuclear                 3.5
   Quadrillion Btu




                     500                                                             15
                                                    %

                     400                    %
                                                   Share
                                                                       Coal
                                           Share     7.0
                                                     7.0
                                            6.5      6.8
                                                     6.3
                                            5.9                                       47.5
                     300    %                        24.4
                                                                      Gas
                                            26.1     23.7
                           Share
                            5.9
                     200                    21.6
                                                     22.7
                                                     22.1
                           28.9    0.4

                                                                      Oil
                           17.4
                           17.4
                     100                             38.7
                                            38.9
                           47.3                                                      25.9

                       0
                           1970          1988-2001           2001     2010   2020
Poll
• Question: Which term is used to refer to the Exploration and
  Production part of the oil cycle?


• Multiple Choice Answers:
  - Downstream
  - Transcontinental
  - Upstream
  - Midstream
Where does Oil come from?
Oil Exploration & Extraction
• Oil is a fossil fuel formed from the remains of
  tiny plants and animals (plankton), 10 million-
  600 million years ago, which fell to the bottom
  of the sea.
• There, little or no oxygen was present,
  allowing microorganisms to break down the
  remains into carbon-rich compounds that form
  organic layers. The organic material mixed
  with the sediments to form fine-grained shale,
  or source rock.
• As the rocks layer, they exert extreme heat
  and pressure to distill the organic material into
  crude oil and natural gas.
• The oil then flows from the source rock and
  accumulates in thicker, more porous limestone
  or sandstone known as reservoir rock.
• When the earth moves the oil and natural gas
  is trapped in reservoir rocks, which are
  between layers of impermeable rock, or cap
  rock– usually granite or marble.
• The whole process takes millions of years.
                                         Source:Howstuffworks.com
Finding Oil
• Government and Oil companies usually assign
  finding oil to contracted geologists
• The Geologists make an average of $100,230
  making it an incentive to find new reserves
• Oil geologists examine surface features,
  surface rock, reservoir rock, entrapment,
  satellite images, sensitive gravity meters and
  magnometers. They can also detect the smell of
  hydrocarbons using electronic noses called
  sniffers.
• The most common technique for finding
  reserves is seismology which uses shock waves
  that interpret waves reflected back to the
  surface.
• Despite all the technology, modern oil
  exploration methods are only 10 percent
  successful.
Once the Site is Selected
Getting the land ready                             Making way for the Rig
• Area surveyed to determine                       • Holes dug to make way for the rig and
  boundaries.                                        main hole
• Environmental studies done.                      • A rectangular pit (cellar) is dug around
• Land cleared and access roads built.               the location of the drilling hole. (This
• Water is drilled if no natural sources             provides a workspace.)
  available.                                       • Crew drills a main hole
• A reserve pit is dug to dispose of rock          • Additional holes dug to the side to store
  cuttings and mud. It is lined with plastic         equipment
  to “protect” the environment only if the
  area is considered to be “ecologically
  sensitive.”


                        Source:Howstuffworks.com
Setting Up the Rig
Once the land is ready, several holes are dug to make way for the rig and main hole. A
rectangular pit called a cellar is dug around the location of the actual drilling hole. The cellar
provides a workspace around the hole. The crew then drills a main hole.
Here’s how a rig is set up.
Drilling

• Drill bit, collar and drill pipe placed in the
  hole.
• Kelly and turntable attached; drilling begins.
• As drilling progresses, mud is circulated
  through the pipe and out of the bit to float the
  rock cutting out of the hole.
• New sections (joints) of drill pipes added as
  the hole gets deeper.
                                                     Directional Drilling
• Remove (trip out) the drill pipe, collar and bit
  when the pre-set depth (anywhere from a
  few hundred to a couple thousand feet) is
                                                     Photo courtesy Institute of Petroleum
  reached.
Confirming the Presence of Oil
• After the pre-wet depth is reached, the
  workers run and cement the casing –
  pipe sections into the hole to prevent it
  from collapsing.
• Drilling continues in stages.
• When the rock cuttings from the mud
  reveal the oil sand from the reservoir
  rock, they may have reached the final
  depth.
• Then, they remove the drilling
  apparatus from the hole and perform
  several tests to confirm the presence
  of oil.
• These tests are Well Logging, Drill-
  stem Testing, and Core Samples.
Extracting the Oil
• Once the well is completed, the operators
  must start the flow of oil into the well.
• For limestone reservoir rock, acid is
  pumped down the well and out the
  perforations.
• For sandstone reservoir rock, a special
  blended fuel containing proppants is
  pumped down the well and out the
  perforations.
• The pressure from this fluid makes small
  fractures in the sandstone that allow oil to
  flow into the well, while the proppants hold
  these fractures open.
• Once the oil is flowing, the oilrig is removed
  from the site and production equipment is
  set up to extract the oil from the well.         Source:Howstuffworks.com
Extracting Oil




                 Source:Howstuffworks.com
Oilfield Services




                                                                                 Formation Evaluation
Drilling




                                                                                                                  Fluid
                                                                                                                Sampling



                             Drilling Fluids                                                                                                                    Integrated
                                                                                                                                                                Formation
                                                                                                                                                                Evaluation
                                                       Drilling Optimization


                                                                                                                                                                 Coring
                                                                                                          Logging              Wireline
                                                    Directional                                         While Drilling         Logging
                                                      Drilling
                       Drill Bits
Completion




                                                                                 Production
                Pumping
                Services


                                                                                                                                            Oilfield
             Sand Control                                                                                                                  Chemicals
             Completions                          Multilateral                                                              Progressing
                                                   Systems                                                                 Cavity Pumps

              Expandable                                                                                                                    Workover
              Completions                                                                                                                    Services
                                                                      Flawless
                                                                     Execution
                                                                                                                                                        Fishing Services

                                                       Intelligent Well                                 Electric Submersible       Production Logging
                                         Perforating
                                                           Systems                                         Pump Systems
Oil Refining - Cracking
Oil Refining - Cracking
 • Further chemical processing is needed to make products such as gasoline of various grades,
   lubricating oils, kerosene, jet fuel, heating oil, chemicals for plastics and other polymers. It is
   possible to change one fraction into another through these three methods; cracking, unification, and
   alteration.
 • Cracking takes large hydrocarbons and breaks them into smaller ones.
Poll
• Question: Which of these day-to-day activities is not touched by oil at
  some point?
• Multiple Choice Answers:
  - Air Travel
  - Dry Cleaning
  - Driving a Toyota Prius/Hybrid Car
  - Paddling a Wooden Canoe
Products Produced from Crude
Pipeline System Sample Map
                               2
                          PACIFIC                                       COCHIN



                                                                                                       2                                       2
                                                                                           NORTH           2
                                                                         KMIGT                                                             2
                    2
                         PACIFIC                                                                                   2
                                                                   3
                                   CALNEV                   2

                                                                                                                                 2
                           4                PACIFIC                                 NGPL
        CO2 Pipelines                                     KMCO2
        CO2 Field
                                                                                                               PLANTATION
        Terminals
        Products Pipelines                                                   KM TEJAS
                                                                                                   8
        Products Pipeline Terminals                   NGPL                                                 2
                                                                           KMTP                2
        Transmix Facilities                           NGPL Storage                         2                                    CFPL
                                                                                                                         4
        Natural Gas Pipelines                         Natural Gas Pipelines 2
        Natural Gas Storage                           Natural Gas Storage     MONTERREY
        Natural Gas Plants                            Gas-Fired Power Plants
(2,3,8) Indicates # of Facilities                     Retail Natural Gas Division                                      Source: Kinder Morgan
Oil Exploration


Oilfield Development


 Crude Oil Extraction

Transportation / Storage


      Refinery


Downstream Distribution


  Gasoline Retailing
Oilfield Data




• Pipeline Data, Operation, Security   • Seismic Data
• Well-head Data                       • Wireline and Logging Data
Seismic Data Acquisition Overview



        streamer




          Deep Water    Shallow Water   Land   Land
Seismic Data Utilization Overview
    Real-Time Decision
                         3D Map creation




                                               Visualization




          Well Mapping   Remote Well Operations &
                         Completions
Real-time Oil & Gas Operations



                                           Onshore
                                           Facilities


                              Offshore
                              Facilities




                                                        Decision
                                                        Centers

Source: Peter Breunig (CVX)
Integrated Global Operations


                      Service Company’s
External Experts
                   Onshore Operation Center


                                              Decision Center




                             Control Room
                               Offshore

  Remote
Collaboration                                 Remote Monitoring
    Room
Business Challenges facing Oilfield Sector

 1.  Maintain high production while prices are high.
 2.  Manage production decline at existing sources.
 3.  Manage/effectively use huge amounts of data (seismic, wireline etc.).
 4.  Integrate/manage continuous data from multiple sources
 5.  Optimize production operations with real-time decision support.
 6.  Applying technologies effectively, and not “owning” technology.
 7.  Direct support and close collaboration with the industry and partners working on
     the projects internationally.
 8. Staying compliant with accounting, privacy, safety, and environmental laws in the
     countries where they are working.
 9. Managing the growing shortage of skilled workers.
 10. Securing data and information in a world of contract employees and multiple
     partners on every job.
CA as a Player in Oil and Gas

• EITM is highly relevant to the industry
  - Security Management
  - Project & Portfolio Management
  - Compliance Management
  - Records Management
  - Service Management

• Upcoming webcasts will drill into these solutions with a
 number of use cases
Further Reading / Reference

• U.S. Energy Information Administration: Oil Market Basics
  http://www.eia.doe.gov/pub/oil_gas/petroleum/analysis_publications/oil_market_basics/default.htm

• UK Government Energy/Regulatory site – includes links to
  other useful sites http://www.dti.gov.uk/energy/statistics/index.html
• Society of Petroleum Engineers http://www.spe.org/spe-app/spe/index.jsp

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Understanding Oil Sector

  • 1. Understanding the Oil & Gas Sector Dharminder Dargan – Principal Cyber Security Architect Houston, Texas
  • 2. Oil Production Capacity 120 World Production Capacity 100 Excess Capacity Oil Rate MMbd 80 60 40 World 20 Demand 0 1970 1975 1980 1985 1990 1995 2000 2005 2010 Source: BP Statistical Review, IEA WEIO, Salomon Smith Barney
  • 3. Oil Demand vs Production Capacity 120 Projected Demand growth 240 at 1.6% per year 110 World 220 Excess 100 Capacity Capacity 200 90 180 Oil Rate MMbd E&P Expenditures $ Billion Oil Price $/bbl 80 160 70 140 60 E&P Expenditure 120 50 100 40 World 80 Demand 30 60 20 Oil Price $/B 40 10 20 0 0 1970 1975 1980 1985 1990 1995 2000 2005 2010 Source: BP Statistical Review, IEA Oil Market Annual Summary, OPEC Secretariat, Salomon Smith Barney. Data Revised January 2006. Source: BP Statistical Review, IEA WEIO, Salomon Smith Barney
  • 4. Terminology Check… • SCADA = Supervisory Control and Data Acquisition Systems (these open and close valves, read flow, and give input into companies’ accounting systems) • BTU = British Thermal Unit = Caloric Value = how natural gas is measured
  • 5. Economides & Oligney: World Energy Consumption 700 % Hydro, Geothermal, Solar Share 600 8.1 Nuclear 3.5 Quadrillion Btu 500 15 % 400 % Share Coal Share 7.0 7.0 6.5 6.8 6.3 5.9 47.5 300 % 24.4 Gas 26.1 23.7 Share 5.9 200 21.6 22.7 22.1 28.9 0.4 Oil 17.4 17.4 100 38.7 38.9 47.3 25.9 0 1970 1988-2001 2001 2010 2020
  • 6. Poll • Question: Which term is used to refer to the Exploration and Production part of the oil cycle? • Multiple Choice Answers: - Downstream - Transcontinental - Upstream - Midstream
  • 7. Where does Oil come from?
  • 8. Oil Exploration & Extraction • Oil is a fossil fuel formed from the remains of tiny plants and animals (plankton), 10 million- 600 million years ago, which fell to the bottom of the sea. • There, little or no oxygen was present, allowing microorganisms to break down the remains into carbon-rich compounds that form organic layers. The organic material mixed with the sediments to form fine-grained shale, or source rock. • As the rocks layer, they exert extreme heat and pressure to distill the organic material into crude oil and natural gas. • The oil then flows from the source rock and accumulates in thicker, more porous limestone or sandstone known as reservoir rock. • When the earth moves the oil and natural gas is trapped in reservoir rocks, which are between layers of impermeable rock, or cap rock– usually granite or marble. • The whole process takes millions of years. Source:Howstuffworks.com
  • 9. Finding Oil • Government and Oil companies usually assign finding oil to contracted geologists • The Geologists make an average of $100,230 making it an incentive to find new reserves • Oil geologists examine surface features, surface rock, reservoir rock, entrapment, satellite images, sensitive gravity meters and magnometers. They can also detect the smell of hydrocarbons using electronic noses called sniffers. • The most common technique for finding reserves is seismology which uses shock waves that interpret waves reflected back to the surface. • Despite all the technology, modern oil exploration methods are only 10 percent successful.
  • 10. Once the Site is Selected Getting the land ready Making way for the Rig • Area surveyed to determine • Holes dug to make way for the rig and boundaries. main hole • Environmental studies done. • A rectangular pit (cellar) is dug around • Land cleared and access roads built. the location of the drilling hole. (This • Water is drilled if no natural sources provides a workspace.) available. • Crew drills a main hole • A reserve pit is dug to dispose of rock • Additional holes dug to the side to store cuttings and mud. It is lined with plastic equipment to “protect” the environment only if the area is considered to be “ecologically sensitive.” Source:Howstuffworks.com
  • 11. Setting Up the Rig Once the land is ready, several holes are dug to make way for the rig and main hole. A rectangular pit called a cellar is dug around the location of the actual drilling hole. The cellar provides a workspace around the hole. The crew then drills a main hole. Here’s how a rig is set up.
  • 12. Drilling • Drill bit, collar and drill pipe placed in the hole. • Kelly and turntable attached; drilling begins. • As drilling progresses, mud is circulated through the pipe and out of the bit to float the rock cutting out of the hole. • New sections (joints) of drill pipes added as the hole gets deeper. Directional Drilling • Remove (trip out) the drill pipe, collar and bit when the pre-set depth (anywhere from a few hundred to a couple thousand feet) is Photo courtesy Institute of Petroleum reached.
  • 13. Confirming the Presence of Oil • After the pre-wet depth is reached, the workers run and cement the casing – pipe sections into the hole to prevent it from collapsing. • Drilling continues in stages. • When the rock cuttings from the mud reveal the oil sand from the reservoir rock, they may have reached the final depth. • Then, they remove the drilling apparatus from the hole and perform several tests to confirm the presence of oil. • These tests are Well Logging, Drill- stem Testing, and Core Samples.
  • 14. Extracting the Oil • Once the well is completed, the operators must start the flow of oil into the well. • For limestone reservoir rock, acid is pumped down the well and out the perforations. • For sandstone reservoir rock, a special blended fuel containing proppants is pumped down the well and out the perforations. • The pressure from this fluid makes small fractures in the sandstone that allow oil to flow into the well, while the proppants hold these fractures open. • Once the oil is flowing, the oilrig is removed from the site and production equipment is set up to extract the oil from the well. Source:Howstuffworks.com
  • 15. Extracting Oil Source:Howstuffworks.com
  • 16. Oilfield Services Formation Evaluation Drilling Fluid Sampling Drilling Fluids Integrated Formation Evaluation Drilling Optimization Coring Logging Wireline Directional While Drilling Logging Drilling Drill Bits Completion Production Pumping Services Oilfield Sand Control Chemicals Completions Multilateral Progressing Systems Cavity Pumps Expandable Workover Completions Services Flawless Execution Fishing Services Intelligent Well Electric Submersible Production Logging Perforating Systems Pump Systems
  • 17. Oil Refining - Cracking
  • 18. Oil Refining - Cracking • Further chemical processing is needed to make products such as gasoline of various grades, lubricating oils, kerosene, jet fuel, heating oil, chemicals for plastics and other polymers. It is possible to change one fraction into another through these three methods; cracking, unification, and alteration. • Cracking takes large hydrocarbons and breaks them into smaller ones.
  • 19. Poll • Question: Which of these day-to-day activities is not touched by oil at some point? • Multiple Choice Answers: - Air Travel - Dry Cleaning - Driving a Toyota Prius/Hybrid Car - Paddling a Wooden Canoe
  • 21. Pipeline System Sample Map 2 PACIFIC COCHIN 2 2 NORTH 2 KMIGT 2 2 PACIFIC 2 3 CALNEV 2 2 4 PACIFIC NGPL CO2 Pipelines KMCO2 CO2 Field PLANTATION Terminals Products Pipelines KM TEJAS 8 Products Pipeline Terminals NGPL 2 KMTP 2 Transmix Facilities NGPL Storage 2 CFPL 4 Natural Gas Pipelines Natural Gas Pipelines 2 Natural Gas Storage Natural Gas Storage MONTERREY Natural Gas Plants Gas-Fired Power Plants (2,3,8) Indicates # of Facilities Retail Natural Gas Division Source: Kinder Morgan
  • 22. Oil Exploration Oilfield Development Crude Oil Extraction Transportation / Storage Refinery Downstream Distribution Gasoline Retailing
  • 23. Oilfield Data • Pipeline Data, Operation, Security • Seismic Data • Well-head Data • Wireline and Logging Data
  • 24. Seismic Data Acquisition Overview streamer Deep Water Shallow Water Land Land
  • 25. Seismic Data Utilization Overview Real-Time Decision 3D Map creation Visualization Well Mapping Remote Well Operations & Completions
  • 26. Real-time Oil & Gas Operations Onshore Facilities Offshore Facilities Decision Centers Source: Peter Breunig (CVX)
  • 27. Integrated Global Operations Service Company’s External Experts Onshore Operation Center Decision Center Control Room Offshore Remote Collaboration Remote Monitoring Room
  • 28. Business Challenges facing Oilfield Sector 1. Maintain high production while prices are high. 2. Manage production decline at existing sources. 3. Manage/effectively use huge amounts of data (seismic, wireline etc.). 4. Integrate/manage continuous data from multiple sources 5. Optimize production operations with real-time decision support. 6. Applying technologies effectively, and not “owning” technology. 7. Direct support and close collaboration with the industry and partners working on the projects internationally. 8. Staying compliant with accounting, privacy, safety, and environmental laws in the countries where they are working. 9. Managing the growing shortage of skilled workers. 10. Securing data and information in a world of contract employees and multiple partners on every job.
  • 29. CA as a Player in Oil and Gas • EITM is highly relevant to the industry - Security Management - Project & Portfolio Management - Compliance Management - Records Management - Service Management • Upcoming webcasts will drill into these solutions with a number of use cases
  • 30. Further Reading / Reference • U.S. Energy Information Administration: Oil Market Basics http://www.eia.doe.gov/pub/oil_gas/petroleum/analysis_publications/oil_market_basics/default.htm • UK Government Energy/Regulatory site – includes links to other useful sites http://www.dti.gov.uk/energy/statistics/index.html • Society of Petroleum Engineers http://www.spe.org/spe-app/spe/index.jsp