Petroleum Industry Structure

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PETROLEUM INDUSTRY STRUCTURE
Presentation · February 2016

DOI: 10.13140/RG.2.1.4699.7363
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PETROLEUM INDUSTRY STRUCTURE
Hassan Z. Harraz
hharraz2006@yahoo.com
2015- 2016
This material is intended for use in lectures, presentations and as

handouts to students, and is provided in Power point format so as to
allow customization for the individual needs of course instructors.
Permission of the author and publisher is required for any other usage.
Please see hharraz2006@yahoo.com for contact details.
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"
© Hassan Harraz 2016 3

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
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.

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

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 2) International Oil Majors Companies (IOCs)
and Their Trading Arms;
3) Product distribution and sales segments.
3) Independent Oil Trading Companies;
4) Financial houses and non industry
II) The American Petroleum Institute divides speculators
the petroleum industry into five sectors:
1) Upstream sectors (exploration, development V) Oil companies used to be classified by sales as:
and production of crude oil or natural gas);
1) Supermajors Companies (BP, Chevron,
2) Midstream sectors; ExxonMobil, ConocoPhillips, Shell, Eni and
Total S.A.),
3) Downstream sectors (oil tankers, refiners,
retailers and consumers); 2) Majors Companies, and
4) Pipeline sectors; 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

1) Crude oil exploration and
production segment;
2) Refining segments;
3) Product distribution and
sales segments
1) Supermajors Oil
Companies ;
2) Majors Oil
Companies;
1) Upstream sector; 3) Independents (or
2) Midstream sector; Jobbers) Oil
PETROLEUM Companies
3) Downstream sector;
4) Pipeline sector; INDUSTRY
5) Service and supply STRUCTURE
sector
1) National Oil Companies
(NOCs);
2) International Oil Majors
Companies (IOCs) and
Their Trading Arms;
3) Independent Oil Trading
1) National Oil Companies;
Companies (NOCs); 4) Financial houses and
2) International Oil non industry
Companies (IOCs); speculators
3) Operator (E & P)
Companies;
4) Service Companies

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

 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.

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.

 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

3.1.1) Business Cycle of Upstream
Upstream
Licensing Prospect Exploration Production Downstream

Drilling Drilling
 Negotiation with  Geological  Infrastructure  Full scale project

Governments / characteristics set-up . Field optimization
Individuals (US)
 Seismic  Uncertainty Definition of drilling
 Different types of evaluation
contracts: royalties,  Analysis of program and well
 Geological formations and profiles
PSA, service
Model …(+See hydrocarbon
contract, …etc
Prospect characteristics
evaluation
section in
Lecture #1)
Onshore / Offshore

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’?

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
< $1/barrel
 New Barrels

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.

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.
3.2) MIDSTREAM SECTOR (cont.)
d) Technological applications: Midstream service Midstream companies include:
providers apply technological solutions to improve  Aux Sable
efficiency during midstream processes. Technology  Bridger Group
can be used during compression of fuels to ease flow
through pipelines; to better detect leaks in pipelines;  DCP Midstream
and to automate communications for better pipeline  Enbridge Energy Partners
and equipment monitoring.  Enterprise Products Partners
 While some upstream companies carry out  Genesis Energy
certain midstream operations, the midstream  Gibson Energy
sector is dominated by a number of companies  Inergy Midstream
that specialize in these services.
 Kinder Morgan Energy
Partners
 Oneok Partners
 Plains All American
 Sunoco Logistics
 Targa Midstream Services
 TransCanada
 Williams Companies

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.

Table 3: Characteristics of Downstream Process and Sector
Downstream
Characteristics Upstream Distribution &
Refining
Sales
Source Resource Extraction Manufacturing Marketing
Revenue depends Revenue depends Revenue depends
on absolute price on margin on margin
Key Drivers Access to Location Location
resources Configuration Marketing skills
Technical skills Technical skills Economy of scale
Financial Highly capital Highly capital Low capital relative
Resource intensive intensive to other segments
Subject to corporate
Government Subject to corporate taxes. Products
Often highly taxed
Taxation taxes highly taxed in
Europe

Major Companies Involved in Downstream
 TAMOIL
 PREEM
 NESTEOIL
 ERG
 Q8

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.

Figure : Production adding value

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

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).

Typical Fuels Refinery

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%
Distillate Fuels
Residual Oil 24%
39% Residual Oil 10%

What is in a Barrel of Crude Oil?
Refineries upgrade crude oil to higher value products

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

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 Revenue (Billions Reserve Size in
of Dollars) Billions of Barrels
ExxonMobil Texas – United States 383 72
Royal Dutch Shell The Hague – Netherlands 368 20
BP/Amoco London – United Kingdom 308 18
Total SA Paris – France 229 10.5
Chevron California – United States 204 10.5
ConocoPhillips Texas – United States 198 8.3

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 Function
Upstream Exploration and development of crude
Downstream Tankers, refineries, and consumers
Pipeline Any hazardous pipeline, including petroleum, liquid CO2, etc.
Marine For transport by water of petroleum
Service and Supply Equipment manufacturers, consulting firms, etc.
(General)
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.
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.

Table shows top 10 LARGEST WORLD OIL COMPANIES by RESERVES AND PRODUCTION
Worldwide Natural Total Reserves in Output

Worldwide Liquids Company
Rank Name of Company Gas Reserves Oil Equivalent (Millions
Reserves (109Bbl) (Production)
(1012ft3) Barrels (109Bbl) Bbl/day)
Saudi Arabian Oil Company

1 (Saudi Aramco)
260 254 303 Saudi Aramco 12.5
National Iranian Oil Company
2 (NIOC)
138 948 300 NIOC 6.4
3 Qatar Petroleum (QP) 15 905 170 ExxonMobil 5.3
PetroChina Company
4 Iraq National Oil Company (INOC) 116 120 134 Limited (PTR)
4.4
5 Petróleos de Venezuela, S.A. (PDVSA) 99 171 129 British Petroleum (BP) 4.1
Abu Dhabi National Oil Company Royal Dutch Shell
6 (ADNOC)
92 199 126 plc (RDS.A)
3.9
3.6
7 Kuwait Petroleum Corporation 56 102 111 Pemex
Nigerian National Petroleum

8 Corporation (NNPC)
36 184 68 Chevron 3.5
National Oil Corporation Of Libya Kuwait Petroleum

9 (NOC)
41 50 50 Corporation
3.2
Société Nationale pour la Recherche,

la Production, le Transport, la
Abu Dhabi National Oil
10 Transformation, et la 12 159 39 Company (ADNOC)
2.9
Commercialisation des Hydrocarbures
s.p.a.- Algeria (Sonatrach)
Total energy output, including natural gas (converted to Bbl of oil) for companies producing both.
Company Country Market value ($m)
Gazprom (OGZPY) 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
PetroChina Company Limited (PTR) China 220,893.70
Royal Dutch Shell plc (RDS.A) UK 238,993.50
Total S.A. (TOT) France 155,984.80
China Petroleum & Chemical Corporation, or

China 96,667.80
Sinopec Limited (SHI)
Petróleo Brasileiro S.A. or Petrobras (PBR) Brazil 88,517.80

ConocoPhillips Co. (COP) US 86,358.30

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

Integrated/Supermajors (upstream and downstream):
Refinery
http://www.npl.co.uk/upload/img_400/oilrig.gif
Getting Raw
Getting Refined
Oil & Gas to
Products to
the Refinery
the Consumers
A Fully-Integrated Oil Company

(Example: ExxonMobil)
Example: Shell Gas Integrated Value Chain
Shell Gas Integrated Value Chain

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.

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

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

Table 5: shows main categories of participants in the international oil market.
Examples Participation in the market
 NOCs mostly sell under term contracts (NOCs account for 70% of
Saudi Aramco,
National Oil world production and for most of the OPEC production).
INOC, PDVSA,
Companies (NOCs)  Limited number of term contracts prevent re-selling to third
KPC, etc parties.
 Privately owned international majors are large vertically
integrated companies that are present in all the activities along
ExxonMobil, the supply chain (upstream exploration and production, refining,
trading, downstream distribution and marketing through fuel
International Oil Total, Chevron,
distribution networks).
Majors and Their ConocoPhillips,
 Majors do not trade all of their production, because an important
Trading Arms 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
Independent Oil production assets.
Sempra,
Trading Companies  Actively trade in spot physical and derivatives markets.
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.
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 state-
owned oil companies in emerging-market economies.

Refining
The Eight Majors’ Mobil 4,6%
Gulf
4,1% Socal 4,1%
Texaco 6,4%
Market Share, Shell 11,9%
Exxon 12,4%
1970 B P 5,4%
CFP 1,9%
(in percent)
altri 49,3%
Production Products Sales

Gulf Socal Gulf
4,8% 4,2%
Socal 8,3% Texaco 8,3%
6,6% Mobil 5,4% Texaco 7,3%
Mobil 5,4% 15,7%
Exxon Shell 13,1% Exxon 14,2%
Shell 13,0% BP 5,4%

CFP 2,0%
29,1%
BP 10,4%
altri
CFP 3,2% altri 43,7%

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 Co-
operation and Development (OECD.
 This group comprises:
1) Saudi Aramco (Saudi Arabia)
2) China National Petroleum Corporation
3) Gazprom ((OGZPY) Russia)
4) National Iranian Oil Company (NIOC)
5) PDVSA (Venezuela)
6) Petrobras (Brazil)
7) Petronas (Malaysia)

“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
sovereign countries © Hassan Harraz 2016 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.

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.

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.

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.

Egyptian Petroleum Sector
Ministry of Petroleum
Egyptian Egyptian Egyptian Ganob El-Wadi

General Natural Gas Petrochemical Petroleum
Petroleum Holding Holding Holding
Corporation Company Company Company
(EGPC) (EGAS) (ECHEM) (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 Exploration
Investments 427
 Egyptian Ministry of Petroleum New Discoveries
has been successful in attracting Were achieved
more international oil and gas During the Period
companies. from
 Upstream Investments has more 1999 to 2009
than doubled during the past
271 Oil discoveries
decade compared to the eighties
and nineties. &
 Oil and gas investments account 156 Gas discoveries
for 76% of total foreign
investments in Egypt.
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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© Hassan Harraz 2016

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PETROLEUM INDUSTRY STRUCTURE

Presentation · February 2016

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This material is intended for use in lectures, presentations and as

Prof. Dr. H.Z. Harraz Presentation

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Licensing Prospect Exploration Production Downstream

 Negotiation with  Geological  Infrastructure  Full scale project

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 To maintain a healthy petroleum company, one would want to:

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 The wholesale (or distributor) sector supplies to customers in small loads

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Distillation of Crude Oil

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Content of a Typical Barrel of Crude Oil

Kerosine 12% Gasoline 58%

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Refineries upgrade crude oil to higher value products

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The Petroleum industry can be subdivided into four major categories:

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Worldwide Natural Total Reserves in Output

Saudi Arabian Oil Company

Nigerian National Petroleum

National Oil Corporation Of Libya Kuwait Petroleum

Société Nationale pour la Recherche,

China Petroleum & Chemical Corporation, or

Petróleo Brasileiro S.A. or Petrobras (PBR) Brazil 88,517.80

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Exploration and Production/Independents (just upstream): ConocoPhillips, Anadarko,

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A Fully-Integrated Oil Company

Shell Gas Integrated Value Chain

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Types of service petroleum companies:

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An impossibly large

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According to the main petroleum companies types that participants in

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© Hassan Harraz 2016 46