How is The Complex Oil and Gas Sector Managed? | Oil and Gas Management (PDF)

If a business is going to be successful, it needs competent management. Oil and gas management is crucial because the oil and gas industry is large and contributes significantly to the economies of some of the world’s most significant countries. The best thing for the oil and gas business is to discover fresh reserves. The industry will only perish if new resources are found to make up for falling oil and gas production.

The oil and gas sector will crack if further reserves are not discovered to compensate for declining O&G production. Given the importance of management in this and other industries, it would be beneficial to learn more about global oil and gas management.

Overall Oil and Gas management

The primary responsibilities of a manager in oil and gas management are the exploration of new reserves, the development of such resources, and the production of crude oil and natural gas. The technology and expense of seismic analysis and deep sea drilling are essential, but so are the rules, guidelines, leases, sales, and permissions mandated by governments worldwide to discover new oil and gas deposits. Below, we’ll go over some more comprehensive picture strategies and approaches to oil and gas management.

1.     Access and exploration

Access and exploration operations are the first steps in global oil and gas management. It is because there will be no fresh opportunities for development and production if the company does not purchase new oil and gas deposits.

The steps to enter untapped reserves and conduct exploratory drilling for oil and gas are detailed below.

Oil Finding

The search for oil, often known as oil exploration, is the first process in global oil and gas management that is notoriously challenging and almost invariably expensive. Following geologic seepage to the surface led to the discovery of early oil and gas resources. The depth of these sediments was hundreds or thousands of feet.

The main achievement during these early years was the widespread mapping of sedimentary rock formations on the surface, which was then projected onto maps of sedimentary rock formations in the subsurface in vast portions. The next logical step in developing subsurface mapping and geologic study should have been the development of seismic technology, in which sound waves are generated from a source.

Rights to access and development

Before the corporation can begin substantial exploration at the site, it must have legal access to the area. The majority of mineral rights and subsurface rights are held by the state, giving the state the ability to conduct exploration and development. The first step in gaining access to the property for oil and gas exploration is identifying the properties and rights owners.

An entirely new and more detailed contract would be negotiated between the developer and the rights holder if oil was discovered (typically the state). An all-inclusive development pact is now part of the country’s modernized fiscal structure. The developer’s role in the oil and gas venture, if any, is defined by this agreement. It considers necessary license costs, royalties, profit/loss splits on oil, and other financial factors.

2.     Oil and gas production management

Oil and gas production management refers to the entire operation that begins with the extraction of raw materials from wells and ends with the creation of finished petroleum products. A systematic approach is required to manage oil and gas, beginning with identifying possible locations, continuing through the extraction process, and distributing the product to merchants and end users.

The three primary stages of the production of the O&G process are known as the upstream, middle, and downstream stages, respectively.

Upstream

The exploration, drilling, and extraction processes are all essential components of the upstream phase of oil and gas production management. First, exploration is carried out by geologists and other specialists in the area to discover prospective rock formations or places with a high potential for oil and gas resources. As soon as a spot has been chosen, preparations can be made to cultivate and prepare it for use in production.

In a similar vein, the instruments used and the processes that are carried out to dig a well can have a significant impact on the length of time it takes as well as the approaches that are utilized. During oil and gas extraction, subsurface reservoirs and wells are commonly used to retrieve standard oil and natural gas.

Midstream

The primary components of the secondary phase of oil and gas production management, often known as the midstream phase, are the processes of processing and storing. After being separated, oil and natural gas are sent to gas processing plants, where the remaining byproducts and gases that do not contain hydrocarbons are cleaned up.

The commodities must be stored appropriately to fulfill domestic as well as international demand, prevent supply shortages and inconsistencies, and guarantee the well-being of everyone involved in the industry.

Downstream

“Downstream” refers to the third and last stage of the process of oil and gas production management that involves creating and distributing petroleum products. The method of converting crude oil and natural gas into petroleum products that may be sold to consumers is referred to as “refining“.

3.      Transportation management

Transporting raw materials from the wellhead or field to the refineries and finally to the consumer markets is one the critical aspects of managing the world’s oil and gas resources. In the transportation of oil and gas, the following are some of the most important factors to consider:

Fundamentals

Transportation of oil and gas is a complex process requiring precise planning at every pipeline stage.

  • Distance: Oil and gas transportation is frequently determined by the required travel distance. Trucking may be the most common mode of transport over shorter distances, barges, and trains over medium ones, and tankers and pipelines over the longest ones.
  • Gasoline vs oil: Oil is a heavy liquid; therefore, it has always been easy to carry. However, gas has traditionally been set apart by its inability to transport easily. Several methods exist for oil and gas transportation from the field.
  • Ownership and international politics: This is probably the only part of global oil and gas management that is so politically contentious or with such a varied ownership structure. The global transportation system is a complicated web, including thousands of owners, companies, governments, and interests.
  • Concern about environmental security: Accidents involving trucks, trains, pipelines, and supertankers have prompted a level of safety and security precautions and environmental protection rarely seen in other sectors.
  • Consequences for producers’ selling prices: Assuming that market rates are generally equal for similar crudes brought to any refining facility, the purchase price for a given grade of oil is subtracted from the amount paid to the producer and transportation costs.

Upstream transportation

Crude oil (sometimes called “black oil”) and natural gas are transported from the field to the refinery by land-based pipelines and maritime supertankers, respectively.   Many potential lands- and sea-based production sites are challenging to reach, making it difficult to establish economically feasible means of transportation of oil and gas.

Pipelines

Pipelines are crucial even at the earliest stages of oil and gas management. There is a common saying among engineers who construct land and underwater pipes: “Nothing happens until we get our lines in place.”  Whether the well is on land or sea, the first step in transporting the oil and gas it produces is to confine it and put it into a pipeline. Buried lines offer higher levels of safety and security but dramatically raise the cost of construction. It takes little time for these added costs to be recouped through lower repair and maintenance bills spread out over the pipeline’s lifetime.

Pipelines are the backbone of the energy distribution network for oil and gas worldwide. Pipelines that transfer oil and gas must traverse thousands of miles of treacherous terrain, including undersea tunnels, dense rainforests, and steep mountain ranges.

Oil Tankers

The majority of crude oil transported today is done so by oil tankers. Crude oil tankers are ships specifically designed to transport crude oil over long distances, usually from producing sites to refineries. For transporting petrochemical products from refineries to downstream consumer markets, product tankers are typically substantially smaller than other tankers. Due to restrictions on draught, waterway width, navigational abilities, and availability of sufficient loading and handling facilities, smaller tankers are often required for inland waterway and coastal movements. Massive crude carriers (VLCCs) and ultra-large crude carriers (ULCCs) carry the great majority of today’s crude oil (Ultra Large Crude Carriers). It’s a service with huge distances and tonnes of stuff to move around. VLCCs and ULCCs use the vast trade routes that circle the globe to transport massive amounts of crude oil.

Downstream Transportation

Downstream products, such as refined derivatives and petroleum-based products of crude oil are transported via practically every mode of transportation imaginable.  In contrast, upstream products are mainly transported via pipelines and mega tankers. However, pipelines, railroads, and tanker trucks are currently the most popular means of transporting petroleum products from refineries to consumers.

Present-day railroad transportation

Today’s railroad tanker cars are more expensive, sophisticated, and technologically advanced than their predecessors in global oil and gas management. There are numerous distinguishing characteristics of today’s train tank cars. Depending on the need, modern railroad tankers may be single- or multiple-load capable, insulated, lined, pressurized, or able to carry a variety of loads. Tank cars are highly specialized vehicles, with materials like glass used to separate the tank from the cargo being transported. Given that many loads are caustic or acidic, this may be vital. Due to their unique design, tank cars can only travel in one direction and are less common than freight or boxcars.

4.     The refining management

The refining process is a crucial link in oil and gas management because crude oil has economic value once it is transformed into consumer goods. A refiner’s opinion on crude’s worth is based only on the value of the products that can be made from it. Below are the refining industry’s competitive dynamics and some of the most significant developments impacting the field.

Refining Methods

Modern refining techniques used to isolate different components in global oil and gas management have their distinct difficulties. Refiners are constantly seeking ways to optimize their operations and reduce operating costs and emissions to maximize profits per barrel of crude oil. Therefore, the processes are in a constant state of evolution. Water, inorganic salts, suspended particles, and trace metals soluble in water are standard components of crude oil. Desalting is the initial step in refining and is essential for preventing equipment corrosion, clogging, and fouling and protecting the catalysts in processing units from poisoning. Getting rid of these contaminants achieves this goal (dehydration). Distillation is the next step. After desalting, the oil is heated in a furnace to temperatures between 340 and 370 degrees Celsius.

The pollutant-removing hydrogenation process known as “hydro treatment” is applied to petroleum liquids. Some examples of these pollutants are nitrogen, sulfur, oxygen, and metals (fuel standard regulations impact the number of contaminants removed). Having these contaminants remain in the petroleum fractions as they move through the refinery’s processing units can severely affect the machinery, the catalysts, and the final product quality.

Integrated and independent Refiners 

Because they have complete command over all aspects of production, integrated refiners are better able to weather fluctuations in the refining spread components’ prices. Therefore, integrated refiners have the edge over their non-integrated competitors. However, an independent refiner may see lower-than-expected refining profits if it is exposed to the risk of rising crude oil costs and falling prices for processed goods. While integrated refiners do many things, buying and selling crude with other refiners is one of the most important for optimizing the management of their complex network of assets.

5.     Financing management

Every company owner knows the need for ready access to capital at reasonable costs for the company’s operation and expansion. Oil and gas management is not an exception, even though its capital requirements grow faster than those of the majority of other economic sectors.

Business Financing

Access to financial resources is essential for anyone who sells a product or renders a service. The amount of money that a company needs might vary significantly based on its business type and the products or services it sells. The income statement, balance sheet, and cash flow statement describe a company’s operational and financial results. The following are some examples of finance from businesses for oil and gas management:

  • Equity Capitalization
  • The Importance of Individual Capital Contributions
  • Obtaining financial assistance using loans that charge interest
  • Finance that is connected to the production, such as royalties and streams, in addition to pre-export and prepayment financing

Changes in oil and gas financing

To begin, the amount of money required has skyrocketed because the upstream sector of the global oil and gas business has been forced to search for new deposits at ever-greater distances and depths. Recent developments have increased the need to invest more money per well and per barrel than ever before. Second, the risk is unprecedentedly considerable since these projects are challenging and complex to access. Due to this uncertainty, many oil and gas value chain players have had to get creative about how they structure and fund projects, including the partners they engage with them.

The third element is the growth of state power that can be changed in oil and gas management. All the capital for oil exploration and production is assumed to come from international oil firms in the fiscal regimes. While this was often the case, the government is now directly involved in many nations’ petroleum project development and profit sharing. As a result, money comes from a wide range of sources, including governmental organizations, which are taking a more active role.

Conclusion

Oil and gas management is an essential component in the functioning of the economy on a worldwide scale. In addition to its use as a primary component in fuel production, petroleum is also utilized in many other contexts. Global oil and gas management is preparing to meet the challenges posed by climate change, alternative energy sources, energy replacements, and detrimental changes in the quality of accessible downstream feedstocks. So, it is acutely aware of the requirement for managers with a broad and deep understanding of oil and gas management.

FAQs

What exactly is involved in oil and gas management?

The bulk of industrialized economies worldwide can only satisfy their demand for manufactured goods by importing significant quantities of oil and natural gas. Oil and gas management comprises determining what needs to be done for the field development process and then actually carrying out those tasks. It includes not only the discovery of oil and gas but also the functioning of the commercial world and the world of logistics.

How are hazardous liquid pipelines used in the transportation of oil and gas?

Pipelines that are utilized for the transportation of hazardous liquids include those that are used for the transportation of crude oil, refined products, and other petroleum liquids and those that are utilized for the transport of ammonia and carbon dioxide.

Yasir Khan

Hello Everyone! This is Engr. Yasir Khan. I am a Mechanical Engineer, professional content writer, and SEO expert with extensive experience. My work experience includes niches of technology news, parenting, online selling, product description, Amazon (B2B), and Mechanical blogs. On this website, we look forward to serving you.

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